The cash- and employee-strapped Colorado state government is battling a growing oil and gas drilling permit backlog created by a combination of a 70% jump in applications between 2007 and 2010 and the recession, which shrank state government. However, oil and gas industry representatives are praising state officials for attempting to address the problem.
The state estimates that it will take all of this year to eliminate the backlog in environmental and public health permits that are needed to obtain state approval to drill wells. Construction can be held up by as much as a year waiting for a state health department or air emissions permits, according to energy companies.
Every exploration and production (E&P) company is impacted by the situation, according to Tisha Schuller, president of the Colorado Oil and Gas Association. Companies cannot drill without these permits, and the state has not been able to eliminate the backlog.
"Air permitting requirements are becoming increasingly complex, and so it does take longer to get permits," Schuller said. "The oil and gas industry has invested tens of millions of dollars in air pollution control equipment, and is committed to meeting and exceeding state permitting requirements."
Nevertheless, Schuller said recent news reports on a boom-caused backlog are "misleading" because currently Colorado is at just 63% of its rig count from an all-time high in 2008. She said it still important that her industry and the state continue in what she called "our partnership to reduce the air permitting backlog." An absence of air permits can cause production bottlenecks that shut in production, Schuller said.
"This impedes both job creation and the generation of state and local taxes off production. Everyone has a stake in a healthy, thriving oil and gas industry."
With encouragement from Gov. John Hickenlooper, Colorado has hired additional engineers to cut into the backlog, but it still sits at 1,800 applications, according to recent reports. Six temporary engineers hired in the Colorado Air Pollution Control Division have begun to make a difference, but they won't be able to eliminate the backlog until next year.
Officials with the pollution regulatory division told the state legislature recently that applications jumped from 164 per month to 284 per month from 2008 through 2010, and the state agency needs another 20 permanent engineering positions.
This backlog comes at a time when Colorado is gearing up for a continued surge in natural gas and oil E&P, particularly in the liquids-rich Niobrara formation centered in Weld County. Anadarko Petroleum Corp. and Noble Energy Corp., among others, are spending money to drill thousands of new wells in the formation.
The state so far has been "really responsive" to the continuing problem, not just in adding more staff to speed up application reviews, but by helping E&P companies with the permitting application process, Schuller said. In the meantime, Colorado officials talk about having to get ready for another surge of permit requests.