Navigating Colorado AQCC Regulation 22: How CO2 Regulations is Impacting Natural Gas Processing Plants

As Colorado increases its efforts to combat climate change, the regulatory landscape for industrial operators (particularly in the natural gas processing plant and gathering system sectors) is evolving rapidly. The latest development, Colorado Air Quality Control Commission (AQCC) Regulation 22, introduces stringent greenhouse gas (GHG) reporting and reduction mandates that will significantly impact how midstream infrastructure is designed, operated, and maintained.

Understanding Regulation 22

Regulation 22, formally titled Colorado Greenhouse Gas Reporting and Emission Reduction Requirements (5 CCR 1001-26), establishes a comprehensive framework for monitoring, reporting, and ultimately reducing GHG emissions across multiple sectors of the state’s economy. For midstream operators (those responsible for gathering systems, natural gas processing plants, and transportation), this regulation will require balancing the development needs of producers and the emissions caps related to GHGs.

The rule mandates that Annual GHG reporting will be required for facilities that emit over 25,000 metric tons of CO₂e per year, as well as multiple sources if they fall below the federal reporting thresholds (e.g., the 25,000 metric ton CO₂e threshold under EPA’s 40 CFR Part 98).

Emission reduction targets are aligned with Colorado’s broader climate goals: a 26% reduction by 2025, 50% by 2030, and 90% by 2050 (from 2005 levels) established under HB 19-1261.

On February 14, 2025, regulatory provisions became effective requiring every midstream company to participate in the emissions reduction program. They must achieve a collective midstream segment cap of 3,930,228 metric tons CO₂e by December 31, 2030, and maintain company-specific caps annually thereafter.

Implications for Midstream Project Development

From a project development perspective, Regulation 22, which was adopted in October 2024 and went into effect in early 2025, requires a paradigm shift. No longer can emissions be an afterthought. GHG emission reduction and methane reduction must be embedded from the earliest stages of project planning.

Here’s what midstream developers will need to consider with their emissions planning:

Carbon Footprint Assessments for New and Existing Assets

Developers must evaluate the lifecycle emissions of both current and planned infrastructure. This includes emissions from:

Compressors and natural gas processing plants
Fugitive methane leaks from gathering systems and pipelines
Combustion sources such as flares and engines

Integrating carbon modeling tools into the front-end engineering design (FEED) process is now essential to determine how overall emissions levels will be impacted for the operator. The company-specific emissions caps are calculated using each operator’s 2021 MFCE GHG emissions. October 2025 will require reporting under this program.

Technology Integration for Emission Reduction at Existing Assets

To meet reduction targets, midstream operators will consider solutions to lower the overall GHG emissions:

Electrification of engines at compressor stations and natural gas processing plants
Deployment of low-bleed or zero-bleed pneumatic devices
Advanced leak detection and repair (LDAR) programs
Carbon capture and storage (CCS) feasibility for large emitters

Operators will expect to see increased CapEx costs for compliance with marginal increases in processing capacity. Some assets may be consolidated and decommissioned before the planned end of useful life. Client will focus on reducing their methane emissions first, considered 25 times more potent than CO2 emissions. CANUSA EPC has various solutions documented for ideas, check out a novel capture application for Turbine Seal Gas Capture.

Regulatory Compliance Strategy

Operators must establish robust compliance systems that include:

Real-time emissions monitoring
Accurate data collection and reporting mechanisms
Internal audits and third-party verification

Failure to comply could result in penalties and reputational damage, especially as public scrutiny of fossil fuel infrastructure intensifies.

Civil penalties for midstream operators, under C.R.S. § 25-7-122, outline that violators may face civil penalties of up to $47,357 per day, per violation, with the amount adjusted annually for inflation. These penalties apply to a wide range of noncompliance issues, including failure to meet greenhouse gas (GHG) reduction targets, inadequate emissions reporting, and violations of leak detection and repair (LDAR) or combustion control requirements. In severe cases, the Colorado Department of Public Health and Environment (CDPHE) may also seek injunctive relief through the courts to compel compliance or halt operations.

In egregious circumstances (such as willful misconduct, repeated violations, or incidents causing serious harm), operators may also face permit suspension or revocation under C.R.S. § 34-60-121, enforced by the Energy and Carbon Management Commission. While this statute is relevant to upstream operators, it is not directly applicable to midstream GHG violations under Regulation 22 is not clearly defined. These consequences underscore the importance of strict regulatory compliance, accurate emissions tracking, and timely communication with regulators.

Looking Ahead for Natural Gas Processing Plants

Colorado’s Regulation 22 is not just a regulatory hurdle—it’s a signal of the energy transition underway. For midstream operators, aligning with these mandates is not only about compliance but also about future-proofing assets and maintaining social license to operate.