Colorado Oil and Gas Conservation Commission rules may be a model for other states

GLENWOOD SPRINGS, Colorado - Colorado Oil and Gas Conservation Commission (COGCC) members' tentative endorsement of several new rules last week and last month may garner the attention of several states as they look to regulate the ongoing energy boom in the American West, the head of the agency said Friday.

Dave Neslin, acting director of the COGCC, said several states may look to Colorado about how to regulate that energy boom after the commission's initial endorsement of several rules that he said "mark some new approaches on some issues."

The rules Neslin cited would mandate that companies inform the state of which chemicals are being used at a drilling location, encourage operators to use a comprehensive drilling plan and require companies in three counties in northwest Colorado to use green completion techniques. That is a process that recovers gas that would otherwise be vented or flared during the completion phase of a natural gas well.

"I think those are all new tools other states may look at," Neslin said.

Colorado's oil and gas commission has given tentative approval to about 80 rules during five hearings in August and last week. Commission members based much of their provisional votes on rule language drafted by agency staff.

"Our final recommendations reflected a lot of input from different parties," said Neslin, adding those parties included the energy industry, environmental organizations and local governments like Garfield County. "The commission certainly gave thoughtful and thorough deliberation to the rules it acted upon."

Two more days of hearings will be held on Sept. 22 and Sept. 23. That is when commissioners are expected to begin deliberation on wildlife and waste pit rules, which have engendered the most criticism and controversy during the state's current rule-making process.

The oil and gas industry perspective

COGCC staff began work on the new rules in August of last year. That process began because of legislation the legislature passed last year that required the agency to expand its focus to consider public health and wildlife impacts, and require the use of best management practices to minimize harm from oil and gas development.

Ken Wonstolen, an attorney with Fulbright & Jaworski and legal counsel for the Colorado Oil and Gas Association, said there is "no question" that the proposed rules are some of the "most restrictive" ever proposed by a state.

"There isn't another state in the union that provides for general public comment on drilling permits," he said. He was referring to a rule that would allow a 20-day comment period on all drilling permit applications, along with individual notice to the surface owner and individuals who own property within 500 feet.

As the rule-making process has moved forward in August and September, Wonstolen said there has been some movement forward to include industry's suggestions and wording into agency staff's final rule recommendations.

"In terms of actual wording, the staff recommendations probably incorporated more wording from industry alternatives than other parties," he said. "But I think the commissioners have given a fair hearing to the issues raised by all of the parties."

Wonstolen said it should be made clear that industry wants to improve the final product and appreciates the work being made toward that. However, that doesn't mean industry thinks that "this new regulatory edifice makes a lot of sense or that it meets the goal of being timely and efficient," he said.

"Certainly, it puts Colorado in a unique position among the oil and gas producing states, in terms of the regulatory burden," Wonstolen said.

Tentative rules The Colorado Oil and Gas Conservation Commission (COGCC) held more than 30 hours of deliberations during three days of hearings last week. Here is a snapshot of what they tentatively decided: • On Tuesday, the commissioners signed off on a rule that would encourage oil and gas companies to draft comprehensive drilling plans identifying future drilling locations. Those plans would be crafted with the Colorado Department of Public Health and Environment and the Colorado Division of Wildlife. Local government and surface owners would be invited to participate in the drafting of those plans. It is voluntary for companies to draft such plans. But if they go forward with them, they can gain incentives from the state, like possible fast-tracking of drilling permits through the COGCC's permitting process. The commissioners also gave preliminary approval to a rule that would keep the minimum distance a drilling rig may be placed near a home at 150 feet. However, a stakeholder group is expected to meet in January and report back to the commission in April about possibly increasing that setback distance. • On Wednesday, commissioners endorsed a rule that would mandate that energy companies operating in Mesa, Garfield, Gunnison and Rio Blanco counties receive approval for each new well pad they may place in those counties. • On Thursday, commissioners tentatively approved rules requiring energy companies to notify landowners in areas where drilling will occur. Those rules also allow people whose property will be subject to drilling to request a hearing with the commission if they allege any kind of violation. However, adjacent landowners would not be able to request a hearing.

Controversy surrounding the rules

Criticism from the oil and gas industry erupted after the agency released a pre-draft proposal of rules in December. Some companies expressed warnings about the economic consequences they could have on local communities, like those on the Western Slope.

However, Neslin said the state still has seen record drilling levels as the current rule-making has progressed. The state has already approved 1,957 drilling permits in Garfield County this year, according to COGCC records. The agency approved 2,550 drilling permits in the county last year.

"The energy boom has not just been sustained, it is accelerating," he said, adding that 7,000 state drilling permits could be approved this year.

Neslin added that some of the materials that the industry submitted during the rule-making process showed that projected drilling activity in the Piceance Basin would increase by about 40 percent in the next 10 years.

"It is a vigorous industry," Neslin said. "We hope it continues to thrive in Colorado, and we want it to thrive in Colorado. We are confident it can do that, while at the same time better protect our water, our air and our wildlife resources."

The contentious relationship that began between the industry and the state after the draft rules were released in March continued to boil over in June when the COGCC held a public meeting in Grand Junction over the proposed rules. About 2,000 energy industry representatives showed up to that meeting, which the agency organized to gain public feedback on the proposed rules.

The vast majority of those representatives, many of whom were visibly angry, blasted a proposed 90-day drilling restriction in sensitive areas of the Western Slope. During that time, industry trade groups also launched a massive ad campaign in newspapers and on radio across the state, criticizing the state and Colo. Gov. Bill Ritter over that specific rule.

But as the rule-making process has moved forward some of the earlier polarization and controversy has dampened down some, Neslin said.

"That is not to say everyone is in agreement with the final recommendations and the rules," he said. "I understand some parties are not (happy), but I think they might appreciate the process they have been part of."

The 90-day drilling restriction would have been triggered for wildlife habitat areas on the Western Slope if companies declined to do any of the following: draft comprehensive drilling plans, consult with the Division of Wildlife, limit their density in certain areas or demonstrate that their targeted drilling area has had a demonstrated lack of habitat.

That rule has since been dropped from the state's final recommendations. However, in each instance where the timing restriction would have been triggered before, the rules still include a mandatory consultation requirement in which companies must work with "the DOW and attempt to agree to on site-specific mitigation," Neslin said.



Contact Phillip Yates: 384-9117

pyates@postindependent.com



Post Independent, Glenwood Springs, Colorado CO