Colorado Legislature Approves New Oil & Gas Regulations

Regulations Take Effect April 1, 2009

The following article appeared in the Denver Post on Sunday, March 29, 2009

Companies Bracing For New Oil, Gas Regulations
Legislature Approved New Rules Last Week

GRAND JUNCTION, Colo. — Colorado oil and gas companies are poring over new state regulations to be ready by April 1, when the rules are set to take effect.

The Legislature approved the rules last week despite objections from opponents, mainly Republicans, who warned that stricter regulations will harm one of the state’s most important industries. The rule’s supporters say state regulations needed to be updated to handle the impacts of widespread drilling.

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State officials say companies will be able to ease into the new rules because drilling permits approved before Wednesday are subject to the old rules. Permits are good for one year, and state officials say there are thousands of wells yet to be drilled under existing permits.

“There’s going to be a transition period which will, we believe, be helpful to the companies,” said Harris Sherman, executive director of the Colorado Department of Natural Resources.

Sherman is also a member of the Colorado Oil and Gas Conservation Commission, the main regulatory body.

Wayne Bankert of Laramie Energy II questioned how much having grandfathered permits will help at a time when the industry has sharply cut back drilling and may not use a lot of the permits. He said companies plan a year or two ahead, and delays in getting permits under the new rules could be become an issue later when existing permits expire.

The industry has said the new rules, which require consultation with state health and wildlife experts in some cases, likely will make it longer and more expensive to get permits. They have blamed uncertainty around the new regulations for significant drops in drilling in Colorado, saying companies would rather invest elsewhere.

The rules’ supporters say that plunging oil and natural gas prices, tight credit and a shortage of pipeline capacity in the region have more to do with the decline in activity.

The roughly 100 new and revised rules will enact two laws requiring more consideration of the environment, wildlife and public health and safety when approving oil and gas development. Lawmakers overwhelmingly approved the two measures in 2007, when Colorado and the rest of the Rockies were in the middle of a natural gas boom.

Companies have cut back drilling since the national recession has deepened.

The rules’ opponents have targeted Gov. Bill Ritter, who made updating the regulations and expanding the oil and gas commission to include more industry outsiders priorities. But residents who live in natural gas fields and wildlife advocates are thanking him and Democratic lawmakers for supporting the rules.

“This is an important achievement,” said Gretchen Nicholoff, president of the Western Colorado Congress, a conservation group. “For years we’ve been pursuing commonsense protections for public health and the environment while endorsing responsible energy development. ”

Last year, the state issued a record 8,027 drilling permits, nearly double the 4,323 approved in 2005. Most of the permits were for natural gas.

The oil and gas conservation commission worked about 18 months on the new rules. The commission approved the regulations late last year after holding public hearings across the state and dozens of work sessions attended by industry and government officials, landowners and conservationists.

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