July 16, 2008

Energy Firms Face Overhaul on Rules Proposals Address Paying for Spills, Other Impacts

By Gargi Chakrabarty

Should Colorado's 600 or so energy companies pay higher bonds to help pay for environmental mishaps? Or should they be required to adopt stricter rules to contain pollution?

Those questions and others were debated at a hearing Tuesday before the Colorado oil and gas commission as part of an overhaul of the state's drilling rules.

The commission staff is rewriting drilling rules at the behest of the legislature after residents living in the vicinity of energy development complained about spills, noise, odors and the effect on the environment and wildlife habitat.

A proposed rule that aims to double a statewide bond paid by oil and gas operators of less than 100 wells to $60,000 from the current $30,000 drew strong reactions from various parties.

"If the environment is not protected by these regulations, then somebody's going to pay the cost of cleanup, maybe the landowner, the water-right owner or maybe taxpayers," said Lance Astrella, a lawyer who often represents landowners against oil and gas companies. "But the appropriate thing to do is to make the oil and gas operators pay."

Dave Neslin, director of the commission, said there have been several instances in past years during which the state had to call on bonds to pay for cleanups.

Recently, there have been instances of waste associated with drilling for natural gas northwest of Parachute. Last month, an empty truck working for oil and gas companies fell into the Colorado River, likely releasing diesel.

Doubling bonds across the board would financially hurt smaller operators, said Jim Walker of Petron Development Co., a contractor that manages 102 wells for smaller companies.

Walker said most of the wells his company manages in Yuma and Washington counties are stripper wells. Those wells produce less than one-tenth the average of wells in Garfield County's Piceance Basin. He said if the bonds were hiked, many stripper wells would have to be plugged.


Tuesday's highlights

* The Colorado Oil and Gas Conservation Commission deferred discussions on proposed rules regarding gathering, processing and other midstream activities, along with gas storage, until October.

* The panel heard testimony about a proposal to double the statewide bond for an oil and gas operator with fewer than 100 wells to $60,000 from the current $30,000.


* Today: Hearings on record keeping, chemicals, safety, setbacks for drilling and coal-bed methane drilling-related issues.

* Thursday: Presentation of alternative proposals by different parties and conclusion of the hearings.

* Aug. 12: Commissioners begin deliberating a final decision on the proposed rules, with their decision likely by mid-August.

Originally published by Gargi Chakrabarty, Rocky Mountain News.

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