Drilling permits starting to slip

Pace for 2009 is 14% lower than 2008’s record number

Oil and gas drilling permit approvals in Colorado this year are lagging behind last year’s record pace.

Colorado Oil and Gas Conservation Commission staff report having approved 886 permits through Feb. 16. If that pace of approvals continues, the state would issue 6,880 permits this year, down 14 percent from the 8,027 permits issued last year, but ahead of the 6,368 permits approved in 2007.

The 2007 total also had been a record.

Whether the current pace of approvals will sustain itself is in question. In recent months, energy companies operating in western Colorado have made sharp cutbacks in their drilling rig counts, citing factors ranging from the tighter lending market to falling energy prices to stricter Colorado rules that are scheduled to take effect this spring. Some of those cutbacks may not be immediately reflected in permit statistics because of the lag time between permit applications and approvals.

The oil and gas commission’s acting director, Dave Neslin, told commissioners during their meeting Monday in Denver that the state has yet to see a significant reduction in permit approval numbers.

“But that’s something we’re continuing to take a close look at,” he said.

Despite local rig cutbacks, Garfield County continues to lead the state in approvals of new permits. Through mid-February, the state approved 278 permits within the county, or 31 percent of the total statewide.

Weld County was second, with 252 permits, or 28 percent of the total. Mesa and La Plata counties came in third and fourth, with 101 and 97 permits respectively, or about 11 percent of the total for each of them.

Drilling permits last for one year. Actual drilling activity can be substantially less than permit approvals, and the state is working on beginning to provide data on actual versus approved drilling activity.

Meanwhile, the state says two-thirds of the permit applications received since an interim review policy took effect Jan. 5 will require no additional environmental review.

The oil and gas commission adopted the interim policy to address permits received before its new rules take effect this spring. The policy provides for notification of state health officials for wells proposed in drinking water protection areas, and of the Colorado Division of Wildlife where drilling would be in riparian areas, sensitive wildlife areas or places where the state plans to restrict occupancy for habitat protection under its new rules.

During the interim period, the oil and gas commission director will consider recommendations by those agencies for special conditions on well approvals.

The state found that about a third of the applications analyzed are for drilling in sensitive wildlife habitat, 12 percent involve riparian areas and 3 percent involve drinking water protection areas. One application is for drilling in a restricted surface occupancy area.

The analysis may shed some light on the potential reach of some of the new rules once they take effect. Industry advocates say stricter rules for areas with special protections will add to the costs and bureaucracy facing energy companies in economically trying times.

Republican Colorado lawmakers have been unsuccessful in legislative attempts to postpone the new rules or ease aspects of them. Last week, state Senate Republicans said Gov. Bill Ritter should follow the example of New Mexico Gov. Bill Richardson — like Ritter, a Democrat. Richardson plans to modify tougher oil and gas regulations passed by that state last year, following concerns about the rules’ added costs at a time of economic turmoil.

“Apparently Richardson gets it: Now is not the time to rule out jobs,” Colorado state Sen. Greg Brophy said in a news release.

However, Neslin said Monday that Richardson agreed to ease drilling pit rules that went far beyond the revisions Colorado is making to its rules. New Mexico’s revised rules will only bring them more in line with Colorado’s new rules, and cutbacks to Colorado’s rules aren’t warranted, Neslin said.


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