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Oil, gas commission to hire 14 employees

9-member panel to meet, consider new drilling rules

By Gargi Chakrabarty, Rocky Mountain News (Contact)

Published December 6, 2008 at 12:05 a.m.

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The state oil and gas commission will hire 14 employees to help implement new rules for drilling after Gov. Bill Ritter exempted the regulatory agency from the current hiring freeze.

The nine-member commission will consider formal approval of the rules when it meets Tuesday through Thursday.

A majority of the rules are expected to take effect in April and May - months later than originally scheduled.

The commission's staff has spent the past 16 months drafting the rules.

The staff has compromised on many issues and incorporated changes in the rules after suggestions from industry, landowners, activists and other stakeholders, said David Neslin, acting director of the oil and gas commission.

The rules won't be scaled back at this point, he said, adding that they are designed to better protect the environment, public health and local communities from the impacts on air, water, wildlife and lifestyle from oil and gas drilling.

Industry insiders, however, said some rules were unnecessary or even unconstitutional. Also, implementing them in this recession would discourage new investment and jobs in the energy sector.

"Certainly, with the global economic downturn, reduction in commodity prices and pipeline constraints, it looks like the level of activity will moderate next year," Neslin said.

"But we still are expecting a robust level of industry activity. Even if the level of drilling in the state were to decrease 20 to 30 percent, that would take us back to where we were a couple of years ago, not where we were 10 or 20 years ago."

The commission, which employs 54, had approved 7,225 permits through the end of November. Neslin expects the agency to issue about 7,600 permits by the end of the year. Last year's total was 6,368 permits.

Falling natural gas prices and the difficulty in getting loans are causing companies to tighten their budgets. Companies also complain that the commission is overhauling drilling rules in such a way that they will create a stringent regulatory climate and further dampen new investment.

"The price issues we are suffering through should be cleared in 18 months, once the new Ruby pipeline is built," said John Harpole, president of Mercator Energy, a Denver company. "Right now, the biggest long-term concern is the regulatory uncertainty."

Industry counsel Howard Boigon said, "If you start from a position where you disagree that a rule is appropriate or required, and some changes are made so that it is not as defective as it originally was, that doesn't mean you agree it's a good rule."

For instance, the industry doubts whether the commission has the authority under the constitution to implement the new rules for drilling projects on federal lands, many of them on the Western Slope.

Also, the rules would require companies to get consent from landowners on wildlife conditions before drilling. If landowners don't consent, the director of the commission would have authority to either issue or withhold a drilling permit - an authority industry says the director doesn't have under the law.

Companies say although the revised rules don't include timing restrictions on drilling in habitat areas, the language remains unclear whether those restrictions would be triggered in certain cases.

Comments

  • December 8, 2008

    1:43 p.m.

    Suggest removal

    ekim writes:

    Excellent paying traditional energy jobs are being lost and Governor Ritter is denying ALL responsibility.

    A better policy would be to try to do something to SUPPORT the oil and gas industry to offset the impact of the regulations.

    How about speeding up the FERC approval process for the Ruby pipeline or securing government funding for the proposed Chicago pipeline.

    It is time to do something postive for the traditional energy economy instead of trying to regulate and tax it to death.

    Every job matters in an economy like this one.

    Do something that is employment positive for a change!!

  • December 10, 2008

    12:02 p.m.

    Suggest removal

    Silent_Statesman writes:

    I expect that level of drilling activity in the state will decrease more than 20-30%, when the prices have dropped more than 60%. I think people who keep reciting the 20-30% number need to look at the fundementals and/or do some research as to how many rigs have been released since September 2008. My sources tell me that some companies have reduced their rig obligations a 100% as compared to 2008 drilling levels.

    In any event, if the price of oil and gas has dropped 60% since last year, wouldn't it be logical to conclude revenues will also drop proportionately, and then, you factor in the reality that production decreases over time. Then the actual change in revenues to the State of Colorado is more than 60%.

    However, the net effect to the State of Colorado is greater than just lost revenue, because some of these people are getting laid off and now are collecting unemployment benefits, decreasing spending (lower sales taxes), etc...

    So, the timing of these regulations is very poor and "may" further amply the economic factors...