Colorado Oil and Gas Conservation Commission study finds no significant impacts expected from drilling limits
GLENWOOD SPRINGS, Colorado A cost-benefit analysis of draft rules for the states oil and gas industry found that proposed 90-day drilling restrictions for wildlife habitats are not expected to have significant impact on economic competitiveness, job creation or state revenues.That rule has engendered some of the concerns for natural gas operators in the Piceance Basin and for Garfield County commissioners.The cost analysis, prepared by Colorado Oil and Gas Conservation Commission (COGCC) staff and a consulting firm, said it was difficult to estimate the probable cost companies would face from the drilling restrictions because the state requested that information from 50 oil and gas operators, but it did not receive a response. Companies were too busy preparing for upcoming rule-making hearings to provide the state with information for its study, according to letters sent to the COGCC by lawyers representing the Colorado Oil and Gas Association (COGA) and the Colorado Petroleum Association (CPA).This sort of analysis should have been conducted by the COGCC as part of the rule development and should have informed their scope and complexity, wrote Ken Wonstolen, an attorney for COGA.In contrast to the states analysis, a previous COGA-commissioned assessment of possible seasonal drilling restrictions found that reducing drilling activity in Northwest Colorado by 20 percent decreases the gross state product by $206 million, cuts statewide employment by 1,782 jobs, and reduces labor earnings by $104 million.The 90-day seasonal drilling restrictions to protect wildlife areas mostly are a part of new rules for the states oil and gas industry. The creation of new rules are a result of house bills 1298 and 1341, which the state Legislature passed last year. They required that the COGCC expand its focus to consider public health and wildlife impacts, and require the use of best management practices to minimize harm from oil and gas development.
The states 182-page analysis into the new draft rules compared the purpose of each proposed rule, the anticipated costs and benefits and impacts on communities, according to the state.The study found that for companies to maintain an inventory of chemicals used in oil and gas production, it would cost them up to $25,000 per year for a part-time position to create and maintain an inventory, according to the COGCC. Another draft regulation that would require companies to use double-layered synthetic liners for their storage pits would cost companies about $30,285 per pit, according to the cost-benefit analysis. Our analysis of the draft rules shows that while there (will) be additional costs to energy companies, there will also be significant benefits from better protecting water and air quality, public health and the wildlife, said Dave Neslin, acting director of the COGCC, in a prepared statement.Although companies did not provide information to the state, COGCC staff and Stratus Consulting Economic Advisors which helped the state draft the cost-benefit analysis estimated the costs based on the agencys staffs extensive experience with the industry and input from other state agencies and two consulting firms.
But its the possible costs of the 90-day drilling restrictions that have many operators in the Piceance Basin worried. EnCana Oil & Gas (USA), one of the largest operators in the county, has called the rule one of the most concerning regulations in proposed draft rules for the states oil and gas industry. Realistically, we see it as a 120-day or a 150-day (restriction), given the time to mobilize and re-mobilize rigs, said Doug Hock, a spokesman for EnCana. Hock said a key question left unanswered in the states cost-benefit analysis is, What is the impact on production?The corollary for that, (which) is important to the community, is what then is the impact on tax revenues? Hock said. Commissioners John Martin and Larry McCown have said they were concerned about the effects the proposed 90-day seasonal drilling restriction rule might have on the local economy. They have said high-efficiency rigs that drill multiple wells and the workers who operate them might leave and possibly not come back to the region.The COGCC has said new rules do allow companies to avoid the 90-day drilling restriction which it says is for critical wildlife areas especially on the Western Slope if a company limits the density of its development in an area or consults with the COGCC and the Colorado Division of Wildlife (DOW).Randy Hampton, a spokesman for the DOW, said many timing restrictions some much more restrictive for drilling in or near wildlife areas already exist on federal lands. The agency consults with several companies about those timing restrictions, he said.The goal of the proposed state timing restrictions, said Hampton, is to make companies look at field development and not approach their drilling plans by a well-by-well, haphazard kind of an approach.If we can we can be involved in that and look at field development, and get that taken care of, then it will actually speed their application (for drilling permits) process up because they wont have to go back to a well-by-well approach, Hampton said.The proposed rules for the oil and gas industry are expected to be adopted in mid-August.The cost-benefit analysis is available on the Internet at http://oil-gas.state.co.us/RuleMaking/CBA/COGCC_CBA_Main_doc.pdf.Contact Phillip Yates: 384-9117pyates@postindependent.com