As a state with several decades’ experience regulating gas and oil development in a complex jurisdictional landscape, Colorado is a national leader in many respects. The state has endured several boom and bust cycles, understands the conflict inherent in a split estate environment where landowners and mineral rights owners are not necessarily the same party, and recognizes the need for regulations that protect all parties as well as public goods such as water, air and wildlife. The rule that requires gas and oil operators to capture the excess methane released in the production process is an example of this balance, and the Bureau of Land Management was wise to model a nationwide regulation on Colorado’s effective precedent.
Colorado has established – and reconfigured to better balance conflicting interests – a robust series of rules that aim to ensure mineral rights owners access to their property without unduly harming surface rights owners or the environment. The multi-faceted rules are not perfect, but they are an evolving framework that provides certainty and protection for all involved. The methane rule is a good example of a regulation that recognizes and attempts to counter the negative impacts that gas development can have on the environment – in this case air quality and carbon emissions – without unduly fettering industry. The state adopted detect-and-capture rules that require gas and oil operators to monitor equipment for leaking methane and then install technology that captures 95 percent the errant gas. The rules were adopted by the Colorado Air Quality Control Commission in 2014, with support from several gas and oil producers, including Encana and Anadarko – largely because the requirement allows producers to bring the captured gas to market; it is an investment worth making.
The Bureau of Land Management on Friday released proposed rules that aim to take the Colorado model nationwide. The rules would require gas and oil operators to detect and repair methane leaks, install new equipment to prevent the gas from being released into the atmosphere, and to limit the amount of flaring allowed by operators. The measures would serve to reduce the amount of the greenhouse gas emitted from gas and oil facilities and at the same time give operators the regulatory push needed to make better use of the gas they are already extracting. The BLM estimates that enough gas harvested on federal and Indian lands was wasted from 2009 through 2014 to power more than 5 million homes – at a cost of $23 million a year in royalty revenues that the federal government could have collected.
The industry, correspondingly, lost revenue due to the wasted methane, and the climate – already compromised by greenhouse gas emissions around the globe – was negatively affected by the leakage. The BLM’s cost-benefit analysis expects that the new methane rules will cost between $125 million and $161 million annually to implement, while benefitting the industry and the environment to the tune of $155 million to $188 million each year. The numbers support the notion that this rule is to all parties’ benefit – with some associated but necessary costs.
Colorado can take pride in its leadership role attempting to balance the diverging interests affected by gas and oil development. The methane capture rule now being emulated nationally is a testament to the compromises that are possible, to the advantage of every one involved.
