Put the brakes on new drilling rules
A committee of the Colorado Legislature began reviewing new oil and gas regulations Friday — rules that the Legislature must approve before they can be implemented. Lawmakers should not be in a rush to approve them.
Long before the Legislature approved a series of bills in 2007 that required the Colorado Oil and Gas Conservation Commission to adopt new regulations for oil and gas drilling, this newspaper strongly supported the notion of developing stricter state rules to help protect Colorado’s health and environment.
We still believe that ultimately needs to be the goal. But with the gas industry in rapid retreat for many reasons, we also think it would be sensible for the Legislature to hold off on adopting the new rules for the time being.
No, we don’t believe the new regulations are a primary reason that the great boom in gas drilling Colorado has experienced over the past decade and more has come screeching to a crawl over the last few months.
One needs only to look at weekly rig counts in the West to see that almost every other state in this region — from Texas to Wyoming — is also experiencing a slowdown in drilling on a par with Colorado.
International energy prices, a drop in demand by industrial users of natural gas and limited pipeline capacity have far more to do with the slowdown than the regulations adopted by the state oil and gas commission.
Even so, the rules are already increasing costs for businesses. Energy companies have had to hire additional personnel to explore what they will have to do to comply with the new rules once the regulations are implemented. And actual compliance will add still more expense to the cost of drilling.
In a normal business environment, these additional costs wouldn’t be devastating. But, as everyone knows, this is far from a normal business environment, for the energy industry or any other sector.
On the same day that lawmakers began reviewing the oil and gas rules, federal officials released the February unemployment numbers that showed the national unemployment rate jumped to 8.1 percent, the highest level since late 1983.
That, by the way, was in the midst of the last energy bust in this region.
The 651,000 job losses recorded in February were across the board, not limited to any single sector. And analysts believe the number will grow. A turnaround in the unemployment numbers is not predicted until 2010.
Locally, there has also been dismal news about jobs. Energy companies large and small have been shedding workers, and the report that Halliburton has been cutting its workforce was simply the most recent. Other firms, not directly involved in the energy business, have also been hit hard. The pending closure of long-time local business Grand Junction Steel will put roughly 100 people out of work.
In such conditions, it’s not surprising that political and business leaders from Mesa and Garfield counties are pleading with state officials to do something to help the gas industry regarding the new regulations.
As recently laid-off gas company official Dave Cezack noted during a press conference last week, the new gas rules amount to a new tax on industry. And it’s not good to add taxes for anyone during tough economic times.
We agree. We’ve argued for many years that boosting taxes during an economic downturn is counterproductive. And this is much more than a normal, cyclical, economic downturn.
Temporarily halting the implementation of the state’s new gas rules won’t suddenly turn around the gas industry in Colorado. Not by a long shot. But burdening any business with additional costs in the middle of the worst economic crisis since the Great Depression is a terrible mistake, not just for this business but for the entire economy.
The Legislature has an opportunity to avoid that by postponing the implementation of at least the most onerous and costly of these rules, if not the entire package.