Clash of the titans

Hickenlooper Working to Bridge the Gap

When Colorado Gov. John Hickenlooper (former AAPG member) set his sights on new air quality rules for the oil and gas industry, he called together some of the state's biggest producers and one of the country's biggest environmental organizations.

Gov. John Hickenlooper

"For the first couple of months they sat down and focused on agreeing to the same set of facts," Hickenlooper told the EXPLORER. "Both sides got cranky from time to time. My job was to make sure both sides stayed in the room."

The result was a set of fugitive-emission rules and a leak-detection-and-repair regimen that could become a model for other states, and is now considered the strongest in the United States.

Discussion in that rulemaking process included Anadarko Petroleum Corp., Encana Corp. and Noble Energy Inc., and representation from the Environmental Defense Fund, a green advocacy group with a special interest in air quality.

"There's been such bad blood for a while, there was a level of mistrust that we had to work through," Hickenlooper said.

The oil and gas industry is keeping an intense watch on the development of state regulations that affect hydraulic fracturing. The regulatory picture still isn't completely clear, but it is becoming clearer.

Operators in some states have worked with regulatory agencies, environmentalists and citizen groups to devise new rules for hydraulic fracturing. In each case, a primary goal of the industry was to lessen public concerns.

Some recent developments:

New water-testing rules took effect in Wyoming earlier this year.

Companies now must test wells and springs within a half-mile of a drilling site, both before and after drilling. Testing targets the presence of several chemical compounds, dissolved gases, bacteria and other factors.

The Colorado air quality rules, finalized in February, require 95 percent capture of methane and volatile organic compounds from specified industry operations, including new and recompleted wells, centrifugal compressors, dehydrators and storage tanks. Some tanks are subject to even stricter limits.

Baker Hughes Inc. published a Chemical Disclosure Policy for hydraulic fracturing, aimed at full disclosure of chemicals used in the fracturing process.

"Baker Hughes believes it is possible to disclose 100 percent of the chemical ingredients we use in hydraulic fracturing fluids without compromising our formulations – a balance that increases public trust while encouraging commercial innovation.

"Where accepted by our customers and relevant governmental authorities, Baker Hughes is implementing a new format that achieves this goal, providing complete lists of the products and chemical ingredients used," the policy states.

Hickenlooper began his career as a petroleum geologist in the 1980s and later opened a restaurant and brewpub in Denver, then was elected mayor of Denver in 2003 and governor of Colorado in 2010.

He emphasized the importance of states bringing all stakeholders together in creating oil and gas rules on which the public can rely.

"If we do a good enough job, people will calm down about the perceived risks of hydraulic fracturing," he said. "What this is, is a process of winning back the public trust."

The Costs of Compliance

After Colorado adopted the new air quality regulations, some operating companies complained about the potential cost of compliance.

The Colorado Oil & Gas Association issued a brief statement from Doug Flanders, COGA director of policy and external affairs in Denver: "The new rules accomplish much, which we support. Unfortunately, we were not successful in ensuring that the rule accommodates the differences in basins and operators," the statement said in part.

Flanders said the emissions-capture and leak-detection regulations are just the latest items in a long process of rulemaking that affects the oil and gas industry in Colorado, most of it from the Colorado Oil and Gas Conservation Commission.

"Since 2008, we've essentially been in perpetual rulemaking," he said. "We've had so many changes it's kind of hard to tell how well the process is working. We have good relations with the commissioners. We have good relations with the Commission."

He noted the regulations do not directly address hydraulic fracturing but are broader rules targeting industry activities. They "are not ‘hydraulic fracturing' per se – they are oil and gas rules," he said.

Colorado has emerged as a national leader in regulations affecting hydrofracturing, but at the same time has had to significantly increase regulatory staff, according to Flanders.

"Some of the things that other states are still grappling with we dealt with in the 2008 rulemaking, early on," he said. "I think what you're seeing (in Colorado) is a process that's working, but you're also seeing a process that's stressed."

Andrew Casper, COGA's regulatory counsel, said the need to add additional employees and to increase spending to comply with the state's new oil and gas rules do put a meaningful burden on the industry.

"Operators are constantly working to implement all the new regulations," he noted. "It's an ongoing process."

A Work in Progress

The Environmental Defense Fund supports a variety of green initiatives but has focused many of its efforts on issues related to air quality, said Dan Grossman, Rocky Mountain regional director for EDF in Boulder, Colo.

He supports the state's recently developed emissions-capture and leak-repair regulations and hopes they become a model for other states. Overall, he gives mixed grades to Colorado's regulatory approach to oil and gas.

"I think it's safe to say that it's been a mixed bag. The agencies have gotten some things close to right, and some things not so close to right," Grossman said.

While Colorado has now promulgated strict air quality rules – and Hickenlooper himself prescribed a "zero tolerance" policy on methane emissions – Grossman described regulation as an ongoing process.

"These rules addressed production but not so much compression, distribution and transmission," he said. "It makes sense for us to think about how we might realize efficiencies further downstream."

Technological advances, especially, could affect the development of future regulations, he said. As an example, he cited the possibility of better emissions-monitoring tools than today's typical infrared flare-gun monitoring.

"As that technology develops, we may need to take another look at the regulations," he said.

EDF works with corporations on environmental matters because it wants "to make real progress, and not just rhetorical points," Grossman said. He acknowledged that companies, environmentalists and special-interest citizens groups have had problems cooperating in the past.

"We set out to disprove that theory in Colorado, at least in regard to the air rules," Grossman observed. "But a lot of that burden falls on industry."

Today, cooperation seems more possible, even likely. A desire to ease public concerns about the possible adverse effects of hydraulic fracturing brings industry to the negotiating table.

Both Hickenlooper and Grossman mentioned a "social license to operate" – the concept that corporations can conduct operations only with society's support and approval, which is neither automatic nor unconditional.

Environmental groups come to the table to have a voice in the regulatory process, and because they recognize that hydraulic fracturing isn't going to go away. Some, like Grossman, believe that natural gas can replace or offset more-polluting fuel use.

"This incredible energy boom brings enormous opportunity for the country and the environment, but also enormous risks," he said.

Hickenlooper said increased oil and gas production from hydraulic fracturing is providing huge benefits for the United States, while also taking industry operations "right to the front doorsteps of people in suburban communities" who had never even expected to see a drilling rig or well.

"I think it's one of the great opportunities for this country," he said. "It's also bringing very rapid change. The industry needs to stay out ahead of the change."

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Emphasis: Rocky Mountain Roundup