Colorado's new oil and gas rules portend a major 2009 issue

Want a glimpse of one of 2009's potentially biggest domestic production issues? Look no further than the new oil and gas regulations Colorado adopted on Dec. 11, 2008.

Jan 9th, 2009

Want a glimpse of one of 2009's potentially biggest domestic production issues? Look no further than the new oil and gas regulations Colorado adopted on Dec. 11, 2008.

The Colorado Oil & Gas Association thinks they're awful. Earthworks, which originally was formed to oppose mining practices but expanded its efforts into oil and gas in 1999, thinks they're terrific.

The state's Oil and Gas Conservation Commission unanimously approved changes which it said would provide greater protection for Colorado's water, wildlife and communities while enabling the oil and gas industry to thrive. The new regulations also apply to private and federal land because they are "grounded in the police powers of the state" to protect the public's safety and welfare, COGCC said.

The commission developed the new rules after Colorado's general assembly adopted House Bills 1341 and 1298 in its 2007 session. COGCC said that the rulemaking process involved more than 12 hours of public meetings statewide, thousands of comments and testimony, 12 days of hearings and 11 additional days of deliberation before the final vote.

It said that the final package reflects many modifications drawn from comments and suggestions of industry representatives, local governments, conservation groups and others. The legislature is scheduled to review the rules in its 2009 session.

"We are committed to working closely with industry to ensure these rules work as intended. We will pay close attention during the implementation phase to make sure the transition proceeds as smoothly as possible," said Harris Sherman, the commission's chairman and director of its parent, the Colorado Department of Natural Resources.

Primary provisions

Key provisions include establishing protection zones around streams that serve public drinking water supplies, requiring producers to keep track of and disclose drilling chemicals they use to state and emergency responders, managing erosion and reducing water pollution around production sites during storms and snow run-off periods, and reducing odors from development near homes and schools, according to COGCC.

It said that producers also will be required to let the state's health department and wildlife agency consult and offer recommendations, notify nearby landowners and seek public comments on proposed projects. Operators also will have the ability to submit large-scale development plans to expedite or eliminate some permit reviews while helping avoid potential conflicts, the commission said.

"Almost all of the environmental changes reflect the environmental practices already employed by some companies. The consultation approach taken by the COGCC with regard to wildlife protection was proposed by industry itself. The rules grandfather most existing operations and will be phased in over several months to provide for a smooth implementation," it indicated.

The commission said that it is already working with a number of producers to develop comprehensive drilling plans, which were a major element of the new rules. It said that these plans will provide producers certainty about development of a field while letting agency officials assess cumulative impacts and help operators avoid potential problems. COGCC also has received approval to hire new employees and is planning training sessions with producers, it added.

'Time consuming, burdensome'

But John Swartout, COGA's senior vice president for policy and government affairs, said on Dec. 11 that COGCC's new regulations "create the most expensive, time consuming and burdensome regulatory environment in the nation, all at a time when Colorado should be fighting to keep jobs."

The rules also don't achieve the legislative intent to create a "timely and efficient" drilling permit application process because they add "numerous and burdensome layers . . . to the already cumbersome process," he added.

Earthworks takes the opposite view. "A commission that had been oil and gas industry-dominated for decades now has a balance of representation from the industry, local government, public health, agriculture and wildlife sectors, with a mandate to protect public health and the environment in the course of oil and gas development," it said in a Dec. 12 statement.

The group opposes hydraulic fracturing to produce gas and sent Bruce Baizel, the staff attorney in its oil and gas accountability project, to Sullivan County, NY, in late October to participate in a forum with other environmental organizations.

Colorado's new rules take effect on May 1 on public land within the state and on April 1 on all other acreage, COGCC said.

Contact Nick Snow at nicks@pennwell.com

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