Drilling permit dip concerns officials
Moffat County saw a decrease in drilling permit applications filed by oil and natural gas companies in 2009.
Some area officials say new regulations designed to better protect wildlife and the environment from potential harm caused by drilling for oil and gas are to blame, while others point to a downward economy or a drop in natural gas prices.
The regulations, which took effect in spring 2009, were fostered by citizen concerns for drilling spills, releases, seeps, well contamination, storm water run-offs, odors and wildlife impacts, according to the Colorado Oil & Gas Conservation Commission.
Although a dropping economy and fluxing natural gas prices have played a factor, Moffat County Natural Resources Director Jeff Comstock said the new regulations are to blame.
David Neslin, director of the Colorado Oil & Gas Conservation Commission, said decreased drilling permits had little to do with the new legislation, however.
Neslin points instead to a 50- to 70-percent drop in natural gas prices.
Natural gas sold for about $9 per thousand cubic foot in 2008 and dropped to about $3 per thousand cubic foot in 2009, he said.
Because of the high prices, 2008 saw a record high 8,027 drilling permits issued statewide, which dropped to 5,159 permits in 2009. Moffat County had 51 permits issued in 2009.
Comstock said this is because of energy resource companies wanting to submit their permits before the new regulations occurred.
In March 2009, Moffat County received 22 applications for drilling permits, accounting for 43 percent of all requests that year, and March and April combined accounted for 64 percent of all applications in the year.
The new rules implemented by Colorado House Bills 07-1298 and 07-1341 took effect in April on private land and July on federal land of 2009.
Since October, five drilling permit applications have been granted for the county while eight are pending approval for 2010. Six location assessments for additional drilling pads are also pending.
The low numbers in permits are concerning to state Rep. Randy Baumgardner, R-Hot Sulphur Springs, who said the regulations “are the straw that broke the camel’s back.”
“Talking with the oil and gas companies, I’m finding out (the drilling regulations) are a huge deterrent to the industry here in the state,” he said. “It’s cheaper for them to go to another state. Even though the tax base may be higher, over a period of time they can operate cheaper.”
The current permit request activity in Moffat County isn’t stirring Neslin’s stance, however.
“That wouldn’t strike me as significantly out of range with what Moffat’s experiences have been over the last five or six years,” he said. “So far in 2010, application levels are back to where they were in 2007.”
Although drilling requests are down about 35 percent from 2008 in Colorado, Neslin said “we fared better than most of our neighbors.”
The 5,159 permits issued in 2009 are about 2,000 more permits more than Kansas, Oklahoma and New Mexico and about 4,000 more than Utah or Montana.
Baumgardner said the processing time on applications to drill also may be affecting the industry in Colorado.
“It takes about two to three days in other states to have a permit but here in Colorado it takes 30, 60 or 90 days to get a permit approved,” Baumgardner said. “It’s just not business friendly to oil and gas here in the state.”
David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, said the regulations are making the gas industry in Colorado unstable.
“Like an earthquake, the rule-making created enough instability to keep companies off-balance,” he said in a statement. “Are companies pulling out? No. I’d say they’re rebuilding for the long term and hoping against regulatory aftershocks that might create more instability.”
The potential drop in revenue also could hurt the county financially.
Moffat County projected a $110 million drop in proposed county assessed value for 2010 and 60 percent of that could be attributed to potential oil and gas price drops, Moffat County Assessor Suzanne Brinks said.
“Price and regulatory factors can’t be separated and measured against each other,” Ludlam said. “High prices are better for our business, but no investor in their right mind wants to build a drilling program around a regulatory fault zone, prone to quakes and instability.”
Moffat County Commissioner Tom Mathers said the problem comes from a combination of things but that Gov. Bill Ritter isn’t helping the situation.
“Gov. Ritter’s rules and regulations run (oil and gas) right out of the county,” Mathers said. “The first time I met Ritter ... I told him ‘Please don’t protect us into starvation’ ... and that is exactly what he has done.”