With a raft of new oil and gas rules, now comes the tough part for companies and regulators alike. The rules kick in Jan. 15 and the industry and state will have to see which of the roughly 5,000 pending drilling permits can make it under the wire, have to be redone under the stricter rules — or get dropped.
More than 200 people called into a Colorado Oil and Gas Conservation Commission Zoom meeting Tuesday to get their first looks at the new applications for wells and to assess the cumulative impacts of drilling and alternative locations for drilling.
“The first and most important thing to keep in mind over the next couple of weeks and months is that this is the first time our agency has launched multiple new forms at the same time and redesigned our entire permitting system in one fell swoop,” COGCC Director Julie Murphy said. “So, to say that the guidance documents are living documents is an understatement.”
A big question is the fate of a little over 5,000 permits already in the pipeline, about 4,300 to drill wells and about 740 for the location of well sites. Those that don’t make it through the process by Jan. 15, when the new regulations take effect, will have to be “replaced” if companies want to pursue them.
Replacing the applications will require redoing them under the new rules approved by the COGCC in November after several months of hearings and drafting and redrafting. The rules are intended to carry out a 2019 law mandating that the commission shift from fostering development to regulating it in a way that protects public health and safety, the environment and wildlife.
The backlog of permits was in part a result of a flurry of applications leading up to the vote on a 2018 ballot measure that would have mandated a minimum of 2,500 feet between new wells and occupied buildings, waterways and other areas. Voters rejected the measure.
Adding to the pile was a pause in approval of permits last year to let the COGCC write temporary guidelines while the new regulations were being written. Advocacy organizations called for halting all permits until the permanent rules were in place.
In addition, oil and gas activity had slowed down and companies were cutting spending before the coronavirus pandemic because a glut of oil and a price war between Saudi Arabia and Russia that depressed prices. When the pandemic hit, the steep drop in demand sent oil prices plunging even lower. Four to five drilling rigs are operating in Colorado, compared to 21 to 22 at the start of 2020.
In 2019, the COGCC approved 2,111 permits to drill wells and 256 well-location permits. Through Dec. 11 this year, the state has approved 1,350 to drill wells and 155 location permits.
As the new rules were being developed, Great Western Petroleum formed a strategy for handling the transition, said Susan Fakharzadeh, a vice president with the Denver-based company.
“We’ve been proactively approaching all of our projects in anticipation of the new rules and guidelines, so we’ve implemented a lot of the new standards on our locations,” Fakharzadeh said.
Great Western has been looking at the permits it has in the queue with an eye toward which ones could be approved before Jan. 15, which will have to be replaced using the new forms and which are wells the company doesn’t intend to drill. The company has about 160 permits pending for new wells.
Both the Colorado Oil and Gas Association and the American Petroleum Council-Colorado said the industry is looking for clarity, certainty and a lot of guidance in the documents the COGCC will write to explain the new applications and processes.
“The COGCC staff really has to roll up their sleeves and draft guidance so that operators have clear guidelines for how they’re going to comply with these new set of rules,” said Lynn Granger, executive director of API-Colorado.
Dan Haley, CEO and president of COGA, said the industry is in a wait-and-see mode.
“Essentially, everyone is starting over. Companies are going to have to assess which of their permits are a priority and really concentrate on those first and resubmit those permits,” Haley said
The new rules run the gamut from requiring at least 2,000 feet between new wells and schools and homes, to stricter monitoring of emissions from well sites, to more opportunities for the public to weigh in on proposed drilling, to giving local governments more control over oil and gas.
The COGCC staff stressed during Tuesday’s call with companies that implementing the new rules is a work in progress. Staffers advised people who want to get approval for permits under the old rules to shoot for early next week to get everything in. The staff wants companies to prioritize the permits they plan to resubmit by March 1.
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