Drillers pay less upfront in Colorado

By Todd Hartman, Rocky Mountain News (Contact)

Published July 1, 2008 at 9:05 p.m.

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And on the seventh day . . . they kept testifying.

Hearings on a proposed revamp of state rules regulating oil and gas development in Colorado continued Tuesday, with state regulators outlining the need to require more upfront money from energy companies to ensure sufficient funds for environmental cleanup should problems arise.

The nine-member Colorado Oil and Gas Conservation Commission heard from its own staff that Colorado's requirements for financial assurance are generally lower than surrounding states, including Utah, Wyoming and New Mexico.

Proposed changes would raise to $60,000 the amount operators must set aside if drilling fewer than 100 wells. That's double the current rate of $30,000.

Amounts also would rise in other categories, such as those for natural gas gathering and processing facilities - from a blanket bond of $50,000 to cover all of a company's facilities to $250,000.

"Staff feels our financial assurance values are too low and need to be increased," said David Dillon, engineering manager for the commission.

Dillon noted that rates haven't been increased in 12 years and, since 1996, the commission has recovered only 50 cents on the dollar to deal with problems at abandoned wells. It's had to take the remaining money - nearly $500,000 - from a state environmental response fund.

But Jim Walker of Littleton-based Petron Development Co. warned that upping the cost would endanger smaller operators. He urged regulators to leave the current structure in place, arguing that it has worked well and provided sufficient funds to do the job.

He said smaller operators sympathize with the state's job of handling abandoned wells and want to work with regulators, but said proposed changes "may have numerous unintended consequences - putting smaller operators out of business."

What's next

* The Colorado Oil and Gas Conservation Commission meets again July 15 for three or four days to continue hearing testimony on proposed rules.

* Final comments are due from interested parties on July 25.

* The COGCC plans to deliberate on the rules in mid-August, with the precise date yet to be determined.

• July 2, 2008

  11:09 a.m.

  Suggest removal

  jbowen43 writes:

  I see no good reason why one industry should get preferential treatment. These increases are very reasonable and anyone who cannot afford the cost probably shouldn't be in the business in the first place.

• July 2, 2008

  5:35 p.m.

  Suggest removal

  Logical writes:

  Will you have the same attitude when insurance premiums rise to offset disasters elsewhere? "The increases are very reasonable and anyone who cannot afford the cost probably shouldn't own a house in the first place".

  Since you are not paying the increased premium (directly), you feel the increase is affordable. If you did have to pay it directly, you may sing a different tune. By the way, we will all be paying for the increase in bond premiums, through our energy bills. Drillers will pass that along to us.

• July 12, 2008

  7:55 p.m.

  Suggest removal

  dukeco1 writes:

  Logical,
  Drillers don't pass along anything. The price is totally disconnected from production costs. This is not speculation nor my opinion, it is a fact.

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