New rules blamed for cuts in oil, gas drilling

Gargi Chakrabarty
Friday, April 18, 2008

As much as $1 billion in oil and gas investment is bypassing Colorado because of what the industry perceives as interference from Gov. Bill Ritter's administration, state legislators told the Rocky Mountain News this week.

Sen. Josh Penry, R-Grand Junction, said several energy companies have told him they are cutting back on new investment that amounts to up to $1 billion. Sen. Chris Romer, D-Denver, said he has heard similar complaints from energy lobbyists, but he puts the amount at $500 million.

Oil & Gas lobbyists tell Josh Penry they're broke and starving, Penry tells the newspapers and they print it. Since the oil & gas industry started complaining about having to follow some rules, they've consistently increased the number of wells they're drilling here.

The companies say the Ritter administration's overhaul of drilling rules is not only turning Colorado into an uncertain regulatory climate but also increasing the cost of doing business.

"It's clear that the energy sector is significantly scaling back new investment in Colorado," Penry said. "There's tremendous uncertainty regarding where the new rules are headed, or what they mean. The sooner the certainty can be established, the better it is for Colorado."

Clear? What's clear is that they're drilling here more and more. It would be nice if the reporter would ask for some evidence rather than just assuming it's "clear."

The proposed rules were prompted by mounting complaints from residents living near rigs about noise, odor and adverse impacts on health, environment and wildlife. Some rules are scheduled to go into effect July 1.

"We'd be disappointed to see a company reducing their investment in Colorado," said Dave Neslin, acting director of the Colorado Oil and Gas Conservation Commission - the state agency writing the rules.

State officials and environmental groups supporting the proposed rules were skeptical that investment was being cut down because of regulatory reasons. Rather, Colorado's weak gas prices - the result of pipeline constraints - is the probable reason, they said.

With the oil and gas companies pleading poverty and complaining about how unfairly they're treated, when all they really want to do is offer us low-priced energy, it's easy to forget that they're actually for-profit corporations. If prices are low, they'd rather not sell us energy.

EnCana Oil and Gas has said the new regulatory hurdles caused them to bypass Colorado while deciding where to spend $500 million in additional investment. The money went to Texas and Wyoming, they told the Rocky.

But on its Web site, EnCana touts the Piceance Basin in Garfield County as its "fastest- growing and highest potential resource play in the U.S."

Also, in a 2007 report, EnCana said: "Natural gas per unit production and mineral taxes in the U.S. decreased $0.15 per Mcf - or 31 percent in 2007 compared to 2006 - mainly as a result of lower natural gas prices in the U.S. Rockies and a reduction in the severance and ad valorem effective tax rate for Colorado properties."

EnCana spokesman Doug Hock said the company hedges production; hence, lower prices don't impact investment strategy. Moreover, the newly built Rockies pipeline is pushing up prices.

"Regulatory climate is part of business. You can't separate those two," Hock said. "We looked at this jurisdiction versus others and chose to allocate the majority of investment elsewhere."

Pioneer Natural Resources says its budget this year is $100 million less than last year because of additional (proposed) rules and related costs.

But Neslin took issue. "In an investor presentation dated April 2008, Pioneer said profits are going to increase due to operations in the Raton basin," he said. "It's hard to reconcile that with a statement that they are reducing operations in Colorado."

EnCana and Pioneer are among 600 companies operating in Colorado. Their decision comes as the energy industry continues its boom, with requests for drilling permits already more than 400 ahead of last year and on track to break the 2007 record of nearly 6,400 drilling applications.

"I can guarantee the oil and gas is not going anywhere," said Mike Chiropolos with Boulder- based Western Resource Advocates. "Somebody will come along and be willing and excited about developing that oil and gas in compliance with new rules, and who can turn a profit."

Romer said he believed companies were changing their investment strategy, but it was a temporary phenomenon.

New pipelines, coupled with appropriate changes in the proposed rules, will return Colorado among the top oil and gas investment destinations - as ranked by the Fraser Institute in December, Romer said.

chakrabartyg@RockyMountainNews.com or 303-954-2976

Some rethink budget rules

Larger joint committee, more input and more time among the ideas

By John Ingold
The Denver Post

Article Last Updated: 04/14/2008 12:00:49 AM MDT

Bills may propose changes this year, but JBC members say lawmakers will get plenty of chances to have their say.

The annual roller derby that is the state budget's trip through the legislature is over for the year.

Both chambers late last week gave final approval to the budget, sending it to Gov. Bill Ritter for his signature.

And after three weeks of party strategy meetings, lengthy and combustible floor fights over 151 proposed amendments, pounding-on- the-lectern rhetoric and general partisan fisticuffs, here is what the legislature has to show for it: $2.4 million shuffled around in the budget from where it had been originally.

In a $17.6 billion budget, that shuffled money is a mere .014 percent. A number of lawmakers wonder whether there is a better way.

"I think it's time we upgrade the budget, Colorado budget 2.0," said Rep. Cory Gardner, R-Yuma. ". . . When you're talking about spending $18 billion, there is no reason 100 legislators shouldn't be able to amend, vote and debate the budget in a more open manner."

Gardner is among a handful of legislators who say they intend to introduce before the end of the session proposed rule changes to how Colorado crafts its budget. A number of lawmakers plan to meet over the summer to talk about bigger changes.

"Every year when we get to this point, we hear these things where some of the other 94 members seem to think it's an easy process," said Sen. John Morse, a Colorado Springs Democrat who is one of the six members of the legislature's Joint Budget Committee. ". . . It's not as easy as you think."

The Joint Budget Committee, or JBC, spends months putting together the budget, which then hits the floor of either the House or Senate in March. Within two weeks, both chambers need to have argued, amended and passed the budget.

Because the House and the Senate have to pass the same version of the bill, a conference committee — made up of the JBC members — is appointed to resolve differences. In conference committee, the JBC members often take off amendments, then send it back for final approval.

This year, the House passed four amendments, and the Senate added 12 more, though some of those took off House amendments. By the time the budget emerged from the conference committee, only six of the amendments remained.

Gardner suggests expanding the JBC to 10 members, as well as switching to biennial budgeting. Rep. Kathleen Curry, D-Gunnison, said she intends to introduce a rule change that would give the legislature more time to review and debate the budget.

Curry is also looking at allowing other legislative committees to review portions of the budget and make advisory votes on it. Gardner and Senate Majority Leader Ken Gordon, D-Denver, are considering similar ideas.

"I don't think the process is set up to allow for up-front engagement that is more meaningful than trying to put amendments on after decisions have been made," Curry said.

JBC members, though, said lawmakers have the opportunity to attend any of their meetings, all of which are public, and make suggestions.

JBC member Sen. Steve Johnson, R-Larimer County, said some tension around the process will likely always exist.

"It is the one bill we have to pass," he said. "No one gets everything they like."

John Ingold: 303-954-1068 or jingold@denverpost.com

Every member of the legislature is welcome to join every JBC budget briefing and hearing, ask questions, and participate in the debate. Every member of the legislature can amend the budget.

When the JBC holds hearings on departments, members of the committees that oversee those departments can get paid a per diem for attending.

After the briefings and hearings, the JBC visits every committee to brief the members on the budget.

When the JBC wants to adjust the budget in a way that requires a change in law, the members have to carry a bill that goes through the usual committees. That, by the way, can be agonizing. A committee that's concerned with just one portion of the budget can fight to prevent budget cuts without worrying about balancing the overall budget.

Colorado's budget is limited. There are a lot of good ideas that can't get money. It's always disappointing when something you think is important can't get funded. It happens at least as much to members of the JBC as it does to any other legislator. They hear about every item that needs money and hear a lot of good arguments in favor of them.

Some members choose not to participate in the budget process, and some argue for cutting the budget without knowing what's in it. Then when something they want doesn't get funded, or gets cut, they howl and demand changes to the process. But changing the process won't make any more money available and it won't guarantee that every legislator will get the money he or she wants for his or her district.