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Colorado oil, gas methane rules proving cost effective, survey says

Colorado's upstream oil and gas methane emissionsregulations appear to be a cost effective approach to curbing the industry'sgreenhouse gas output, the Center for Methane Emissions Solutions found in asmall but detailed survey published April 15.

Of the 10 oil and gas company representatives surveyed, mostbelieved that the benefits of finding and fixing leaks under Colorado's rules,known as Regulation 7, outweigh the costs. Keating Research, who conducted thesurveys on behalf of the Center, reached out to 35 companies to talk about theregulations, and the 10 representatives who agreed participated in 30-minutetelephone interviews.

Colorado's Regulation 7, which went into effect in January2015, imposes methane emissions limits on oil and gas producers, including a95% reduction in emissions on certain equipment. Given the stringency of thestandards, Patrick Von Bargen, executive director at the Center for MethaneEmissions Solutions, said he was surprised that there had been such a dearth ofopposition from the industry.

"We're well over a year into the regulations [but] nolawsuits have been filed [and we've seen] no pushback at the regulatory levelto undo these regulations," Von Bargen said in an April 14 interview.

In large part, the industry's high level of cooperation hasstemmed from the relatively low cost of compliance, coupled with positiveexternalities associated with fulfilling the regulatory obligations, Von Bargensaid, citing the survey's results.

Nearly 90% of the methane leaks found during inspectionsover the past year were small leaks, according to the survey participants.Further, 30% of the leaks that were found could be fixed on the spot, whileanother 66% could be fixed within a few days, the survey said.

Six out of the 10 survey participants said they were paying"a little more" to comply with the rules, while one participant saidthe company was breaking even because of the extra gas that was captured andanother said the organization was profiting. Only one survey participant saidthe company was paying "a lot more" as a result of the rules. Theremaining participant did not say how the rules factored into company finances.

But more notable than the straight economics of the rules'effect, Von Bargen said, was that the regulations have helped companies improvethe efficiency and safety of their employees.

"When you think about … leak detection and repair, thefirst thing that came to mind and was in my head was, 'This is about defectiveequipment that's going to have to be replaced, old equipment that [needs] to bereplaced by new equipment.' I was very focused on the technology, [but]actually when you ask, 'What's the source of these emissions?' a good number …are human error," Von Bargen said. "Then I switched from thinkingabout equipment to people — worker training, worker safety."

Colorless and odorless, methane is difficult to detectwithout intentionally seeking it out, which means that employees may haveoverlooked instances in which they did not fully close a hatch or tighten avalve — easy steps that are happening more often under Colorado's rules, VonBargen said.

"In the case of methane, you can't see the stuff, soyou can't see whether you're efficient," he said.

Von Bargen said the survey helped identify what Colorado gotright in devising its regulations, but he said he would like to get a betterhandle on what concerns industry has about Regulation 7.