BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF CHANGES TO THE RULES AND ) CAUSE NO. 1R

REGULATIONS OF THE OIL AND GAS CONSERVATION )

COMMISSION OF THE STATE OF COLORADO ) ORDER NO. 1R-103

REPORT OF THE COMMISSION

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

Pursuant to a hearing before the Oil and Gas Conservation Commission on September 18 and 19, 2006, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver Colorado, the Oil and Gas Conservation Commission promulgated amendments to its Rules and Regulations as described below:

802. NOISE ABATEMENT

c. In the hours between 7:00 a.m. and the next 7:00 p.m. the noise levels permitted below may be increased ten (10) db(A) for a period not to exceed fifteen (15) minutes in any one (1) hour period. The allowable noise level for periodic, impulsive or shrill noises is reduced by five (5) db(A) from the levels shown.

ZONE 7:00 am to next 7:00 pm 7:00 pm to next 7:00 am

Residential/Agricultural/Rural 55 db(A) 50 db(A)

Commercial 60 db(A) 55 db(A)

Light industrial 70 db(A) 65 db(A)

Industrial 80 db(A) 75 db(A)

FLOWLINE REGULATIONS

1101. INSTALLATION AND RECLAMATION

a. Material.

(1) Materials for pipe and components shall be:

A. Able to maintain the structural integrity of the flowline under temperature, pressure, and other conditions that may be anticipated;

B. Compatible with the substances to be transported.

C. Locatable by a tracer line or location device placed adjacent to or in the trench of all buried nonmetallic flowlines to facilitate the location of such flowlines.

b. Design. Each component of a flowline shall be designed and installed to prevent failure from corrosion and to withstand anticipated operating pressures and other loadings without impairment of its serviceability. The pipe shall have sufficient wall thickness or be installed with adequate protection to withstand anticipated external pressures and loads that will be imposed on the pipe after installation.

c. Cover.

(1) All installed flowlines shall have cover sufficient to protect them from damage. On crop land, all flowlines shall have a minimum cover of three (3) feet.

(2) Where an underground structure, geologic, economic or other uncontrollable condition prevents flowlines from being installed with minimum cover, or when there is a written agreement between the surface owner and the operator, the line may be installed with less than minimum cover or above ground.

d. Excavation, backfill and reclamation.

(1) When flowlines cross crop lands, unless waived by the surface owner, the operator shall segregate topsoil while trenching, and trenches shall be backfilled so that the soils shall be returned to their original relative positions and contour. This requirement to segregate and backfill topsoil shall not apply to trenches which are twelve (12) inches or less in width. Reasonable efforts shall be made to run flowlines parallel to crop irrigation rows on flood irrigated land.

(2) On crop lands and non-crop lands, flowline trenches shall be maintained in order to correct subsidence and reasonably minimize erosion. Interim and final reclamation, including revegetation, shall be performed in accordance with the applicable 1000 Series rules.

e. Pressure testing of flowlines.

(1) Before operating a segment of flowline it shall be tested to maximum anticipated operating pressure. In conducting tests, each operator shall ensure that reasonable precautions are taken to protect its employees and the general public. The testing may be conducted using well head pressure sources and well bore fluids, including natural gas. Such pressure tests shall be repeated once each calendar year to maximum anticipated operating pressure, and operators shall maintain records of such testing for Commission inspection for at least three (3) years.

(2) Flowline segments operating at less than fifteen (15) psig are excepted from pressure testing requirements.

1102. OPERATIONS, MAINTENANCE, AND REPAIR

a. Maintenance.

(1) Each operator shall take reasonable precautions to prevent failures, leakage and corrosion of FLOWLINES.

(2) Whenever an operator discovers any condition that could adversely affect the safe and proper operation of its flowline, it shall correct it within a reasonable time. However, if the condition is of such a nature that it presents an immediate hazard to persons or property, the operator shall not operate the affected part of the system until it has corrected the unsafe condition.

b. Repair.

(1) Each operator shall, in repairing its flowlines, ensure that the repairs are made in a safe manner and are made so as to prevent injury to persons and damage to property.

(2) No operator shall use any pipe, valve, or fitting in repairing flowline facilities unless the components meet the installation requirements of this section.

c. Marking.

(1) In designated high density areas, and where crossing public rights-of-way or utility easement, a marker shall be installed and maintained to identify the location of flowlines.

(2) The following shall be written legibly on a background of sharply contrasting color on each line marker:

"Warning", "Caution" or "Danger" followed by the words "gas (or name of natural gas or petroleum transported) pipeline" in letters at least one (1) inch high with one-quarter (¼) inch stroke and the name of the operator and the telephone number where the operator can be reached at all times.

d. One Call participation. As to flowlines and any other pipelines over which the Commission has jurisdiction, each operator shall participate in Colorado's One Call notification system, the requirements of which are established by §9-1.5-101., C.R.S. et seq.

1103. ABANDONMENT

Each flowline abandoned in place shall be disconnected from all sources and supplies of natural gas and petroleum, purged of liquid hydrocarbons, depleted to atmospheric pressure, and cut off three (3) feet below ground surface, or the depth of the flowline, whichever is less and sealed at the ends. This requirement shall also apply to compressor or gas plant feeder pipelines upon decommissioning or closure of a portion or all of a compressor station or gas plant. Notice of such abandonment shall be filed with the Commission and with the local governmental designee or local government jurisdiction.

Attached as Exhibit A is the statement giving the basis and purpose of the revisions and such statements are incorporated herein by reference.

Attached as Exhibit B is Figure 901-1 Sensitive Area Determination Decision Tree and Exhibit C is Table 910-1, Allowable Concentrations And Levels.

DONE AND PERFORMED by the Oil and Gas Conservation Commission of the State of Colorado this day of September, 2006.

IN THE NAME OF THE COLORADO

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

October 6, 2006

Exhibit A

STATEMENT OF BASIS AND PURPOSE

800 Series

The 800 Series Rules and Regulations of the Oil and Gas Conservation Commission pertain to regulation of noise and aesthetics.

The statutory authority for the promulgation of these rules is found in:

§34-60-106 (2)(a), C.R.S., provides that the commission has the authority to regulate “[t]he drilling, producing and plugging of wells and all other operations for the production of oil or gas; . .”

§34-60-106 (2)(d), C.R.S., gives the commission authority to regulate “[O]il and gas operations so as to prevent and mitigate significant adverse environmental impacts on any air, water, soil or biological resource to the extent necessary to protect public health, safety, and welfare, in consideration of cost-effectiveness and technical feasibility.”

§34-60-106 (10) C.R.S., as amended, gives the Commission authority to promulgate rules and regulations to protect the health, safety and welfare of any person at an oil or gas well.

§34-60-106 (11), C.R.S., mandates that the commission “promulgate rules and regulations to protect the health, safety and welfare of the general public in the conduct of oil and gas operations.”

§34-60-108 (7), C.R.S., provides that the “commission may act upon its own motion, or upon the petition of any interested person . . . .”

Consider revision of Rule 802.c. as it pertains to facilities constructed after January 1, 2007 in Residential/Agricultural/Rural Zones.

At its December 5-7, 2005 rulemaking hearing, the Commission voted to establish an allowable noise level of 45 db(A) between the hours of 7 p.m. and 7 a.m. for oil and gas facilities constructed after January 1, 2007 in Residential/Agricultural/Rural Zones. The rule that had been proposed by the stakeholder group and supported by Commission staff established a level of 50 db(A) between the hours of 7 p.m. and 7 a.m. for oil and gas facilities without distinguishing facilities constructed after January 1, 2007.

At its February 13, 2006 hearing the Commission heard statements from industry and citizens’ groups representatives about the efficacy of having promulgated an indoor receptor-based standard in an outdoor source-based rule.

The Commission voted to have its staff conduct a “noise inventory” of a variety of existing oil and gas facilities and report to the Commission in September, 2006. In addition, Commission staff was asked to analyze the cost of reducing the allowable noise standard from 50 db(A) to 45 db(A) level for new facilities constructed after January 1, 2007.

The Commission will consider the information provided at the September, 2006 hearing to determine whether to reconsider the allowable noise level for new facilities constructed after January 1, 2007.

900 Series

The 900 Series of the Rules and Regulations of the Oil and Gas Conservation Commission pertain to exploration and production waste management regulations.

The statutory authority for the promulgation of these rules is found in:

§34-60-106.(1)(c), C.R.S., as amended, gives the commission authority to prevent the pollution of fresh water supplies by oil, gas, saltwater or brackish water.

§34-60-106.(11), C.R.S., gives the commission authority to promulgate rules and regulation to protect the health, safety and welfare of the general public in the drilling, completion and operation of oil and gas wells and production facilities.

§25-8-202(7), C.R.S. specifies the commission as an "implementing agency" of statewide water quality standards.

§25-8-202(7)(a), C.R.S. gives implementing agencies authority to adopt points of compliance (locations at which compliance with the Water Quality Control Commission's groundwater standards must be achieved) and implement the statewide groundwater quality standards for the activities they regulate.

2 CCR 404-1, Table 910-1 of the Rules and Regulations of the Oil and Gas Conservation Commission sets forth the Water Quality Control Commission’s groundwater standards that must be met for each oil and gas well.

2 CCR 404-1, Figure 901-1 of the Rules and Regulations of the Oil and Gas Conservation Commission sets forth a chart for determination of sensitive areas.

Revise Table 910-1 and Figure 901-1 to conform to groundwater standards for ethylbenzene and total xylenes promulgated at the September 13, 2004 rulemaking hearing of the Water Quality Control Commission.

1100 Series

The 1100 Series Rules and Regulations of the Oil and Gas Conservation Commission (1100 Series Rules) pertain to the installation, reclamation, operations, maintenance and repair, and abandonment of flowlines and gathering lines.

The statutory authority for the promulgation of these rules is found in:

§34-60-103 (6.5), C.R.S., defines oil and gas operations to include the “installation of flowlines and gathering systems . . . .”

§34-60-106 (11), C.R.S., mandates the commission to “promulgate rules and regulations to protect the health, safety and welfare of the general public in the conduct of oil and gas operations.”

§34-60-106 (12), C.R.S., mandates the commission to “promulgate rules to ensure proper reclamation of the land and soil affected by oil and gas operations and to ensure the protection of the topsoil of said land during such operations.”

Revise 100 Series Rules of the Rules and Regulations of the Oil and Gas Conservation Commission (100 Series Rules) to delete definitions of “gathering lines” and “pipelines.”

Revise 1100 Series Rules so that they apply only to flowlines.

On March 15, 2006 (after the Commission promulgated amendments to the 100 and 1100 Series Rules on October 31, 2005) the U.S. Department of Transportation, Office of Pipeline Safety (USDOT), revised its definition of gathering lines and outlined a new process to determine which lines are subject to its minimum safety standards. The Colorado Public Utilities Commission (CPUC) is responsible for enforcing federal pipeline safety regulations in this state and will be promulgating rules to comport with the federal program.

There is duplication and conflict between the Commission’s 100 and 1100 Series Rules and the March 15, 2006 rules promulgated by USDOT primarily because of the definition of “gathering lines” by each agency. Therefore, there is likely to be duplication and conflict between the Commission’s 100 and 1100 Series Rules with rules promulgated by CPUC to implement the federal program.

The Commission wants to rescind rules that may duplicate or conflict with CPUC’s rules. The Commission considered alternatives to rescinding its rules that apply to “gathering lines,” including suspending their effectiveness until the CPUC promulgates its rules. However, due to the length of time anticipated for the stakeholder process, public comment, and drafting proposed rules, the Commission determined it was more efficient to rescind its rules as they apply to “gathering lines” until such time and the CPUC delineates those pipelines that are subject to its jurisdiction.

Exhibit B

Figure 901-1

SENSITIVE AREA DETERMINATION

Decision Tree

Exhibit C

Table 910-1

ALLOWABLE CONCENTRATIONS AND LEVELS

Contaminant of Concern	Allowable Concentrations

Organics in Soil: EPA Method 8015 (modified)
TPH-Non-Sensitive Area	10,000 mg/kg
TPH-Sensitive Area	1,000 mg/kg
Organics in Ground Water: EPA Method 8020 ¹
Benzene	5 mg/l ¹
Toluene	1,000 mg/l ¹
Ethylbenzene	700 mg/l ¹
Xylenes (Total)	1,400 to 10,000 mg/l ⁵
Inorganics in Soils⁴
Electrical Conductivity (EC)	<4 mmhos/cm or 2x background
Sodiun Adsorption Ratio (SAR)	<12
pH	6-9
Inorganics in Ground Water
Total Dissolved Solids (TDS)	<1.25 x background ¹
Chlorides	<1.25 x background ¹
Sulfates	<1.25 x background ¹
Total Metals in Soils: EPA Method 3050 ⁴
Arsenic	41 mg/kg ²
Barium (LDNR True Total Barium)	180,000 mg/kg ²
Boron (Hot Water Soluble)	2 mg/l ²
Cadmium	26 mg/kg ²
Chromium	1,500 mg/kg ²
Copper	750 mg/kg ²
Lead	300 mg/kg ²
Mercury	17 mg/kg ²
Molybdenum	³
Nickel	210 mg/kg ²
Selenium	³
Silver	100 mg/kg ²
Zinc	1,400 mg/kg ²

¹Concentrations taken from CDPHE-WQCC

²Concentrations taken from API Metals Guidance: Maximum Soil Concentrations

³Concentrations are dependent on site-specific conditions

⁴Consideration shall be given to background levels in native soils

⁵For this range of standards, the first number in the range is a strictly health-based value, based on the WQCC’s established methodology for human health-based standards. The second number in the range is a maximum contaminant level (MCL), established under the Federal Safe Drinking Water Act which has been determined to be an acceptable level of this chemical in public water supplies, taking treatability and laboratory detection limits into account. The WQCC intends that control requirements for this chemical be implemented to attain a level of ambient water quality that is at least equal to the first number in the range except as follows: 1) where ground water quality exceeds the first number in the range due to a release of contaminants that occurred prior to September 14, 2004 (regardless of the date of discovery or subsequent migration of such contaminants) clean-up levels for the entire contaminant plume shall be no more restrictive than the second number in the range or the ground water quality resulting from such release, whichever is more protective, and 2) whenever the WQCC has adopted alternative, site-specific standards for the chemical, the site-specific standards shall apply instead of these statewide standards.

Please delete the following definitions from the 100 series.

GATHERING LINE(S) shall mean a pipeline which transports natural gas beyond leasehold gas metering equipment to a compressor facility, processing plant or interstate pipeline connection.

PIPELINE(S) shall mean flowline(s) and gathering line(s) as defined herein by the 100 series definitions.