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New regulations aimed at mitigating effects of oil and gas near urban areas

The Colorado Oil and Gas Conservation Commission (COGCC) released the draft proposal for two new regulations after more than a year of consideration from the Colorado Oil and Gas Task Force with local stakeholders. In September 2014, Colorado Governor Hickenlooper created the task force in order to reach a compromise over pro- and anti-hydrocarbon development initiatives from a November ballot.

The goal of the task force was to allow for an open dialogue, Hickenlooper told Oil & Gas 360 during an exclusive interview. “You can resolve 99% of the problems, the conflicts you see, just by sitting down at the table,” he said.

In February of this year, the task force voted to send nine recommendations to Gov. Hickenlooper. Many of the proposals require legislative action to enact, but two of the largest ones, Nos. 17 and 20, require the COGCC to draft new regulations for the industry. The commission released the draft regulations this week.

The recommendations sent to the governor listed Item 17 as calling for energy companies to consult with local governments when locating a new well in urban environments, and if the two sides couldn’t agree on the location then the issue would go to mediation — with both sides splitting the cost.

Item 21 requires oil and gas companies to register with the municipalities where they will operate and share their best, good-faith assessment of their five-year drilling plans with local governments, so that those locations could be compared with the local master plan.

To read a full list of the nine recommendations, click here.

Photo: Free Range Longmont, Colorado

Photo: Free Range Longmont

The draft regulations released today by COGCC sought to address the issue of oil and gas companies consulting with local governments when locating a new well in an urban area by requiring companies to submit notice to the local government when developing a multi-well pad with cumulative measured depth exceeding 90,000 feet, or with on-site storage capacity in excess of 4,000 barrels. The well sites to be considered under this regulation would be in “urban mitigation areas” (UMA), located within 1,000 feet of at least 22 homes.

The 90,000-foot mark could be reached by eight horizontal wells drilled about a mile long, including the vertical portions as well, according to a cover letter explain the draft rules from Matt Lepore, the COGCC’s director, . Alternatively, the 4,000 barrel storage mark was set to incentivize oil and gas companies to invest in underground pipeline systems to move production away from the wells, rather than storing it at each well site, requiring trucks to take out of neighborhoods.

If the company and the local government cannot come to an agreement over the use of the land, the two parties can agree to mediation. Both the local government and the company will work together to select a mediator, and both parties will share the cost of mediation.

COGCC’s draft regulation regarding Item 20 from the task force would require operators to share their five-year drilling programs with local governments so that they can be incorporated into local planning and development. City planning departments located in fast growing residential areas, such as certain parts of Weld County where neighborhoods are being developed above Wattenberg field oil and gas assets, can incorporate operators’ plans into city planning models that will provide access for extraction of the minerals while accounting for homeowners’ privacy concerns.

Operators must provide well estimates based on proved undeveloped reserves; and a map showing sites for which the operator has approved, or has submitted applications for drilling and spacing orders, Form 2s or For2As, and sites the operator has identified for development on its current drilling schedule for which it has not yet submitted applications for COGCC permits.

Beyond the registration requirement, the COGCC asked for input about how a company should determine what information it needs to share. It noted that relying on information publicly traded energy companies provide to the Securities and Exchange Commission won’t cover private companies that don’t file reports with the SEC.

Lepore did say the agency wants more input on companies sharing information on plans inside a city’s existing boundary as well as in “growth management areas” in areas that the city might be looking at for long-range planning purposes.

The new draft regulations also propose a time limit on drilling and hydraulic fracturing operations needed to bring wells online. Lepore said in his letter that time limits are necessary because “drilling completion and stimulation operations typically occur around-the-clock and are unavoidably disruptive, particularly when taking place in a UMA.” Lepore acknowledged in his letter that the rule could result in wells being drilled in phases.

Both sides unhappy with compromise

Representatives from the oil and gas industry in Colorado, as well as those from neighborhood and environmental groups were less than satisfied by the COGCC draft proposals.

“The administration has chosen largely to ignore the needs and concerns of Colorado communities,” said Windy Highby of Weld Ari and Water from Greely. “This rule seems designed to accommodate drilling in neighborhoods rather than protecting public health and welfare.”

Dan Haley, president and CEO of the Colorado Oil & Gas Association (COGA), said his group is still reviewing the draft rules, but already, “it’s clear the draft rules far exceed the actual recommendations put forward by the Governor’s Task Force.”

“We’re disappointed this draft seems to dismiss the hard work of the Governor’s Task Force, which spent nine months deliberating and deciding on these recommendations,” Haley said. “The task force worked hard to find compromise on some very contentious issues and most of the recommendations were approved with unanimous votes.”

Tracee Bently, executive director of the Colorado Petroleum Council, said that the oil and gas industry supports a “common-sense regulatory approach that promotes the safe and reliable production of oil and natural gas to benefit Colorado consumers,” but that Colorado needs to be certain not to produce duplicative and costly regulations that could smother energy investment in the state.

Unregulated cooperation working just fine in Windsor, Colorado

It was announced today that privately held, Denver-based Great Western Oil and Gas Company altered its drilling plans in Windsor, Colorado, moving its wells away from neighborhoods to a nearby site, reports Colorado’s Biz West. The change was in response to objections from residents of local subdivisions that sat on the north and south of the land where the wells were originally planned to be drilled.

Great Western worked with the COGCC, the town of Windsor and Windsor Neighbors for Responsible Drilling to come up with the alternative plan, which will allow the oil and gas company to develop on a site approximately one mile east of the original drill-site.

Rich Frommer, Great Western’s CEO, said the new plans came at a financial cost to the company, but “most importantly, this new proposal is in line with what the residents of the town of Windsor, and the state have asked to us to accomplish.”

“The new plan from Great Western shows that our local process works. All stakeholders had a voice and were heard,” Windsor Mayor John Vasquez said. “Together, we found a solution that allows Great Western to operate in Windsor but minimizes the impact on local residents and allows the [mineral owners] access to their mineral rights,” said Vasquez.

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