COGA says revised energy rules will cost consumers $32B

Dozens of prehearing statements about Colorado's pending rewrite of the rules that oversee oil and gas permits and operations outline the battle lines between the various interest groups and the Colorado Oil & Gas Conservation Commission, the agency that oversees the state's $23 billion a year industry.

And if the proposed rules are adopted, consumers nationwide will end up paying an extra $32 billion in higher natural gas costs, compared to existing rules, according to a study by the Colorado Oil and Gas Association, the trade group representing the state's oil and gas industry.

Preliminary statements were due May 9; final, expanded statements were due May 14.

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A May 14 filing by COGA included economic impact studies outlining billions of dollars in higher natural gas costs for consumers in Colorado and nationwide if the rules are adopted as drafted.

A draft of the rules was issued March 31.

The studies said the rules as drafted will lead to a 10 percent to 30 percent drop in drilling activity in the state.

Fewer wells, and less production, will drop natural gas supplies nationally and lead to higher prices, the studies said.

At a 30 percent drop in drilling, natural gas costs for Colorado consumers would be $1.7 billion higher than otherwise in the next 10 years. Nationwide, the figure rises to $32 billion in higher expenditures in 10 years, the study said.

The study also said the value of natural gas that would be left in the ground in the next 10 years ranges from a minimum of $5.7 billion to $17.6 billion -- including the loss to local and state governments of tax revenue based on natural gas production and the payrolls associated with its production.

But in preliminary statements, environmental groups say they'd like to see the proposed rules go further in restricting operations and protecting Colorado's wildlife and environment, while COGA was sharply critical of the draft and characterizes the draft rules as overreaching the initial goal of responsible development of resources.

Towns and county governments also weighed in with their concerns, and so did the U.S. Forest Service, which owns thousands of acres of Colorado lands that hold oil and natural gas resources.

The Forest Service said it "is not necessarily opposed to the proposed rules, but feels that certain [aspects] ... create potential conflicts with federal land use designations, management plan direction, leasing decisions and the rights granted to federal lessees," the agency said in its preliminary prehearing statement to the oil and gas commission.

In addition, the Forest Service said, the proposed rules could conflict with federal authority to make decisions on federal land -- and appear to try to make federal land subject to state decisions.

Eighty-six individuals, companies, agencies, governments, and environmental or wildlife groups, have asked for "party status" in the rule-making. The rules stem from legislation passed in the 2007 session and backed by Gov. Bill Ritter to overhaul the makeup and mission of the oil and gas conservation commission.

Hearings on the proposed rules are scheduled for June and July, with adoption expected by Aug. 12.