New floodplain rules for oil facilities criticized by conservationists

DENVER – Oil and natural-gas producers will have to follow long-awaited rules approved by the state this week for facilities in floodplains, but conservationists say the regulations do not go far enough.

The nine-member Colorado Oil and Gas Conservation Commission unanimously approved Monday new regulations designed to better protect oil and gas facilities in floodplains following the September 2013 deluge, which led oil and natural-gas companies to suspend production on nearly 2,700 oil and natural-gas wells in Northern Colorado. Flooding overturned oil tanks, spilling more than 48,000 gallons of oil, although officials said the spills paled in comparison with sewage and household and industrial chemicals that mixed in with the flood waters.

The rulemaking comes nearly a year after regulators compiled a 44-page report “Lessons Learned in the Front Range Flood,” issued March 14, 2014. The new rules require more preparation from operators to reduce potential damage by taking the following steps:

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–Producers must remove existing pits used for exploration and product waste;

–All tanks must be surrounded with hardened berms made of steel, or similarly engineered protections, instead of earthen barriers;

–Critical equipment must be anchored according to an engineering plan;

–All new wells must be configured so operators can suspend production on the well remotely.

Western Resource Advocates supported the rules that the state oil commission enacted, but the conservation group asked that the state require oil companies to find alternatives to locating oil and gas wells in the floodplain, said Laura Belanger, water resources and environmental engineer for the Boulder-based group.

The new rules “enact a lot of protections, but they don’t go far enough,” she said. “We really pushed to try to keep oil and gas facilities out of these areas that we know are prone to flooding, whenever possible.”

Encana Corp. (NYSE: ECA) (TSX: ECA) spokesman Doug Hock said that, for the most part, the company already has taken measures to fortify its facilities. The company does not use wastewater pits in the Denver-Julesburg Basin, and it already has the ability to remotely suspend production on wells.

Locating facilities outside the floodplain, as environmentalists had suggested, would further crimp the oil and gas industry’s ability to extract minerals, Hock said.

“The concern the industry has is that, once again, it’s eating into available areas for drilling,” he said.

He points out that the state oil commission already has passed rules on increased buffers between oil and gas wells and buildings.

The state oil commission learned from its experiences in September 2013, including what existing practices successfully reduced damages, said Matt Lepore, director of the commission.

“Requiring these practices for oil and gas operations within a floodplain makes sense and will ensure environmental impacts are reduced and equipment is further protected should we see another flood event,” Lepore said.

The new rules require producers to establish an inventory of wells and critical equipment located within a floodplain and to register all those facilities and equipment with the COGCC by April 1, 2016. Operators are also required to create a formal plan on how they will respond to flooding.

“These new rules requiring operators to establish an inventory and a formal response plan will help ensure both operators and the COGCC can react more quickly when a flood threatens or strikes,” Lepore said.

The new rules take effect June 1, 2015, for new wells and equipment and April 1, 2016, for retrofitting existing equipment.

The new rules follow regulations requiring stricter groundwater monitoring measures in 2013, though those rules did not pertain to streams, rivers and lakes.

The state also passed some regulations protecting fisheries and drinking water infrastructure in 2008. It adopted a rule to create setbacks and mitigation requirements near areas with drinking water infrastructure as well as a 300-foot buffer from waterways designated as “gold medal” streams and those containing cutthroat trout.

However, regulators did not take up rulemaking related to restricting the location of oil and gas facilities in floodplains.

“We need to keep equipment and potential hazardous materials out of these flood zones,” Belanger said. “Our waterways and water supplies are some of our most valuable resources, so we need to ensure these activities take place in our floodplains only when no other feasible locations exist.”