County, state reach compromise on oil and gas regulations

February 21, 2012
photo - On Feb. 17, Ultra Resources began building an access road to a drilling site in eastern El Paso County. It will be the company's first drilling site in the county. Photo by ANDY WINEKE, THE GAZETTE
On Feb. 17, Ultra Resources began building an access road to a drilling site in eastern El Paso County. It will be the company's first drilling site in the county. Photo by ANDY WINEKE, THE GAZETTE 

El Paso County commissioners Tuesday approved a modification to the recently passed oil and gas regulations that preserves the county's desire for enhanced water quality monitoring while heading off a threat of litigation from the state.

In a unanimous vote, commissioners passed a resolution that requires oil and gas drillers to perform an initial, baseline water quality test and, after drilling is completed, one follow-up test between one and three years later. For the six drilling permits Houston-based Ultra Resources has already applied for with the Colorado Oil and Gas Conservation Commission, two follow-up tests would be required over six years after drilling is finished.

"I think this offers protection on the one end while also being very pro-business and bringing in a new industry," said commissioner Sallie Clark.

The resolution also directs county staff to pursue an intergovernmental agreement with the oil and gas commission to transfer that water quality monitoring to the state level. If such an agreement is reached, the county would then again modify its regulations to reflect it.

County commissioners passed the oil and gas regulations 3-2 in a contentious nine-hour meeting Jan. 31. The Colorado Attorney General's Office, the oil and gas commission and the oil and gas industry all objected to the proposed rules approved earlier in January by the county's planning commission, arguing that many of the proposed regulations would usurp the state's authority. The version commissioners eventually agreed on tossed most of the disputed regulations, but kept a water quality provision that the state continued to object to.

Both sides hammered out the compromise agreed to Tuesday, said county attorney Bill Louis.

"Think of this resolution as a peace treaty, if you will," he said.

Tisha Conoly Schuller, president and CEO of the Colorado Oil and Gas Association, an industry group, said the compromise gives both sides what they wanted.

"It meets everyone's objectives," she said. "It ensures water will be sampled in El Paso County, while ensuring state supremacy."

Not everyone was satisfied with the compromise, though. Jim Lockhart, conservation chair for the Pikes Peak group of the Rocky Mountain chapter of the Sierra Club, said the county was weakening its citizens' input on the process by deferring so much to the state.

"I'm concerned that what you're going to do today is going to further take away the public's right under the land use code," he told commissioners.

The commissioners also heard some good news from El Paso County Assessor Mark Lowderman. He said he had been working on the assumption that the county would receive little property tax from oil and gas drilling because the production would likely fall under the personal property category, which the county doesn't tax. A little more digging, however, revealed a state statute that classifies oil and gas production as real property, which is taxed in El Paso County, and lays out two special assessment rates for the industry.

The upshot of all that, Lowderman said, is that the county stands to receive very roughly $9,000 a year from a primary well that generates $1.2 million a year in production. A less-productive well is assessed at a lower rate and might generate only $700 a year in property taxes. Both those examples came from actual wells in Weld County, he said.

"This is new for us, the evaluation of oil and gas wells and the taxes that go with it," Lowderman said. "It's kind of mind-boggling how much revenue is produced by that industry."


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