Colorado Gov. Bill Ritter Jr. said that new oil and gas regulations would allow the industry to grow in a sustainable way compatible with the state's economy as he signed them into law on Apr. 22. Producers remain concerned that the rules will simply create more delays and expenses. "These rules were shaped with valuable input from people all across the state and unanimously adopted by the Colorado Oil & Gas Conservation Commission [COGCC]. They strike the right balance, a balance that recognizes the importance of a healthy industry and the importance of healthy communities, water supplies and wildlife," the governor said.

"In 1999, Colorado issued 1,000 drilling permits. Last year, the state issued more than 8,000. These new, modern rules recognize this increase in drilling activity as well as the technological changes that have occurred within the industry over the past decade. The rules also incorporate the forward-looking practices already being used by companies such as EnCana, Williams, and Gunnison Energy" he said.

The regulations took effect May 1 on federal lands and began to apply Apr. 1 on all other lands in the state.

Several producers with operations in the state did not want to comment for attribution. "We've handed this off to the Colorado Oil & Gas Association [COGA] because we're going to have work under these new rules. I could speak for a good half hour if this was off- the-record," one company's official told OGJ.

"Our primary message involved the business environment for oil and gas companies in Colorado. Obviously, with the economic downturn, the state government has created an uncertain business environment where companies might be more comfortable to Louisiana or Texas," said Nate Strauch, COGA communications coordinator.

'Second bite of the apple'

Strauch said, "Colorado's permitting already takes longer than the national average.

"Under the new rules, after the permit has been approved, different entities can come in and challenge the action. Surface owners can come in and second-guess the decision. So can the Department of Public Health and the Division of Wildlife. This gives them a second bite of the apple after being involved in the process already if they don't like the results," he told OGJ.

Strauch and Jack Ekstrom, a COGA board member, separately expressed concern about the new regulations' impacts on smaller producers.

"The investment in compliance involves whether you can afford to do it. The delays and difficulties in getting a rig and having to restart the clock because of some minor hiccup remain to be seen," said Ekstrom, who is executive director of investor relations and corporate communications at Whiting Petroleum Corp., Denver.

"You probably won't see evidence during this downturn because there are plenty of rigs available. But once there's an uptick, a company's difficulty in timing and contracting for services may be complicated by having to wait or stand by if it hasn't jumped through all the hoops perfectly," he said.

COGCC Director Dave Neslin said the agency received a wide range of input as the regulations were developed.

"We incorporated a lot of input from both large and small operators, and we will continue to work with operators to help them comply successfully with these requirements," he said.

"We intend to implement these changes in a reasonable and responsible manner. If there are issues we didn't anticipate or if further changes are needed, the commission will consider adjustments. That's the advantage of working through a regulatory process instead of the courts," he told OGJ.

Downhole chemicals

The new regulations contain several significant provisions. Under Section 205, operators will be required to keep an inventory by wellsite of each chemical used downhole or stored for use downhole during drilling, completion, and workover operations, including fracture stimulation, in an amount exceeding 500 lb during any quarterly reporting period. They also will maintain an inventory of fuel stored at the well site in an amount exceeding 500 lb in a quarter.

When the composition of a chemical product is considered a trade secret by its vendor, operators will be required only to maintain the product's identity. The vendor or service provider will be required to supply COGCC with a list of a trade secret chemical product's ingrethents when the commission's director notifies them in writing that the information is necessary to respond to a spill or release, or a property owner registers a complaint about such a release.

COGCC's director or designee may disclose such information to other staff members, but only to the extent that it is necessary for spill response assistance.