Government & Politics  October 26, 2007

New rule could cool Colorado oil, gas boom

Record high oil prices and an ongoing strong demand for natural gas has drillers digging new wells across Colorado at a feverish clip. Whether that pace will continue under a new state oil and gas commission with a new mission to protect the environment and surface owners’ rights remains to be seen.

“I think there is a concern about that,´ said Meg Collins, new president of the Colorado Oil and Gas Association, which represents about 300 drilling operators in the state.

Northern Colorado – particularly Weld County – is one of the state’s prime oil and gas production areas, with thousands of pumping rigs dotting the landscape and new drilling rigs setting up operations almost daily.

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Oil and gas extraction is a $23 billion-per-year industry in Colorado, employing about 70,000 people and paying out millions in severance taxes to state and local governments annually. State law has required landowners to make accommodations for the owners of mineral rights on their property to extract those substances.

But that’s likely to change dramatically under an oil and gas commission that’s been expanded since July to include more divergent perspectives. With former commissions often top-heavy with those connected to the oil and gas industry, there was a perception by some observers that the fox was guarding the chicken coop.

Legislation signed in to law by Gov. Bill Ritter earlier this year expanded the Colorado Oil and Gas Conservation Commission from seven to nine seats and mandated including members with specific backgrounds in environment and wildlife protection, soil conservation or reclamation and agricultural production in addition to those with oil and gas experience.

Balance is new keyword

Harris Sherman, director of the Colorado Department of Natural Resources and the Environment and chair of the new commission, says the keyword is going to be “balance.”

“I think there was a perception, right or wrong, that the industry was regulating itself,” Sherman said. “We’re trying to meet our statutory mandate to protect the public health and environment and our wildlife resources while accommodating oil and gas interests. That, by necessity, requires us to balance these dual goals.”

Richard Alward of Grand Junction is an example of the commission’s new face. Alward, an ecologist and environmental scientist, said he’ll be focusing his expertise on reclamation issues after drilling at a site is wrapped up.

Alward said he’s looking forward to helping write new regulations for oil and gas drilling, which the commission is charged to formulate and deliver to the Legislature’s next session. Work on drafting the new rules has just gotten under way, he said.

“The first things we’ll be looking at are public health, safety and welfare,” he said. “It’s time to work out that balance so the people of Colorado are protected and the industry can still operate in a reasonable way.”

Tresi Houpt, a Colorado native and Garfield County commissioner, is from another part of the state where oil and gas production is a major part of the local economy. Garfield County was No. 4 in oil production last year and No. 2 in natural gas production.

Houpt said she sees her role on the oil and gas commission as someone who understands government and development. Houpt said she, too, wants to seek a balance between resource utilization and environmental protection.

“I realize the resource is very important to our state but we have the technology now to better protect the environment,” she said. “I want to make sure we’re not sacrificing people’s health or wildlife or the environment as we move forward.”

For example, new advances in drilling technology have made it possible in recent years to drill multiple “directional” wells from a single drilling pad, thereby reducing the number of pads and acres of land that are disturbed.

Fewer landowner conflicts?

Another law passed by the Legislature in the last session is House Bill 1252, which calls for oil and gas operators to try harder to avoid conflicts with surface rights owners.

The law requires an operator to “conduct oil and gas operations in a manner that accommodates the surface owner by minimizing intrusion upon and damage to the surface of the land.”

Houpt said she’s glad to see the law change. “The old mining laws really gave (operators) senior rights to property rights, and that has created some conflict in the past,” she said. “The new legislation that’s coming forward is more appropriate now. We’ve grown out of that old law.”

Mark Cutright, another new commission member, has had a career connected to the oil industry for more than 27 years. Cutright works for J.W. Operating, the 13th-largest privately owned oil and gas company in the nation, and admits he’s intimately familiar with the workings of the industry.

“I’m married to it,” he jokes. But Cutright said he’ll try to take an even-handed approach to the commission and not automatically side with the oil and gas industry.

“My appointment is first and primarily to the citizens of Colorado – what’s best for them and not necessarily for the industry,” he said. “I’m pro-industry and I hope to be a voice for the positive side of the industry.”

Cutright notes that oil drilling and surface use can coexist, citing oil rigs that operate in downtown Los Angeles. “I think this is an opportunity to move the industry forward and I think Colorado can take a lead in developing a set of regulations that work for everyone,” he said. “We have an opportunity to develop a blueprint that can be copied across the nation.”

Industry awaits new rules

Collins, who became president of the Colorado Oil and Gas Association in August, said operators across the state are closely watching the new commission.

“The rule-making that’s going to be coming out is something that COGA member companies are vitally interested in,” she said. “We view it as one of the most important rule-making efforts that will happen in the next several years.”

Collins, who worked for 16 years as an energy lobbyist in Washington, D.C. for such clients as Shell and Tenneco, said she believes the new commission’s more diverse membership is welcomed by the industry.

“I think they’ll bring a different perspective to the deliberations of the commission, and it’s our job to let people know how we do business and make sure the business environment is still good for the state of Colorado,” she said.

Collins said the industry is concerned that the commission may write new rules that slow the pace of oil and gas production in the state and cut into industry profits in a time of strong demand for both resources. Record prices for oil in recent years has pushed new drilling and the reopening of many old wells.

“We have to do as good a job as we can to convince the commissioners why the pace is what it is,” she said. “The price of oil right now has allowed companies to make investments that wouldn’t have been economical a few years ago.”

Like the commissioners, Collins said she hopes a spirit of compromise will prevail as new rules are hammered out in the months ahead. “I’m big on collaboration,” she said. “The best outcome always includes everybody’s point of view.”

Sherman shares that hope. “Whether we can please everyone at the end of the day, I will reserve judgment,” he said. “But that is our goal.”

Members of the expanded, nine-member Colorado Oil and Gas Conservation Commission, who hold their seats from July 1, include:

• Richard D. Alward – Ecologist and environmental scientist based out of Grand Junction. A former Peace Corps volunteer, Alward holds a bachelor’s and master’s degree in biology from University of Nebraska and a Ph.D. in ecology from Colorado State University. Term expires 2011.

• Mark Cutright – Operations manager for Excell Services Inc., a subsidiary of J-W Operating Co., in Denver. Cutright has a bachelor’s degree in petroleum engineering from the Colorado School of Mines and has been involved in various aspects of oilfield work for 27 years, including with EnCana Oil and Gas. Term expires 2011.

• Tom Compton – Beef cattle rancher with a ranch near Hesperus and past president of Colorado Cattlemen’s Association. Compton has a master’s degree in biology from University of Alaska and a Ph.D. in zoology from University of Wyoming. Term expires 2011.

• Michael P. Dowling – Founder and chairman of Colorado Conservation Trust and former chair of Colorado Wildlife Association. Dowling has a bachelor’s degree in geology and geophysics from Yale College, a master’s degree in forest science from the Yale School of Forestry and Environmental Studies and a master’s degree in public and private management from the Yale School of Management. Term expires 2011.

• Joshua Epel – Attorney for DCP Midstream LLC, one of the nation’s largest natural gas gatherers and processors. Denver-area resident Epel has practiced environmental law for more than 25 years, specializing in air pollution law. Term expires 2011.

• Kimberlee Miskell Gerhardt – Consulting geologist and La Plata County resident. Gerhardt holds a bachelor’s degree in geology from Wellesley College, a master’s degree in marine geology and geophysics from the University of Miami and a Ph.D. in geology from Rice University. She has worked for Kerr-McGee Corp. and Exxon Production Research Co. Gerhardt was appointed by former Gov. Bill Owens and reappointed by Gov. Bill Ritter. Term expires 2008.

• Tresi B. Houpt – Garfield County commissioner and chair of Colorado Counties Inc. Natural Resource and Land Use Steering Committee. Houpt holds a bachelor’s degree in political science and sociology from Lewis and Clark College. Term expires 2011.

• James B. Martin – Executive director of Colorado Department of Public Health and Environment and former director of Natural Resources Law Center at the University of Colorado School of Law. Martin has a bachelor’s degree in biology from Knox College in Illinois and a law degree from Northwestern School of Law. The position is a permanent part of the commission.

• Harris Sherman – Executive director of Colorado Department of Natural Resources. Sherman has a bachelor’s degree from Colorado College and a law degree from Columbia University Law School. The position is a permanent part of the commission.

SOURCE: COLORADO OIL AND GAS CONSERVATION COMMISSION

Record high oil prices and an ongoing strong demand for natural gas has drillers digging new wells across Colorado at a feverish clip. Whether that pace will continue under a new state oil and gas commission with a new mission to protect the environment and surface owners’ rights remains to be seen.

“I think there is a concern about that,´ said Meg Collins, new president of the Colorado Oil and Gas Association, which represents about 300 drilling operators in the state.

Northern Colorado – particularly Weld County – is one of the state’s prime oil and gas production areas, with thousands of…

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