Friday, December 12, 2008

Colorado Legislation Anti Natural Gas?

By Mark Jaffe and John Ingold
The Denver Post
Posted: 12/11/2008 12:30:00 AM MST
Updated: 12/11/2008 02:06:09 AM MST

After an 18-month rulemaking marathon, Colorado adopted the most comprehensive state oil and gas drilling regulations in the nation Wednesday.

Republican lawmakers, however, already are vowing to make changes.

"We cannot afford to push the energy industry out of Colorado, given the current state of the economy," House Minority Leader Mike May, R-Parker, said. "And many fear that the proposed rules will do just that."

The 177 pages of rules — aimed at better managing oil and gas development, protecting wildlife, and reducing impacts on people living near drilling operations — were passed unanimously by the state's Oil and Gas Conservation Commission.

Among the protections the regulations impose are:

• A 300-foot no-drill buffer around streams used for drinking-water supplies.

• Controls on odors and dust on operations within a quarter-mile of homes in Garfield, Mesa and Rio Blanco counties — all major areas for natural- gas development.

• A requirement that drillers consult with the state Division of Wildlife on mitigation plans if they drill in designated wildlife areas.

"These rules are a model for the rest of the West," said Michael Saul, an attorney with the Rocky Mountain Natural Resource Center.

Ken Wonstolen, counsel for the Colorado Oil and Gas Association, an industry trade group, said: "There is nothing like it in the country. They are very complex."

Delays in permits seen

The industry's concern, Wonstolen said, is that the rules will greatly increase the time it takes to get drilling permits to as much as 75 days.

A survey of 13 other oil- and gas-producing states found that it took about five days for a permit, Wonstolen said.

But the average processing time in Colorado is now 65 days because of the crush in applications and limited staff, said David Neslin, director of the oil and gas commission.

In 2009 — with additional staff and the new rules — the goal is to cut processing time to 30 to 40 days, Neslin said.

Nevertheless, Republican legislators are taking aim at the rules.

"We are going to spend the first part of the legislative session dealing with the mess that is these regulations," state Sen. Josh Penry, R-Grand Junction, told an energy industry conference Tuesday.

The rules are the product of two bills passed in 2007 as the pace of drilling accelerated in the state.

Drilling permits are set to reach a record 7,870 in 2008 — up 33 percent in three years, according to the commission.

Commission revamped

The legislation directed the oil and gas commission to protect wildlife and public health by consulting with the Division of Wildlife and the Department of Public Health and Environment.

The legislation also expanded the oil and gas commission, and Gov. Bill Ritter appointed members that included environmentalists, local government and agricultural interests, as well as industry representatives.

Ritter made the new regulations one of his principal initiatives.

"These are rules that provide much more balance than we had in the face of unprecedented gas drilling," said Evan Dreyer, Ritter's spokesman.

The reconstituted commission also decided to overhaul its operating regulations and bonding requirements, which were more than a decade old.

The bills, however, also included a provision for a legislative review of the regulations.

DOW authority assailed

The rules for wildlife protection and stream buffers have drawn the most criticism.

There are concerns land could be made off-limits to drilling or landowners might be forced to accept wildlife projects on their property.

"The rules give the Division of Wildlife too much power," Penry said.

Those worries have been exacerbated by the weakening economy and fears that the rules will dampen industry activity in Colorado.

"I think there are folks on both sides of the aisle who get that," said state Sen. Greg Brophy, R-Wray.

But state Rep. Kathleen Curry, a Gunnison Democrat and a sponsor of the 2007 bills, said: "I don't think there is an appetite in the legislature for a wholesale rewrite."

Curry said the legislature would take a close look at the rules to make sure they match what lawmakers envisioned and may tweak some.

The rights of landowners potentially being overruled by a state agency is a particular concern, Curry said.

"The legislature gave us a difficult job of balancing wildlife protection and property rights, and we've tried to do that," said Harris Sherman, director of the Department of Natural Resources and chair of the commission.

As for the rules dampening industry activity, Sherman said: "What is affecting the industry is the credit crunch and the fall in commodity prices."

The spot price of natural gas on the New York Mercantile Exchange this year has fallen from $13.57 per thousand cubic feet to $5.67.

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