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Encana, Front Range Town Reach Agreement For New Drilling Sites in Denver-Julesburg

Encana Corp., one of Colorado's biggest oil and gas producers, and the town of Erie, which sits along the Front Range, have reached an agreement governing how drilling sites should be operated.

The five-year landmark operating agreement followed months of negotiations (see Shale DailyJan. 27). It imposes more stringent regulations than Colorado requires for horizontal wells covering eight pads, five in town and three adjacent, Encana spokesman Doug Hock told NGI's Shale Daily. "The Denver-Julesburg Basin wells in the Erie area are one of the company's original assets from its inception in 2002."

Pro Tem Mayor Mark Gruber said the town was able to improve the regulatory process, while the town was able to achieve "the 19 components that we thought were the most important to the community into the agreement." The contract, he said, is legally enforceable.

The resolution approved by the trustee board said the agreement "is found to be in the best interest of the Town of Erie, and necessary for the preservation of the public health and safety."

Encana agreed to impose wider drilling setbacks, more stringent noise limits, additional air quality inspections and stakeholder meetings to discuss the drilling plans. Regular, quarterly meetings with town's board of trustees also are required.

The eight drilling sites are considered to be fully permitted at the local level. With local permits, Encana is not required to seek additional approvals by the town's planning commission or the trustees. If the contract terms were to be violated, mediation would be required.

Among the more stringent requirements to which Encana agreed to adhere were setbacks of at least 1,000 feet and up to nearly 9,000 feet between new wells and buildings in town; noise levels capped at 60 decibels, the level of normal conversation about three to five feet away; and air quality inspections every month for a year using infrared camera equipment to check for leaks in equipment, with the results shared with the town. Encana also has to file a five-year drilling plan.

Before seeking a state drilling permit, Encana has to notify Erie neighbors within a half mile of the drilling site and conduct public meetings to gather comments, which would be included in the permit application for review by the Colorado Oil and Gas Conservation Commission.

In the summer of 2012, Erie's board of trustees voted to end a six-month moratorium on new drilling and instead introduced the idea of securing memorandums of understanding with Encana and another big producer in the area, Anadarko Petroleum Corp., that placed regulations on its operations that were stricter than the state's (see Shale DailyAug. 30, 2012). Other towns in Colorado with oil and gas interests at that time were continuing to pursue drilling moratoriums, many of which have since been tossed by the courts.

The contract with Encana was approved unanimously on Tuesday by a vote of 6-0. It is to be renewed automatically but it may be terminated at the end of the five-year term if either party gives at least 30 days notice.

"The agreement encompasses 19 best management practices, or BMPs, that Encana has agreed to follow in development of eight well pads in and around the Town of Erie," Hock said. "In some cases, for example air emissions testing and noise, they go above what's required by the state.

"The BMPs are conditions of the state permit and enforceable by the Colorado Oil and Gas Conservation Commission. For its part, Encana's permitting process with the town is streamlined, with no requirement for a vote by trustees on each application. Rather, following public comment, applications are reviewed by the town's planning commission to ensure completeness.

Encana officials, Hock said, "spent many hours with representatives of the Town of Erie board of trustees in negotiation of the agreement. The resulting process provides business certainty and timeliness moving forward as we pursue our development program in and around Erie. Furthermore, we believe it provides a good framework for oil and gas companies and communities working to resolve issues surrounding energy development."

Encana has a field office in nearby Firestone, CO, with about 80 employees. In addition, Encana has a team in Denver that works on the Erie properties, Hock added.

Anadarko has said it would be interested in pursuing an operating agreement also, according to Gruber.

Erie's planning commission also is updating zoning regulations to give producers three choices under which they could drill new wells. Producers could either work within Colorado regulations and Erie's land use rules, which would include public hearings and votes before the town's planning commission and board of trustees; impose more stringent setbacks and noise limits and have a vote taken by the planning commission; or negotiate an operating agreement with the town. A vote on the updated rules is expected in September.

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