Earlier this year, after a long and contentious battle, Colorado gave final approval to a thorough overhaul of the state’s rules governing production of oil and natural gas. The state’s experience with a dramatic increase in drilling—though this boom has slowed recently—and its belated realization that it needed more effective safeguards to deal with the boom offers a lesson for other states and the nation as the possibility grows that natural gas will play a more prominent role in the U.S. energy mix.
The painstaking reform effort, which took nearly two years, was crafted by the Colorado Oil and Gas Conservation Commission, or COGCC, and approved by the state legislature in April 2009. The overall thrust of the new regulations is tougher industry oversight in order to better protect public health and safety, the environment, and wildlife and fisheries.
“A major reason for adopting these regulations was to address concerns created by the unprecedented increase in the permitting and production of oil and gas in the past few years,” according to COGCC, an agency that was often regarded as little more than a rubber stamp for industry until the legislature expanded and diversified its membership.
Beginning in 2001 the number of oil and gas permits approved in Colorado by COGCC rose dramatically. By 2004 they had nearly doubled from the level in 2000, jumping from 1,529 to 2,917. By 2008, they had reached 8,027. With the nation now in the grip of a tough recession, and natural gas prices below $3 per thousand cubic feet compared to $13 a year ago, the pace of energy development has slowed. COGCC expects to only approve about 5,000 permits this year and the number of drilling rigs operating in Colorado has dropped to about 40 from 140 at this time last year.
This slowdown notwithstanding, a surge in U.S. technically recoverable natural gas reserves due to new drilling technologies has spurred interest in providing incentives to replace dirty coal and oil with natural gas. This relatively cleaner fuel can serve as a bridge to a lower-carbon economy by replacing coal in electric power plants and being used as a transportation fuel for heavy trucks and buses.
A recent report by Center for American Progress President and CEO John Podesta and former U.S. senator Timothy E. Wirth of the Energy Future Coalition concluded that the United States now has an “unprecedented opportunity to use gas as a bridge fuel to a 21st-century energy economy that relies on efficiency, renewable sources, and low-carbon fossil fuels such as natural gas.”
As Podesta and Wirth noted in their proposal, policies to encourage fuel switching to natural gas should include “a comprehensive analysis of the impact of natural gas production on air, water, land, and global warming” and “a compilation of best practices and recommendations for new state safeguards.”
At the very least, Colorado’s revamped regulations can serve as a starting point for assessing the best practices compilation called for by Podesta and Wirth. Energy development must be done responsibly, and a greater reliance on natural gas must include protections for special landscapes, watersheds, and areas prized for hunting, fishing, and other recreation.
As Colorado’s experience showed, it’s better to get a handle on regulatory needs before the boom hits. The drilling surge in Colorado and other Rocky Mountain West states brought with it a range of problems affecting ranchers, homeowners, sportsmen, local governments, and others and underscored the need for better state oversight to protect public health and safety and the state’s water and wildlife resources.
“There had not been nearly enough done to ensure that oil and gas development was done right,” says Elise Jones, executive director of the Colorado Environmental Coalition. “The boom caught us flat-footed. We didn’t have the rules to allow the state to deal with the boom we were experiencing.”
In 2007 the legislature adopted measures expanding the oil and gas conservation commission and mandating that state rules for energy development be reformed. The legislation called for responsible and balanced energy development that would be consistent with protections for public safety, public health, the environment, and wildlife.
The result, says Jones, is the “most comprehensive set of rules anywhere in the Rocky Mountain West.” Overall, she said, the rules are “an extraordinary victory,” but also a work in progress because a number of key issues remain to be addressed, including how far oil and gas wells should be set back from fisheries and homes, and interim reclamation standards once wells are in place and producing.
Key parts of the new safeguards require that oil and gas developers:
- Consult with the state wildlife, public health, and environmental agencies to avoid critical wildlife areas and protect the public’s health.
- Avoid areas near drinking water supplies, better control storm water runoff, and install emissions control devices on equipment operating near homes and buildings.
- Be more transparent when they use a widely employed technique called hydraulic fracturing, which involves pumping a mixture of water, chemicals, and sand into formations to fracture the rock and release oil and gas. Under the new rules, companies must keep an inventory of chemicals used in drilling operations and make them available to state regulators in cases of spills or incidents that could affect public health and safety. For shallow wells operators must do monitoring to ensure chemicals don’t get into groundwater. Operators must also monitor pressures inside drill holes and report to state regulators if pressure readings indicate possible escape of hydraulic fracturing fluids.
- Make an effort to prepare comprehensive drilling plans on a broad-based landscape level rather than piecemeal.
- Provide more information to landowners, the general public, and state agencies about pending applications to drill.
Colorado’s new rules certainly aren’t perfect. For one thing, full public disclosure of hydraulic fracturing chemicals—as it’s called in federal legislation sponsored by Rep. Diana DeGette (D-CO) and Sen. Robert Casey (D-PA) and recommended in the CAP/EFC report—is preferable to disclosure only to government regulators. And gas producers should capture their fugitive methane releases so that they don’t contribute to global warming.
But the Colorado rules can guide other states facing a natural gas boom. These proper safeguards can help speed the transition to a low-carbon energy economy. And federal efforts to increase demand for natural gas to reduce global warming pollution should look to Colorado’s progress as a model for environmental safeguards in any program that would increase the use of the fuel.
Tom Kenworthy is a Senior Fellow at the Center for American Progress.
- Natural Gas: A Bridge Fuel for the 21st Century by John Podesta and Timothy E. Wirth