Amid escalating worries about climate change and pollution from oil and gas operations, Colorado’s largest electric utility is going to buy natural gas from a company that is continuously monitoring its emissions and working to certify its product as responsible.
Xcel Energy said Wednesday that it will buy some of its gas for use in Colorado from Denver-based Crestone Peak Resources as part of a pilot project to show that it’s dedicated to delivering “a cleaner energy product.” Xcel was the first utility in the country to announce a goal of delivering carbon-free electricity.
The utility’s latest announcement comes as Colorado continues to tighten regulations to cut emissions of methane, a potent greenhouse gas, and pollutants from oil and gas, transportation and other activities that have put a large portion of the Front Range out of compliance with federal air-quality standards.
The decision by Xcel also comes as the public and investors are pressuring the oil and gas industry and energy suppliers to be more environmentally responsible. Companies’ performance in ESG — environmental, social and corporate governance — is being scrutinized along with revenue and free cash flow.
Crestone is working with Project Canary, a Denver-based company, to deploy 24/7 monitoring of its oil and gas sites in Weld, Arapahoe and Adams counties. Project Canary provides the monitoring technology and works with the Payne Institute for Public Policy at the Colorado School of Mines, which collects the data to provide an independent analysis of the information.
“We saw where the air quality standards and where the regulations were going and what was going to be required of companies to operate in Colorado. As a leader in this space we wanted to continue to lead,” said Jason Oates, Crestone’s vice president of government affairs.
The intent is to produce “some of the cleanest molecules” anywhere, Oates said.
Jeremy Nichols, climate and energy program director for the environmental group WildEarth Guardians, said continuous monitoring of emissions instead of just periodic inspections can provide a sense of what’s happening at well sites. The sites typically include multiple wells, tanks and other equipment.
However, Nichols voiced concern about efforts by companies to brand their oil and gas as responsibly produced. Oil and natural gas emit greenhouse gases no matter how cleanly they’re produced, he said.
“Reducing methane leaks, ensuring compliance with clean air rules and regulations, that’s all well and good,” Nichols added. “But ultimately, we need to find ways to transition, to learn to live without oil and gas.”
Colorado’s oil and gas regulations are considered among the strongest in the nation. The rules have been revised through the years and in 2019 a state law mandated a sweeping overhaul of the regulations, including earlier and more frequent monitoring of emissions.
In 2014, Colorado became the first state to approve methane regulations, which were used as a model for the Obama administration’s rules. The Trump administration rolled the rules back, but Congress is considering reviving them.
Methane, the main component of natural gas, is a key focus in the battle against climate change. In the short term, it is 84 times more effective than carbon dioxide at trapping heat. The gas is released through leaks or releases from equipment or produced when natural gas is burned as waste at oil wells.
“I think that it’s beyond reasonable dispute that fossil fuels are going to be with us for the immediate future. As we all move toward a cleaner economy, we need to understand that in this interim we need to make sure that the fossil fuel supply chain is as clean as it can be,” said Dan Grossman, senior director of regulatory and legislative affairs at the Environmental Defense Fund.
Grossman said initiatives like Crestone’s are positive and might be a good model, but voluntary measures aren’t a substitute for regulations.
“That’s why it’s so critical that the Biden administration moves quickly and boldly on methane regulations and states like Colorado continually improve their own regulations,” Grossman said.
Crestone has caught leaks and other problems much more quickly, thanks to its continuous monitoring, said Taryn Weiner, the air quality supervisor for the company. She said the sensors have identified seven incidents over 17 months that warranted action.
Justin Blohm, an environmental consultant, along with Crestone employees, gets all the alerts and alarms. Some are due to maintenance work. Information about wind direction and other meteorological data can help determine whether a spike in emissions is from the site or blowing in from somewhere else.
During a demonstration at a Crestone well pad near Firestone, Blohm pointed out the small jump on his computer screen after someone opened a propane bottle around a sensor.
“Those canaries sense every second of every day, and it’s uploaded to the cloud once a minute,” said Canary Project co-founder and CEO Chris Romer, referring to the sensors.
Besides methane, the devices monitor volatile organic compounds, which include toluene and benzene, known to cause cancer. The chemicals contribute to the formation of ground-level ozone, or smog, which can cause or aggravate respiratory problems. The sensors also monitor levels of particulate matter, which causes hazy air.
Romer said Project Canary has its devices on more than 100 well pads in major oil and gas fields in Texas, North Dakota and other states. The company works with operators through its TrustWell program to certify that well construction meets certain standards and that operations haven’t harmed the air, water or surrounding communities.
A company that can show its natural gas or oil was produced responsibly will likely have a competitive edge, said Morgan Bazilian, director of the Payne Institute. He pointed to a decision last year by Engie, a French utility, to halt negotiations on a multi-billion-dollar deal to import liquified natural gas from the U.S.
Although Engie hasn’t fully explained publicly why it scuttled the deal, Bazilian said he believes there were political and environmental concerns, such as the impact of methane emissions. He said the gas was called too dirty.
“I think that sent ripples through the industries: the operators, the people in the oil and gas industry as well as the finance community,” said Bazilian, formerly the lead energy specialist at the World Bank.
The Payne Institute is going through the initial phases of pulling together Crestone’s data. The company is working to have Project Canary recognized as a state-approved monitoring method so it can share its data with regulators, Oates said.
“We know that natural gas and fossil fuels are slowly being replaced by other forms of energy, but we need to have an organized and efficient transition. You want to use the cleanest forms (of energy) when you’re doing that,” said John Schmidt, Crestone’s vice president of operations. “We want to basically be the last spigot turned off when we’re off fossil fuels.”
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