Colorado Oil and Gas Conservation Commission releases draft of gas rules

One regulation would prohibit construction of facilities within 500 feet of drinking water sources

By Phillip Yates
Post Independent Staff
Glenwood Springs, CO Colorado
April 1, 2008

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Other notable changes

STORM-WATER MANAGEMENT: Requires operators to identify and implement best management practices to control storm-water erosion and provide for periodic self-inspection of storm-water measures. Current rules require companies to protect soils from wind and water erosion. POLLUTION PREVENTION CHECKLIST: Companies with oil and gas facilities in the Piceance Basin will have to fill out a checklist to demonstrate ongoing compliance with seven specific requirements. No such requirement existed in the state’s current rules. SPILL REPORTING: Rules require operators to alert the Colorado Department of Public Health and Environment of all spills and releases that threaten surface water and to report any spill that threatens a public water supply immediately upon discovery. Berms will also be required around sites sufficient to contain the largest tank plus precipitation. Current rules require operators to report spills to the director of the COGCC. LINING OF PIT WASTES: More pits will have to be lined. The new rules will also prohibit soil liners and double the required thickness for synthetic liners. They will also require double lining of centralized exploration and production waste management facilities. Current rules require certain pits to be lined, but not all. COOPERATION WITH LOCAL GOVERNMENTS: The new rules allow the commission to enter into a memorandum of agreement (MOA) with a local government to clarify, coordinate and harmonize the relationship between the COGCC rules and local regulations. The MOA will be approved by the commission after a hearing and must be consistent with the Oil and Gas Conservation Act. This issue is not in the agency’s current rules, nor was it considered in the state’s initial proposal for new rules. LANDSCAPE LEVEL PLANNING: The rules provide for planning at the landscape level to better avoid and mitigate development impacts. Comprehensive drilling plans (CDP) will generally include one operator and address its impacts in a discrete area. A geographic plan may include multiple operators and address a larger geographic area. These landscape planning tools “will encourage proactive, collaborative planning and should generate win-win solutions,” according to the COGCC. To encourage operators to develop CDPs, the COGCC will make decisions on their applications for permits to drill and Form 2As within 30 days. This requirement substantially follows what was outlined in the initial predraft proposal. SOURCE: The Colorado Oil and Gas Conservation Commission

GLENWOOD SPRINGS, Colorado — New draft rules for energy development in Colorado call for more environmental and water protections, while also abandoning a proposed permitting process that drew the ire of the oil and gas industry.

The Colorado Oil and Gas Conservation Commission (COGCC) on Monday released a set of proposed regulations that include restricting drilling in critical wildlife areas, primarily in Western Colorado, for specified periods of up to 90 days and prohibiting the construction of oil and gas facilities within 500 feet of “sources of drinking water” for a distance of five miles upstream of a “public water supply intake.”

However, the timing restrictions for drilling can be avoided if a company limits the density of its development in an area or consults with the COGCC and Colorado Division of Wildlife to find a “mutually agreeable solution” that would allow drilling to occur “in exchange for alternative mitigation,” according to the COGCC.

The new rules also require companies to provide additional information of their ancillary facilities’ impacts on the surface in an expanded Form 2A — a form the state already uses — when applying for drilling permits. Companies operating in the Piceance Basin would have to receive approval of the form before a permit to drill is issued, according to the new rules.

“There are reasons for that,” said Dave Neslin, acting director of the COGCC. “The pace of drilling has increased dramatically in the Piceance Basin, operators face more challenging terrain, there is more significant wildlife habitat, and drilling is occurring, in some cases, in closer proximity to residences and communities.”

The COGCC contemplated creating a new permitting structure that would have required companies to obtain a Form 34 permit — a process that would have required consultation with the Colorado Department of Public Health and Environment (CDPHE) and DOW. The state’s oil and gas industry criticized that idea, saying it could have created permitting delays of several months.

However, the new rules require consultation from DOW and the CDPHE for drilling applications when a company, surface owner or local government requests a variance from wildlife or environmental rules.

The road to the new rules
The COGCC released its draft rules almost four months after issuing an “initial predraft” of proposed new rules proposal in November, which immediately drew criticism from the state’s oil and gas industry and several lawmakers. Bills the state Legislature passed last year required the COGCC to 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.

“We want to ensure that the oil and gas industry continues to thrive in Colorado,” Neslin said. “We understand (the industry) generates billions of dollars in income, employs thousands of Coloradans, and provides substantial tax revenue to our communities. But at the same time, we also want to ensure that our landscapes, our streams and air and our wildlife are protected from the adverse effects of this development. We want to make sure that the oil and gas boom leaves Colorado as beautiful as it is today, and that companies use the latest technologies and strategies for this purpose.”

Neslin said “the draft rules reflect a number of changes from the initial predraft proposal that was circulated in November.”

The release of the new draft rules comes as Garfield County and northwest Colorado continue to see a surge in drilling activity in the area. The COGCC issued 6,368 permits in 2007, with 2,550 of those permits for wells in Garfield County. The COGCC expects to issue about 3,200 permits in the county in 2008, according to the agency’s projections in early March.

The immediate feedback
The proposed rules are a “step in the right direction” for Colorado and go “a long way in meeting the objectives” of the legislation passed last year, said Matt Sura, the oil and gas organizer for the Western Colorado Congress, an advocacy organization that supports responsible environmental stewardship.

“But from our perspective, there are a lot of areas that still need to be strengthened,” Sura said.

Meg Collins, president of the Colorado Oil & Gas Association, said an initial review of the draft rules has left the group extremely concerned.

“It appears that we have traded one set of concerns for another,” Collins said in a prepared statement. “Many of our initially stated concerns remain in the draft rules but in a different form. We still believe that the draft rules clearly go far beyond the intent of last year’s legislation.”

Collins said the rules, as currently drafted, will negatively impact Colorado’s “number one economic contributor.”

“Getting these rules wrong could mean less tax revenue to local and state governments, increased costs to state government and hardworking Coloradans, costly and uncertain delays for industry, and, most importantly, less production of the clean natural gas Coloradans rely on as a part of their secure, stable and affordable energy supply,” Collins said. “Again, this comes at a time when several independent economists report that one of the primary drivers keeping Colorado from entering a recession is the natural gas and oil industry.”

Rep. Kathleen Curry, D-Gunnison, said the new draft rules balance “protection of the environment, wildlife and public health with energy development.”

“Today, we have a clear and practical plan to put common sense protections in place,” Curry said.

More tweaks
Other environmental draft rules require companies operating in the Piceance and San Juan basins to utilize odor control devices on certain equipment — such as condensate tanks or produced water tanks — if they are within a half-mile of occupied buildings. The draft rules would also mandate energy firms maintain inventories of all chemicals used at a well pad or released into the environment, and to provide that information immediately to the agency upon request.

Surface owners, operators, the DOW and the CDPHE can request a hearing on drilling permit applications under the new rules. Before, only local governments could request a hearing on drilling permit applications. The COGCC had considered allowing adjacent landowners to request a hearing, but that was not included in the new rules.

Several residents who live near the Project Rulison blast site — where the government detonated a 43-kiloton nuclear weapon below the surface in 1969 to free up commercially marketable gas — wanted the new rules to give them the ability to request a hearing. Those residents, fearing contamination from possible drilling, requested hearings on the matter, but were denied by both the COGCC and the Garfield County Commissioners.

“It is unfortunate that it didn’t carry,” said Wesley Kent, whose property abuts the blast site and who sought a hearing before the COGCC over drilling permits within three miles of the blast site. “We weren’t surprised it didn’t carry, through.”