Craig The current rules governing energy drilling permits and public land mineral leases are more than a decade old, said Dave Neslin, Colorado Oil and Gas Conservation Commission acting director.
Because of increases in the speed and breadth of energy development, the Colorado Legislature decided those rules no longer were adequate to promote responsible development and protect Colorado's wildlife and public health, Neslin said.
To answer that dilemma, it passed House Bills 1298 and 1394 last year.
The two bills require the Oil and Gas Commission to appoint Division of Wildlife and Department of Public and Environment representatives to the Oil and Gas Commission, as well as create new oversight methods.
The Oil and Gas Commission set about drafting new regulations to meet those legislative mandates last year and released a draft of those rules Monday.
The Colorado Oil and Gas Conservation Commission expects to ratify new rules after a week of public hearings from July 23 to 27 in Denver.
If approved, the rules would take effect Nov. 1.
Before then, however, there will be a day of hearings on the Western Slope on June 10 at the Two Rivers Convention Center in Grand Junction.
The state agencies involved with the draft rules said at a press conference Monday that the 160-page document was a series of compromises.
The draft contains several changes from a pre-draft circulated around the state earlier this year, Neslin said.
He added that his agency's goal was to strike a balance between its two objectives: to encourage responsible development and to protect wildlife and health.
The Moffat County Commission, the county Natural Resources Department director and energy company representatives disagree, saying the draft rules still burden developers.
Moffat County commissioners Tom Gray and Tom Mathers added the rules make it clear that responsible development is not the Oil and Gas Commission's sole aim.
"It's not that we're making a value judgment on the importance of protecting wildlife," Gray said. "Everyone thinks that is an important obligation.
"We see there's another agenda here, to control the pace of development, and they're using wildlife to do that and cloud the issue."
Local authorities previously have said that certain areas in the pre-draft rules jeopardize private property rights.
One example of a concern from the pre-draft was a new right granted to adjacent property owners giving them authority to call a hearing about a neighboring property owner's lease agreement with a drilling company.
That is no longer in the draft rules, Neslin said. However, neighboring landowners will be given notice of proposed drilling agreements within 500 feet of their property and will be allowed to provide comments to the Oil and Gas Commission.
Compromises extend to proposed wildlife regulations.
In certain areas, local wildlife populations need undisturbed space to propagate, said Mike King, Colorado Department of Natural resources deputy director.
For example, mule deer need established winter ranges to survive the season, and sage-grouse require their leks - where males attract females - to be accessible during mating season.
In these cases, the Oil and Gas Commission proposed timing restrictions on drilling, prohibiting activity during certain times of the year.
However, these will be limited to no more than three months each year, Neslin said, and they cannot be stacked if more than one species is in the same area to limit drilling beyond three months.
Companies also may drill year-round if they minimize their surface footprint by using directional drilling from common well pads, Neslin added.
Proposed regulations are for two well pads in mule deer ranges and one pad in sage-grouse habitats.
These proposals flout already established local agreements, Gray said, pointing to the draft rules' inclusion of the black-footed ferret as a protected species.
When the black-footed ferret was reintroduced to Colorado, it came with a federal "non-essential experimental" designation, said Jeff Comstock, Moffat County Natural Resources Department director, meaning it would not be seen as a protected species in Colorado.
The Oil and Gas Commission "flat-out ignored the black-footed ferret plan," Gray said. "And that should tell you there's another agenda here. That science and protecting wildlife is not of the utmost importance."
Energy companies are leaving Colorado because the state is "rewriting the rules in the middle of the game," Comstock and the commissioners said.
Companies knew what to expect when they negotiated with local authorities, Gray added.
"They weren't always happy, but they knew what to expect," he said. "Now, because the state is coming in and rewriting the rules on contracts that have already been agreed to, (companies) don't have any surety or confidence they will be able to follow through on their drilling plans."
At least two energy companies see the recent rule-making process as a reason to invest in other states.
"There's a climate of uncertainty for our business," said Doug Hock, an EnCana Oil and Gas USA spokesman.
EnCana's corporate headquarters in Calgary, Canada, allocated $500 million for U.S. development in 2008, he said, adding that it was all designated for Wyoming and Texas lands, leaving nothing for new development in Colorado.
"That was in large part due to the uncertainty about the rules and the impossibility for us to know what our return on our investment might be," Hock said.
Pioneer Natural Resources also sees Colorado becoming less attractive in the future, said Kimberly Mazza, Pioneer Western Division senior public relations adviser.
"We must allocate our capital to the projects that offer the best returns," she said. "Our projects in Colorado must compete with projects in other states for capital investment. Additional regulations and related costs will make Colorado projects less competitive and less likely to be funded."
Pioneer has worked with local agencies in Moffat County to mitigate wildlife and public health impacts, she added, taking steps to control effects on water reservoirs and sage-grouse habitats.
"Pioneer is a strong believer in being a good corporate neighbor and investing in the communities where we operate," said Jay Still, Pioneer executive vice president. "We believe this area holds significant potential for Pioneer and the county and would like to see great things happen here."
The Colorado Environmental Coalition does not see the Oil and Gas Commission's proposed rules chasing away development, said TJ Brown, Environmental Coalition Front Range field director.
"Colorado has one of the friendliest regulatory climates in the world for oil and gas," Brown said.
"I think the threat of industry leaving Colorado doesn't hold water."
Some of the proposed rules don't go as far as those in neighboring states, he added. The proposed 150-feet setback between a drilling rig and a house, for instance, doesn't compare to the 500-feet setback in other states.
The Coalition also thinks there should be more protections for public drinking water, Brown said.
The Coalition, as well as Pioneer and EnCana, still are parsing the draft rules, representatives said, adding that they were not prepared to release a formal opinion.
The Oil and Gas Commission took Moffat County's comments on its rules pre-draft "very seriously," Neslin said.
It compromised on wildlife regulations, cutting them from 11 pages in the pre-draft to about three in the released draft, Neslin said. It compromised on excessive state forms, cutting back on a new form and consolidating it into an existing one, and it took steps to provide local authorities and energy companies with avenues to work with the state on local plans.
"We're trying to find a process to clarify and harmonize local regulations and state rules," Neslin said.
Local governments can seek Memorandums of Agreement with the Oil and Gas Commission that can change the letter of the regulations, Neslin said. However, any changes must meet the Oil and Gas Commissions objectives of responsible development and reasonable wildlife and health protections.
The Commission also offers incentives to local areas to create area-specific Comprehensive Drilling Plans, Neslin said.
There are no requirements for local plans, he added, and the Oil and Gas Commission will shorten its approval timeline for drilling applications and lease from 50 to 60 days in areas without, down to 30 to 40 days in areas with one.
"The state approach is a well-by-well approach," Neslin said, "which, frankly, is outdated today."
However, in all cases, Neslin said, in areas without additional agreements between state and local agencies, state regulations will trump local and federal Bureau of Land Management plans.
Jeremy Casterson, planning and environmental coordinator for the BLM Little Snake Field Office in Craig, said no one in his office is upset about that.
Moffat County officials see it as one more example of the state executive overstepping its boundaries.
"What good was three years of (the Northwest Colorado Stewardship) if they'll trump BLM regulations?" Comstock said.
The Stewardship - a group of agencies that worked together on the BLM Little Snake Resource Management Plan - was recognized nationally for being the most public BLM process in the country, Comstock said.
"Yet, that appears to have been set to the side," Comstock said.
Neslin said the Oil and Gas Commission's proposed rules do not overstep its legal boundaries. The Colorado Attorney General's Office reviewed the rules before they were released and did not find any issues.
Neslin added that the Oil and Gas Commission was created to regulate energy activity on all lands in Colorado, whether they are owned privately, by the state or by the federal government.
The Oil and Gas Commission, the BLM and local authorities will need to work together in the coming months for a unified plan, he said.
Neslin encouraged the Moffat County Commission to contact him directly so they can discuss the issues.
"Our goal is to come up with a solution that (all parties) can reach agreement on," Neslin said.