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Study Shows Production Slowdown With New Colorado Rules

Proposed new permitting and drilling rules under consideration in Colorado would cause a production slowdown that could increase the average wellhead price in the state between 13 and 41 cents/Mcf, costing in-state consumers up to $1.7 billion over the next 10 years and consumers across the United States up to $32 billion, according to a study by ICF International.

The study examines three possible scenarios, based on the estimated impact of the final rules to be decided by the Colorado Oil and Gas Conservation Commission (COGCC). The draft rules were issued last month and statewide hearings on the proposals are expected to begin by the end of June (see Daily GPI, April 2). The final rules could take effect in November.

The study, prepared for the Colorado Oil and Gas Association (COGA), shows that the pending rules would cause a production slowdown due to longer lead times to gain state permits, months-long limitations on when drilling could occur, and an increase in the cost of drilling new wells. Under the three possible scenarios the ICF study found reduced gas well completion activity of 10, 20 and 30%.

Projected gas well completions for Colorado would potentially drop from near 30,000 to less than 22,000 throughout the next 10 years. Gas production that would rise to about 4,700 MMcf/d without the new rules, would only rise to about 3,850 MMcf/d in the 30% reduction case, which is only a slight increase from today's level, the study said.

"The environmental extremists are applauding this study," said Greg Schnacke, president of Americans for American Energy. "It shows the proposed regulations are going to do what they want -- slow down American oil and gas production. What the study doesn't show is how much more imported oil and natural gas we will have to add."

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

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