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Testimony before the United States Senate, Environment and Public Works

Committee, Clean Air and Nuclear Safety Subcommittee

William C. Allison, Director, Air Pollution Control Division, Colorado Department

of Public Health and the Environment

June 19, 2012

________________________________________________________________________
Good morning . Mister Chairman, members of the Committee, my name is Will Allison.
I am the Director of the Colorado Air Pollution Control Division. Thank you for this opportu nity to provide our perspective on the responsible development and regulation of oil and gas resources. I am here today to offer comments supportive of EPA’s recently finalized oil and gas rules, and to describe Colorado’s extensive experience with oil and gas development and regulation.

Colorado has a long history of oil and gas development. Our first well was drilled in the
1860’ s. Develo pment techniques have advanced greatly since then. Hydraulic fracturing
of oil and gas wells in Colorado began in t he 1970 ’ s , a nd continues to evolve and improve

. Hydraulic fracturing is now standard practice for virtually all oil and gas wells in Colorado, and across much of the country

. As of 2009, Colorado ranked fifth in natural gas production and tenth in oil pr oduction. Today, Colorado has over 45 ,000
activ e oil and gas wells

. We foresee continued and steady growth in this industry sector. For example, thousands of more wells are planned in the Niobrara formati on, which
extends from El Paso C ounty south of Denver , north to the Wyoming border.

In addition to abundant oil and gas resources, Colorado also has a thriving recreational, resort and tourist economy

. Colorado’s c lean air and clear streams, wildlife, majestic Rocky Mountains, and the parks and wild erness are as are an essential part of our economy and our identity.

Oil and gas are an important source of domestic energy for our state and our nation. The industry provides good

- paying jobs and nee ded tax revenues . That is good news . Our job is to he lp ensure oil and gas development does not result in bad news for public health and the environment, and to help strike a responsible balance between environmental protection and energy development.

Colorado has been at the forefront of r egulating air em issions from oil and gas operations for many years , and has a comprehensive regulatory framework . S imilar to other oil and gas producing states, Colorado provides multiple state agencies with differ ent authorities to regulate industry operations. The Colorado Department of Public Health and Environment and the Colorado Department of Natural Resources maintain separate but complementary oversight of industry operations. Colorado’s Air Quality Control Commission has regulations to address emissions from tanks, engines, compressors, and associated equipment. Colorado’s Oil and Gas Conservation Commission has regulations pertaining to such issues as well completions, odors, noise, and drill rig setbacks. Many improvements to Col orado ’s oil and gas regulations were adopted in the 2007

- 20102

timeframe , and several of these regulations are reflected in EPA’s new rules.

Colorado’s regulatory agencies regularly confer on matters within their areas of expertise, including natural resou rces, air quality, water quality, and wildlife issues. Colorado regularly reviews and seeks enhancements to i ts oil and gas programs . Recently, this
included a favorable third

- party review of Colorado’s oil and gas rules by a national oversight group , ado ption of the country’s most comprehensive fracking fluid disclosure rules, and creation of a state task force to discuss state and local jurisdiction al issues in the oil and gas arena

. The oil and gas industry continues to thrive in Colorado under our

com prehensive regulatory programs.

EPA issued its oil and gas rules in April 2012. The rules will reduce emissions of such
harmful pollutants as volatile organic compounds , sulfur dioxide , and ai r toxics such as
benzene

. The rules also have the co

- benefit of reducing greenhouse gases such as
methane. Because EPA’s new rules are issued under the Clean Air Act, this will require some changes in our state agency responsibilities.

E PA’s rules are largely based and build upon rules that have been s uc cessfully implemented in several oil and gas producing states, including Colorado. The rules promote proven technology and best practices that are already being used by many
C olorado operators. Colorado supports EPA’s efforts to provide cost

- effective em ission reductions for the nation’s oil and gas industry. Colorado has consistently supported the responsible and balanced development of natural resources. The f ederal rules will

p rovide a level playing field and cer tainty to industry nationwide. States will retain the right to be more stringent than EPA’s rules, if they desire

.

One of th e central components of EPA’s rules is “green” or “reduced emission” completions of hydraulically fractured wells. Green completions can significantly reduce emission of pollutants such as volatile organic compounds and hazardous air pollutants

. When a c ompany completes a fractured well without best operational practices, the water, chemicals, sand, and related air emissions are vented to the atmosphere. This can go on for several days. Green completions capture this material, much of which can be reu sed

. Green completions also significantly minimize emissions to the environment

.

The EPA has concluded that in m ost instances green completions are highly cost effective. We agree. Colorado already has rules requiring green completions where technically and economically feasible. Ma ny operators routinely utilize gree n completions on all of their wells in Colorado

.

Many Colorado operators also alread y use other practices s et forth in EPA’s new rules.
This includes the use “low” or “no bleed” valves, which emit less pollution than “high”
bleed valves. Switching the valves out is as s imple as changing a spark plug. We have
found that the controls in EPA’s rules are cost effective

, and that industry can quickly

recoup its costs, as companies capture and then sell natural gas that would otherwise be
vented to the atmosphere.3

The trem endous growth of oil and gas industry in Colorado and other states presents tremendous opportunities and challenges. EPA’s rules include the first federal air standards for natural gas wells that are hydraulically fractured, along with requirements
for se veral other industry sources of pollution that have not been regulated at the federal
level. The rules a re an important tool to complement the unprecedented success and growth of Am erica’s oil and gas industry. Tens of thousands of oil and gas wells alre ady exist in individual states, and EPA estimates that nationally, approximately 11,000 more wells will be frac tured annually. As thousands of additional wells are drilled, and associated infrastructure is built to service these wells, it is important t o have cost effective emission controls in place to address the individual and cumulative impacts of
these sources. For example, despite the growth of oil and gas emission sources in Colorado, over the past decade we have seen decreases in the levels of man y organic pollutants associated with oil and gas operations, including ethane, propane, benzene and
toluene.

As another example, m any areas of the nation

, including the Denver metropolitan area,

are not currently meeting EPA’s health

- based ozone standard. O il and gas operations are a sign ificant source of VOC emissions, which in turn contribute to ozone formation. W e estimate that almost 40% of anthropogenic VOC emissions in Colorado’s ozone non

attainment area are related to oil and gas operations.

I t can be challenging for businesses to come into or expand their operations with in non

attainment area s. That is one reason why Colorado alread y has more stringent rules in

our ozone non

- attainment area, and several oil and gas companie s already use practices
that go beyond our existing rules. Sound and cost

- effective oil and gas practices are thus important to our efforts to maintain and improve air quality

, while supporting a rapidly growing industry sector

.

With t he growth of the o il and gas industry , it is important for state agencies and industry to work diligently to catch up and keep up with the growth. The oil and gas industry now accounts for approximately 50% of the air permit applications received in Colorado. Oil and gas applications have almost doubled in recent years and

, as previously noted, we expect further growth. We have created a separate unit within our agency devoted exclusively to oil and gas permitting and compliance issues. Colorado has devoted considerable resources to understanding and regulating this industrial sector. Our

agency received approximately 3,360 permit applications from oil and gas sources alone
in 2010. These permit s cover equipment such as wellheads, compressor stations, natural gas processing plants, wastewater treatment and disposal facilities, and natural gas storage facilities. Throu gh the processing of these permi ts, the Division has developed extensive experience with o il and gas operations

.

It will be important for states to have sufficient field personnel to assist with compliance
with the new rules . This is particularly true as , in addition to the volume, drillin g activity
often occurs in remote area s with limited advance notice. Most oil and gas companies4

work very hard at environmental compliance, and some go beyond applicable standards. Regulatory agencies must continue to work with industry to ensure widespr ead and regular compliance. EPA’s rules will place additional responsibilities upon state agencies already operating under resource constraints. We support continued and adequate Congressional funding to ensure that EP A and the states can effectively implement these important regulations.

H ydraulic fracturing has been utilized for decades, but it is new in many parts of the

countr y. Even where it is not new, it i s now deployed commonly as part of natural gas developmen t. W hile hydraulic fracturing and directional drillings result in a smaller environmental footprint at the well pad, the drill rigs can be onsite much longer, and the practices rai se their own environmental challenges

. We are increasingly hearing

concern s about the potential impacts of oil and gas development on public health and the environment, including questions about em issions and odors

. Comprehensive rules suc h
as these are an important tool for addressing community concerns regarding the potential impac ts of oil and gas operations

.

Colorado beli e ve s that oil and gas activities are most effectively regulate d at the state
level. It is important that oil and gas development occur in an env ironmentally responsible manner, recognizing the unique geo logic, atmospheric, and aquatic resources
of each state. EPA’s rules build o n proven and cost

- effective technologies that have already been implemented by several state s . The rules provide a comprehensive baseline and framework for all states, particular ly those jurisdictions where oil and gas activity may be relatively new. They also p rovide a sta nd ard ized program for oil and gas exploration on federal lands, including Indian lands within state boundaries where the federal government may have primary ju risdiction.

In conclusion, Colorado supports EPA’s rules and plans to incorporate the new rules into

our air quality program . The rules are an important step forward in our efforts to provide clean air while promoting economic growth. We will continue to look for opportunities
and take approp riate action to ensure that our regulatory programs are protective, cost

effective and efficient.

Thank you for the opportunity to speak with you today.