Gas rules will not be inconsequential
In all likelihood, the new gas-drilling regulations developed by the Colorado Oil and Gas Conservation Commission will be approved by the state Senate this week and sent on to Gov. Bill Ritter for his signature. If that happens, the bulk of the regulations will take effect on April 1.
The new rules have been debated for the past 18 months or so. They remain controversial, and no one should believe they will be inconsequential.
They will have important effects on things like watershed protection, public health, private landowners’ rights. They’ll have a major impact on how drilling interacts with wildlife. That’s why we have supported them from the beginning.
But the rules will also have consequences on the cost of drilling. And, given the current state of the economy, we believe the timing for saddling industry with those costs is bad.
One piece of evidence of the costs, reported in The Daily Sentinel Friday, is that the number of drill rigs operating in the Piceance Basin has plummeted more than other areas in the Rocky Mountain region. State officials argue that’s because it’s more costly to drill in this area and limited pipeline capacity drives prices lower, which is true. But it’s also true that the strictest wildlife provisions in the new rules apply primarily in the Piceance Basin.
Others use industry figures to calculate that the new rules will increase drilling costs by something in the neighborhood of 2 percent or 3 percent. But those numbers do have a real impact for any business. Added on top of declining revenue, they may result in job cuts or abandoned projects.
It’s absolutely true that the regulatory costs are not the primary cause of the drilling cutbacks. The national economy and the drop in natural gas prices had far more to do with it than the new regulations. And, if the gas business had continued to boom as it was just a year ago, the costs of the new regulations would probably have been absorbed with minimal impact.
But the economy is not the same as it was a year ago, and the new regulatory costs are coming at a time when gas companies can least afford them.