Usual suspects praise, slam new oil and gas rules

Hearings draw throngs to Paramount Theater

By John Schroyer

In its ongoing quest to rewrite the rules governing the state’s oil and gas industry, the Colorado Oil and Gas Conservation Commission began a multiweek series of hearings on Monday, June 23, at Denver’s downtown Paramount Theater. The verbal clashes during some of the hearings highlighted what has turned into a game of political tug-of-war, with Democrats and environmentalists on one side and Republicans and the energy industry on the other.

The COGCC, which has been holding public hearings for months on the proposed changes to the state’s rules, wants to tighten regulations governing energy producers. Those plans have the left applauding while the right frowns and warns of economic disaster. If the rules currently being weighed are eventually adopted, the ensuing furor could lead to legislative attempts next year to repeal or alter some of the changes, making the situation even more complicated.

“It would not be a wild speculation that (Sen.) Josh Penry might be interested in that,” said Meg Collins, the executive director of the Colorado Oil and Gas Association.

Penry, a Republican lawmaker from Fruita, could not be reached for comment, but he has been a vocal critic of the proposed changes from the beginning, and has slammed the rule changes as bad economic policy that will probably cost the state jobs.

And Penry is not alone. Other Republicans, and even some Democrats, also have floated the possibility of rolling back some of the rule changes via legislation next year. Before such a bill could take shape, however, the rules need to be finalized, and that won’t happen until August.

“There’s a broad sense that where the rules are now exceeds the authority granted by House Bills 1298 and 1341,” said Rep. Frank McNulty, R-Highlands Ranch, referring to the initial legislation in 2007 that led to the rewrite. He also pointed out that HB 1341 gives the Legislature the right to alter or repeal the rules, and said discussions along those lines already have begun.

Meanwhile, environmentalists and industry workers showed up in force on Monday to make their case during the public testimony session.

Randy Udall, a Carbondale-based freelance writer and activist (and brother of U.S. Senate candidate Mark Udall), said according to some estimates, Colorado energy producers will continue to enjoy a 40 percent rate of return, even if the tighter new rules are promulgated.

“These guys are making a staggering amount of money now. They’ll continue to make a lot of money in the future,” said Udall, the former director of the Community Office for Resource Energy.

Josh Joswick, a former La Plata County Commissioner and spokesman for the San Juan Citizens Alliance, applauded the commission’s approach to the rulemaking process and said that for too long the balance of power has been “so far out of balance (in favor of the energy industry) that you have to go a good ways with what you pass.”

Jason Wedemeyer, a field organizer for the Colorado Environmental Coalition, also said his group is largely pleased with the proposed changes but even stronger restrictions might be necessary. He pointed to public health concerns, and said a newly suggested drilling moratorium within 500 feet of drinking water supplies ideally should be doubled.

A number of lawmakers stopped by to add their two cents to the debate on Monday, including Rep. Judy Solano, D-Brighton, and McNulty. Predictably, Solano spoke in favor of tightening regulations for public health reasons while McNulty ominously warned of economic pitfalls.

Solano spoke of a trip to Glenwood Springs a few years back and how she encountered residents who had been poisoned by chemicals used by the energy industry.

“We need rules like these that provide common sense protection,” she asserted.

She added that, like the CEC, she’d like to see the current proposals ramped up even harder, especially those concerning public health protections.

McNulty countered, “The rules as we have them now pose a significant risk to the men and women in the oil and gas industry who are out trying to make a living.”

He warned energy companies would probably get fed up with the increased regulations and begin investing in neighboring states “where they can drill 365 days a year.”

During the Wednesday hearing, however, Encana Oil and Gas team leader Joel Fox admitted, “No, we’re not going to walk away from the rigs and leave Colorado.”

But he, along with his other colleagues, warned more restrictions would mean less fuel and less income to Coloradans. Alistair Bickers, a spokesman for British Petroleum America, estimated the new rules could cost landowners $200 million in royalties over the next several years.

Industry representatives also insisted throughout the week that the new restrictions would wind up damaging the economy, and more than an hour was devoted Wednesday to arguing against proposed limitations on drilling permits in areas deemed sensitive to certain animal species, such as elk, mule deer and sage grouse. Two areas where such limitations would prove a serious obstacle to energy operations are the San Juan Basin and the Piceance Basin, both on the Western Slope.

An entire panel of energy experts and spokesmen argued that there have been no conclusive studies that prove wildlife are adversely affected by oil and gas development in Colorado. Wildlife biologist Derris Jones displayed a chart showing, over the past several years, the mule deer population in the Piceance Basin has shot up, while the elk population has remained consistently above the ideal population listed by the Colorado Division of Wildlife.

Timing limitations, he argued, “do nothing” to improve the situation of wildlife in the areas identified as vital to wildlife habitat.

But Deb Frazier, communications director for the Colorado Department of Natural Resources, pointed out that the suggested rule change allows for deals to be struck, and explicitly calls for exemptions in cases where operators only have two well pads.

“The people who are claiming that western Colorado will be shut down to drilling three months a year know better. It’s very unfortunate, because it’s not correct, and certainly because it’s certainly a concern to workers and children and folks in the community. There was never such a moratorium discussed or contemplated,” Frazier said.

The COGCC and the state could face additional problems from the federal government if they’re not careful. In a letter earlier this month, Bureau of Land Management state director Sally Wisely informed the commission that they could be overstepping their authority.

“BLM believes that certain draft rules would be pre-empted by federal law if applied to oil and gas operations on federal lands,” Wisely wrote. “This potential for conflict creates uncertainty regarding the demarcation between the respective authorities of our agencies and invites legal challenge to the regulations … We believe it is in the best interest of all involved to avoid this uncertainty by addressing the pre-emption issue during the rulemaking process.”

Wisely warned against the wildlife timing restriction, especially when combined with proposals to require companies to consolidate their facilities, oversee land reclamation projects and restrict drilling operations near residential areas.
Frazier, however, said the letter was not likely to play a role in the commission’s deliberations.

“Colorado has had authority to manage wildlife on federal land, and they’ve been doing it for quite a while,” Frazier said. “It is the position of the commission staff that, no, (the letter) does not (play into the final decision).”

Colorado’s retiring U.S. Senator, Republican Wayne Allard, also took an interest in the matter and sent a letter to Dirk Kempthorne, the Secretary of the Interior, which oversees the BLM. Allard requested information on what actions the DOI was taking to ensure the protection of the sovereignty of both the U.S. Forest Service and the Southern Ute Indian tribe, which he said had expressed concerns about the rulemaking process possibly infringing on their turf.

The COGCC hearings continue through July 3, and are scheduled to pick up again July 15. The deadline for the rules to be promulgated is Aug. 12.