The COGCC APD/LGD Process and Recent Changes

Presented To –Garfield County Energy Advisory Board

February 3, 2005

Presented By -Doug Dennison, Oil & Gas Liaison

2February 3, 2005

• Summarize and explain some of the recent changes to COGCC rules and policies

• Explain the COGCC’s process for Application for Permit-to-Drill (APD)– Opportunities for input from surface owners,

Local Governmental Designees (LGDs), and others

– On-site inspection policy– Obligations of operators to provide information

to LGDs and surface owners

Goals of Presentation

3February 3, 2005

• Colorado Oil & Gas Conservation Commission (COGCC) has an established process for involvement of LGDs and others in APD approval

• This process allows for input from LGDs and surface owners during the review and approval cycle for all APDs

• APD process was revised in April 2004 to open the process to parties other than the surface owner or LGD

• New onsite inspection policy will go into effect on 2/15/05

Background

4February 3, 2005

COGCC Rule 303• Rule 303.k.(1) The Director may withhold approval of any Application for Permit-to-Drill, Form 2,

for any proposed well when, based on information supplied in a written complaint submitted by any party with standing under rule 522.A.(1), other than a local governmental designee,

NOTE: Rule 522.a.(1) defines a party of standing as –

… the mineral owner, surface owner or tenant of the lands …, other state agencies, … the local government …, … any other person who may be directly and adversely affected or aggrieved as a result…

5February 3, 2005

COGCC Rule 303 (cont.)• Rule 303.k.(1) (cont.)

… or by staff analysis, the Director has reasonable cause to believe the proposed well is in material violation of the Commission’s rules, regulations, orders or statutes, or otherwise presents an imminent threat to public health, safety and welfare, including the environment.

6February 3, 2005

COGCC Rule 303 (cont.)• Rule 303.k.(1) (cont.)…ANY SUCH WITHHOLDING OF APPROVAL SHALL

BE LIMITED TO THE MINIMUM PERIOD OF TIME NECESSARY TO INVESTIGATE AND DISMISS THE COMPLAINT, OR TO RESOLVE THE ALLEGED VIOLATION. IF THE COMPLAINT IS DISMISSED OR THE MATTER RESOLVED TO THE DISSATISFACTION OF THE COMPLAINANT, SUCH PERSON MAY CONSULT WITH THE LOCAL GOVERNMENTAL DESIGNEE PURSUANT TO RULE 303.D.(4).

7February 3, 2005

COGCC Rule 303 (cont.)• Rule 303.k.(2) …The Director shall withhold approval of

any application for permit-to-drill, From 2, when a request for a hearing is made by a local governmental designee in accordance with rules 303.D.(4) AND 503.B.(6), unless the local government has been disqualified from making such request under Rule 501.b.

8February 3, 2005

COGCC Rule 303 (cont.)• Rule 303.k.(3) In the event the Director withholds

approval of any application for permit-to-drill, Form 2, under this Rule 303.k, an operator may ask the Commission to issue an emergency order rescinding the Director’s decision

9February 3, 2005

COGCC Rule 303 (cont.)• Rule 303.k.(4) Any hearing granted pursuant to this Rule

303.k. shall be expedited and the matter shall be heard at the next scheduled Commission hearing, and all parties shall be deemed to have waived any notice requirements to the contrary. The Director shall use best efforts to notify the parties of any such hearing.

10February 3, 2005

COGCC Rule 303 (cont.)

• Rule 303.lSUSPENDING APPROVED PERMIT-TO-DRILL, FORM 2.

PRIOR TO THE SPUDDING OF THE WELL, THE DIRECTOR SHALL SUSPEND AN APPROVED PERMIT-TO-DRILL, FORM 2, IF THE DIRECTOR HAS REASONABLE CAUSE TO BELIEVE THAT INFORMATION SUBMITTED ON THE PERMIT-TO-DRILL, FORM 2 WAS MATERIALLY INCORRECT. UNDER THE CIRCUMSTANCES DESCRIBED IN RULE 303.J.(1) OR (2), AN OPERATOR MAY ASK THE COMMISSION TO ISSUE AN EMERGENCY ORDER RESCINDING THE DIRECTOR’S DECISION.

11February 3, 2005

COGCC Rule 503

• Rule 503.b.(6)• This rule is key to understanding the LGD process

For purposes of seeking a hearing on a Permit-to-Drill, Form 2, under Rules 303.d. and 303.k.(2), the relevant local government shall be the applicant, and the hearing shall be conducted in similar fashion as is specified in Rule 508.j., k. and l. with respect to a public issues hearing. It shall be the burden of the local government applicant to bring forward evidence sufficient for the Commission to make the preliminary findings specified in subsection j. of Rule 508. at the outset of such hearing.

12February 3, 2005

COGCC Onsite Inspection Policy

• Provides for an opportunity for the surface owner (SO) to request an onsite inspection with COGCC staff and LGD prior to approval of an APD when:– The SO did not execute a lease or is not

party to a surface use agreement (SUA) or other agreement; and

– The SO contends that the impacts of the well may not be addressed by COGCC rules & regulations.

13February 3, 2005

COGCC Onsite Inspection Policy (cont.)

• Purpose of Onsite Inspection– Avoid potential unreasonable crop loss or

land damage;– Address potential health, safety, welfare,

or adverse environmental impacts; or– To ensure compliance with COGCC’s rules

relating to timing of operations and location of facilities.

14February 3, 2005

COGCC Onsite Inspection Policy (cont.)

• Purpose of Onsite Inspection (cont.)– The onsite inspection shall not address

matters of –• Surface owner compensation• Property value diminution• Future use of property• Private party contractual issues

15February 3, 2005

COGCC Onsite Inspection Policy (cont.)

• Conduct of Onsite Inspection– Operator must provide SO with copy of onsite

inspection policy and request form at time of initial notification (Rule 305)

– SO and Operator must first participate in good-faith consultation (Rule 306)

– Within 10 business days of good-faith consultation, SO must submit form requesting onsite inspection (fax is preferred)

• SO must designate whether they want LGD to participate in onsite inspection

16February 3, 2005

COGCC Onsite Inspection Policy (cont.)

• Conduct of Onsite Inspection (cont.)– COGCC staff will arrange time for onsite

inspection– After completion of onsite inspection,

COGCC may apply site-specific drilling permit conditions to address issues identified

• Conditions must be consistent with COGCC rules

• Operator may request a hearing if they object to the conditions applied

17February 3, 2005

COGCC Onsite Inspection Policy (cont.)

• Examples of conditions that may be applied to an APD –– Visual or aesthetic impacts– Surface impacts– Noise impacts– Dust impacts– Ground water impacts– Safety impacts– Wildlife impacts

18February 3, 2005

SURFACE OWNER/LGD INVOLVEMENT IN APD PROCESS

• SO, LGDs, and other parties with standing have opportunity to file written complaints to COGCC prior to APD approval

• SO may request onsite inspection within 10 business days of good-faith consultation

• LGD has initial 10-day comment period which can be extended to 20 days upon written request to COGCC

19February 3, 2005

SURFACE OWNER/LGD INVOLVEMENT IN APD PROCESS

(cont.)

• If complaints are not resolved to complainants satisfaction, they may pursue further action with their LGD

• LGD may request hearing on an APD provided they have adequate basis per Rule 508.j

20February 3, 2005

OPERATOR’S OBLIGATIONS DURING APD PROCESS

• No heavy equipment operations can be started until APD is approved

• Must provide copy of complete APD to LGD at or before the time APD is filed with COGCC

• Must comply with all of the notification and consultation requirements of Rules 305 and 306, including providing SO with copy of onsite inspection policy and request form

21February 3, 2005

OPERATOR’S OBLIGATIONS DURING APD PROCESS (cont.)

• Rule 305.b– Notice of drilling provided to SO and LGD at least 30

days prior to heavy equipment operations– On irrigated crop lands between 3/1 and 10/31, must

contact SO14 days prior to construction to coordinate with irrigation activities

– Must post notice of planned operations at or near site at least 30 days prior to heavy equipment operations

– SO may waive notice requirement

22February 3, 2005

OPERATOR’S OBLIGATIONS DURING APD PROCESS (cont.)

• Rule 306.a– Operator must consult in good faith with surface

owner on locating roads, production facilities and well sites

– Operator must provide an opportunity to engage in similar consultation with LGD, if LGD has requested such consultation

– Surface owner may waive consultation requirements– SO may also request onsite inspection, if SO meets

criteria in onsite inspection policy and makes request within 10 business days of good-faith consultation Flowchart

23February 3, 2005

24February 3, 2005

SUMMARY• April 2004 rule changes have expanded the

universe of potential complainants on proposed APDs

• April 2004 rule changes have clarified rules applicable to the APD process

• January 2005 adoption of onsite inspection policy provides another avenue for SOs to have issues addressed prior to APD being approved

• The APD process allows for significant involvement of SOs, LGDs, and others and should be utilized to its fullest extent

25February 3, 2005

For More Information

• Garfield County Oil & Gas Liaison– Doug Dennison

Phone 970-625-5691

Fax 970-625-0908

Cell 970-309-5441

ddennison@garfield-county.com

• County Website– www.garfield-county.com– Click on “Oil & Gas” under “County Departments”