American Oil and Gas Reporter - March 2016 - 106

port. The moratorium effort failed.
Rule-Making Background
As operators developed unconventional oil plays in the Denver-Julesburg Basin's
Niobrara play, conflicts with expanding
communities north and east of Denver
steadily escalated. Earlier revisions to
the state's rules were written for largely rural areas west of the Continental Divide,
where large-scale conventional natural
gas or coalbed methane plays were said to
disrupt quiet mountain towns.
Operators were encouraged by state
regulators to focus on remote areas for development, according to industry testimony at rule-making hearings, but those areas eventually played out, pushing development to the DJ Basin and proximity to
growing urban areas.
As conflicts grew, so did opposition
challenges to oil and gas development
through local government action and ballot initiatives.
In late-summer 2014, while facing several potentially damaging ballot measures,
Governor John Hickenlooper brokered a
deal between industry and opposition to
withdraw the initiatives in favor of a 21member task force. The group was appointed to recommend ways to ease the ongoing
conflicts between industry and local governments (AOGR, October 2014, pg. 173).
Two key task force recommendations,
Numbers 17 and 20, were sent to the Colorado Oil & Gas Conservation Commission
for rule making. That effort concluded with
the Jan. 25 approval of revisions to several sections of rules in the COGCC's 300 Series, a new definition for a large urban site,
revising location rules in the 600 Series.
Throughout the 18 months of task
force hearings and rule-making sessions,
industry remained an active participant,
points out attorney Dave Neslin of Davis,
Graham & Stubbs, and a former COGCC
director. Participation in the process was
important because "significant oil and
gas development will occur in and near urban areas," Neslin notes.
"Several operators have up to one-third
of their DJ Basin holdings in or near municipalities. At the same time, populations
along the Front Range are expected to grow
by 50 percent in the next 25 years. Prior
patterns should not be confused with new
realities," Neslin advises.
A member of the industry team that
provided comments and alternative versions of rule drafts, Neslin urged rule makers to "stay within the four corners of the
task force recommendations."
Define Large
Among the objections industry raised
was that the definition of a large facility

in an urban mitigation area (UMA) set a
threshold that was too low.
"During the past two years, the number of wells on approved locations in a
UMA averaged 14, with the median number at 12," Neslin observes. "Any definition of 'large' should mean bigger than the
median. Pads of 12 or more wells help consolidate development and allow for more
production with less surface disturbance."
The other threshold defining a large
UMA facility was for storing hydrocarbons
on site. Setting the storage capacity bar too
low discourages pad consolidation and increases surface disturbance, according to
comments by the Colorado Oil & Gas Association.
COGA proposed that the large UMA
site definition include storage of more than
9,600 barrels for a new multiwell pad or
associated facility. It also proposed a
large facility be defined as having 16 new
vertical or directional wells, or 12 new horizontal wells. If the operator committed to
replace site storage in favor of pipeline
transport, the number of new wells should
be increased to 20 vertical or 16 horizontal wells to qualify as a large site, the association recommended.
At the least, argues COGA President
Dan Haley, "Rules should allow the operator an incentive to utilize one of the
strongest mitigation measures available:
pipeline or other take-away capacity. Unfortunately, it was not included in the rule."
As approved, the final rules increase the
on-site hydrocarbon storage threshold for
a large UMA site to 4,000 barrels from the
2,000 barrels of earlier drafts, but left unchanged the number of wells per site at
eight. As a result, COGA notes, any proposed location within the urban mitigation
area that exceeds either the site storage volume or number of wells is considered a
large facility.
As defined by COGCC rules, an urban
mitigation area is where at least 22 buildings or one high-occupancy building are
located within a 1,000-foot radius of a proposed location; or where 11 buildings or
one high-occupancy building are within a
semicircle of the 1,000-foot radius.
Giving Notice
The sequence for notifying local governments and landowners also was revised
under the new rules.
Under Rule 305A, an operator must notify the local government and the surface
owner 90 days prior to submitting Form
2A, the location assessment, the filing of
which initiates a COGCC review of the location. The local government then has 30
days to request the operator consult with
it regarding siting rationale and anticipated best management practices.

106 THE AMERICAN OIL & GAS REPORTER

If the operator and local government are
unable to agree on the location choice, they
have 45 days to pursue an agreement
through mediation, the new rule reads. If
an agreement is not reached through mediation, the operator may file Form 2A and
have the site selection heard before the
COCGG.
COGA also objected to rule language
that it contends circumvents existing or
new surface use agreements (SUAs),
which it calls "private business decisions
between the operator and the surface
owner."
By specifying the operator notify local
government "before the operator has finalized a specific location with the surface
owner," the rules disregard existing SUAs
and "interfere with private contractual
rights," COGA states.
Proximate Government
Task force recommendation Number 20
suggested the operator "register with each
municipality in which it has current or
planned oil and gas operations." The intent
of the recommendation was to incorporate
"drilling plans into municipal comprehensive planning."
As a result, rules now require operators
to notify any "proximate local government" of plans to develop a large UMA facility, giving that government an opportunity to file comments and seek clarification from the COGCC.
Operators also are required to register
with any municipal or county government
in which they have approved drilling
units, although a requirement to notify both
the municipality and the county of intent
to permit was reduced to notifying only the
municipal government.
Proximate local governments are defined as those with boundaries within
1,000 feet of a proposed site.
Following commission approval of the
rules, Haley noted the association was "disappointed the rules exceed the task force
recommendations," but said COGA "remains committed to working with operators, communities and the state to see the
rules are implemented effectively."
❒

Coming In April
Drilling Technology special reports, including data analytics to optimize extended-reach drilling, powering drilling operations using natural
gas-fueled engines, and integrated approaches to boosting drilling performance in horizontal resource plays. Reports also include AOGR's 2016
gallery of new drill bit technologies.

American Oil and Gas Reporter - March 2016

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