Colorado midstream operators have been subject to new rules addressing fuel combustion equipment greenhouse gas (GHG) emissions since 2021. A milestone reporting deadline under the new rule is coming up in June. This article explains the components of these new reporting requirements for Colorado midstream operators.
Colorado Regulation 7 Background
In 2021, the Colorado Department of Public Health and Environment (CDPHE) Air Pollution Control Division (APCD) updated rules formerly under Regulation 22, now under Regulation 7, to address GHG emissions from midstream operators’ fuel combustion equipment. Starting on October 31, 2025, APCD will publish an annual midstream segment report outlining the new program’s status. Midstream operators must report fuel combustion equipment GHG emissions by June 30, 2025, for this report.
Key Definitions and Numbers
Colorado defines Midstream Fuel Combustion Equipment (MFCE) as “engines, turbines, process and other heaters, boilers, and reboilers operated by a midstream company in the midstream segment.” APCD assigns existing midstream operators company-specific caps for carbon dioxide-equivalent (CO₂e ). These caps are based on midstream operators’ reported 2021 MFCE GHG emissions, avoided emissions through electrification, and a cap factor percentage.
CO₂e Cap Determination for Midstream Operators
| GHG Emissions in Metric Tons (MT) CO2e | Company Cap |
| <25,000 MT CO2e | 2021 MFCE GHG Emissions |
| >25,000 MT CO2e | 2021 MFCE GHG Emissions OR (2021 MFCE GHG Emissions + Avoided Emissions via Electrification*) x (1 - Cap Factor %) |
*Avoided Emissions via Electrification refers to GHG emissions reductions from electrification projects undertaken between January 1, 2016, and July 31, 2022, as identified by APCD in 2024.
Cap Factor Percent Calculation
The cap factor percentage varies based on a midstream company's 2021 MFCE GHG emissions:
| 2021 MFCE GHG Emissions in MT CO2e | Cap Factor Percentage |
| >500,000 MT CO2e | 22.532666% |
| All Other Midstream Companies | (2021 MFCE GHG Emissions + Avoided Emissions via Electrification - 25,000) x ((22.532666% - 6.0%) / (500,000 - 25,000)) - 6.0% |
*For individual subsidiaries of a parent company with total aggregated emissions exceeding 500,000 MT CO₂e, the parent company cap factor is also 22.532666%.
Location and Seniority
APCD differentiates between existing and “new entrant” midstream operators.
“New entrant” is defined as a midstream company that did not own or operate any MFCE in the midstream segment in Colorado as of September 30, 2023. A company cannot become a new entrant by acquiring an existing facility. A company only becomes a new entrant if it does not own or operate any MFCE in Colorado and then constructs a new midstream facility with MFCE.
Unlike the previously detailed company caps for existing companies, new entrants must comply with a company cap of 0 MT of CO₂e. APCD has developed different compliance paths for operators within the Front Range Prioritization Area (FRPA) (Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Jefferson Larimer, and Weld counties) and operators outside of the FRPA.
Extensions and Exemptions
There are four scenarios offered for granting reporting deadline extensions:
The midstream operator requires permits or permit modifications to comply with this rule and has submitted all permitting actions before December 31, 2028, but APCD has not issued the relevant permits by December 31, 2029.
After December 31, 2030, the midstream operator requires a permit or a permit modification and submitted the permit application at least 12 months prior to planned construction, but APCD has not issued the relevant permit.
The midstream operator submitted a service application request as required by its electric utility by December 31, 2026, but will not have service by December 31, 2029.
The midstream operator is unable to achieve the company cap due to unforeseeable circumstances or unavoidable events that are beyond the reasonable control of the company. Such circumstances or events include natural disasters and utility actions subject to public utilities commission approval or other regulatory restrictions.
APCD acknowledges four scenarios when electrical grid reliability could result in the need for a midstream operator to have temporary emissions from MFCE:
The midstream operator must curtail onsite electricity consumption at the request of the electricity provider.
The midstream operator must generate onsite electrical power to operate electrically powered equipment that does not have sufficient power from the utility company.
The electrical utility company has issued a public safety shutoff notice for the area.
The midstream operator experiences a full or partial power outage at the facility.
If any of the previously mentioned scenarios occur, operators must submit a notice to APCD within 30 days. The notification must include the AIRS ID of MFCE used, documentation from a utility company, the startup and end date and time, total time in hours the equipment operated, and the total estimated CO₂e emissions.
Maintaining Colorado Regulation 7 Compliance
Operators without facilities located within the FRPA must either reduce onsite GHG emissions or retire GHG credits. Operators with facilities within the FRPA have the option to either reduce onsite GHG emissions or retire GHG credits, provided they can demonstrate that the company's reduction obligation has been met either within the FRPA or in facilities located within disproportionately impacted (DI) communities. Alternatively, by January 1, 2029, operators can demonstrate that meeting the company's reduction obligation is not technically or economically feasible.
APCD Required Criteria for Feasibility Demonstration
APCD outlines the four criteria below for adequate demonstration. This demonstration is subject to public comment prior to APCD approval.
The direct costs, including capital costs and incremental operating costs, of potential onsite emissions reduction options.
The benefits of completing the onsite emissions reductions, including reduced energy use and reduced emissions over the life of the emissions reduction options.
If an evaluated onsite emissions reduction option involves electrification, the availability and cost of supplying electric grid power to the facility or equipment.
The most recent social cost of GHG for which the federal government has determined the cost, except that the social cost of GHG that is used may not be lower than that established by the federal Interagency Working Group in 2016, and it can’t have a discount rate higher than 2.5%, consistent with the State Air Act as of December 20, 2024 (currently $57/MT CO₂e).
Getting GHG Credits
Midstream companies can generate, sell, purchase, and retire GHG credits through CDPHE’s system. This system was established by CDPHE’s Regulation 27, Part D. Midstream operators must register with the APCD by December 1, 2028, to participate in the GHG credit system.
Starting with emissions in calendar 2027, midstream operators will generate one GHG credit for each metric ton of CO₂e that is below the annual direct GHG emissions company cap. These credits can be traded among operators, providing some flexibility.
APCD Required Reporting
Midstream operators are required to submit annual emissions inventory reports (AEIR) by June 30th of each year. Starting in June 2025 the AEIR will require the following:
Project plans to achieve company cap
Project location and MFCE
AIRS IDs for engines requesting exemptions
Timelines for project commencement and completion
Estimated annual reductions in CO₂e and Hazardous Air Pollutants (HAPs) from projects
Supporting documentation that long-duration projects are planned or underway
Material changes to plans since last report
Completed projects
Ownership transfers that occurred in the previous calendar year
GHG credits generated
GHG credits retired
Verification that the midstream operator achieved or will achieve the 45% goal by December 31, 2030 (if applicable)
If extensions are requested, documentation of resolution of extension causing situation
If exemptions are requested, documentation of resolution of the exemption causing situation
Certification by a company representative.
Questions? Connect with Our Air Quality Compliance Specialists.
Trihydro's air quality and regulatory specialists can help you manage the complexities of Colorado’s Regulation 7 compliance. With our expertise in emissions regulations and industry best practices, we can assist you in developing effective strategies for monitoring, modeling, permitting, and reporting compliance data.
Contact us to develop your CDPHE - APCD compliance strategy.
