Colorado oil regulators endorse new drilling restriction

DENVER (Reuters) - Colorado’s oil and gas regulator this week gave preliminary approval for a rule to require a 2,000-foot (610 meter) separation between new oil and gas wells and public spaces, compared to as little as 500 feet currently.

A final vote on the rule, which would go into effect next year, will take place in November.

Colorado is the fifth-largest U.S. oil producing state, but its population growth has led to increased friction between the energy industry and environmental groups. Activists have tried to pass setback requirements that would make it more difficult to develop new wells, so far unsuccessfully.

The new regulation would fit legislation passed last year that altered how the oil and gas industry is regulated in Colorado. It provides some leeway to meeting the spacing rule.

Still, wider setbacks could hurt Colorado drillers, according to energy consultancy Enverus, adding pain to an industry reeling from COVID-19 pandemic lockdowns.

PDC Energy could see 89% of its total acreage off limits for new well pads as a result of the rule, while 73% could become non-viable for Extraction Oil & Gas and 71% for Occidental Petroleum Corp., analysts wrote in a note on Monday.

The Colorado Oil and Gas Association (COGA) on Tuesday said the longer setbacks were “arbitrary, not based on science and were made without any substantive consideration on the impacts to our industry.”

It called for greater clarity and certainty on how drilling permits would be issued going forward.

Reporting by Liz Hampton; Editing by David Gregorio and Richard Pullin