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Rocky Mountain high: U.S. looks to Colorado for methane emissions policy

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October 24, 2021

By Valerie Volcovici and Nichola Groom

WASHINGTON (Reuters) – U.S. environmental regulators are expected to base new rules for controlling methane emissions from oil and gas operations on the nation-leading policies of a state that has been tamping down on the potent greenhouse gas for seven years – Colorado.

The U.S. Environmental Protection Agency is likely to unveil the rules, which will have major repercussions for oil and gas drillers, this week, according to sources familiar with early versions of the proposed regulations.

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The proposal, which will be rolled out just days before the start of the United Nations conference on global warming https://www.reuters.com/business/environment/cop26-glasgow-who-is-going-who-is-not-2021-10-15 in Glasgow, is a key pillar of the Biden administration’s broader crackdown on climate change.

While drillers from major producing states like Texas and North Dakota are bracing for a raft of new requirements, for companies in Colorado, stiffer government rules around methane emissions are business as usual.

The state has both strong environmental ambitions and a large oil and gas industry. It first put state-level methane regulations into place in 2014, and has gradually expanded those requirements in efforts to cut methane emissions from the drilling sector by more than half of 2005 levels by 2030.

“Colorado regulations are the toughest on the planet,” Dan Haley, president of the Colorado Oil and Gas Association, said, adding that the rules were crafted with industry input.

Methane https://www.reuters.com/business/environment/save-planet-focus-cutting-methane-un-climate-report-2021-08-09, a gas that leaks from oil and gas infrastructure, livestock farming and landfills, is the second-biggest cause of climate change after carbon dioxide. It has a higher heat-trapping potential than CO2 but it breaks down in the atmosphere faster, so rapid reductions of methane emissions https://www.reuters.com/business/environment/save-planet-focus-cutting-methane-un-climate-report-2021-08-09 can quickly have a large impact on slashing greenhouse gases.

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The U.S. and European Union last month kicked off an effort https://www.reuters.com/business/environment/us-eu-line-up-over-20-more-countries-global-methane-pact-2021-10-11 by two dozen nations to slash methane emissions 30% over the next decade.

Current federal rules limit methane emissions from new sources, leaving existing operations unregulated in states that do not have their own standards.

Colorado’s rules require oil and gas companies to find and fix methane leaks and install technologies to limit or prevent emissions at existing operations. Since 2019, it has required semiannual leak detection, tank controls and performance standards for transmission. The rules, which also apply to low-production, or so-called marginal wells, also ban routine flaring of methane and require the installation of valves that reduce emissions.

SOARING PRODUCTION

Oil production in Colorado surged 57% between 2015 and 2019 due to the rise of horizontal drilling techniques that underpinned the U.S. shale gas boom before slipping in 2020 at the outset of the coronavirus pandemic, according to U.S. Energy Information Administration data.

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Methane emissions growth lagged the production increases, climbing 9% in the 2015 to 2019 period, according to the state. In the Permian Basin, meanwhile, the nation’s largest and most productive oil field which covers portions of Texas and New Mexico, methane emissions from oil production soared by more than a quarter during that time at large facilities that report to the EPA, federal data shows.

“It’s noteworthy that Colorado emissions have remained fairly stable despite an increase in oil and natural gas production,” Colorado Department of Public Health and Environment spokesperson Andrew Bare said in an emailed statement. He added the 2019 figures do not reflect expected emissions reductions from additional policies the state has crafted since.

“Since 2014 it feels like we’ve been engaged in almost continuous rulemaking,” said Garry Kaufman, director of the CDPHE’s air pollution control division.

The state has been deploying overflights and ground-based measurements to try to refine its measurement of methane emissions.

The EPA examined a number of state programs and spoke with state regulators, including Colorado’s, as it evaluated new methane rules, according to EPA spokesperson Nick Conger.

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THE CLEANER GAS ADVANTAGE

    Some Colorado drillers have embraced the opportunity to market what they bill as lower-emitting natural gas to customers eager to tout their environmental credentials.

“Being a Colorado operator has really given us a tremendous advantage relative to the rest of the United States in terms of the environmental quality of our operations,” Brian Cain, vice president of government affairs for Denver-based Extraction Oil and Gas Inc, said in an interview.

His company, which produced an average of 88,907 barrels of oil equivalent per day last year, is merging with two others to form Civitas Resources Inc and focus on lower-emission drilling in Colorado’s Denver-Julesburg Basin.

Jon Goldstein of green group Environmental Defense Fund says the state’s production increases since 2014 “show the fallacy in the oil and gas industry myth about strong, comprehensive methane rules putting industry out of business.”

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Others say the new rules have made doing business in the state untenable, particularly for smaller, less well-capitalized producers. Some have started to look elsewhere for future operations, said Trisha Fanning, who leads the Colorado Small Operator Society, representing 60 oil and gas companies.

“Some operators are no longer able to economically operate within the state,” she said. This does not bode well for small operators nationwide, Fanning added, since “we expect the federal methane rule to possibly take several aspects from Colorado.”

Industry players voiced concern that the EPA may follow Colorado’s lead and apply methane rules to small production or “marginal” wells, which environmental groups say are a significant source of methane emissions, according to sources who saw earlier versions of the proposal.

Research by EDF this year found there are 565,000 actively producing marginal U.S. well sites, which represent 5.8% of combined oil and gas production but an outsized share of emissions. For example, in the Appalachian Basin, gas wells that account for 0.2% to 0.4% of production account for 11% of federal methane emissions, according to EDF.

Kathleen Sgamma, president of the Western Energy Alliance, said federal marginal well regulations would affect 20% of current oil and gas production. “A lot of those wells would have to be shut in,” she said.

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(Reporting by Valerie Volcovici in Washington and Nichola Groom in Los Angeles; Additional reporting by David Gaffen; Editing by David Gaffen and Matthew Lewis)

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Yen shines, Aussie sags as Powell turns hawk despite Omicron uncertainty

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December 1, 2021

By Kevin Buckland

(Reuters) – The safe-haven yen held steady on Wednesday, while the risk-sensitive Australian dollar languished near a one-year low after Federal Reserve Chair Jerome Powell signalled a faster taper of stimulus despite the risks around the Omicron COVID-19 variant.

Investors fear that hasty monetary tightening could choke off the nascent economic recovery, with little still known about Omicron’s potential to evade current vaccine protection or how deadly it might be.

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“Investors are staying cautious,” said Shusuke Yamada, chief Japan FX strategist at Bank of America-Merrill Lynch.

“It’s very difficult to make a judgement about the impact of Omicron when we don’t have a lot of information.”

Global markets fell sharply on Tuesday after the head of drugmaker Moderna said existing COVID-19 vaccines would be less effective against the new variant, although BioNTech’s chief executive struck a cautiously positive note, saying the vaccine it makes with Pfizer would likely offer strong protection against severe disease from Omicron.

The Aussie weakened 0.12% to $0.71245 after dipping as low as $0.7063 of Tuesday for the first time since Nov. 3, 2020. The New Zealand dollar was largely flat at $0.68195 after also touching the lowest since early November of last year at $0.6773 in the previous session.

The greenback ticked 0.09% higher to 113.26 yen, but still within sight of an overnight low of 112.535, a level not seen since Oct. 11.

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Powell said in testimony to Congress on Tuesday that Fed officials will discuss at their Dec. 14-15 policy meeting whether to end bond purchases a few months earlier than had been anticipated. The Fed chief finally did an about face on a long-held contention that inflation would be “transitory.”

Powell expressed confidence that the impact from Omicron will be far less than in the spring of 2020, when the pandemic erupted.

In response, traders wound up interest rate hike expectations, with money markets now almost fully priced for tightening at the June meeting.

Powell’s testimony continues later Wednesday.

“Powell’s unexpectedly hawkish tone overnight, essentially asserting that inflation risk has primacy over growth/Omicron risks, should leave the (dollar index) forging ahead,” Westpac strategists wrote in a client note.

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The index, which measures the dollar against six major peers, traded at 95.921 after sliding to 95.544 on Tuesday for the first time since Nov. 18, weighed down largely by an unwinding of bearish bets on the euro, the most heavily weighted component in the basket.

Westpac recommends buying dips in the index down to the mid-95 level.

The single currency slipped 0.04% to $1.1331, down from a two-week high of $1.1387 overnight.

Sterling traded not far from an 11-month low of $1.31945 reached overnight, last changing hands at $1.32955.

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)

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OPEC+ begins two days of talks amid oil rout

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December 1, 2021

LONDON (Reuters) – OPEC and its allies begin two days of meetings on Wednesday to decide whether to release more oil into the market or restrain supply amid an oil price rout and fears the Omicron coronavirus variant could weaken global energy demand.

Oil prices fell to near $70 a barrel on Tuesday from as high as $86 in October, posting their biggest monthly decline since the outset of the pandemic, as the new variant raised fears of a supply glut.

For November, Brent fell by 16.4%, while WTI fell 20.8%, the biggest monthly fall since March 2020.

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“The threat to oil demand is genuine,” said Louise Dickson, senior oil markets analyst at Rystad Energy. “Another wave of lockdowns could result in up to 3 million bpd (barrels per day) of oil demand lost in the first quarter of 2022.”

Also pressuring prices, Federal Reserve Chair Jerome Powell said the U.S. central bank likely will discuss speeding its reduction of bond purchases amid a strong economy and expectations that a surge in inflation will persist.

The Organization of the Petroleum Exporting Countries (OPEC) will meet on Wednesday after 1300 GMT, followed by a meeting on Thursday of OPEC+, which groups OPEC with allies including Russia.

Several OPEC+ ministers, including from Russia and Saudi Arabia, have said there was no need for a knee-jerk reaction from the group.

But some analysts have suggested OPEC+ might put plans to add 400,000 barrels per day (bpd) to supply in January on hold.

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The group was already weighing the effects of last week’s announcement by the United States and other countries to release emergency crude reserves to temper energy prices.

OPEC+ has been gradually winding down record supply cuts of 10 million bpd implemented last year and currently has some 3.8 million bpd of reductions still in place.

The increase in OPEC’s oil output in November has again undershot the rise planned under a deal with allies, a Reuters survey found.

(Reporting by OPEC team, writing by Dmitry Zhdannikov, editing by Richard Pullin)

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New York accuses Amazon of backsliding over worker safety, seeks monitor

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December 1, 2021

By Jonathan Stempel

NEW YORK (Reuters) -New York state’s attorney general on Tuesday asked a state judge to appoint a monitor to oversee worker safety at an Amazon.com Inc fulfillment center in New York City, citing the retailer’s alleged rollbacks of COVID-19 safety measures that were “already inadequate.”

Letitia James, the attorney general, also wants a court order requiring the rehiring of Christian Smalls, who Amazon fired for allegedly violating a paid quarantine by leading a March 2020 protest over conditions at the Staten Island facility.

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James, a Democrat running to become New York governor, sued https://www.reuters.com/article/us-amazon-com-complaint/new-york-attorney-general-sues-amazon-over-covid-19-shortfalls-idUSKBN2AH0C2 Amazon in February in a New York state court in Manhattan over its safety protocols for thousands of workers at the Staten Island facility and a distribution center in the New York City borough of Queens.

She said Amazon is valuing profit over safety and “acting as if the pandemic is over” by rolling back safety protocols even as the Omicron variant https://www.reuters.com/business/healthcare-pharmaceuticals/omicron-variant-could-outcompete-delta-south-african-disease-expert-says-2021-11-30 of the COVID-19 virus threatens to increase transmission rates.

The alleged rollbacks include making the Staten Island facility “mask-optional” for vaccinated workers while not requiring masks for unvaccinated workers, and failing to enforce social distancing.

In her motion for a preliminary injunction, James said the proposed monitor would oversee upgraded cleaning, hygiene and social distancing procedures.

“While case rates, hospitalizations, and deaths rise, Amazon rescinds protections and packs in more workers for its holiday rush,” James said in her motion. “Amazon’s ongoing – and worsening – failure to protect workers must be halted.”

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Amazon said in a statement it has taken a “comprehensive approach” to COVID-19 safety.

“It’s disappointing that the Attorney General is seeking to politicize the pandemic by asking for ’emergency’ relief now despite having filed this lawsuit nine months ago,” Amazon said.

The Seattle-based company is appealing a judge’s refusal in October to dismiss James’ lawsuit.

Amazon on Nov. 15 reached a separate settlement with California https://www.reuters.com/legal/government/amazon-settles-california-claims-it-concealed-covid-19-cases-workers-2021-11-15 over claims it violated a state “right-to-know” law by concealing from warehouse workers and local health agencies the numbers of workers being infected with COVID-19.

(Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis and Stephen Coates)

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