In Silt, it was a seep from a gas well leaking benzene into a creek, and in Hobbs, N.M., it was a subdivision built on an old oil waste pit.
In Gillette, Wyo., it was an oil-field high-voltage line buried just 6 inches underground, and in Miles City, Mont., it was the prospect of heavily salted well water coming down the Tongue River.
Across the West, states are moving to add new regulations and laws as oil and gas drilling intensifies and potential problems — small and large — emerge.
“Rule-making is going to go on for a while until there is a little more balance,” said Joanna Prukop, head of the New Mexico Department of Energy, Minerals and Natural Resources.
In Colorado, the number of active wells has risen to 34,000 from 22,000 in the past five years, and the number of drilling rigs has more than tripled to 125 in four years.
“This is really unprecedented, and it is a dramatically different industry than in the past,” said David Neslin, the interim director of the Colorado Oil and Gas Commission.
“That is what is driving this rule-making process,” Neslin said.
Colorado has, at the legislature’s direction, embarked on a broad rule-making scheme aimed at bringing wildlife and health department officials into the drilling-permit evaluation process.
The rule-making is also trying to add regional planning for energy development.
“Everyone is watching Colorado because Colorado is trying to take a comprehensive approach,” said Erik Schlenker-Goodrich, an attorney with the Western Environmental Law Center in Taos.
“Colorado may be setting the stage for the region,” he said.
The dilemma, energy-industry executives say, is that the pace and intensity are a function of the more geologically difficult reserves of the Rocky Mountains.
“As you shift to these unconventional reserves — tight sands, coal-bed methane — you have to punch a lot more holes to get at the gas,” said Charles Stanley, a vice president with Salt Lake City-based energy producer Questar Corp.
Pressure to drill
New technology, such as directional drilling, which allows many wells to be drilled from a single site, has helped limit the impacts, said Stanley, who also is president of the Independent Petroleum Association of Mountain States.
Still, the pressure to drill is great, because, unlike a conventional gas reserve, where a few wells produce gas for many years, in most Rocky Mountain wells the bulk of the gas is out in the first few years — leading to the need to drill more wells.
In the face of the operating and financial pressures, Stanley said “the uncertainty that comes with new rules makes it hard to make economic decisions.”
Drilling is growing as other domestic sources are dwindling — with national production dropping 2.8 percent between 2000 and 2006.
Natural gas from the five mountain states of Colorado, Montana, Wyoming, Utah and New Mexico provided 23 percent of U.S. production in 2006, up from 17 percent in 2000, according to the U.S. Energy Information Administration.
In the past three years, Wyoming has issued close to 27,000 drilling permits. The number of operating wells in New Mexico rose 12 percent in three years to 46,955 in 2007.
And so in the past three years, Wyoming, Montana, New Mexico and Colorado have all either passed new controls or embarked on new oil and gas rule-making.
• New Mexico this month is set to adopt a new rule more tightly regulating waste from oil development.
• Wyoming — after an oil-field power line carrying more than 10,000 volts was found buried just 6 inches underground near planned housing — this year adopted a rule requiring inspection of all new lines.
• Wyoming in the past three years adopted laws to give landowners more of a say and better compensation when energy companies, using their so-called split-estate right, drill on private land.
• Montana in 2003 became the first state in the nation to adopt standards limiting the amount of salt from coal-bed methane wells in waterways, and last year tightened those regulations — sparking lawsuits from the industry and Wyoming, where most of the drilling is taking place.
“We could see all this water being pumped out of wells coming our way,” said Mark Fix, a Miles City rancher.
Industry groups around the region say that some of these rules could hamper energy development.
“Capital is a coward,” said Bob Gallagher, president of the New Mexico Oil and Gas Association. “It will always follow the path of least resistance, where there are fewer rules, less risk.”
But regulators say drillers and producers should brace themselves for the prospect of new regulations throughout the West leaving few places “of least resistance.”
“The industry is going to have to come to grips with the fact that the environment has to be protected, and in the arid West we have to protect water,” New Mexico’s Prukop said.
Colorado began its new rule-making process in January, after the legislature passed laws directing the oil and gas commission to add protection of wildlife and public health to its permit process.
The commission is proposing a new regional planning process to take into account the impacts of multiple projects and an upgrade of operating rules on things such as noise control, pit liners and reclamation.
“We haven’t revised our rules since 1996, and so much has happened since then, including advances in drilling technology and the growth of the state’s population,” said the commission’s Neslin.
Praise and concern
It is the breadth of the proposed rules that has drawn praise from environmentalists and concern from industry.
“It’s one thing to have prescriptive rules addressing something the existing rules don’t — like water coming out of a CBM (coal-bed methane) well,” said Questar’s Stanley. “It’s another when you have these broad rules that infringe on property rights and the rights of oil and gas companies.”
Industry officials are concerned about rules such as requiring small operators to assess regional impacts from drilling beyond their own fields, or several state agencies potentially overseeing the traditional negotiations between landowner and driller, Stanley said.
The aim of the rules is not to discourage energy development, Neslin said, but to manage the intense development.
While comprehensive planning and environmental assessments are already required on federal land, about 85 percent of the drilling in Colorado is on state or private land, Neslin said.
After a series of public meetings — attended by about 1,700 people — draft rules are slated to be issued in March and final rules by July 1.
Mark Jaffe: 303-954-1912 or mjaffe@denverpost.com
