It has been more than a year since Colorado stiffened drilling regs for oil and gas operators following months of sharp debate … and, surprise … the industry didn’t fall off the cliff as was predicted by many opponents prior to legislative approval of the new rules.

By David A. Hill

The numbers tell the story: 2010 is shaping up as the state’s second busiest year ever for issuing oil and gas drilling permits despite the tougher regulatory environment.

Colorado Oil and Gas Conservation Commission Director David Neslin said the state has issued more than 3,100 permits through the first six months of the year and is on pace to issue more than 6,500 by the end of the year. That would be a 30 percent increase from last year.

This hasn’t stopped embattled Republican Gubernatorial candidate Scott McInnis from calling for the repeal of the rules because they’re “job-killing.” He said the “onerous” rules overreached, destroyed jobs and sent the industry to other states. Democratic candidate (and Denver Mayor) John Hickenlooper offers the view that the rules, in general  “include the best practices of the oil and gas industry,” and that any rewrite (or repeal) of them would be a mistake. 

Despite low natural gas prices and decreased economic activity, Neslin noted that Colorado is among the leaders nationwide in permits issued and has the most in the Rocky Mountain region. Wyoming is the second busiest in the region with more than 2,700 permits so far, Neslin said.

“Colorado’s oil and gas industry is currently faring better than that in many other states, including our closest neighbors.”

Many in the industry warned that the new set of regulations to increase environmental and wildlife protections where companies operate would negatively impact energy development and drive away investment in Colorado. The concern was amplified last year in the run up to final approval of the rules because 2008 saw a record 8,027 permits issued. Then, the bottom dropped out of the economy and natural gas prices tumbled. Still, while last year brought a decline, Colorado issued the most permits in the region with 5,159.

Garfield County led the state in permits through June, with 1,089. Weld County was second with 1,010. In Larimer County, 2010 has already brought more state oil and gas drilling permit approvals than any previous year except 2008. Neighboring Weld County is one of the state’s oil and gas extraction hot spots with more than 1,000 permits approved this year

Not all permits are acted upon because some are not used by companies. But Neslin said figures from an industry tracking firm showed that 819 new wells were created in Colorado through June 15, the most in the region. Wyoming had the second most new wells with 506.

“We believe this demonstrates that operators have adjusted to the amended regulations and are continuing to pursue their opportunities here,” Neslin said.

Doug Flanders, director of policy for the Colorado Oil and Gas Association, said the association has been working closely with the COGCC to increase the efficiency of the drilling permitting process.

“While permits have been on the rise and rig counts are increasing, we know issues will continue to exist, which is why we must remain diligent and continue to work closely with the commission to ensure that we continue this progress,” he told The Coloradoan.

The COGCC lead man said in his letter that he believes the industry’s competitive performance after the rules went into effect shows that energy development can be compatible with environmental protection.