While discussion of political and environmental headwinds for the oil and gas industry is not new, the conversation grows louder with mounting scrutiny under a new U.S. political regime and an investor community that demands corporate and environmental responsibility.
The implementation of a new state-level bill in Colorado challenges operators to remain competitive while adhering to strict drilling rules in an urban setting. Last November, the Colorado Oil and Gas Conservation Commission (COGCC) revised regulation to increase setbacks, the distance from well pad surfaces to the edge of building units, schools and childcare facilities, from 500 feet to 2,000. The tighter standards, effective on Jan. 15, heavily impact operators drilling in the western portions of the Wattenberg field in the Denver-Julesburg (DJ) Basin, which accounts for ~90% of oil and gas production in Colorado. Wells drilled or permitted before Jan. 15 will be exempt from the increased setbacks. Figure 1 shows the existing drilled uncompleted wells (DUC)s and permit counts by major operators in the basin.
While an operator’s DUC and permits inventory will allow some reprieve in the short term, we use Enverus’ proprietary algorithms to arrive at a holistic understanding of the impacts on surface constraints and the subsurface inventory at risk. This allows us to completely model the impacts of regulation on oil and gas operations.
FIGURE 1 | DUCs, Permits by Operator in DJ Basin
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