Policy and Targets
Background and the Role of Reductions in Meeting Environmental and Economic Objectives
Colorado has one of the lowest flaring rates among the oil-producing states. Through House Bill 19-1261, it committed to reducing its GHG emissions to 26 percent below 2005 levels by 2025, 50 percent below 2005 levels by 2030, and 90 percent below 2005 levels by 2050. Senate Bill 19-181 aims to prevent the escape of natural gas into the air through flaring or venting and to minimize adverse impacts on public health and the environment from oil and gas operations. Governor Jared Polis signed both pieces of legislation into law in 2019. The state endorsed the World Bank’s Zero Routine Flaring by 2030 initiative in early 2021 (World Bank, n.d.). The Background and the Role of Reductions in Meeting Environmental and Economic Objectives section of the Federal Onshore case study provides federal information relevant to Colorado’s onshore oil and gas operations.
Targets and Limits
Colorado’s Greenhouse Gas Pollution Reduction Roadmap contains near-term and long-term targets, including for oil and gas sector. Implementation of new rules to eliminate routine flaring and venting is mentioned as a near-term goal.
Legal, Regulatory Framework, and Contractual rights
Primary and Secondary Legislation and Regulation
The Colorado Oil and Gas Conservation Act, 1951, defines the regulatory and enforcement authority for the state.The Primary and Secondary Legislation and Regulation section of the Federal Onshore case study provides relevant federal laws and regulations that apply to federal lands in Colorado.
The Environmental Impact Prevention 900 Series, 2021, is Colorado’s central state-level regulation on flaring and venting. The Safety and Facility Operations Regulations 600 Series, 2021, regulate the siting requirements for all oil and gas industry–related facilities, including flare pits. The Rules of Practice and Procedure 500 Series, 2021, govern hearings, including enforcement hearings. Combined with § 34-60-121, Colorado Law, Colorado Revised Statutes, 2017, these rules allow disciplinary action to be taken.
The Colorado Air Pollution Prevention and Control Act, 1984, includes key aspects affecting climate change, air quality, and federal air quality standards. Regulation Number 1 Emission Control for Particulate Matter, Smoke, Carbon Monoxide, and Sulfur Oxides, 5 CCR 1001-3, 2007, covers requirements for atmospheric emissions from combustion devices. Regulation Number 3 Stationary Source Permitting and Air Pollutant Emission Notice Requirements 5 CCR 1001-5, 2020, represents the primary reporting and permitting regulation and encompasses the permitting aspects of flaring and venting. Regulation Number 7, Control of Ozone Via Ozone Precursors and Control of Hydrocarbons via Oil and Gas Emissions (Emissions of Volatile Organic Compounds and Nitrogen Oxides), 5 CCR 1001-9, 2009, governs the operation of oil and gas equipment, including requirements for gas capturing and combustion equipment.
Flaring and venting are matters for both national and state-level agencies. The BLM regulates flaring and venting on lands owned by the federal government and on lands owned by or held in trust for Native American tribes and individual tribal members within the boundaries of federally recognized reservations. State regulations apply to all lands, including those that belong to the federal government, except for lands owned by Native American tribes and their members within the boundaries of federally recognized reservations. With respect to air emissions, the EPA plays a role by approving State Implementation Plans (SIPs).
Associated Gas Ownership
Land ownership determines mineral rights. About 36 percent of land in Colorado is federal land. Private landowners with surface rights own the rights to mineral resources under their land unless mineral rights are severed from surface rights (via a separate sale, for example). Companies can obtain a concession from the mineral rights owner to explore for oil and gas. In case of a commercial discovery, the concessionaire owns oil and gas under the leased area. Under most private leases, royalties are not paid on lost gas, which includes flared and vented volumes.
Regulatory Governance and Organization
Based on the Colorado Oil and Gas Conservation Act, 1951, the Colorado Oil and Gas Conservation Commission (COGCC) has the authority to regulate and enforce the development and production of the state’s oil and gas resources in a manner that protects public health, safety, welfare, the environment, and wildlife resources. As per the Colorado Air Pollution Prevention and Control Act, 1984, the Air Quality and Control Commission (AQCC) oversees the state’s air quality and emission efforts. It has the authority to adopt emission control regulations.
Regulatory Mandates and Responsibilities
Both the COGCC and the AQCC have overlapping and shared authority over flaring and venting. For areas of joint interest between the COGCC and AQCC, particularly the protection of public health, an energy liaison officer from the Department of Public Health is assigned to coordinate alignment.
The COGCC is the primary regulator of flaring and venting because of its direct authority to prevent natural gas waste and protect public health. Rule 903 of the Environmental Impact Prevention 900 Series, 2021 prohibits routine flaring and venting. It also includes record-keeping and reporting requirements to ensure that oil and gas operators comply with the rule’s prohibition of flaring and venting. The COGCC can impose penalties and otherwise require operators to take corrective action if the operator violates any part of Rule 903.
The AQCC also regulates flaring and venting as part of its statutory duty to ensure compliance with federal ambient air quality standards and minimize emissions from the oil and gas sector. The key powers assigned to it cover instruments such as permitting, compliance, and record-keeping.
Monitoring and Enforcement
Rule 901 of the Environmental Impact Prevention 900 Series, 2021, empowers the director of the COGCC to take corrective action whenever there is a reasonable belief that the conduct of oil and gas operations is causing harm to public health, safety, welfare, the environment, or wildlife resources. Rule 903 of the Environmental Impact Prevention 900 Series, 2021, specifies formal notification and reporting requirements with regard to flaring and venting activities. All flared or vented gas needs to be metered or estimated and reported in the operator’s monthly report of operations, which must be shared with the COGCC upon request. The COGCC’s field inspectors are tasked with inspection and compliance supervision.
In cases where Rule 903 is violated, § 34-60-121, Colorado Law, Colorado Revised Statutes, 2017 and Rule 525 of The Rules of Practice and Procedure 500 Series, 2021 enable the COGCC to impose penalties and otherwise require operators to take corrective action (see the Monetary Penalties section of this case study).
Flaring or Venting without Prior Approval
During drilling operations, Rule 903.b of the Environmental Impact Prevention 900 Series, 2021 allows emergency flaring without prior notice when necessary to protect the safety of onsite personnel. However, a verbal notification must be provided to the COGCC within 12 hours of the event, and a written report must be submitted within 7 days.
Authorized Flaring or Venting
Rule 903.c requires operators to use reduced emission completion practices and enclose all flowback vessels to limit venting during completion operations. Flaring is allowed only with prior approval of the COGCC through a gas capture plan. Flaring is also allowed for a period not exceeding 24 hours during completion operations or for safety reasons during an upset condition.
Rule 903.d states that flaring or venting is prohibited during production operations unless one of the following exceptions applies:
- Flaring or venting lasting less than 24 hours is allowed during an upset condition. Operators must maintain records of the date, cause, duration, and estimated volume of gas vented or flared during each upset condition.
- Venting is allowed during active and required maintenance if it is in line with AQCC requirements, as long as the operator uses best practices to minimize venting during the maintenance or repair activity.
- Flaring lasting less than 24 hours can be allowed for safety considerations in the event of liquids unloading.
- For production evaluation and productivity testing purposes, flaring is allowed for up to 60 days, provided an approved gas capture plan is in place (see the next section).
- Flaring is allowed during wellhead pressure tests.
If the gas release had not been authorized, Rule 912 requires the operator to notify the director of the COGCC within 24 hours and then produce additional data on the incident within 10 days of the event. In the case of intended flaring of hydrogen sulfide, Rule 612 of the Safety and Facility Operations Regulations 600 Series, 2021 requires the operator to submit an air monitoring plan to the director of the COGCC before flaring.
Flaring approval during completion can be granted through an approved gas capture plan during the permitting process or a subsequent application explaining why flaring is necessary. The plan must detail how the operator will minimize adverse impacts and include information on the volume of gas that will be flared and the duration of flaring.
All proposed new facilities must submit a gas capture plan as part of their permit application, in accordance with Rule 903.e. The gas capture plan must include a commitment to connect the production facility to a gathering line before production starts or a plan for how the operator will connect the facility to a gathering line or otherwise put natural gas to beneficial use. If the gas capture plan is not implemented, the director of the COGCC may require the well to be shut in until there is an acceptable gas capture plan.
For wells completed before January 15, 2021, that are not connected to a gas gathering system or otherwise do not put natural gas to beneficial use, a formal application for permission to flare, including a gas capture plan, must be made. The director of the COGCC can approve the application once for up to 12 months, but in no case will such wells be allowed to flare or vent natural gas after January 15, 2022.
According to Rule 904 of the Environmental Impact Prevention 900 Series, 2021, starting in 2022, the director of the COGCC will carry out an annual EIA of the cumulative impact of flaring and venting on key environmental metrics. Operators can be required to contribute as a condition of their development plans receiving approval.
If the required gathering infrastructure (as discussed in the previous section) is unlikely to be available, an operator may either shut in the well or make a formal variance request to COGCC under Rule 502 of The Rules of Practice and Procedure 500 Series, 2021. A formal variance request requires the operator to prove in a formal hearing that it would suffer undue economic hardship and that there will be no net adverse impacts from continued flaring or venting.
Measurement and Reporting
Measurement and Reporting Requirements
Under Rule 903(d) of the Environmental Impact Prevention 900 Series, 2021, gas flared or vented needs to be metered subject to the requirements of Rules 429 and 430 of the Operations and Reporting 400 Series, 2021, or estimated and reported on a per-well basis in the operator’s monthly operations report as required by Rule 413.
Measurement Frequency and Methods
According to Rule 903(d) of the Environmental Impact Prevention 900 Series, 2021, the metered or estimated gas flared or vented during production operations must be reported monthly.
Under Rule 903(d) of the Environmental Impact Prevention 900 Series, 2021, per-well estimates of the gas flared or vented are permitted.
According to Rule 903 of the Environmental Impact Prevention 900 Series, 2021, the operator needs to maintain flaring and venting data records. Rule 206 of the General Provisions 200 Series, 2021, requires operators to keep all records for five years and provide access to the director or the COGCC upon request (see the Authorized Flaring or Venting, and Measurement Frequency and Methods sections of this case study).
Data Compilation and Publishing
At the state level, the COGCC publishes oil- and gas-related data on its website. The Energy Information Administration compiles data from states and reports on its website, but the data are incomplete (see the Data Compilation and Publishing section of the United States: Federal Onshore case study).
Fines, Penalties, and Sanctions
According to § 34-60-121, Colorado Law, Colorado Revised Statutes, 2017, and Rule 525 of The Rules of Practice and Procedure 500 Series, 2021, the COGCC has powers to impose penalties on operators violating its rules, orders, or permits. The penalties depend on the duration and severity of the adverse consequences on public health, safety, or the environment. However, penalties are limited to US$15,000 a day of violation. Higher penalties are possible for behaviors such as gross negligence and willful misconduct, noncooperation of the operator, significant loss of resources, and falsified reports. Mitigating factors include self-reporting or prompt and prudent responses by the operator.
Rule 901 of the Environmental Impact Prevention 900 Series, 2021, empowers the director of the COGCC to suspend operations or initiate immediate mitigation measures until the cause of the threat to public health, safety, welfare, the environment, or wildlife resources is identified and mitigated. Rule 210.a of the General Provisions 200 Series, 2021 and Rule 525 of The Rules of Practice and Procedure 500 Series, 2021 also empower the COGCC to issue corrective actions to stop an adverse event. Rule 209(a) of the General Provisions 200 Series, 2021, empowers the director of the COGCC to require an operator to conduct tests or surveys, if necessary and reasonable, to protect and minimize adverse impacts to public health, safety, welfare, the environment, or wildlife resources.
Under § 34-60-121(2), Colorado Law, Colorado Revised Statutes, 2017, individual employees of an operator that intentionally make a false report to the COGCC may also be subject to criminal prosecution. If found guilty, an employee may be fined up to US$5,000 or sentenced to up to six months of imprisonment.
Rule 903 of the Environmental Impact Prevention 900 Series, 2021 requires a 98 percent design efficiency for the combustion of flare gas. This requirement is in line with the EPA’s national legislation (see the Performance Requirements section of the United States: Federal Offshore case study).
Fiscal and Emission Reduction Incentives
No evidence regarding fiscal or emission reduction incentives could be found in the sources consulted.
Use of Market-Based Principles
No evidence regarding the use of market-based principles to reduce flaring, venting, or associated emissions in Colorado could be found in the sources consulted (but see the Use of Market-Based Principles section of the United States: Federal Offshore case study).
Negotiated Agreements between the Public and the Private Sector
No evidence regarding negotiated agreements between the public and the private sector could be found in the sources consulted.
Interplay with Midstream and Downstream Regulatory Framework
The intention of the gas capture plan mentioned in Rule 903(e) of the Environmental Impact Prevention 900 Series, 2021 is to ensure the beneficial use of the gas in the future. In areas with a limited pipeline network, the beneficial use requirement has led to solutions for gas that would otherwise have been flared. See the Interplay with Midstream and Downstream Regulatory Framework section of the United States: Federal Onshore case study.