By Peter Rossi, STATE BILL COLORADO
DENVER — Critics of Colorado’s new oil and gas regulations scurried to file permits before the April 1 deadline before the regulations went into effect. Oil and gas attorneys agree that there is uncertainty in the near future with filing permits and the additional hurdles to leap before permits are valid.
Gov. Bill Ritter put pen to paper April 22, cementing the new oil and gas rules into law. Most of the regulations were already in place but needed legislative approval to continue past May 15. Proponents praise the new regulations as vital to protect natural resources and wildlife, and the governor has been adamant about developing new energy initiatives.
“These rules were shaped with valuable input from people all across the state and unanimously adopted by the Colorado Oil and Gas Conservation Commission,” Ritter said in a news release at the time of the signing. “They strike the right balance, a balance that recognizes the importance of a healthy industry and the importance of healthy communities, water supplies and wildlife.”
The requirements — 169 pages in all — will make oil and gas companies doing business in Colorado adhere to far stricter guidelines when securing permits to drill. Among the requirements: conferring and obtaining sign-off on numerous environmental standards, including creating buffer zones and greater sensitivity to geologic and wildlife issues.
With the new regulations is the certainty that Colorado will receive more stimulus money for turning its focus towards new energy, including for transportation and renewable energy. Colorado’s leadership with wind power and a commitment to the protection of wildlife and vital natural resources, could place it at the top of the list to receive federal dollars.
Opponents, however, argue that the new rules will lengthen permitting time and cause a profitable business to leave Colorado in an already down economy.
There was certainly an effort from oil and gas operators and legal counsel to file permits before April 1, with a record number of 8,027 permits approved in 2008.
“There was definitely a mad dash,” said Steve Sullivan, a partner at Sullivan Meck & Tooley and board member on the Colorado Oil and Gas Association. Sullivan’s practice involves the permitting process.
Colorado’s permitting already takes longer than the national average. Under the new regulations, oil and gas operators will be required to consult with the Colorado Division of Wildlife and the Department of Health. Permits are valid for one year.
“The feeling from the oil and gas companies is even if we have to consult — which they’re not arguing about doing that — we want to do it under the old rules,’” Sullivan said.
Most oil and gas companies are not arguing, since they already informally consult with DOW and the Department of Health, Sullivan said. Yet under the new rules, the formal requirements are not sitting well with oil and gas companies.
“Three of my clients will no longer do business in Colorado,” Sullivan said. He declined to comment on which three, but says he understands their concern and reason for looking to other states.
Supporters maintain the additional regulations created by the new rules will create a safer environment. Others say it will make for an untimely process to obtain permits.
“I do think they’re certainly more burdensome,” said John Jacus, a partner at Davis Graham & Stubbs and the head of the firm’s environmental practice group. “I don’t think anyone would argue that they’re more burdensome. The question is, what do you get for the additional burdens?”
The answer is still uncertain because it’s so early in the process, Jacus said. He preferred that the old rules stayed intact.
“The general view of the industry is the number of additional requirements appeared to have been addressed already and adequately in the rules, and if it was a question of simply enforcing the existing rules better or gathering data to see if there was a real problem, that would have been a preferable approach rather than increasing the substantive requirements across the board,” Jacus said.
Sullivan said the best way to find common ground is still surface rights agreements. Call him old school, but he said that still works the best way. Under the new rules, if landowners have surface agreements with the oil and gas companies, DOW can come in and tell them to do it a different way.
At this point the director of the Oil and Gas Commission either has to ignore DOW and allow the permit, or follow the advice and deny the permit. Chances are the permit will be denied, Sullivan said.
Many people still rely heavily on the oil and gas industry, and the best remedy might be to embrace the oil and gas industry while pursuing new energy opportunities.
“Absolutely, the oil and gas industry still has a solid place in Colorado,” said Paul Seby, a partner at Moye White and head of the firm’s energy group along with John Kellogg.
There is a reality that Coloradans still need low cost energy in all forms, Seby said. “The unifying basis for that mentality is energy and low cost energy is the lifeblood of a strong American economy,” he said.
Lengthier process, litigation filed
Currently there is a bit of a backlog in permits before the commission because of the “mad dash” to file them before April 1. After that is settled, the regulations could cause a lengthier process to obtain a permit.
“I do think it’s caused that process to take more time,” said Jacus about the regulations.
Sullivan said oil and gas operators have expressed concerns over DOW’s time to respond in consultations. If the department is slow to respond for an informal consultation that technically isn’t required, it might even be slower with the formal requirement, Sullivan said.
Litigation was also initiated last week by the Colorado Oil and Gas Association in Denver District Court asking a judge to invalidate the new rules. The lawsuit claims that the Department of Natural Resources was wrong in telling legislators in 2007 that enforcing the new rules would cost about $19,500. The lawsuit alleges the cost will be more than $3.3 million.
“These rules, while intended to more fully address potential environmental and wildlife impacts of oil and gas activities, may also have the unintended consequence of giving standing and the opportunity for litigation to a much broader class of persons,” Jacus said.
While there is definite concern in the legal community and oil and gas operators, chances are Colorado could receive more federal grant money for turning its focus towards new energy.
The stimulus package is slated for transportation and renewable energy. Colorado’s leadership with the wind power and showing a commitment to the protection of wildlife and vital natural resources, could place it at the top of the list to receive federal dollars.
But there is still concern in the community, and only time will determine if the new regulations will be a benefit to the state.