Entry - 01-16-08
|
|
More COGCC
Rulemaking Sessions in Denver - and a Warning from my Dog to be Alert to
Trickery
In this
session, there was a lot of concern by the COGCC
mainly for flight-risks type small operators - some of the good ones of
which I probably inadvertently insulted by making a crass "fly-by-night"
reference (sorry, good operators. Bad operators - I stand by my assessment),
in which reclamation was a potential concern and the state was worried about
absorbing the costs of operators who flee in the night.
Industry insisted that there were already three levels of
assurance present in the existing series 700 rules: insurance, bond, emergency environmental fund - so,
they asked, "where are there holes?" Where will the state be left holding
the bag? But the state said the monies could well be insufficient given the
level of environmental destruction that can occur. Industry huffed at this
and on one hand, I can see why, when there are three stop-gaps in place
where is the worry? But 1) fly-by-nighters don't give a hoot about the
rules; 2) bonds are way way too small, and 3) the emergency fund will not
cover widespread abandonment (this area has already experienced one bust
only twenty years ago). And 4) just the seep alone cost and is still costing
a fortune to mitigate. If a less-invested and fortified player faced the
same situation, what would have happened? One guess.
Also, industry disputed costs of actual reclamation. Industry said: 'We don't need an engineer to
anticipate the costs - we use an landscape architect.' Conservationists said:
'We need an engineer, some areas will, in fact, cost way more to reclaim.' A small operator said:
'big companies will simply
self-insure because they can afford it and the little guys won't be able to
afford to bond. This will be unfair to us little guys.'. I personally cater
to little fishes in big ponds, and there should be ways little guys can
participate, but we have to find a better way to level the playing field
than continue to allow insufficient funds for state reclamation and
catastrophe. Conservationist folk said: 'landowners usually have to hire an
attorney to fight for clean-up, so bond use is resisted.'
The state then asked for bonds for un-bonded surface facilities which are
currently outside the scope of consideration; and they also said, they need clarity on reclamation and remediation
because sometimes both are needed.
An EnCana folk brought up the fact that EnCana uses a
landscape architect when reclaiming a pad. Now, I check myself when I say:
this seemed reasonable to me. Did I say those words? Should I say
those words? Should I concede that EnCana had a reasonable point? I'm so
shell shocked that I have to wonder if it's not a trick. But of course I
should concede this point. Absolutely, and bravo for their common sense.
This is what happens when industry does so much
bullying and gets away with it. You get so used to them pushing and taking
and ruining, that you get kind of crazy-on-guard. It's hard to let down your
guard and say 'hmm, yes, that is a good point, industry. Good point.' Plus,
you risk whiplash on the double take.
Now, I'm not sure why some conservationists are asking
for a site engineer to estimate potential costs of reclamation. It sounds
suspiciously like a government plan. Why would you need an engineer to
contour and reseed? Good grief - I hope one wouldn't require a degree to
scrape around a little soil and re-vegetate and put things back as they were. On the other hand, sometimes, I
don't think there is any common sense any more. The most simple and obvious
things seem to be the most elusive. If anything, it seems to be a
horticulturist should be consulted to determine the culture and habit of
various indigenous plant types, etc. And yes, drainage is vitally important,
but does it take an engineer to accomplish this? This just seemed like an
odd point to stick on.
And I have to say that EnCana's enviro folk piped in
to contribute a reasonable suggestion more than once. I was really proud.
But also doubtful. It isn't like them. Which is maybe why the conservation
folk asked for an engineer to evaluate anticipated reclamation needs and
costs. Maybe they are asking for more than they need because they anticipate
not even getting close to what is really necessary. This is a game that is
sometimes played in negotiations - you know, the high ball, low ball game. I
don't like this game. I say - be reasonable across the board and save
everyone some time and hassles.
But, I know what this industry can do to a reasonable
person's countenance. Their propensity toward inappropriate action and
ludicrous demands can cause you to develop all kinds of ticks and mental
instability. Which is why I invited my dog to this meeting also, and asked his
advice.
One of my Shepard's is really good at thinking like
industry. He does this thing with his ball where he'll bring it to you, but
then only touch it to the back of your hand. If you turn your palm upward,
he'll grab his ball away. It's this game, see. And he gets all excited
chomping on his ball and he says: "You want my ball? Look at my ball, isn't
it cool? You want to have it? I know you want to have it... here, you can
touch it - see how I'm sharing?" He does this because he knows that human
fingers cannot bend backward, so there is no real risk of any of us ever
actually 'having' his ball.
This is a game that industry plays too. They say, in
their excitement over resource extraction: "You want fairness? We know you
want fairness! We can be fair. Look how fair we are, see how we participate
in meetings and offer suggestions and seem helpful and concerned...!" But
they play this game knowing that certain regulations contain no real teeth,
so there's no real threat to changing their operations. If - like our dog -
they thought, for a second, that there was any chance of rulemaking changes
making a significant impact to the status quo in any way they might see as a
detriment, they'll take their ball away.
So, when EnCana's folk suggested no need for an
engineer to evaluate a well site, I asked my dog, who shared his opinion in
the last meeting, what he thought. I put my hand over the receiver and
said, "Is this really reasonable? What do you think? Is this some kind of
trick?" And he looked at me from the corner of the sofa, then he looked at
the ball on the floor. "It sounds okay," he said, "but I'd be cautious. Now,
why don't you reach for my ball." It's so hard to keep him focused on the
topic at hand.
I think the idea behind asking for an engineer is so
that the bond, which historically is set at $5,000 per site (or a $50,000
statewide blanket bond) and generally only applies to damaged crops, covers
actual reclamation costs. What's happening is that in some cases, at least
in Garfield County, reclamation isn't given a very high degree of
importance, at least based on some observations of conservationists and me. I've
personally seen a number of pads just left in a
state of disastrous disregard. I've seen improper grading which can lead to storm water
run-off of diesel fuel and spilled chemicals and junk from the site (storm-water
run off that, by the way, industry used to recently be exempted from). I've seen pit waste, that was
supposed to have been removed, simply bladed in. And these are instances
around me, where people see and report it. What happens on public lands,
where inspectors aren't summoned? And of course, irrigated crop land is
often easier and less expensive to reclaim than wild lands, where you have a
blend of indigenous ground cover, shrubs, trees and usually rocky drainage
elevations.
So maybe that's why conservationists asked for an engineer.
Maybe they see the need for a holistic approach to assessing such features
as well as placing a greater degree of accountability upon the assessment.
Those are some valid points too.
And all of this is complicated by the fact that, with
directional drilling, more surface area is increasingly annexed to existing
pads. Which puts the pad in a state of perpetual construction, what with
stimulation and completions operations. So there's the interim period to
think about. I mean, these sites just keep getting bigger and bigger.
They are dusty, void, often contaminated sites useless to anything but big
trucks.
Additionally, These development sites are subject to
sale. And this is how it generally works: the big guns, with the money to
explore come in first and all the speculators gang around to see what
happens. The big guys strike it big and the medium size guys come in and
quickly seize all the holdings they can. The little guy is out scrounging
investors. So all these wells get punched in the ground and lots of gas
starts flowing. As the cream gets skimmed off the top, the wells produce less
and less and become more of a pain in the patootie to operate. While the big
dogs are acquiring the medium dogs, they are also selling off less- producing
or more marginal wells to the little dogs, who are expanding their resource
base and being sniffed out by bigger dogs.
In the course of a sale, should contamination or
failed reclamation exist, what better bargaining chip for the little dog
assuming it as a liability. The little dog says: "Hey, if I have to assume
this nasty 'whatever' here with this well, I'm negotiating a lower price."
And they get it. And the site goes on being contaminated, because maybe the
landowner is absentee and also holds the mineral rights and doesn't really
give two hoots or a holler from his hammock in the Grand Caymans, as long as
the royalty checks and margaritas keep coming. So by the time the well site
is passed to the lowest bidder, and THEY finally flee into the night, the
state is still left holding the bag.
The state seems to think that a bulk of the problem
with reclamation isn't with the big dogs who develop larger fields and
therefore possess greater aggregate assets and a greater incentive to
maintain a good relationship with the state permitting authority. The state
seems to think that there is a segment of the operator population who is at
risk of fleeing into the night when the cash runs out. I characterized them
thusly: "the little guy who comes in and skims off whatever they can to just
make a fast buck." the state was quick to say they would not
characterize such operators the way I had, but it does tend to be the
smaller outfits who pose the bigger problems with failed reclamation. Of
course I did not mean to offend the little guy out there. I am a little guy.
Well, not a 'guy'. But I support the little company out in the big world trying
to make a decent profit. I was referring to those who really are the marginal,
unsavory type of operator who would punch a hole and shun it in the dark of
night. Who needs this type of scallywag running about?
Because as I and the COGCC pointed out, it isn't just surface disturbance that has to be
reclaimed. Some cases might require remediation of contaminated soils or
ground water before reclamation can take place. The state talked about one
area where improperly disposed of produced water has contaminated many acres of soil because of a total
saturation of salts. And the state has asked also for bonding to apply to
certain site facilities like open pits, condensate tanks, and glycol
dehydrators. This ties right into why the state is also asking for an
inventory of site equipment, because right now, they have no way of knowing
how many pads are in the state, nor what kind of facilities may be located
on them. Of course, I happen to believe that this is a very reasonable request that was discussed last
week.
And the state is saying, 'if we get stuck with some of
these clean-up projects - you know, if the operator's walk away - we won't
have enough funds to take care of the sites properly.'
To this industry responds heartily with several key
points:
First of all, they say, and probably rightly so, 'why
can't you find the operator?' To this I say - heck yeah - why can't you find
them? But then, even if they could assets are a whole other issue. Then
industry says, 'hey, the state already has
three levels of reclamation assurance, so where are the gaps? 1) Operators
have to have insurance against bodily injury etc. on the site regarding
operations; 2) then there's the bond, and 3) that failing, you still have
the emergency environmental fund.
These are all good points, but the state is right -
there are holes. Everyone gets assigned homework. Next week the COGCC is
supposed to demonstrate where there is a lack of assurance, and also
demonstrate a division in characterizing various stages of and need for
reclamation together with their respective bonding requests. And industry is
supposed to talk about reclamation practices and costs, in order to back up
what is reasonable. Conservationists are asked to demonstrate where
reclamation had failed.
So anyway, ultimately, there seemed to be some confusion
regarding interim reclamation and final reclamation of a site. That is,
putting everything back the way it was (or better) after the well has been
put in.
Whew. I hope my dog has an opening for next week.
|
|
|
