Ultra Resources will begin exploratory drilling for oil and gas in southeastern El Paso County by early next year, after county commissioners on Thursday revised a moratorium they enacted three weeks ago.
Exploratory vertical drilling now will be allowed, commissioners decided, but production still will be banned under a suspension of new applications for drilling. The suspension is expected to be lifted in late January.
The action will enable Ultra Resources, part of Houston-based Ultra Petroleum, to proceed with plans to drill three exploratory wells on Colorado Land Board property.
The land is located in “a fairly remote area in the southern part of the county,” said Senior Assistant County Attorney George Monsson.
Brad Johnson, vice president of business development for Ultra, told commissioners his company has filed permits with the state to drill three vertical wells, and using hydraulic fracturing, will extract rock and fluid samples to discern whether oil or gas could be “produced in commercially viable quantities.”
If the initial tests appear promising, the company then would do horizontal testing, he said. The company also plans to re-open an existing well.
Exploration is on a smaller scale than full development, Johnson said, but would impact roads in the area, which he said his company would address, along with “meeting or exceeding” state regulations for ground water protection and other drilling requirements.
On Sept. 29, commissioners suspended accepting new permits for exploratory drilling, so they could have time to write local land use regulations. The county currently has no rules specific to the industry. To obtain the local permits for the exploratory drilling, Ultra will have to go through a staff review, which could take 60 to 90 days, Monsson said.
Ultra asked the county to allow exploratory drilling, said Commissioner Dennis Hisey, because the suspension would have delayed its plans.
“They wanted to get the state and county permits going at the same time,” he said, “and we thought it was appropriate to go ahead and allow some exploratory work that had been previously allowed with administrative approval.”
Commissioner Sallie Clark said she’s comfortable with the exploration because the impacts will be minimal.
“We’ll still provide for the protection of our infrastructure and natural resource issues,” she said, “and we felt it was important to not preclude exploration efforts.”
On Thursday morning, commissioners decided to change the drilling policy as an addendum to the consent calendar, with no discussion. In the afternoon, they further amended the policy, with some discussion, including a presentation by Ultra officials.
Ultra purchased 115 oil and gas leases covering about 59,000 acres of mineral rights on state Land Board land in August from another company, Pine Ridge Oil and Gas. Ultra recently closed on a deal to purchase 18,000 acres of the Banning Lewis Ranch on the eastern side of Colorado Springs as part of a bankruptcy sale.
Johnson said his company has invested “tens of millions” of dollars in acquiring property in El Paso County for mineral rights, as well as oil and gas leases from private citizens and the state.
No commercial production of oil or gas has ever been undertaken in the county, but horizontal drilling and hydraulic fracturing — which enables companies to inject water, sand and chemicals at high pressure into the wells to break up rock and loosen the fossil fuels — have opened up new possibilities for discovery.
The Colorado Oil and Gas Conservation Commission’s head criticized the commissioners’ temporary halting of industry activity, saying it was vital to the state’s economy and that the state already regulates a good chunk of the industry.
Jurisdictions such as counties are able to make rules pertaining to local impacts, including road damage, visual aspects, site security, water and air quality monitoring, noise, dust and a host of other issues. Commissioners also will be able to have input on permits applications, under the new regulations.
Commissioners began circulating draft regulations for the industry internally on Thursday and will begin sharing it with industry officials and other stakeholders next week.