Environment & Energy

Colorado’s Oil and Gas Rethink Now Shifts to Rulemaking

April 25, 2019, 10:00 AM

Colorado Gov. Jared Polis (D), with the signing of a bill changing the way the state regulates oil and gas, declared an end to the wars among the industry, environmental groups, and local governments concerned about energy development within their borders.

But the battle over the measure (S.B. 181) has just begun, industry and environmental groups told Bloomberg Environment. The sides remain in sharp conflict over the extent to which regulators should consider public health, safety, and the environment in issuing drilling permits to oil and gas producers.

The clash has now moved to the Colorado Oil and Gas Conservation Commission, which will ultimately decide the rules that govern drilling in the state, and the Colorado Department of Public Health and Environment, which oversees air pollution regulation and the state’s rules controlling methane emissions from oil and gas activities.

‘Not the end’

“The signing of SB 181 into law is the beginning, not the end, with the focus of this legislation shifting to our state oversight agencies,” Dan Haley, president and CEO of the Colorado Oil and Gas Association, told Bloomberg Environment in an emailed statement. “As that happens, we have to remember that we are in no way starting from scratch. Colorado’s oil and natural gas industry already adheres to the toughest regulations in the country, largely because of 15 major rulemakings that have taken place over the past 9 years alone.”

Colorado Rising, an environmental group that promoted a 2018 citizen’s initiative to restrict oil and gas activity, which was defeated by voters, will go back to the ballot box again if the regulatory agencies ultimately approve rules that fall short of the broad priorities of S.B. 181, Anne Lee Foster, spokeswoman for the group, told Bloomberg Environment.

“Prioritizing health and safety really does represent a shift of focus in Colorado, and there are lot of things that have to be done to make sure that mandate is upheld,” Foster said.

Regulating, not Fostering

The mandate in the legislation, which took effect April 16 with Polis’ signature, was a change in the mission of the Colorado Oil and Gas Conservation Commission from “fostering” oil and gas development in the state to “regulating” it, with a priority on health, safety, and environmental concerns.

The law also enables local governments to have increased oversight of land use related to oil and gas activities within their communities.

The bill requires a regulatory overhaul by the two state agencies, with rulemaking hearings “a new front,” Foster said. “And there have already been shots fired by the other side.”

She was referring to an attempt by proponents of the oil and gas industry in the state—including Barbara Jean Kirkmeyer, chair of the board of county commissioners of Weld County, home to much drilling activity—to propose a ballot measure to repeal S.B. 181.

The proposal was struck down at a title-setting hearing April 17— the day after the governor signed the bill into law — because it didn’t meet the standard of constituting a single subject. But advocates for a repeal will be back, Foster said.

Kirkmeyer told Bloomberg Environment she objects to the characterization of the disagreement as a “war,” but agreed the conflict isn’t over with the signing of the bill. She and other industry supporters are working on a “Repeal SB 181" ballot measure to bring in 2019 or 2020, she said.

Chief Concern

Kirkmeyer said her chief concern with the legislation is the negative impact she believes it will have on jobs and the state’s economy. While the legislature was debating S.B. 181, the process of considering drilling permits before the commission slowed substantially, she said. The commission didn’t come out and declare an actual permit moratorium, but the pace of approvals amounts to a de facto freeze, she said.

“There’s a backlog of 6,100 permits, 4,500 in Weld County alone.” The commission reported it has approved 88 site locations and 774 wells in Colorado since January. “They approved 5,116 wells in 2018,” she said. “It looks like they’re on track to have a record-breaking low year.”

Kirkmeyer said she was “not too thrilled” with draft “objective criteria” released April 19 by commission director Jeff Robbins as required by S.B. 181. The criteria describe conditions under which the director may delay oil and gas permits until the commission finishes its rulemaking.

No Moratorium

The legislation doesn’t require delays in final permit decisions, and there are currently no permit holds or moratoriums in place, Robbins told Bloomberg Environment. Rather, the new law allows him to delay action and require additional review until he is satisfied the permit complies with the law’s intent.

Robbins listed 15 criteria, including drilling at locations within a municipality or within 1,500 feet of occupied buildings, that would trigger additional review. The current state setback—the minimum distance between wells and buildings—is 500 feet from homes and 1,000 from higher-occupancy buildings such hospitals and schools.

Additional review also would be required for projects located within a floodplain, an identified drinking water supply area, or a sensitive area for water resources, according to Robbins’ list.

Minimize Impacts

The criteria are designed to minimize adverse impacts from oil and gas operations to public health, safety, and welfare, in addition to the environment and wildlife, Robbins said. Consideration will be given to the cumulative effects of drilling.

Other changes necessitated by S.B. 181 include a new makeup of the commission, Robbins said. The legislation will also require hiring new staff to handle increased workload, including hiring two new deputy directors.

Given the wide impacts of the changes, the commission postponed its April meeting and set a new meeting in May, when the deliberations on new rules will begin.

Robbins said he hopes that the new regulatory mission of the the commission will bring people to the table in a spirit of moving forward. “I view it more as an opportunity than a battle,” he said.

To contact the reporter on this story: Tripp Baltz in Denver at abaltz@bloomberglaw.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Pamela Atkins at patkins@bloomberglaw.com

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