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Producer Groups Slam Colorado's Draft Energy Rules

The Colorado Oil and Gas Association (COGA) is "extremely concerned" about the draft oil and natural gas rules issued last week by state regulators, which COGA said may have a negative effect on the booming energy industry.

The proposed rules were issued for comment last week by the Colorado Oil and Gas Conservation Commission (COGCC) (see NGI, March 10; Dec. 3, 2007). Statewide hearings on the proposals are expected to begin by the end of June; the final rules could take effect by Nov. 1.

COGCC acting director David Neslin said the draft rules are intended to balance the state's approach in dealing with the ongoing energy boom -- taking into account the needs of the energy industry as well as the needs of the environment. For instance, he said the rules, if enacted, would shorten the amount of time it takes to apply for a drilling permit. There also would be less overlapping authority among agencies, he said.

The draft rules followed passage of Colorado House Bills 1298 and 1341 last year, which required stricter environmental regulations for the energy industry. The new laws also expand the regulatory power of the COGCC.

However, COGA President Meg Collins said the draft rules "go far beyond the intent of last year's legislation." Many of the energy industry's concerns remain in the draft rules but in a different form, she said.

"We still believe that the draft rules clearly go far beyond the intent of last year's legislation," said Collins. Producers operating in the state "strongly disagree" that the proposals would lead to growth for energy industry. in fact, she said the proposed rules, she said would negatively impact Colorado's "top economic contributor" at a time when the state's economy is being lifted by energy development.

"The commission has been tasked with a huge responsibility," Collins said. "Getting these rules wrong could mean less tax revenue to local and state governments, increased costs to state government and hardworking Coloradans, costly and uncertain delays for industry, and, most importantly, less production of the clean natural gas Coloradans rely on as a part of their secure, stable and affordable energy supply."

However, the industry now has the opportunity to engage in the formal process, where its expertise may be shared while focusing on "sound science, facts and real data versus anecdote and emotion," Collins added.

Americans for American Energy, a Colorado-based energy advocacy group, took a less charitable view of the proposed rules.

The rules, if adopted, would "dramatically overhaul the state oil and gas regulatory system and create a burdensome permitting process that threatens to add significant delay, cost and project risk to oil and gas development," said AAE CEO Greg Schnacke. He formerly was executive director of COGA. "In addition, the new rules package proposes extensive air regulations that were in the October draft, but given only a cursory description in the 'Initial Pre-Draft Rulemaking Proposal.' It's now clear that this document, issued in November 2007, was not 'pre-draft' regulations at all."

Schnacke said the state's "small producers get clobbered by new waste water disposal rules and higher bonding requirements that could force stripper wells in eastern and north central Colorado to stop producing entirely."

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