Western Colorado’s oil and gas industry trade group has sued the state of Colorado, contending a new rule aimed at reducing greenhouse gas emissions from so-called midstream energy facilities is technically and economically unfeasible for companies locally operating to comply with.
The West Slope Colorado Oil and Gas Association suit challenges state Air Quality Control Commission regulations adopted in December that seek to reduce carbon dioxide and methane emissions from facilities that gather, compress and process natural gas, such as compressor stations and processing plants. The Colorado Department of Public Health and Environment says the rule is the first of its kind in the nation, building on Colorado midstream regulations adopted in 2021, and targeting emissions from fuel combustion equipment such as engines, turbines and heaters. It says the rule will reduce greenhouse gas emissions by more than 1 million metric tons of carbon dioxide equivalent annually compared to 2015 levels, which equates to removing more than 240,000 gasoline-powered cars from the road annually. The measures also will help reduce emissions of air pollutants that can harm public health, including by contributing to formation of ground-level ozone.
Midstream operations are found in 20 counties in the state, with the largest amounts of associated emissions occurring in Weld, Garfield and Rio Blanco counties, according to the state.
But West Slope COGA notes in its suit that companies in the region operate in areas that the Environmental Protection Agency says are in attainment under the Clean Air Act’s National Ambient Air Quality Standards. Parts of Colorado’s Front Range are in nonattainment for ozone.
The suit says the rule sets company-specific caps based on 2021 midstream emissions, requiring more significant reductions from companies with higher emissions. Companies that are new entrants to the midstream segment of Colorado as of Sept. 30, 2023, are allowed to have no greenhouse gas emissions.
“For some West Slope COGA member companies, short of shutting down facilities needed to operate their businesses, electrification of facilities and obtaining electric transmission and service from a third-party provider is the only option for achieving the dramatic reductions required. But in many instances electrification is not a practical, cost-effective option given the logistical issues with obtaining electric power and extending transmission lines in sparsely populated and rugged West Slope areas,” the suit says.
Laramie Energy, which operates in areas including Mesa County, has estimated that its cost for one electrification project would be $253 million, a large part of the company’s overall value. Rocky Mountain Natural Gas has estimated that electrifying a compressor station it operates in the Piceance Basin would cost $86 million, or $8,930 per ton of carbon dioxide equivalent based on 2021 emissions, largely due to the cost of building a transmission line from an electrical substation. That cost is 140 times the estimated $89 per ton social cost of carbon, that company said in a filing during the rulemaking process.
West Slope COGA and others have pointed to environmental impacts that would result from constructing extensive power lines and facilities in the region. Also, Chelsie Miera, West Slope COGA’s executive director, said in an interview Tuesday that a lot of the electricity would come from coal- and natural-gas-fired power plants in Utah and Wyoming, negating some of the hoped-for environmental benefits of the new rule.
The rule allows companies that can’t electrify their facilities to meet their emission-reduction requirements by acquiring credits from other companies’ reductions. But the lawsuit says the credit market is a speculative one, with no governance under the new rule and no guarantee that sufficient credits will exist, meaning it’s not a viable pathway for complying with the rule.
The new rule requires midstream facilities operating in disproportionately impacted communities to prioritize onsite greenhouse gas emission reductions. Such communities are defined in Colorado based on a number of factors, and according to census blocks rather than communities. In western Colorado, much of the Piceance Basin oil and gas region falls within the designation, based on low income. Miera said communities in the Front Range along the Interstate 25 corridor see more environmental burdens that people don’t see in western Colorado. But environmentally and economically burdened communities are being treated the same, she said. And when a new rule results in jobs being eliminated in communities burdened by being lower income, it just exacerbates the issue, she said.
So does the possible loss of local oil and gas tax revenues due to the rule’s impact, she said.
She said in a news release, “By ignoring local conditions, these mandates have now threatened jobs, jeopardized essential local tax revenue, and risk pushing our operators and their families out of Colorado. We need to produce more energy in Colorado, not less.”
Mesa County Commissioner Cody Davis said in the release, “Our oil and gas industry members and our operators have consistently proven their commitment to environmental stewardship, yet the (Air Quality Control) Commission’s one-size-fits-all approach has failed to recognize the impractical and devastating effects these new regulations will have on our West Slope communities.”
A spokesman told the Sentinel that the Colorado Department of Public Health and Environment’s Air Pollution Control Division doesn’t comment on pending litigation.
