American Oil and Gas Reporter - November 2022 - 69

IssuesUpdate: Colorado Oil & Gas Association
Colorado Operators Adjust
To Revised Regulations
By Dan Larson
Special Correspondent
DENVER-The four-year blizzard of
regulatory rulemakings that swathed Colorado's
oil and natural gas industry with
new site-development hurdles, operating
and administrative burdens, and hefty
fees seems to be easing. Now, industry
representatives say, it is time for both industry
and state regulators to restore predictability
to the permitting process.
During the past year, the Colorado
Oil & Gas Association has aimed to build
some permitting certainty for members
while improving the process's efficiencies,
reports President and Chief Executive
Officer Dan Haley. Now that extensive
new site development rules are in place,
he observes, the Colorado Oil and Gas
Conservation Commission has shown
progress on several applications that have
been in the queue.
" All last year, only five site plans (formerly
known as Form 2A) were approved, "
Haley notes. " So far this year, more than
30 oil and gas development plans have
been approved. We are relieved that things
are starting to move, but we will continue
working with the commission on processing
times. "
A company must complete an approved
oil and gas development plan before it
will receive permits for individual wells,
he relates, but expresses hope that things
are starting to happen.
Sharing that measured encouragement
is COGA Chairman Michael Land, CEO
of Terra Energy Partners, who suggests
the commission seems to understand that
innovation, technology and industry investment
can fulfill the legislative intent
of SB 181, a watershed oil and gas oversight
bill that passed in 2019.
" Both sides have had time to adjust to
the new regulations, " Land assesses. " Now
we are in a different phase, with the commission
working to improve implementation.
Most companies have gone from
trying to change the rules to adjusting
how they work. It is going to take time
and cooperation on both sides. "
Land says Terra's goals include a bal " Both
sides have had time to adjust to the
new regulations. Now we are in a different
phase, with the commission working to
improve implementation. "
-Michael Land
COGA Chairman
ance sheet that allows for continued steady
state operations in good times and bad.
The company has continuously operated
a single drilling rig since before Covid19,
he notes. " During the pandemic, we
did not lay off a single person, " he reports.
" We are proud of that. "
The company has interests in 290,000
gross acres (240,000 net) in western Colorado,
he observes, a position that would
allow Terra to operate more rigs if it
could obtain sufficient drilling permits.
" With a few more permits, we could buy
steel and contract for service at fair rates, "
he describes. " With the market where it
is, our bankers say they can double our
funding if permits are available. "
The privately held company operates
7,242 wells, with 85% of its production
dry gas and the remainder largely natural
gas liquids, Land details. Since its 2015
formation, he notes, Terra has acquired
the assets of Piceance Basin operators
WPX Energy, Ursa Resources and Grizzly
Energy. Terra reports September production
of 663.4 million cubic feet a day, which
makes it the basin's top producer.
Orphan Wells
After months of almost continuous
rulemaking hearings, the majority of the
topics specified under SB 181, which
passed in 2019, are complete, Haley observes.
Although the proceedings were
not yet scheduled, he added in early October,
the commission has said it will
consider worker certification rules and
permit fees within the next year. Otherwise,
Haley indicates the industry is focusing
on implementing the new financial assurance
rules and addressing orphan wells.
In June, COGCC approved an Orphan
Well Mitigation Fee Enterprise Fund. As
directed under commission rulemaking,
the orphan well fee has been crafted to
generate $10 million a year from the industry
to fund the state's effort to plug,
remediate and reclaim orphan wells and
sites. An annual review will determine if
a revenue adjustment is needed depending
on " needs and anticipated scale of future
orphan well work. "
Initially revamped in 2018, Colorado's
orphan well program, which worked on
an annual budget of $5 million, drew its
revenue from a mill levy added to operators'
production tax. During that period,
the state claimed there were 263 orphan
wells and 365 associated orphan well
sites that needed addressing.
In a July 2021 pre-rulemaking advisory
session, the commission claimed plugging,
remediation and reclamation cost an average
$92,710 based on a sample of 23 projects,
eight of which included multi-well tank
batteries or production pits. COGCC's
most recent report, meanwhile, cites 494
orphaned wells and 968 associated sites
in the orphan well program as of Sept. 22.
The revised program bases an operator's
orphan well mitigation fee on the company's
production. If an operator has an average
daily per-well production volume greater
than 15 barrels of oil equivalent or 22 Mcf
NOVEMBER 2022 69
American Oil and Gas Reporter - November 2022

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