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Colorado Commission Proposes Oil/Gas Rules Following Task Force Recommendations

The Colorado Oil & Gas Conservation Commission (COGCC) on Tuesday unveiled draft rules to implement two recommendations by the oil and gas task force appointed by Gov. John Hickenlooper and is planning three public hearings this month.

In a six-page letter, COGCC Director Matthew Lepore said the commission proposed defining a Large Urban Mitigation Area Facility (UMA) as one that contains a total of 90,000 feet of wellbore length, or on-site storage capacity totaling 4,000 bbl, which is a task force recommendation. That figure would include all new wellbores on a proposed location, or the cumulative total for new and existing on-site storage capacity.

The COGCC "deliberately proposed a lower threshold for hydrocarbon storage capacity than for wellbore length to incent operators to transfer oil and gas off-site via pipeline rather than truck,” Lepore said. The proposed thresholds "are not limits on either the number of wells or storage tanks that may be located on a facility. Rather, these metrics merely are triggers that require consultation between the local government and the operator concerning the siting of a proposed large UMA facility."

Currently, an operator proposing to build a large UMA facility must notify and consult with local government officials about the plans. The COGCC proposed initiating a deadline specifically within 90 days of filing an oil and gas location assessment (OGLA) for the operator to consult with local officials.

The commission said it wants to discuss the concept of a "consulting agency," which would be tasked with notifying adjacent municipalities within 1,000 feet of a proposed large UMA facility. But Lepore said under the proposed rules, adjacent municipalities would not have the right to request a commission hearing on such facilities, nor would operators be required to win those municipalities' approval.

Large UMA facilities would also be subject to best management practices, divided into required best management practices, required mitigation measures and site-specific mitigation measures. One proposal would be for operators to meet with municipalities to discuss time limits for drilling, completion and stimulation operations. 

The second recommendation by the governor's task force called for requiring operators to register with the municipalities in which they have operations.

According to the COGCC, during its outreach meetings "many questions were raised regarding both the exclusion of counties from the registration [and] information requirements, and the logic behind, and utility of, basing a five-year estimate of the number of wells an operator plans to drill in a municipality on 'proved undeveloped' reserves as reported to the Securities and Exchange Commission [SEC]."

But Lepore’s letter said COGCC staff proposed that the registration requirement continue to apply to municipalities, not counties. The requirement would take effect on March 1.

The COGCC said it wants to discuss the possibility of requiring operators to provide information about planned drilling activity, plus estimates of future planned activities. The latter would include growth management areas currently outside a municipality's boundaries.

The commission said it also wants to discuss possibly requiring privately held operators to disclose to municipalities how many wells they plan to drill in a municipality over the next five years.

"During outreach meetings, operators expressed concern about the utility and practicability of basing a well number estimate on the SEC 'proved undeveloped' reserves analysis," the COGCC said. "Staff proposes not to prescribe the specific basis by which an operator arrives at its estimate, and identifies the SEC proved undeveloped reserves merely as an option, not a requirement."

The COGCC plans to hold three public hearings on the draft rules Oct. 14-16.

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