Gas industry attacks environmental rules

By Todd Hartman, Rocky Mountain News (Contact)

Thursday, May 15, 2008

A slate of new environmental rules will reduce natural gas production and drive up costs for consumers in Colorado and nationwide, according to an industry-funded study provided to state regulators this week.

The Colorado Oil & Gas Association contracted with Virginia-based ICF International to look into the economic impact of the proposed rules. The initial findings show “Colorado will have significant negative impacts on natural gas well completions and production,” an executive summary of the study said.

In the study’s worst-case scenario — a 30 percent reduction in natural gas production in Colorado — consumer costs in the state would rise by up to $1.7 billion over 10 years and $32 billion nationally.

“This is a significant amount of money that will reduce consumer spending, which has been an important driver of economic activity,” the report said.

At issue are rules under consideration by the Colorado Oil and Gas Conservation Commission that grew out of legislation passed in 2007 that sought more consideration of wildlife and public health impacts when undertaking drilling for oil and gas.

The legislation was an outgrowth of Colorado’s energy boom, which has seen a rapid expansion of oil and gas drilling, particularly in the Piceance Basin in northwestern Colorado. The boom has brought newfound wealth to the state but also drawn complaints from residents, outdoor advocates and green groups who say many impacts of the fast-growing industry haven’t been addressed.

The proposed rules, to be considered by the commission in June and July, could lengthen the permitting process, limit the months when drilling is allowed and increase the costs to energy companies, the report said. However, the report also acknowledged that because the rules are not yet in their final form, the potential impacts are “uncertain.”

State regulators pledged to read and consider the report, but after an intial review, they were cautious about embracing its findings.

“We have several concerns,” said Dave Neslin, acting director of the Oil and Gas Conservation Commission. “First of all, the report doesn’t discuss any specific rules and appears to be based entirely on assumptions which are undocumented and unexplained.

“Secondly, the report appears to ignore various provisions in the draft rules which are intended to avoid or minimize any reductions in production.”

Pete Morton, an economist with the Wilderness Society, found much to criticize in the report. He noted that despite Colorado’s increasing natural gas production in the past decade, prices have increased, as have heating bills for Colorado consumers.

“Increased production has not dropped prices for consumers in the past because more and more of our gas is exported out of state,” Morton wrote in an e-mail.

He also said the report failed to take into account “hidden” costs of energy production, including air and water pollution and the loss of wildlife habitat.

“Local governments are experiencing added costs due to increased demand for fire, ambulance and police services. Roads are requiring additional maintenance due to increased truck traffic,” Morton wrote. “The proposed rules help reduce many of these hidden costs ultimately borne by Colorado taxpayers.”

• May 15, 2008

  11:36 a.m.

  Suggest removal

  SASQUATCH writes:

  Screw 'em, hike prices and let 'em pay through the nose until they bleed through their eyeballs. They voted for it...and now they are getting exactly what they voted for.

• May 15, 2008

  12:19 p.m.

  Suggest removal

  RickyLee writes:

  Oh well, if they don't like it, they can go drill in...say...New Jersey.

• May 15, 2008

  12:20 p.m.

  Suggest removal

  RickyLee writes:

  Colorado should start it's own state gas company, and we'll KEEP ALL OF IT.

• May 15, 2008

  12:21 p.m.

  Suggest removal

  Oliver2 writes:

  If such gloom and doom is coming merely because we bring rules into the 21st century and our severance taxes in line with neighboring states, shouldn't Colorado's gas producers note this when they are talking up their investors?

  And yet, this is instead the usual:

  From Petroleum Development Corporation 2008 release

  http://money.cnn.com/news/newsfeeds/a...

  "… Late in June 2007, we placed into service the upgraded Garden Gulch pipeline and compressor facility, which serves a majority of our wells in the Piceance Basin of our Rocky Mountain Region.
  …We continue to expect the Rocky Mountain region to be our primary growth driver for the remainder of 2008. ...Increasing production in combination with the strong energy market will have a positive impact on cash flow from operations in coming quarters.
  …The Company anticipates continuing a very active development drilling schedule in 2008, approximately 380 gross (350 net) wells."

  And this from EnCana, in its quarterly reportings,

  http://www.reportonbusiness.com/servl...

  "The current market environment is very robust, supported by the underlying strength in commodity prices. Our natural gas [portfolio] is very strong, and our existing and emerging plays hold great potential."

  "...The strategy has been wildly successful, catapulting EnCana to top dog amongst Canada's oil and gas firms in terms of production and market capitalization."

• May 15, 2008

  12:24 p.m.

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  somebunnyluvsme writes:

  what a bunch of whinny cry babies. First they obtain the leases at minimum cost. Then they get huge subsidies from the federal government. Next they get a get out of jail free card in regard to the clean water act, all while stating that their industry is environmentally friendly. If your industry is so safe, and clean, then why the exemption from the clean water act???? Lets remember we all have to live here and drink the water, and breath the air. These guys just take their profits, and head back to Canada. No If their feet are held to the fire, they will improve the technology, and produce as much gas as they can. The Market will ultimately determine the price, just as it always has. Make it clean, keep it safe, and you can come punch a hole right in my back yard!

• May 15, 2008

  6:17 p.m.

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  lankylin writes:

  Who is really paying attention here? If the industry funded study shows it will increase the price to consumers, IT WILL!!! You can berate their study all you want, but when they apply to our brown nosing PUC, based on THEIR study for a rate increase, the lowlife suckers will give it to them! What we need is regulation on the prices, not the production and an elected PUC. If they weren't making unbelievable profits, they would try to produce more efficiently! I'm sick of going into shock evry time I get an Xcel bill. How about some honest competition? Other states and places, you have options, i.e. electric companies, lp gas, etc...but NOT IN DENVER!!!

• May 15, 2008

  9:56 p.m.

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  jacka writes:

  Recession Ritter, riding the rapid reduction of receding sales tax receipts.

• May 16, 2008

  9:34 a.m.

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  pitcher writes:

  Peter Morton's grasp of oil and gas economics is astounding.

  If we apply his logic, natural gas prices ought to go down if we produce less of it. Maybe we ought to try that - and let him take credit for the result. Wait! We already have tried his approach, and natural gas prices have tripled in the last few years.

  If you want to find the cause of high natural gas prices, Google Peter Morton's record on his and his ilks position on natural gas production. They have been at the fore of blocking production through out the West. The rulemaking is their greatest powerplay yet. And we all get to pay for it. Get ready to "pay" attention any time you hear Peter speak.

• May 16, 2008

  11:07 a.m.

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  beatrice writes:

  The industry has been claiming that they have to drill at this pace in order to help consumers, using the argument that increasing supply will lower prices. It hasn't, mostly because everytime the wellhead price takes a dip they slow production.

  They are drilling like mad to get it all out while the prices are high - which is resulting in environmental damage, damage to people's property and headaches for the communities where most of the action is. All without giving us any relief on the price!