Colorado now ranks as the least attractive state in the nation for oil and natural gas investment.
The Fraser Institute says the state’s ranking has dropped from first to 81st in only two years, and now ranks among the bottom half of the 143 global jurisdictions included in the 2009 Global Petroleum Survey.
Among the 27 producing states, Colorado ranked last or second-to-last in six of 16 categories, including taxation regime (second-to-last), cost of regulatory compliance (second-to-last), regulatory uncertainty (last), and political stability (second-to-last).
With respect to regulatory uncertainty, which the survey defines as “the extent to which the regulatory environment is unstable, i.e., whether there are frequent, unexpected, or unjustified changes in rules and requirements,” 3 percent of respondents said they would not consider investing in Colorado because of regulatory uncertainty.
An additional 45 percent said that uncertainly poses a deterrent to investment.
All of Colorado’s neighboring states, with the exception of New Mexico, were rated “most attractive” by investors.
Colorado is estimated to have more than 9 percent of the nation’s supply of clean-burning natural gas, while annual production increased more than 380 percent between 1992 and 2007.
The Colorado School of Mines estimates that the industry provides jobs for more than 70,000 people, with an economic benefit to the state of $23 billion annually.
However, since January, Colorado’s rig count has dropped 54 percent – the sharpest decline in the nation – compared to a national average reduction of 43 percent. The number of well permit applications submitted to the Colorado Oil & Gas Conservation Commission during April and May (new COGCC regulations took effect on April 1) has declined 94 percent compared to the same two months of 2008.
At the June 24 COGCC meeting, Commission staff informed the Commissioners that during the first 84 days under the new rules, not a single drilling permit has been approved. By contrast, the industry can obtain well permits in an average of 10 days or less in the rest of the nation.
“This study demonstrates the harsh reality of an inconsistent regulatory regime, and these numbers run contrary to the belief of some policy makers that Colorado’s energy industry will grow no matter the constraints placed upon it,” said Colorado Oil & Gas Association president Meg Collins. “It is clear from this survey that the COGCC’s regulations and other political influences have seriously diminished the industry’s willingness to invest in Colorado at a time when economic development and activity is desperately needed to counter the effects of a slumping global economy. Coloradoans are losing their jobs and our communities are missing out on valuable revenue as a result.”