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Colorado's Proposed Rules Vex Operators, Worry Environmentalists

In clarifications to proposed regulations on oil and gas drilling, Colorado regulators have suggested delaying timing restrictions on drilling activity until 2010 if operators consult with the Colorado Division of Wildlife or develop comprehensive drilling plans to protect wildlife. The oil and gas industry, which is fighting the rules changes with an advertising campaign, seems unimpressed by the clarifications, and at least one environmental group fears the change would create a hole in oversight.

"All I can say is the state has made this claim of change before, and we've seen what it's produced," Colorado Oil and Gas Association (COGA) President Meg Collins told NGI, referring to the latest and previous rules changes proposed by the Colorado Oil and Gas Conservation Commission (COGCC).

"Speaking of these clarifications, I think we'll have to see whether they're really improvements or not. And I think the biggest shortcoming is the fact that, speaking just for the wildlife clarifications, it still compels the companies to consult with the Division of Wildlife.

"We're still, as far as I know, back to having to convince the Division of Wildlife and the commission that the drilling proposed by the individual company is going to be protective of wildlife and show the proper reverence for the environment, which I think we've shown all along."

Among the changes suggested last Wednesday by the COGCC is allowing companies until 2010 to comply with the new timing rules if they submit comprehensive development plans for their activities that include measures to protect wildlife or consult with the Division of Wildlife. Companies that don't negotiate with regulators or submit development plans could be restricted for up to 90 days on when they can drill in order to protect wildlife. The proposed clarifications are available on the COGCC website, http://oil-gas.state.co.us/.

More than 10,700 jobs could be displaced for part of the year if proposed new permitting and drilling rules under consideration in Colorado are enacted, according to COGA and the Colorado Petroleum Association (CPA), which have mounted an advertising campaign to fight the rules. Meanwhile, with new natural gas fields opening up across the country, drilling restrictions in Colorado could drive producers to go elsewhere, which would decrease state revenue from production taxes and fees.

The COGCC in late March unveiled draft regulations that would restructure some of the state's energy rules (see NGI, April 7; Dec. 3, 2007). Statewide hearings are taking place this month, and the final rules could take effect by Nov. 1.

Suzanne O'Neill, Colorado Wildlife Federation executive director, said the industry advertising campaign has mischaracterized the provision of the rules requiring timing restrictions on activity in the case of companies that opt not to work with the Division of Wildlife. "[T]hat is a backstop that doesn't come into effect unless the operator chooses not to use one of the other tools...working with the Division of Wildlife...There are several tools there. If they don't want to do that then that's a backstop."

O'Neill said she is concerned that the rules as proposed could create a stampede of companies beginning work on development plans in order to take advantage of an apparent window in which they would not be subject to oversight for wildlife protection.

"As I understand the clarification, at least one aspect of it, if the operator decides to initiate work on a comprehensive drilling plan by Dec. 1 of this year, then they do not have to comply with these backstops until Jan. 2010. So while the federation always favors providing incentives for good planning that balances the wildlife protections with extraction, we're concerned about what happens in the interim.

"We know there's a flood of applications for drilling permits. That's been true last year and so far this year. And so what happens between December 2008 and January 2010 for someone who is working on a comprehensive drilling plan? Are there no wildlife protections during that entire period in these sensitive habitats? And because of the amount of leases in the Piceance Basin...will there be a rush to gain permits for those parcels during 2009 without any kind of balance for wildlife protection?"

Collins faulted the rulemaking process and said it has been "very strange."

"[W]e don't know how these clarifications are going to be incorporated into the docketed rules," Collins said. "All that industry can deal with and respond to right now is what's been filed and what's been docketed. I don't know what process they're going to use to put forward these clarifications to the commissioners and persuade them to adopt them. Once again, we're back to something of a moving target."

COGCC is to hold a public hearing in Denver Monday to take public comment on the proposed rules. If that hearing is like a recent call for public comment held in Grand Junction, CO, it will draw quite a crowd. Collins said more than 2,000 people showed up at the Two Rivers Convention Center in Grand Junction to express their concerns about the proposed rules. Additional hearings are to follow Monday's with deliberation by commissioners later and then a vote on rules expected in mid August.

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