5 Colo. Code Regs. § 1001-26-B-IV
Current through Register Vol. 47, No. 16, August 25, 2024
Section 5 CCR 1001-26-B-IV - [Effective until 9/15/2024] Greenhouse Gas Intensity Program for the Oil and Natural Gas Upstream SegmentIV.A. Definitions IV.A.1. "Calendar year" means January 1 up through and including December 31 of the year.IV.A.2. "Co-benefits" for this Section IV. means the reduction of harmful air pollutants in disproportionately impacted communities.IV.A.3. "Commencement of operation" means when a source first conducts the activity that it was designed and permitted for. In addition, for oil and gas well production facilities, commencement of operation is the date any permanent production equipment is in use and product is consistently flowing to sales lines, gathering lines, or storage tanks from the first producing well at the stationary source, but no later than end of well completion operations (including flowback).IV.A.4. "Controlling interest" for this Section IV. means an interest that provides a person, either directly or indirectly, the power to direct or cause the direction of the management and policies of another person, whether through ownership or voting securities, by contract, or otherwise.IV.A.6. "Drill-out" means the process of removing the plugs placed during hydraulic fracturing or refracturing. Drill-out ends after the removal of all stage plugs and the initial wellbore clean-up.IV.A.7. "Drilling" or "drilled" means the process to bore a hole to create a well for oil and/or natural gas production.IV.A.8. "Flowback" means the process of allowing fluids and entrained solids to flow from a well following stimulation, either in preparation for a subsequent phase of treatment or in preparation for cleanup and placing the well into production. The term flowback also means the fluids and entrained solids flowing from a well after drilling or hydraulic fracturing or refracturing. Flowback ends when all temporary flowback equipment is removed from service. Flowback does not include drill-out.IV.A.9. "Greenhouse gas intensity" means the sum of preproduction emissions and production emissions in a calendar year in mtCO2e divided by the kBOE for that calendar year, calculated pursuant to Section IV.D.IV.A.10. "Harmful air pollutants" for purposes of Section IV. means pollutants designated by EPA as criteria pollutants (carbon monoxide, lead, nitrogen dioxide, ozone, particulate pollution (PM) (PM2.5 and PM10) and sulfur dioxide) or hazardous air pollutants.IV.A.11. "Hydraulic fracturing" means the process of directing pressurized fluids containing any combination of water, proppant, and any added chemicals to penetrate tight formations, such as shale, coal, and tight sand formations, that subsequently require flowback to expel fracture fluids and solids.IV.A.12. "Hydraulic refracturing" means conducting a subsequent hydraulic fracturing operation at a well that has previously undergone a hydraulic fracturing operation.IV.A.13. "Intensity operator" means a person or entity that operates upstream segment activities or equipment. For purposes of Section IV., where a person or entity holds a controlling interest in more than one intensity operator, that person or entity is the intensity operator of all upstream segment activities and equipment in which that person or entity has a controlling interest.IV.A.14. "kBOE" means production of hydrocarbon liquids and natural gas, measured in thousands of barrels of oil equivalent.IV.A.15. "mtCO2e" means metric tons (mt) of carbon dioxide equivalent, using global warming potential values from the IPCC Fifth Assessment Report, 2014 (AR5).IV.A.16. "Majority operator" means (1) an intensity operator with company-wide production in Colorado in calendar year 2022 of greater than or equal to 10,000 kBOE;(2) a new to market operator whose first transaction(s) in Colorado is to purchase the assets of a majority operator;(3) a new to market operator for which the total level of production from all assets acquired or developed in that calendar year exceeds 10,000 kBOE;(4) a new to market operator who has not purchased assets from a majority or minority operator and who commences operation of a well production facility after January 1, 2023; and(5) a minority operator that becomes a majority operator pursuant to Section IV.B.6.IV.A.17. "Midstream segment" means the oil and natural gas compression segment and the natural gas processing segment that are physically located in Colorado and that are upstream of the natural gas transmission and storage segment.IV.A.18. "Minority operator" means an intensity operator with company-wide production of hydrocarbon liquids and natural gas in Colorado in calendar year 2022 of less than 10,000 kBOE. Minority operator also means a new to market operator whose first transaction(s) in Colorado is to purchase the assets of a minority operator, as long as the total level of production from all assets acquired or developed by (in the case of new well production facilities) of the new to market operator in that calendar year does not exceed 10,000 kBOE.IV.A.19. "New to market operator" means an owner or operator that did not produce any oil or natural gas in Colorado in calendar years 2021 or 2022 or own or operate any well production facility in Colorado as of December 31, 2022. A new to market operator that becomes a majority operator as defined in Section IV.A.16. or a minority operator as defined in Section IV.A.18. is no longer a new to market operator.IV.A.20. "Preproduction emissions" means the greenhouse gas emitted from an oil or natural gas well and associated equipment and activities during the construction and operation of the oil or natural gas well until the well commences operation, including from the drilling through the hydrocarbon bearing zones, hydraulic fracturing or refracturing, drill-out, and flowback of the oil and/or natural gas well.IV.A.21. "Production emissions" means the greenhouse gas emitted from an oil or natural gas well and associated equipment and activities after the well commences operation.IV.A.22. "Upstream segment" means oil and natural gas exploration and production operations physically located in Colorado upstream of the midstream segment.IV.A.23. "Well production facility" means all equipment at a single stationary source directly associated with one or more oil wells or natural gas wells upstream of the natural gas processing plant. This equipment includes, but is not limited to, equipment used for storage, separation, treating, dehydration, artificial lift, combustion, compression, pumping, metering, monitoring, and flowline.IV.B. Greenhouse gas intensity targets for the upstream segment.IV.B.1. Beginning January 1, 2023, intensity operators must participate in this greenhouse gas intensity program to reduce preproduction and production emissions in Colorado. An intensity operator that fails to achieve any of the applicable targets in Section IV.B. must achieve additional reductions in preproduction and/or production emissions in the subsequent calendar year to address the difference between the intensity operator's reported greenhouse gas intensity for that calendar year and the applicable target.IV.B.2. For calendar year 2025, intensity operators subject to Section IV.B.1. must achieve the following greenhouse gas intensity targets for preproduction and production emissions. IV.B.2.a. Majority Operator: 10.94 mtCO2e/kBOE.IV.B.2.b. Minority Operator: 34.39 mtCO2e/kBOE.IV.B.3. For calendar year 2027, intensity operators subject to Section IV.B.1. must achieve the following greenhouse gas intensity targets for preproduction and production emissions. IV.B.3.a. Majority Operator: 8.46 mtCO2e/kBOE.IV.B.3.b. Minority Operator: 26.60 mtCO2e/kBOE.IV.B.4. For calendar year 2030, intensity operators subject to Section IV.B.1. must achieve the following greenhouse gas intensity targets for preproduction and production emissions. IV.B.4.a. Majority Operator: 6.80 mtCO2e/kBOE.IV.B.4.b. Minority Operator: 21.38 mtCO2e/kBOE.IV.B.5. In calendar years 2026, 2028, and 2029, intensity operators subject to Section IV.B.1. must achieve a greenhouse gas intensity less than or equal to the applicable preceding year target in Sections IV.B.2. and IV.B.3. (e.g., for calendar year 2026 achieve at least the target for calendar year 2025).IV.B.6. If, in any calendar year beginning 2023, a minority operatorIV.B.6.a. Has production of greater than or equal to 10,000 kBOE orIV.B.6.b. Has production that represents an increase over production in the prior calendar year by greater than or equal to 2,500 kBOE (e.g., if production is 2,500 kBOE higher in 2023 than it was in 2022), thenIV.B.6.c. Beginning the calendar year after the applicable circumstances under Sections IV.B.6.a. or IV.B.6.b., unless otherwise approved by the Division, the minority operator becomes a majority operator and must comply with the applicable majority operator greenhouse gas intensity targets for all its upstream segment operations for that year and all remaining years through 2030.IV.B.7. Acquisitions. Except as provided, if an owner or operator acquires or takes over operation of an oil or natural gas well in Colorado after January 1, 2025, that owner or operator must meet the greenhouse gas intensity targets in Sections IV.B.2. through IV.B.5. applicable to the intensity operator acquiring the assets. IV.B.7.a. If a majority operator merges with, acquires, or takes over operation of an oil or natural gas well in Colorado from a minority operator on or after January 1, 2025, the majority operator (or surviving entity) must at least comply with the applicable minority operator greenhouse gas intensity target for the preproduction and production emissions from the acquired well(s) for the calendar year of the acquisition. Beginning with the calendar year after the acquisition, the applicable majority owner or operator must comply with the applicable majority operator greenhouse gas intensity targets for the preproduction and production emissions from all its upstream segment operations, including the acquired well(s).IV.B.7.b. If a minority operator acquires or takes over operation of an oil or natural gas well in Colorado from a majority operator on or after January 1, 2025, the minority operator must at least comply with the applicable minority operator greenhouse gas intensity target for the preproduction and production emissions from the acquired well(s) for the calendar years of and after the acquisition, after which the minority operator greenhouse gas intensity targets apply to all assets of the minority operator, including the acquired assets (unless the minority operator has become a majority operator).IV.C. New facility intensity targets. IV.C.1. Beginning January 1, 2023, intensity operators of well production facilities that commence operation after December 31, 2022, must also meet the new facility intensity target(s) for those facilities as set forth in Sections IV.C.2. through IV.C.4. in the calendar year of and the calendar year after the well production facility commences operation. These targets are in addition to the targets applicable to all of the intensity operator's upstream segment operations as specified in Section IV.B.IV.C.1.a. For purposes of Section IV.C., "new facility intensity" means the production emissions in CO2e from all well production facilities commencing operation in a calendar year divided by the production of hydrocarbon liquid and natural gas from those facilities in kBOE for that calendar year.IV.C.2. For calendar years 2023 through 2025, the new facility intensity target is 8.59 mtCO2e/kBOE, unless the well production facility is located in the 8-hour Ozone Control Area and in a disproportionately impacted community, then the new facility intensity target is 7.7 mtCO2e/kBOE.IV.C.3. For calendar years 2026 through 2027, the new facility intensity target is 6.64 mtCO2e/kBOE, unless the well production facility is located in the 8-hour Ozone Control Area and in a disproportionately impacted community, then the new facility intensity target is 6.0 mtCO2e/kBOE.IV.C.4. For calendar years 2028 through 2030, the new facility intensity target is 5.34 mtCO2e/kBOE, unless the well production facility is located in the 8-hour Ozone Control Area and in a disproportionately impacted community, then the new facility intensity target is 4.8 mtCO2e/kBOE.IV.D. Accounting for production kBOE, preproduction emissions, and production emissions. IV.D.1. Production can only be allocated to one intensity operator for the same time period. Intensity operators must account for production from all oil or natural gas wells and well production facilities in which the intensity operator holds the controlling interest. Intensity operators must account for production during the time in which the intensity operator holds that controlling interest.IV.D.2. Intensity operators must calculate kBOE by adding the production of hydrocarbon liquids in thousand barrels to the proportion of natural gas (calculated by dividing the million standard cubic feet (MMscf) volume of natural gas produced by the conversion rate of 5.8 MMscf/kBOE).IV.D.3. The intensity operator that reports the preproduction emissions and production emissions for upstream segment activities and equipment must report the kBOE associated with those activities and equipment.IV.E. Intensity operator greenhouse gas intensity plans. IV.E.1. Greenhouse gas intensity plans must be submitted on a Division-approved format and must contain, at a minimum IV.E.1.a. An identification of all the intensity operator's well production facilities, including facility name; facility AIRS ID, or facility location if the facility does not have an AIRS ID; entity listed as the operator for all well production facilities covered by the greenhouse gas intensity plan for which production is included as specified under Section IV.D.1.; and an identification of which facilities are located within a disproportionately impacted community.IV.E.1.b. The intensity operator's greenhouse gas intensity company-wide and per well production facility for the preceding calendar year, including intensity calculation methodology.IV.E.1.c. A list and description of the best management practices (BMPs), control methods, emission reduction strategies, and technologies the intensity operator intends to use to meet the applicable targets in Section IV.B.2. on a site-specific basis. IV.E.1.d. An estimate of the greenhouse gas emission reductions that each type of BMP, control method, emission reduction strategy, or technology is expected to achieve on a company-wide mass basis and on a company-wide greenhouse gas intensity basis, including calculation methods.IV.E.1.e. A description of which BMPs, control methods, emission reduction strategies, and technologies will be deployed in disproportionately impacted communities, and a demonstration that intensity operators will prioritize co-benefits.IV.E.2. Greenhouse gas intensity plan submittal deadlines. IV.E.2.a. By August 31, 2023, each intensity operator subject to Section IV.B.1. must submit to the Division a proposed greenhouse gas intensity plan demonstrating how the intensity operator intends to meet the applicable greenhouse gas intensity targets in Section IV.B.2.IV.E.2.b. By June 30, 2025, each intensity operator subject to Section IV.B.1. must submit to the Division a greenhouse gas intensity plan demonstrating how the intensity operator will meet the applicable greenhouse gas intensity targets in Section IV.B.3.IV.E.2.c. By June 30, 2027, each intensity operator subject to Section IV.B.1. must submit to the Division a greenhouse gas intensity plan demonstrating how the intensity operator will meet the applicable greenhouse gas intensity targets in Section IV.B.4.IV.E.3. Asset transfer updates. IV.E.3.a. Section IV.E.3. applies whenever ownership or operation of an oil or natural gas well or well production facility is transferred after August 31, 2024. The operator taking over operation of the oil or natural gas well or well production facility is referred to herein as the "acquiring operator". The intensity operator from whom ownership or operation is transferred is referred to as the "selling operator."IV.E.3.b. If the transaction involves any well production facility for which the selling operator's greenhouse gas intensity plan submitted under Section IV.E.2. provides for implementation of any BMP, control method, emission reduction strategy, or technology, then within thirty (30) days of closing of the transaction.IV.E.3.b.(i) The selling operator must submit an update to its greenhouse gas intensity plan that: IV.E.3.b.(i)(A) Identifies each well production facility transferred (name and AIRS ID, if applicable), the name of the acquiring operator, and the date of closing of the transaction.IV.E.3.b.(i)(B) Includes a quantification of the emission reductions that would have been achieved at each well production facility involved in the transaction under the greenhouse gas intensity plan consistent with the calculation methods used in Section IV.E.1.d.IV.E.3.b.(i)(C) Includes a demonstration that the selling operator will still meet its greenhouse gas intensity targets and identifies any additional BMPs, control method, emission reduction strategy, and technologies consistent with Section IV.E.1.IV.E.3.b.(ii) The acquiring operator must submit an update to its greenhouse gas intensity plan (or, in the event the acquiring operator is also a new to market operator, the acquiring operator must submit a new greenhouse gas intensity plan) that, for each well production facility involved in the transaction IV.E.3.b.(ii)(A) Identifies the well production facility transferred (name and AIRS ID, if applicable), the name of the selling operator, and the date of closing of the transaction.IV.E.3.b.(ii)(B) Commits to implementing the same BMP, control method, emission reduction strategy, and technology provided for in the selling operator's plan on the same schedule; orIV.E.3.b.(ii)(C) Quantifies the emission reductions that would have been achieved under the selling operator's greenhouse gas intensity plan consistent with the calculation methods used in Section IV.E.1.d. and identifies how the acquiring operator will achieve equal or greater emission reductions at the same or other well production facilities involved in the transaction (or, if approved by the Division, at other of the acquiring operator's well production facilities) on the same schedule.IV.E.4. Annual verifications. By June 30 of 2024 through 2031, intensity operators must submit annual verifications on a Division-approved form to the Division summarizing the intensity operator's greenhouse gas intensity plan implementation during the preceding calendar year. The annual verification must include, at a minimum IV.E.4.a. The intensity operator's implementation of the types of BMPs, control measures, emission reduction strategies, and technologies in its greenhouse gas intensity plan, on a site-specific basis (by location name and AIRS ID, if applicable, and whether the site is located within a disproportionately impacted community) for each BMP, control method, emission reduction strategy, and technology implemented. IV.E.4.b. If applicable, an identification of new well production facilities subject to Section IV.C. commencing operation in that calendar year.IV.E.4.c. If applicable, the intensity operator's implementation of BMPs, control measures, emission reduction strategies, and technologies to achieve the new facility intensity target at all sites subject to Section IV.C. on a site-specific basis (by location name and AIRS ID, if applicable.IV.E.4.d. Instances of departure from the intensity operator's greenhouse gas intensity plan, reason(s) for departure, and any modifications of the applicable element(s) of the BMP plan.IV.E.4.e. Use of any alternative emission reduction approaches not specified in the intensity operator's greenhouse gas intensity plan.IV.E.4.f. A demonstration that emission reductions were prioritized in disproportionately impacted communities, including a quantification of co-benefits achieved.IV.E.4.g. Identification by location name, AIRS ID (if applicable), well API number, and COGCC location ID (if applicable) of any oil or natural gas wells acquired or divested during the previous calendar year; the date of acquisition or divestment; and the name of the operator from which the well(s) were acquired or to whom the well(s) were divested.IV.E.4.h. A certification by a company representative with oversight over the operator's greenhouse gas intensity program that the annual verification is accurate and complete, to the best of the representative's knowledge and, if applicable, that measures identified in an asset transfer update submitted under Section IV.E.3 have been implemented as described therein.IV.F. Verification. IV.F.1. By no later than March 2023, the Division will submit a petition for rulemaking with a proposed verification plan for how intensity operators will demonstrate compliance with applicable greenhouse gas intensity targets in Sections IV.B. and IV.C. to the Air Quality Control Commission. In preparing the proposal, the Division must IV.F.1.a. Propose appropriate calculation and emission quantification methodologies for the emissions categories to be included in a demonstration of compliance with the greenhouse gas intensity targets in Section IV., taking into account the relative accuracy, reliability, and feasibility of the methodologies.IV.F.1.b. Ensure the proposal addresses the relative completeness and reliability of the annual emission reports submitted pursuant to Regulation Numbers 7, Part D, Sections II.G. and V.IV.F.1.c. Ensure the proposal addresses the results of the aerial and ground-based method surveys, including those conducted by the Division in 2021, and how those surveys should be used to ensure abnormal operating conditions and other large hydrocarbon emission events are accounted for in the demonstration of compliance with the greenhouse gas intensity and new facility intensity targets.IV.F.1.d. Include recommendations for provisions the Division determines are necessary to ensure the enforceability of the greenhouse gas intensity and new facility targets, such as additional monitoring.IV.F.1.e. Include recommendations to evaluate total greenhouse gas emissions relative to the applicable baseline and progress towards statewide greenhouse gas emission reduction goals for oil and gas emissions in § 25-7-105(1)(e)(XII) and (XIII), CRS.45 CR 01, January 10, 2022, effective 1/30/202245 CR 16, August 25, 2022, effective 9/14/202245 CR 24, December 25, 2022, effective 1/14/202346 CR 10, May 25, 2023, effective 6/14/2023