Regulators: Drilling permit numbers misleading

Oil and gas drilling permits in Colorado continue to show a sharp decline, but state regulators say different measures give a more upbeat indication of industry activity in the state.

The Colorado Oil and Gas Conservation Commission approved 945 permits as of March 24. At that pace, the state would issue about 4,155 permits by year’s end, compared to almost 6,000 last year.

However, commission officials note the agency transitioned to permits that are good for two years rather than one, which for now has reduced the need for companies to refile for expiring permits. Commission Director David Neslin told the commission this week that companies continue to hold a high number of active permits. The 4,733 active permits available to companies in February compared to 3,722 a year earlier, according to commission statistics.

The number of wells for which drilling started so far this year is 377, up from 330 for the same period a year ago. And as of March 1 there were 71 rigs operating statewide, compared to 68 on Jan. 4, and 41 on Jan. 2 of last year, according to Anderson Reports.

“So the metrics are painting a different picture (than permits do) and I think a more positive picture,” Neslin said.

Weld County, where companies are pursuing new oil development opportunities, is expanding its lead in permits issued so far this year with 433. For Garfield County, 330 have been issued, which puts it far off the pace of 2010, when 2,037 permits were issued for the year.

Mesa County is third in the permits count with 45. In Rio Blanco County, where 441 permits were approved last year, only 22 have been issued so far this year.

Oil and gas Commissioner Michael Dowling said judging industry activity by well permits also is misleading in that companies increasingly are making use of wells that are drilled down and then horizontally into a formation.

Such a well may result in the same production as multiple vertical wells, he said.

Horizontal wells account for 16.4 percent of this year’s well permits. Most have been issued for Weld County, but some are for companies exploring shale formations in Garfield and other local counties.

David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, said the two-year life cycle has helped companies build up permit inventories, but companies operating locally are contending with low natural gas prices even as high oil prices spur drilling activity elsewhere. In addition, he said, they face high permitting-related costs to meet wildlife-protection and other rules.


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