GHG Estimate Snag Stops Work at Colorado Drill Site

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Denver-based Gunnison Energy's plans to produce natural gas from public lands in western Colorado’s North Fork Valley hit a snag in federal court after a judge vacated certain approvals for the project.

The ruling stops work on a development that has been in the works since 2017 and which had already seen one well drilled. At the heart of the imbroglio is how greenhouse gas (GHG) emissions are to be accounted for.

In her ruling, US District Court for Colorado Judge Marcia Krieger said the admission by the US Forest Service and the Bureau of Land Management that Gunnison’s plan should never have been approved in the first place was crucial to her ruling.

Among the mistakes made by the agencies was a failure to carry out an analysis of GHGs, a relatively new and deeply contested requirement under the National Environmental Policy Act (Nepa).

Although the agencies acknowledged the failure, they argued that blocking Gunnison’s plan entirely would be “unnecessarily disruptive” to the company, which has already drilled one well and had the other permits necessary for the 35-well project in hand.

Arguing Over Estimates

Gunnison’s setback comes as the Biden administration has moved to strengthen Nepa’s GHG rules following attempts to undercut them by the previous administration.

Under former President Donald Trump, rules were put in place stripping the requirement that the “cumulative” and “indirect” impact of emissions be considered, while at the same time restricting agencies’ ability to set stricter guidelines.

Now, under Biden, revisions to the regulations aim to clarify the meaning of “cumulative” and “indirect” to provide less wiggle room and allow agencies to reassert their ability to set stricter project standards.

Not all court rulings have gone Biden’s way, however. In early February, a US District Court in Louisiana blocked the restoration of Obama-era values for calculating the cost of climate change in the government's permitting, investment and regulatory decisions. That was followed a week later by another federal court ruling that GHG estimates would cause undue economic harm to several states pushing against the White House’s new climate numbers.

Pricing Carbon

At issue in all these cases are the values used to determine the social cost of carbon in federal estimates, which have become a political football between supporters and detractors of the fossil fuel industry in Washington.

Under the Obama administration, which first introduced carbon cost estimates, the cost per ton of emissions was pegged at around $43. That was later reduced by Trump to roughly $5 per ton.

The Biden administration has in turn been relying on an interim rate of $51/ton.

Taking It to Court

Courts have played a significant role in shaping oil and gas development on federal lands in the last several years. While federal reviews for drilling plans under Nepa have long been a favorite target of environmental activists in court, in recent years federal judges have stepped up expectations on how those reviews should account for climate implications.

Last year, for example, a district court in Alaska ordered ConocoPhillips to address concerns surrounding its Willow project on Alaska’s North Slope. Among the chief issues the court cited was a failure to properly address GHG emissions from foreign oil consumption, an area that courts were previously hesitant to wade into.

Earlier this year, a court dealt an even stronger blow by annulling a November lease sale in the US Gulf of Mexico over a similar fatal flaw in a Nepa review. The court cited the failure of the US Department of the Interior to properly quantify the carbon emissions that would be produced by foreign consumption of the resources extracted from the leases.

CO2 Emissions, Policy and Regulation, Low-Carbon Policy
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