Reported by Staff

DENVER - The Colorado Oil and Gas Association has sued state regulators, labeling the comprehensive new rules governing oil and gas operation in Colorado the “most costly and burdensome” in the nation. Most of the rules went took effect April 1.

The leading energy industry association in the state filed the lawsuit in Denver District Court on Friday - the very last day any challenges to the new rules could be formally made.

Governor Ritter signed House Bill 1292 on April 22, officially approving all new rules put forth by state agencies, including the oil and gas regulation. At the time of the signing, he said, “House Bill 1292 and the new guidelines will allow the [energy] industry to grow in a way that is sustainable and compatible with our entire economy.”

The Governor also said that he was “committed to helping this [oil and gas] industry thrive. Clean-burning natural gas is an important part of Colorado’s New Energy Economy, and this industry will play a key role in Colorado’s economic recovery and our economic future.”

During the nearly two-year long process of formulating the new rules, Ritter and environmental and sporting groups repeatedly said the new regulations were needed to protect the state’s environment, wildlife and public health from what was until recent months a booming industry.

Energy industry executives strongly objected to the new rules, saying they go too far, require too much, and most importantly, would substantially increase compliance costs, in some cases, by thousands of dollars per well. In addition, oil and gas companies have cautioned that once the economy turns around, their investments will be diverted to states with more favorable operating conditions.

Whether that is an idle threat or an accurate prognosis for the future remains to be seen.

Responding to the lawsuit today, Dave Neslin, Director of the Colorado Oil and Gas Conservation Commission – the agency that developed the new regulations package and which oversees drilling operations in Colorado, said he is confident the state’s new industry rules will withstand the legal challenge.

Two key contentions are at the heart of the COGA lawsuit filing and both center on the issue of cost. The first asks whether the COGCC accurately and publicly forecast what it would cost the state agency to enforce the new rules, and second, whether the agency accurately forecast the cost of compliance the rules would level on companies operating in Colorado.

The lawsuit claims the agency did neither, and asked the judge to invalidate the rules or tell the COGCC to, in essence, try again.