Small gas producers are a big methane problem in Colorado. What are air quality regulators missing?
There’s a battle being waged over Colorado’s air quality. It’s about how much methane is being released into the air, where it comes from and how we regulate it.
Environmentalists say that some of the largest methane polluters in the state are benefiting from a sleight of hand built into a deeply flawed emissions reporting system. They say those large-scale polluters might not be who you expect, pointing to a little-known natural gas producer called Terra Energy Partners, or TEP.
According to federal greenhouse gas emissions data, this small, privately owned company – headquartered in Texas, but operating exclusively on Colorado’s Western Slope — was the fourth-largest source of methane emissions from the oil and gas industry in the entire United States in 2019.
“You know, you expect Exxon to be top of the list because they're so big. But you don't expect Terra Energy Partners to be as high as they are,” said Andrew Logan, director of the oil and gas program at Ceres, a national nonprofit advocating for an environmentally sustainable economy.
His organization released a methane benchmarking study last spring, in concert with the Clean Air Task Force, that analyzed data from the Environmental Protection Agency’s greenhouse gas emissions reporting program for 2019. It highlighted Terra Energy Partner’s outsize methane emissions.
Terra Energy Partners declined multiple interview requests. But, in an email, they said that they “significantly overstated” their emissions last year, and that the report is “not reflective of Terra’s actual operations.”
And that’s where things get complicated.
So, let’s start small, with a little device at the center of the battle. It’s called a pneumatic controller.
In a lab at the Colorado School of Mines, students are running experiments in a network of pipes and valves mounted on the wall. It lets them see how different mixtures of oil, water and gas behave inside a pipeline. In the middle of it all is a green metal gadget — a pneumatic controller. It’s about the size of a steering wheel and looks kind of like a flying saucer.
Jim Crompton used to work for Chevron Oil as a senior advisor for digital oil field projects. He retired in 2013, after 37 years. Now he teaches petroleum engineering students at the Colorado School of Mines. He says pneumatic controllers are very common in oil and gas production.
“It’s essentially how you power a sensing measurement unit,” he said, “whether you're measuring pressure or temperature or flow rates or various other things that the oil operator is interested in. They're just kind of attachments onto the pipeline.”
Pneumatic devices are powered by gas pressure. In this lab simulation, compressed air moves a piston at the base of the saucer up and down to open and close a valve. And every time it does that, a little puff of air escapes through a tiny vent. Crompton says that puff of air is an exhaust of whichever gas is operating the controller.
“In the lab you've got these big steel canisters where this compressed air drives the equipment,” he said. “In the oil and gas field, they don't have a tank of compressed air. You've got a lot of the methane, which is (the main) component of natural gas.”
In other words, pneumatic controllers in the field bleed methane. Until recently, they were never the focus of intense scrutiny.
“If you went out to the oil field, the operators would want to show you all around the whole thing, from the wellhead to the to the tank farm,” Crompton said. “And you're interested in the least important part, from their perspective, of the whole system.”
But Andrew Forkes-Gudmundson, the deputy director of the League of Oil and Gas Impacted Coloradans (LOGIC), a group that advocates for the health and safety of those living near oil and gas operations, is concerned about pneumatic controllers constantly flicking on an off in the field.
“Every single time they flick on and off, it's a little poof of methane,” he said.
Forkes-Gudmundson acknowledges that the size of each poof of air might be insignificant, but says that they add up.
“There's probably 250,000 (pneumatic controllers),” he said, referring to Colorado specifically. “So, it's just an absolute bucket-load of methane in aggregate.”
Colorado’s Air Pollution Control Division confirmed there are nearly 248,000 pneumatic controllers in use by upstream oil and gas operators in Colorado. In an email, the agency said they do not keep track of how many of those pneumatic controllers regularly emit methane, but that most of them are unlikely to be high-emitting types.
Air quality regulators taking notice
Colorado’s Air Quality Control Commission banned methane-emitting pneumatic controllers at new oil and gas operations in early 2021. It was applauded as a nation-leading move – for the first time, regulators were specifically setting their sights on these pneumatic devices. This was the result of intense negotiations between the oil and gas industry and environmental groups, and the deal was hailed a groundbreaking compromise.
Particularly noteworthy was that in addition to regulations at new wells, the rules called for retrofitting some older wells between 2022 and 2023, along a staggered timeline specific to each operator. The regulations meet oil and gas producers where they are at. The more a company produces from polluting equipment, the more upgrades they have to make.
But Andrew Logan, the Ceres oil and gas program director, points out a loophole that exempts an entire class of wells known variably as marginal wells or stripper wells. These are old, low-producing wells being stripped of their last reserves of natural gas.
“Stripper well” is technically a tax designation. The Colorado Department of Revenue defines it as an oil or gas well producing 15 barrels of oil (or an equivalent amount of natural gas) a day or less – a minimal amount in the world of oil and gas production.
“People like to think that stripper wells are a small part of the problem. They're small wells owned by small companies. We should give them a break, not worry about them,” Logan said. “But the data is pretty clear that they are a large and growing part of the problem. And we're not going to be able to address the climate issues if we don't if we don't deal with them.”
The methane benchmarking study backed by Logan’s organization pointed to marginal wells using pneumatic devices as a major source of methane emissions in the U.S. And Logan says that combination of stripper wells and aging pneumatic devices might be the key to TEP’s unusually high volume of methane emissions.
“Their business model is sort of buying up assets that nobody else wants from bankrupt companies or from companies looking to get out of assets,” he said.
According to the Colorado Oil and Gas Conservation Commission, TEP has close to 5,400 producing wells in the state – all of them on the Western Slope. More than two-thirds of them are stripper wells that may be exempt from retrofitting requirements.
“Each individual well is sort of toward the end of its life,” Logan explained. “But, through this quirk of regulation in Colorado and elsewhere, too, it's cheaper to keep the well going than to shut it down as long as you're not forced to deal with the pollution issues.”
Methane and climate change
Methane is a powerful greenhouse gas that contributes to global warming and climate change. While the conversation about greenhouse gases often focuses on carbon dioxide, which is produced when fossil fuels are burned, that is starting to change. According to the Environmental Protection Agency, methane accounts for one-third of global warming from greenhouse gases.
We now know that pound for pound, methane’s impact on warming dwarfs that of carbon dioxide – especially in the near term. According to recent studies from the United Nation’s Intergovernmental Panel on Climate Change, each ton of methane will warm the planet about 85 times as much as the same ton of carbon dioxide over a 20-year timeframe.
Environmentalists say that the fastest way for Colorado to make a major dent in our climate impact is by cracking down on methane emissions. The largest industrial source of methane emissions in the U.S. is oil and gas production.
There is broad scientific consensus that the window for avoiding climate catastrophe is rapidly closing and that the time to make dramatic cuts in greenhouse gas emissions is now. The World Meteorological Organization says greenhouse gas concentrations hit record highs in 2020, and that the last seven years are on track to be the warmest on record.
From rising sea levels to an increase in extreme weather, climate change has global implications. In Colorado and the Mountain West, it means more extreme heat, wildfires and drought. Several United Nations reports say that some impacts of climate change are already locked in and urge communities across the world to start adapting to now-unavoidable climate change.
And the world is trying to take action. Earlier this week, global leaders gathered in Glasgow, Scotland for the United Nations Climate Change Conference — also known as the COP26 conference, where methane emissions were front and center in international negotiations. More than 100 countries, including the U.S., pledged to reduce methane emissions 30% by 2030. And on Tuesday, the EPA announced that for first time, they will adopt rules to limit methane emissions from existing oil and gas operations.
Terra Energy Partners
It’s tough to get a complete picture of TEP’s operations because the data is incomplete, and the company declined KUNC’s request for an interview. But here’s what we do know:
TEP is the largest operator in the Piceance Basin — the natural gas production basin that spans several counties on the Western Slope, including Garfield, Rio Blanco and Mesa counties. They are headquartered in Houston, Texas and owned by the New York-based private equity firm Warburg Pincus. The company’s Colorado field office is located in Parachute.
The company confirmed in an email that, by their own estimates, more than two-thirds of their methane emissions are generated by pneumatic devices. And documents filed with the state show that the overwhelming majority of TEP’s production — nearly all of it — comes from facilities with methane-emitting pneumatic controllers.
To comply with state pneumatic controller retrofit requirements, the company has to increase its share of clean production from essentially zero now, up to 40% by May 2023. The company confirmed that they are planning to start retrofitting some of their facilities in the next year.
KUNC obtained a copy of the document that TEP submitted to the state last summer outlining their plan to reach 40% clean production by that deadline. But it shows upgrades at only a small handful of well sites — accounting for just 20% of the company’s total production.
But that does not mean the company is flouting the rules. It is more likely that state regulations allow the company to say it’s meeting the requirements without upgrading the vast majority of their pollution-causing equipment.
It all comes down to a technicality.
A masterclass in petroleum engineering
Jim Crompton, the Colorado School of Mines engineer, says there can be several components to the products of a natural gas well.
“Natural gas is mostly made up of methane, but sometimes will have some higher hydrocarbon elements to it,” he said. “Sometimes there's natural gas liquids that come from it.”
He went on to explain that those liquids get separated from the natural gas and are sold separately.
But when the state’s pneumatic controller regulations were put together, they substituted this liquids production number — determined by “summing total barrels of oil and water produced through the well production facility” — as a proxy for oil and gas production. Which means that for the purposes of pneumatic device regulation, oil and gas production is liquids production.
Crompton says it’s a common substitution that originated in the 1990s with the EPA.
“It's an easy proxy to use,” he said, “because you’ve got that measurement and you have to turn in the number anyway.”
But just because it’s a common proxy doesn’t make it an accurate one.
“It's not a good proxy for what the total emissions are,” Crompton said, because oilfields are dynamic, and each well has its own personality. There are a lot of variables that affect the amounts of liquids versus oil and gas that any well produces.
“It has to do with going all the way back to underground, to the reservoir itself,” Crompton explained. “The reservoir is under a certain pressure and temperature regime,” that varies from well to well.
And even then, the make-up of any one well’s output is constantly changing.
“The best day of an oilfield is the first day,” Crompton explained. “After that things get worse.”
He said that reservoir pressure declines with the age of the well and the age of the field, changing the composition of the well product — the share of oils, liquids and gas that comes out. Using liquids as a stand-in for oil and gas production doesn’t work because the proportions of all three products are not constant.
“It's not a static thing like a manufacturing plant always builds the same kind of widget,” Crompton said.
Crompton says some wells are wet — meaning they produce a lot of liquids. But some wells are dry.
“A dry gas well is only methane,” he said. In the absence of liquids, “you just have methane.”
That’s why liquids are not a good proxy, especially in a natural gas basin like the Piceance Basin on the Western Slope where, Crompton says, the wells just don’t produce much in liquids.
On the one hand, regulators are only looking at liquids. On the other hand, Terra Energy Partners operates overwhelmingly dry wells. LOGIC’s Andrew Forkes-Gudmundon says the state’s definition of production skews TEP’s production picture, making it look like the company operates just a handful of wells — only the ones that produce liquids.
“It's possible that TEP just produces very dry gas and it doesn't have a ton of liquids associated with it. Plus, they have a lot of facilities that are barely productive,” Forkes-Gundmundson said. “And so, it's possible that this little quirk of making the calculation based on liquids production, plus TEP's specific liquids production rate, allows them to sort of sneakily get into compliance with very, very little work.”
Jim Crompton says the liquids production proxy could represent a big regulatory blind spot.
“You have a percentage of the industry, not the big producers, but the smaller producers who may have lots of well count. They may have lots of wells that are old or older in their lifecycle. They may have lots of wells that are just gas producers like in the Western Slope. And that is a whole segment of the industry that doesn't seem to be in the scope of the current regulatory reform,” he said.
Terra Energy Partners disagrees that there is a problem. In an email, they said their operations are too insignificant to warrant intense regulation, saying that “the most effective way to reduce methane emissions from pneumatic devices is to prioritize high volume wells.” They argue the wells that produce the most, pollute the most.
But recent research, including a study from the Environmental Defense Fund, shows stripper wells emit as much as 10 times more methane as a fraction of gas production than high volume wells — largely due to aging equipment, including pneumatic devices.
That’s one explanation for those millions of tons of emissions reported by TEP that, according to the Ceres and Clean Air Task Force report, made them one of the top methane polluters in the country last year.
But, in an email, TEP told KUNC that those emissions — tallied in 2019 — were based on “incorrect data,” and that in 2020 they were able to report reduced emissions — down by 60% over the previous year — simply by correcting an error in their calculations.
The EPA has flagged the company’s 2020 emissions report for potential error.
And environmentalists like Andrew Klooster, a Colorado field advocate with Earthworks, a group dedicated to fighting adverse impacts of energy and mineral development, aren’t buying it.
“It would be really nice to take them at their word,” Klooster said, “if we could believe that, yeah, they really did have the 60% reduction and this was just a calculation error.”
But, he says, he’s skeptical because the emissions data that state and federal regulators rely on are all self-reported by the oil and gas operators
Klooster also points out that these self-reported emissions are just estimates, not direct measurements.
“So, none of this is based on actual monitoring. None of this is based on actual data,” he said. “And that's where it does become really squishy. That doesn't necessarily mean in any instance that they may be out of compliance, but it does mean that there's just a lot that may be missed.”
TEP confirmed with KUNC that they do not directly measure methane emissions at their well sites. And even if the company is correct about their emissions having been overstated, they would still be among the nation’s top 10 emitters of methane in the oil and gas industry.
Direct measurements on the horizon
There are emerging technologies that are starting to give us a better idea of what emissions really look like.
David Lyon, a senior scientist at the Environmental Defense Fund, says that high-resolution satellite emissions detection, for instance, is becoming more and more powerful and precise all the time. And that gives us better insight into the squishiness of methane emissions from the oil and gas sector.
Lyon cites studies based on satellite methane detection technology that show the federal greenhouse gas reporting program greatly underestimates emissions.
“Often when you use measurements, you find emissions are four, sometimes three to five times higher, even an order of magnitude higher than estimated with the recording program,” he said.
Studies like these show the necessity of replacing formulaic emissions estimates with direct measurement technology.
Lyon and his team at the Environmental Defense Fund recently released the results of the Permian Methane Analysis Project — a study that used high-resolution satellite, aircraft and vehicle emissions detection technology to directly measure methane emissions in the Permian Basin, a vast oil and gas production area in Texas.
They were able to confirm that marginal wells make up as much as half of methane emissions from oil and gas production in the Permian Basin. He says it’s an easy problem to overlook because each well site individually is below detection limits.
“But there's so many of them in the basin that they can add up to a large portion of the emissions," Lyon said.
While those findings are specific to the Permian Basin in Texas, they might contain some insights that shed light on Colorado’s Piceance Basin.
Data from the Colorado Oil and Gas Conservation Commission show that there are over 26,000 low-producing wells in the state run by hundreds of oil and gas companies. And it’s not clear how many of those are operating with this old, methane-emitting technology.
But, as Jim Crompton points out, a definitive count of components might the wrong focus.
“They're not measuring (methane emissions). They're just estimating it,” he said. “And so the answer really is nobody really knows what it is, if it's changed or if it's that big or if it's bigger or smaller or whatever it is. We're kind of in a situation where if you don't measure it, you really can't control it.”
The state Air Pollution Control Division did not respond to multiple requests for an interview to comment on this story. They also did not respond to questions about whether they believe TEP is in compliance with regulations.
Coming up in December, the agency will hold a follow-up round of rulemaking for pneumatic controllers. Additional regulations for pneumatic controllers at stripper wells will be on the table. Environmentalists who say methane must be reduced to avert a climate disaster plan to be there.