Growing up in Colorado, it seems that everyone followed the Code of the West — everyone’s opinion was respected and people tried to be good neighbors. Our laws were based on common sense and were written to facilitate getting things done rather than erecting barriers.
Colorado was born from a foundation of mineral extraction and is recognized worldwide as a place of beauty with our majestic mountains, abundant wildlife and pure streams.
I was appointed by Gov. Bill Ritter in 2007, as someone who had substantial oil and gas industry experience, to serve on the newly reformatted Colorado Oil and Gas Conservation Commission (COGCC).
The commission undertook a rulemaking involving 20-plus days of hearings and 25,000 pages of documentation. The new rules were issued in April 2009. The previous administration initially proposed a set of rules that were punitive rather than realistic in solving problems. The page count on the new rules doubled from the previous version. Of the 100 or so individual votes on the rule changes, I unsuccessfully voted against 22 of them because they were overreaching, they created undue bureaucratic burdens, or they added no value to the process.
I have requested, many times, a cost-benefit evaluation of the rules but have been unable to garner any support. A lot of my opinions were contentious, but I have required accountability not only from industry but from the commission as well.
Many articles have been written about the impacts due to oil and gas extraction as well as the impacts to the industry from new rules that the COGCC established. The rig count in Colorado peaked at 128 in September of 2008. It now stands at at 68 rigs. Most notably, the rig count in Garfield, Mesa and Rio Blanco counties went from 104 rigs to a current count of 32.
The economic recession impacted the oil and gas business, but overall in the U.S, it has recovered to pre-recession levels with the exception of three states and offshore. Only Mississippi, Alaska and U.S. offshore areas had a smaller recovery in rig count than Colorado.
What does a lower rig count mean to the economy of Colorado? On average, a running rig represents an investment of about $60 million per year, so Colorado’s loss of 58 rigs means that the state is losing annual investments of $3.48 billion. Additionally, the state is losing substantial severance and property tax income because of lost production that the additional 1,500 wells the 58 rigs would have drilled every year. Mineral owners also are not receiving their share of the revenue from these wells. An operating rig represents anywhere from 50 to 100 jobs per rig, so Colorado has lost 2,900 to 5,800 jobs to other states.
Recently, there seems to be a continuous stream of press reports about impacts of oil and gas development, and hydraulic fracturing specifically. The environmental community invokes fear by using terms to describe fracking like “toxic,” “known carcinogens,” “radionuclides,” “endocrine disruptors” and “unknown wastes.” And reports imply the oil and gas industry is “unregulated.” But the truth is the fracking process is highly regulated and is no different than any other industrial or manufacturing process — it is highly engineered and is supervised on many levels.
It is undeniable that there have been localized impacts due to spills, equipment failures, and poor operating practices, but due to state and federal laws, companies are fined and made to remediate the impacts. Companies are held responsible for damages. There is accountability.
Challenges that face the newly appointed oil and gas commission include the ever-increasing conflict of wells and development encroaching on each other. New technology is opening up areas to oil and gas development. Engineers are continually refining and developing new applications for technology, opening up new areas for development and revitalizing older fields.
With the resurgence of interest in the Niobrara formation, we are on the verge of an oil boom in Colorado. I hope we are able to capitalize on it with industry and government working together to solve the issues.
We can, once again, follow the Code of the West.
Mark D. Cutright is an outgoing member of the Colorado Oil and Gas Conservation Commission.
