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The red-tape initiative

Rewrite of oil and gas rules heads in worrisome direction

The Rocky

Published February 11, 2008 at 12:05 a.m.

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Two months ago we advocated boosting Colorado's severance tax rate in order to create a permanent fund for future state needs. Needless to say, this is not a popular position with the oil and gas industry; energy producers are resisting pressure from lawmakers and the governor that they agree to a severance-tax hike.

We mention this to illustrate that we do not always take the industry's grumblings and warnings of intolerable burdens at face value. But in the case of new rules for energy production being written by the Colorado Oil and Gas Conservation Commission, we think the industry has a point. It's worried, for good reason, that the new rules will raise costs, sharply limit access to many drilling sites, mandate loads of extra paperwork and create so much uncertainty involving possible interventions by third parties that the net result will drive investment from the state.

That's not what lawmakers had in mind when they revamped the commission last year and updated its marching orders. It's not what this state needs when it's poised to use severance taxes to fund such needs as higher education construction. Finally, it's an alarming prospect for consumers who are increasingly vulnerable to rising natural gas bills.

To be sure, the commission won't issue its proposed rules until the end of March, with final adoption scheduled for July 1. But unless the draft plan changes substantially, the industry's fears could easily come to pass.

As you might expect, the rules cover a complex array of issues that cannot all be mentioned here. So we'll highlight two to demonstrate the problem.

Under the proposal, landowners adjacent to properties slated for drilling would be given greater standing to intervene if they objected to a well. It's not clear by what authority the commission would open this door to the costly delays of third-party interventions during applications for drilling permits. A recent law explicitly requires energy companies to accommodate surface owners, not neighboring property owners, to the extent they can.

Weld County commissioners, who wrote a letter protesting this and other provisions of the draft rules, understandably describe the nod to adjacent landowners as "an incursion by the Oil and Gas Conservation Commission into land use regulation . . . . The [commission] has no statutory authority to regulate land use in the unincorporated areas of counties."

Next, consider the lengthy list of proposed restrictions on drilling related to the seasonal presence of wildlife. In combination, these could effectively shut down operations for months on end in some places. According to the Weld commissioners, for example, "almost half of Weld County falls within these winter ranges" for mule deer and pronghorn antelope, while large areas of the county "have active prairie dog colonies." As a result, "oil and gas development activity may be precluded in areas throughout Weld County from Jan. 1 through June 30." Several other energy producing counties could encounter even more severe restrictions.

At the very least, shouldn't the state be required to specify the issue involving each species that it's trying to resolve? For that matter, where did last year's legislation grant the state new jurisdiction over private lands? Sorry, but we can't find it.

We supported a higher severance tax in the expectation that the hike would be reasonable and that new drilling rules wouldn't amount to a double whammy on an industry that contributes so much to this state. Given the direction of the proposed rules, however, we're beginning to wonder if we spoke too soon.

Comments

  • February 11, 2008

    6:52 a.m.

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    VVVV writes:

    Ha ha ha wooo. "Reasonable?" ha ha ha. "Expectations?" hee hee hee. What rock has the Rocky been hiding its head under that it still thinks government has any sort of rationality or capability of compromise? Government is, and has been for a while, a pseudo-feudal system where one regime comes in and burns the crops to set the peasants free, then a regime change happens on the basis of "change" and the new "lord" comes in and financially enslaves the peasants through worse working conditions and meager pay in order to ensure a strong economy. The only thing you can expect is that getting government involved will mess things up for everyone, that more money will go to the government, and that the money won't be used to help anyone but their own bloated bureaucracy.

  • February 11, 2008

    7:41 a.m.

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    rellimpank writes:

    ---"Two months ago we advocated boosting Colorado's severance tax rate in order to create a permanent fund for future state needs.--"

    This "permanent fund" has the same chance of succeeding as the snowball in hell. if you don't believe that, look at the history of the so-called "tobacco tax" of a few years ago---

    The last sentence in the post by VVVV wraps it up perfectly--

  • February 11, 2008

    7:54 a.m.

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    Mike_In_Hartsel writes:

    "Tax increase" is what this is all about and more rules. The consumer pays the tax increase when the cost is passed on; not the energy companies. Mo' money, mo' money, mo' money. For what? Get your hand out of my pocket to pay for your pet projects. Higher education is funded enough.

  • February 11, 2008

    10:25 a.m.

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    WashParkPoet writes:

    Aren't our energy bills already enough? Aren't they reaching all time high levels? All this 2008 legislature does is talk about hiking taxes. Please, enough is enough.

  • February 11, 2008

    10:49 a.m.

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    BBFanatic writes:

    Great editorial... for once, the media is really doing their job and investigating what is truly going on here. Kudos RMN.

  • February 11, 2008

    11:05 a.m.

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    COSkier writes:

    These new regulations proposed by the Colorado Oil and Gas Conservation Commission are completely out of line! The Commission doesn’t even have the legal authority to regulate such land use (at least that is my understanding). The energy industry provides such a great service to Colorado. They provide thousands of jobs and billions of dollars in revenue. I hope the legislature and the commission take this into consideration before they run this industry completely out of our great state.

  • February 11, 2008

    11:21 a.m.

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    RachCox writes:

    I completely agree with COSkier! I would also like to add that such regulations are going to hurt our economy; an economy that is already headed towards a recession. Governor Ritter and our legislators need to understand that the more red tape they place on the energy industry means the more good paying jobs they are killing. And what bothers me the most is that they are killing these jobs to benefit the extreme left; the radical environmentalists who despise the oil and gas industry. Ritter, please get your priorities straight and begin to act like our Governor.

  • February 11, 2008

    3:15 p.m.

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    dukeco1 writes:

    The hysterical raving of the above industry apologists is typical and not rooted in reality. I have attended almost every rulemaking work group session since their inception. The issues and rules being considered are generated by real, widespread impacts being felt by the people, communities, wildlife, and the environment of the areas feeling the brunt of development. There is no effort to hamstring the industry, just to balance the rules so that no person, place, or critter has to subsidize the richest industry in the world. A couple of things to remember:

    1. "Buyers and sellers set the price of oil. It's a function of what's being produced around the globe. So, it really is a world price." John Felmy...Chief Economist of the American Petroleum Institute. The same is true for natural gas, a commodity just like oil. Production costs are irrelevant to the price.

    2. The industry has an army of lawyers and executives swarming the state government trying to tear apart the process by arguing every point, dismissing every concern, and whining about their costs. They are not protecting you, just their bottom line. That's what industry lawyers do.

    The state agencies and other stakeholders are working hard to try to negotiate with industry. A couple of companies seem to want to cooperate, most are still stonewalling. The Rockies' comments are way off base. I know. I have been in the room.

    Duke Cox

  • February 12, 2008

    7:29 a.m.

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    bwest writes:

    Recession Ritter is killing the golden goose. First he attacks energy producers by demonizing them at every turn to make the environmental lobby happy, then he goes for the throat with draconian new rules that noone can understand, lastly he stomps the bird with his severance tax. Guess what? The goose is flying North/South/East and West to more friendly states.