By David A. Hill

STATE CAPITOL - Over the strenuous objections of Republican lawmakers, Senate Democrats today gave final approval to a new oil and gas rules package promoted by the Ritter Administration as an important step in protecting the public health, environment and wildlife.

The Colorado Oil and Gas Conservation Commission is the state body which developed the rules over the course of a tumultuous 18-month time period that saw confrontional meetings between the COGCC, industry representatives and public citizens. In the end, most Coloradoans favor the new rules, according to surveys pointed to by proponents.

The oil and gas rules package was part of an annual omnibus rule review bill, this year designated HB 1292. Every year the legislature has to vote to repeal or extend all of the rules adopted by the executive office during the previous year. The Senate vote was on a bill reviewing the statutory authority of a wide range of state rules that go far beyond just oil and gas operations, even though the legislative debate has focused on those affecting the energy industry.

Getting back to the oil and gas regulations, the COGCC will be in charge of enforcement once they go into effect later this spring; however, state and federal officials say they plan to get together to figure out how the new regulations will apply to federal land. In 2008 the BLM indicated a portion of the state regulations would be pre-empted by federal laws. The issue could be a confusing one for energy companies, as they would not necessarily know which regulations apply on federal land. State officials say they believe they would have a right to pursue legal actions if its rules were superseded, but the issue may become mute if an agreement can be hammered out.

Senate GOP leadership made an eleventh-hour bid to re-examine the new rules package, pointing to a study showing oil-and-gas development is the state’s biggest private-sector industry. “The new regulations harm the economy, they cost jobs,” Assistant GOP chief Greg Brophy, of Wray, said in today’s floor debate.

Senate GOP leader Josh Penry, offered Senate Dems a compromise that would have tripled penalties on drillers for environmental violations such as excessive noise and odor, while also shoring up property rights and streamlining some of the red tape that hampers energy development.

Declaring the new rules, “will make a bad situation worse” and “will kill jobs,” the Western Slope lawmaker told Senate colleagues that under his amendment, “Bill Ritter could get 90 percent of what he wants, plus some things he didn’t ask for.” 

The Democratic majority continued to insist that the new oil and gas regulations are urgently needed to put oil and gas development more in balance with other state stakeholders and better ensure the public health. What more, supporters point to recent news about methane gas apparently seeping into the water supply of homeowners in Weld County as another indication that oil and gas development in the state must be more closely regulated.

Colorado Energy News’ Editor-At-Large, Richard Martin, believes the argument made that the new rules are driving energy companies out of the state is a dubious one. Slumping commodity prices for crude and natural gas, along with the overall poor economy, play a bigger role than the regulations in explaining why drilling has been substantially reduced in the state, according to Martin.

Nevertheless, it would be foolish to entirely discount the effect the new regulatory framework is having on energy companies. Doug Hock of EnCana Oil & Gas (USA) points to the new rules as a factor in his company’s drilling operations being reduced more in Colorado than elsewhere.

“There’s uncertainty about the rules, and regulations carry a cost - companies evaluate the risk of increased costs and they take those costs into consideration, if not explicitly then implicitly,” “The concern for us in the long term is when prices do recover, it’s more likely that rigs will return to states with transparent and quantifiable regulatory cost structures.”