January 27 Colorado Energy Cheat Sheet: COGCC rulemaking pleases no one; anti-fracking measures disastrous for Colorado economy; pushing back against Clean Power Plan

Even small changes to oil and gas regulations can have deep and damaging effects on Colorado’s economy, according to researchers at the University of Colorado:

A statewide, 2,000-foot buffer zone between drilling rigs and homes, schools and businesses would take a hammer to Colorado’s oil and gas industry, already reeling from low commodity prices, as well as the state’s wider economy, according to a new study from University of Colorado Boulder’s Leeds School of Business.

Such a setback requirement “could result in slower economic growth” for Colorado’s economy as well as state revenue, according to the study released Wednesday.

The study said its forecast on the effects of a 2,000-foot setback included:

Production of oil and gas statewide could drop between 25 percent and 50 percent;
A $6 billion to $11 billion drop in Colorado’s gross domestic product;
A loss of 33,000 and 62,000 jobs between 2015 and 2030;
Loss of $214 million to $428 million in per year in tax revenues from oil and gas companies.

Given that the Colorado Oil and Gas Conservation Commission just concluded a round of rulemaking based on the Governor’s Oil and Gas Task Force recommendations from 2015, new and more onerous regulations like the setback examined by CU researchers or the more dangerous proposed fracking bans and various setback ballot measures could have catastrophic consequences on top of the recent commodity downturns impacting the state.

Anti-energy activists have intimated that even more proposals could be in the offing for 2016:

Larimer County resident Katherine Hall, who testified in favor of local control, said she would not be surprised if a citizen-initiated measure ended up on November’s ballot.

“The final outcome of the rule making does not go far enough to ease the concerns of Colorado citizens,” Hall said.

Remember when this blog said the Oil and Gas Task Force was merely kicking the can down the road?

We’ve made our way down that road, and the can is about ready to explode.

In the near term, the COGCC rules could go into effect in as few as 6 to 8 weeks, subject to review by the legislature and the Attorney General:

Compton said the months of rulemakings were “the most difficult” that he’s been through — a string that included the 2008 wholesale overhaul of Colorado’s oil and gas regulations.

The commissioners voted 5-4 to define “large” oil and gas facilities, the threshold that triggers the communication process between energy companies and local governments, as eight new wells and storage tanks that can hold up to 4,000 barrels of oil and natural gas liquids. The commissioners restricted the rule to large facilities in “urban” areas, defined as 22 buildings within 1,000 feet of the wellsite, rejecting request from some quarters to take the rule statewide.

But the rules appear to exceed the recommendations, and create ambiguities that will only incur more procedural red tape:

The process approved by the COGCC will triple, from 90 days to 270 days, the amount of time needed to get a hearing on a large project before the oil and gas commissioners, said Tracee Bentley, the executive director of the Colorado Petroleum Council, an arm of the American Petroleum Institute.

The final rules also said facilities should be “as far as possible” from existing buildings, a phrase Bentley called “vague and confusing” that would cost energy companies time and money to comply with.

The commissioners also rejected a request that existing surface-use agreements between energy companies and landowners be grandfathered, and allowed to avoid the notification and consultation process.

“We feel the industry brought reasonable solutions to the table that were largely ignored, and the rules still go beyond the recommendations of the task force,” said Dan Haley, president and CEO of the Colorado Oil & Gas Association.

Bringing reasonable solutions and constructive dialogue should be expected of the industry, but the same can’t be said for the forces calling for the end of natural resource development altogether:

Activists addressing a state oil and gas rulemaking hearing this week levied a barrage of accusations and insults toward state officials and even renewed calls to eliminate Colorado’s state agency responsible for regulating oil and gas development.

Speaking at the Colorado Oil and Gas Conservation Commission (COGCC) hearing, Lauren Swain, representing national climate activist group 350.org, largely ignored the fact that the rulemaking was supposed to be the focus of the hearing and instead used her time to complain about the agency. From Swain’s testimony:

“With this new proposed rule, the COGCC has proven once again that it can no longer be considered a legitimate state agency because the COGCC continues to facilitate the pace of hazardous polluting oil and gas drilling and fracking operations near homes and schools subjecting communities to the risks of toxic emissions, spills and explosions.”

But Swain took her testimony even farther by lobbying for disbanding the agency in favor of creating a new agency that would “swiftly” transition the state to 100 percent renewables using the Solutions Project at Stanford as a guide. From Swain:

“The COGCC must be replaced with one or more agencies charged with one, facilitating to protect Coloradans from the harmful impact of oil and gas production and two, to aid and foster Colorado’s swift transition to one hundred percent renewable energy production and consumption using the Solutions Project developed at Stanford University as a guide.”

Up next was testimony from an activist who has previously accused the oil and gas industry of having a “personality disorder” and of being “socially deviant.” This time, Amanda Harper called oil and gas producers a “short sighted, selfish and sociopathic industry.”

Not a lot of balance or reasonable tone, it seems.

Colorado Governor John Hickenlooper offered his comments at an event that saw journalists kicked out and required an open records request to seek audio of the Democrat’s comments–and while he questioned the leverage of the anti-energy groups to get the proposed measures on the 2016 ballot, he surreptitiously argued that the COGCC rules discussed above had, in his opinion as well, gone further than his own Oil and Gas Task Force had recommended:

“I haven’t heard of any funding source for any of them,” Hickenlooper began. “Like the normal, large funders of those initiatives, you know, I haven’t heard of. So, maybe they’ll get on the ballot, but without a lot of money, I don’t think they’re going to do well. I can guarantee you there’ll be money spent showing that, the, the problems associated with any of those initiatives.” (Forum Q & A – 17:05)

Moments later, he added, “Again, we’re going further even than the commission recommended, and in certain cases, to try and give local, local municipal elected officials more, a greater role.”

Further.

We’ll see how that plays out.

***

The Environmental Protection Agency’s Clean Power Plan received a stay of its own last week when the DC circuit refused to grant a stay of the rule, forcing 26 states to appeal the case to the US Supreme Court.

Meanwhile at the Colorado legislature, Sen. John Cooke (R-Greeley) has championed measures designed to keep the implementation of the Clean Power Plan at arms’ length, allowing lawsuits to be completed before the state moves forward, something Coloradans clearly support:

Two weeks into the 2016 legislative session, Sen. John Cooke, a Republican from the heart of the Front Range oil and gas patch in Greeley, has introduced two bills that take aim at the plan, which requires power plants to cut carbon emissions by 32 percent from 2005 levels by 2030, largely by shutting down or converting coal-fired plants to alternative fuel sources.

One of Cooke’s bills couldn’t be more timely. After several state attorneys general, including Colorado’s Cynthia Coffman, failed to win a stay of the plan from a federal court Thursday, Cooke’s Senate Bill 46 jumps into the ring like a tag-team wrestler, working from another angle to stall implementation of the Obama administration plan.

“Well, it wasn’t really a surprise that the court in D.C. struck down the stay request,” Cooke told The Colorado Statesman. “Unfortunately, the bill is more relevant now.”

The “Preserve State Clean Power Plan Options Act” aims to “slow down the implementation process” in part by suspending it “until all [related] lawsuits are done,” Cooke told members of three rural Colorado advocacy groups, including some representing coal mining areas, who were visiting the Capitol Friday.

In effect, Colorado wouldn’t need a stay from a court because it would have passed a stay for itself, written by Cooke.

Cooke’s other bill, SB 61 or “Ratepayer Protection Act,” would require the Colorado Department of Public Health and Environment to pay for costs generated as a result of Clean Power Plan implementation.

***

NEWS ROUNDUP:
Silverton punts on Superfund designation

How the EPA handled Flint, MI water contamination, vs. Animas River spill

Plunging oil prices means lower severance tax revenue in Colorado

Lower gas prices? Let’s raise taxes!

Anti-energy activists oppose coal development on the Western Slope. News at 11.

Trading: Coal extraction for sage grouse habitat

Fracking bills: regulations in search of problems

January 25, 2012 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

Two bills concerning hydraulic fracturing can be summarized best as excessive regulations in search of problems. I consulted with Doug Flanders, director of policy and external affairs for the Colorado Oil and Gas Association (COGA), who provides a summary of each bill citing statistics from the Colorado Oil and Gas Conservation Commission (COGCC), the state agency charged with the “responsible development of Colorado’s oil and gas natural resources.”

Bill Summaries

HB12-1173 Restrictions on the Use of Open Pits in Connection with Hydraulic Fracturing

House Sponsors: Roger Wilson (D-HD 61)

Senate Sponsors: None

Rep Wilson wants to ban all hydraulic fracturing open pits. It’s a little like other “zero tolerance” policies, which always have negative unintended consequences. Besides, the trend already is toward a closed loop system as Flanders explains:

According to the COGCC, the percentage of well pads utilizing closed loop or pitless drilling systems has increased from 31% in January 2010 to 79% in March 2011 and that number continues to rise.  The COGCC considers many factors when reviewing permit applications for surface operations, all of which are designed to protect the health, welfare, and safety of the surrounding population. COGC Rule 907 provides general requirements to ensure that exploration and production waste is properly stored, handled, transported, treated, recycled, and disposed. Operators are encouraged to: reduce the quantity and toxicity of their waste; recycle, reuse and reclaim it; treat it to reduce toxicity; and dispose of it in a manner that protects the environment. Several of the 900 Series Rules require simple practices for reducing waste toxicity and volume, including: removing oil and condensate before produced water is placed in a production pit (Rule 907.c) and subsequent removal of any accumulation within 24 hours (Rule 902.c).

Prediction: Rep. Wilson apparently is not a fan of hydraulic fracturing, but the majority of House members are. This bill dies in committee.

HB12-1176 Oil and Gas Surface Owner Horizontal Drilling Setbacks

House Sponsors: Su Ryden (D-HD 36), Dickey Lee Hullinghorst (D-HD 10), Matt Jones (D-HD 12), Nancy Todd (D-HD 41), and Wilson

Senate Sponsors: None

Another bill going after hydraulic fracturing with a reasonable sounding title, but in reality the details reveal burdensome and unnecessary regulations with severe negative consequences including reducing the regulatory discretion of the COGGG. Most dangerous is the expanded definition of “surface owner” which would allow for the violation of private property rights as Flanders explains in his summary:

COGCC has already looked at wells in subdivisions and determined 300 feet as the appropriate distance for public safety in high density residential areas. However, at their discretion, the COGCC can determine that a greater distance is required.  COGCC has been tracking setback metrics since the adoption of the amended rules on December 17, 2008.  Of the 4836 well locations sited during this period, 91% or 4410 are 500 feet or greater from a building structure. (And buildings are often not residences.)

The value of the surface to homebuilders should be considered in determining any setbacks.  If there is an existing well, then any new homes or schools would also have to be 1000 feet from the existing well.

The bill also changes the definition of a surface owner to be more than just the owner of the land where the oil and gas operations occur, but would also include any land which overlays the horizontal path of the operations if hydraulic fracturing occurs, despite that fact that horizontal drilling can extend over one mile in length and over a mile and half in below the surface.  This would unnecessarily hinder drilling operations below surface that would not impact surface buildings.

Prediction: Reason will prevail in the House. This bill will die in committee.

Final Thoughts

Those who thought environmentalists would tolerate development of natural gas as a “clean” technology along side wind and solar were mistaken.

There could be one less sponsor of anti-fracking legislation next year, Rep Wilson was drawn out of his current House district and will not seek re-election.

Remember to check the energy blog for updates on all energy legislation. We read this stuff so you don’t have to.