Exploration

Colorado oil and gas well permitting cut in half by drilling reforms

Colorado Oil and Gas

Denver Business JournalColorado is approving less than half the number of oil and gas well locations and new drilling permits it was before this spring’s overhaul of state laws regulating the industry.

Six months after Senate Bill 181 was enacted, the Colorado Oil and Gas Conservation Commission’s approvals of well locations is down nearly 57% in a typical month, averaging 19 new location well permit approvals. Over the same six-month stretches of 2018 and 2017, the COGCC averaged 44 Form 2A approvals each month, the agency’s data show.

Similarly, the number of approved well-drilling permits, known as Form 2s, is down 58% on average since April. COGCC numbers show a average of 148 Form 2s approved each month between April and the end of September. The COGCC approved an average of 354 new well drilling permits each month over that stretch in 2018 and 2017.

“It’s a reflection of the new emphasis on health, safety and the protection of the environment,” said Megan Castle, spokeswoman for the COGCC.

SB-181, enacted April 16, changed state law to require the state prioritize public safety and health, and protect wildlife and the environment in how it regulates oil and gas. The law also says COGCC should consider the cumulative impacts of oilfield development, not just each individual well in isolation.

Colorado

Jeff Robbins, director of the Colorado Oil and Gas Conservation Commission

Until specific regulations triggered by SB-181 are finished being written, Jeff Robbins, COGCC director, tightened scrutiny of well sites proposed with 1,500 feet of an occupied building or other sensitive areas to ensure permits are fitting the spirit of the law.

The COGCC extended that distance to 2,000 feet after the a health-impact study published in October found exposure to the chemical benzene can spike within that distance during a phase of new-well drilling.

The decline in permitting since spring has created uncertainty for the industry and been problematic for some companies, said Dan Haley, president and CEO of the Colorado Oil and Gas Association.

“As the state’s most regulated industry, you have to have permits for every stage of oil and gas development, and ideally you want some certainty as to when you might see those permits,” Haley said.

Companies drill new wells to sustain oil and gas production as existing wells age and their output declines. Most companies had a backlog of well permits in hand when SB-181 passed, so the permitting slowdown may not yet be affecting the state’s oil production.

Fewer new permits will eventually lead to decreased production and a smaller industry. Critics of SB-181 warned it could pitch the state’s economy into recession.

COGA isn’t expecting permitting to speed up again soon.

“Until some of the key regulations of 181 are finalized, I have to believe that this slower permitting process is the new norm,” Haley said.

Dan Haley

Dan Haley

Robbins has set a goal to have permitting of new well locations rebound to close to 30 each month. The agency has yet to approach that approval rate.

In only one month, August, has the COGCC surpassed 20 location permit approvals since SB-181 became law.

The COGCC increased its staff reviewing location permit applications from four people to seven over the summer.

Meanwhile, the COGCC is under pressure from anti-fracking and climate activists to stop issuing permits to all. Colorado Rising, an anti-fracking group behind the 2018 Proposition 112 statewide ballot question that unsuccessfully sought to limit drilling, filed a lawsuit seeking to halt all COGCC permits being issued until all the rule changes required by SB-181 are complete.

In the COGCC’s view, the new law didn’t call for a moratorium or tell the agency to stop permitting, just to prioritize health, safety and environmental protections in its permit reviews.

“If there are permits that fit within that, then it is our mission to authorize those,” said Castle.

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