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Initiative 75 (local government control over oil and gas) and 78 (mandatory 2,500-ft. setback) fall short of required signatures

The Colorado Secretary of State issued a press release today, explaining how two anti-oil & gas initiatives failed to achieve the minimum number of required signatures to make the November ballot.

If either attempt had succeeded, it would have put the fate of oil and gas development in Colorado into the hands of voters.

“Supporters didn’t collect enough valid voter signatures,” Secretary of State Wayne Williams announced in today’s press release.

Both Anti-Oil & Gas Initiatives Fail to Make Colorado Ballot

Collecting signatures to limit/halt oil and gas development in Colorado. photo: Greenpeace

“Citizens who are trying to get an issue on the ballot must submit 98,492 voter signatures. Supporters of the two measures collected more than that for each proposal, but not enough to compensate for the number of signatures that were rejected during the random sample,” the Secretary said in the release.

The proposals, had they made the ballot, would have asked voters to approve two amendments to the Colorado constitution that would have severely limited oil and gas development in the state. Colorado is seventh in the U.S. for oil and natural gas production.

Initiative 75 would have given local governments control over oil and gas operations and initiative 78 would have imposed a mandatory 2,500-foot setback on new oil and gas operations.

A 5-percent random sample must project the number of valid signatures to be greater than 110 percent of the total number of signatures required for placement on the ballot. Both failed to achieve the Secretary of State’s required signature count.

Both Anti-Oil & Gas Initiatives Fail to Make Colorado Ballot

Source: EIA

Potentially Forged Signatures on No. 78 were Turned over to the Colorado Attorney General

The Secretary of State reported that for No. 78, the petition processing team identified a petition section that contains several potentially forged signature lines. “Although the Secretary of State does not conduct signature verification when reviewing petitions, our office has referred the questionable section to the Attorney General’s office for investigation. The section, numbered 2109, had no lines marked for review in the random sample,” the Secretary of State’s office said.

Signature Counting Math

Petition verification summary for No. 75 (local control initiative):

Total number of qualified signatures submitted  


5% of qualified signatures submitted (random sample) 5,362
Total number of entries accepted (valid) from the random sample 3,982
Total number of entries rejected (invalid) from the random sample 1,380
Number of projected valid signatures from the random sample 79,634
Total number of signatures required for placement on ballot 98,942
Projected percentage of required valid signatures 80.85%


Petition verification summary for No. 78 (setback initiative):

Total number of qualified signatures submitted 106,626
5% of qualified signatures submitted (random sample) 5,332
Total number of entries accepted (valid) from the random sample 3,856
Total number of entries rejected (invalid) from the random sample 1,476
Number of projected valid signatures from the random sample 77,109
Total number of signatures required for placement on ballot 98,492
Projected percentage of required valid signatures 78.29%


For comparison, a number of other proposals succeeded in gaining enough valid signatures to make the ballot. Here is how the numbers ended up:

No. 20, State health care system: 158,831 signatures, 110.80%

No. 101, State minimum wage: 189,419 signatures, 116.70%

No. 145, Medical aid in dying: 155,676 signatures, 110.44%

No. 96, Requirements for constitutional amendments: 183,691 signatures, 129%

No. 143, New cigarette and tobacco taxes: 161,412 signatures, 118.74%

No. 98, Primary elections: 147,707 signatures, 110.15%

No. 140, Presidential primary election: 152,213 signatures, 111.39%

The proponents of the two failed initiatives, both of which are backed by global environmental organizations and Greenpeace, have 30 days from today to appeal the decision to the Denver District Court.

Future Citizen Amendments Could Face Higher Hurdles if Colorado Voters Pass 96 in November

On a related matter, future attempts to amend Colorado’s constitution to impede energy development could face a more difficult process. If Initiative 96 is passed by voters on the November 2016 ballot, henceforth a citizen initiative will require a certain percentage of signatures from all of Colorado’s individual senate districts to place a proposed amendment on the ballot, replacing the general statewide voter percentage that can be collected in only one or two cities.

News should Relieve Ballot Issue Downdraft on Colorado Energy Stocks

Most securities analysts covering companies with DJ basin and Piceance operations have forecast better stock performance if the two anti-oil and gas amendments failed to gain enough signatures. Companies with Colorado operations include Noble Energy (ticker: NBL), Anadarko Petroleum (ticker: APC), PDC Energy (ticker: PDCE), Synergy Resources (ticker: SYRG), Bill Barrett Corporation (ticker: BBG), Bonanza Creek Energy (ticker: BCEI), Whiting Petroleum (ticker: WLL) and others.

Analyst Commentary

From Wunderlich Securities E&P Research:

Overhang Removed from the Ballot Initiative & Colorado Looks to Raise the Bar
Key Points

Initiatives 75 and 78 do not qualify for the Colorado ballot. While we, many companies and others in the industry did not expect the two initiatives to get enough verified signatures to make the November ballot, this announcement today is a positive in that it removes a potential overhang in operations throughout the state. Both initiatives barely made the signature threshold and with only ~80% valid signatures from the sample the initiatives both fell well short of moving forward.

Raise the Bar is still in play. With the two initiatives out of the upcoming November ballot there likely will be a push to put more/new ballot initiatives on to hinder industry operations. That's why it is also important to note that Initiative 71, or Raise the Bar, has made the November ballot and would make future ballot initiatives and other changes to the state constitution much harder to execute.

With these positive developments an overhang on the Niobrara/Colorado operators is removed. While these have been considered long-shots, the fact is that they still were potentially crippling issues. With these initiatives removed, the companies can get back to business as usual in a Niobrara area that has strong economics at today's prices.

Reiterate our positive stance on the Niobrara as well as Bill Barrett Corp. (BBG-$6.41, Buy), Noble Energy Inc. (NBL-$36.34, Buy), PDC Energy (PDCE-$67.49, Buy) and Synergy Resources (SYRG-$6.66, Buy). These companies remain interesting investment opportunities and interestingly at this point BBG and SYRG are becoming the only essentially pure plays in the region. We continue to like these names given the strong Niobrara potential and economics especially following the positive ballot initiative news and would also point out Whiting Petroleum (WLL-$7.69, Hold) has a sizable position in the region as well.
From Wells Fargo:

Colorado Setback Initiatives Fail To Make Ballot

Summary - Positive. The Colorado Secretary of State's Office announced that Ballot initiative 75 and 78 (local control and setback) have failed to gather enough signatures to make the November ballot. Initiative 75 and 78 turned in 107,232 and 106,626 signatures, respectively, but after the verification process from a random sample, the Secretary's office determined that neither measure was going to reach the required threshold of 98,492 certified signatures. The backers of 75 and 78 can still appeal the decision, but based on verification rates from the other 5 initiatives submitted for the November ballot, an appeal would appear to be futile. Of note, Initiative 96 (''Raise the Bar'') did garner enough signatures and will be on the ballot - we view this initiative as pro-industry and pro-business, as it would make it more difficult to amend the state constitution (i.e. - may be able to prevent anti-oil and gas initiatives from being proposed every two years).

Over the last 3 weeks, we believe that the market has largely reflected the view that these initiatives would not make the ballot, with DJ based operators outperforming the broader sector by 9% since August 8th. Nonetheless, official confirmation of the failure of these initiatives to make the ballot should be a positive for DJ based operators including APC, BBG, PDCE, WLL as well SYRG and BCEI (SYRG and BCEI not covered).

From Baird Energy Research:

Initiatives 75 and 78 fail to make ballot. In a victory for oil and gas producers and midstreamers with operations in Colorado, Initiatives 75 and 78 failed to garner enough valid signatures to make the November election, the Colorado Secretary of State announced this morning. Only 80% and 78% of the required signatures were submitted, respectively.

• Initiative 75 would have allowed local control of oil and gas
drilling.107,232 signatures were submitted, and an audit of 5,362 of the signatures rejected 1,380, leaving only 80.85% of the 98,942 signatures required.

• Initiative 78 would have required an onerous 2,500-foot setback around oil and gas operations, a frack-ban in disguise. Proponents submitted 106,626 signatures. 5,332 were audited, rejecting 1,476, leaving the count shy at 78.29% of required signatures.

• In E&P coverage, we expect CRZO (Outperform) and WLL (Outperform) to outperform on this news. See 8/8/16 report: “Buy Negative Colorado Headlines” Other non-covered E&P names likely to be impacted include APC, BBG, NBL, PDCE, and SYRG.

• In MLP coverage, SMLP (Outperform) and to a lesser extent Tallgrass Energy (TEP/TEGP) should outperform. Link to SMLP upgrade, 8/12/16. Link to most recent TEP/TEGP report. Uncovered MLPs and midstream companies with exposure include DPM, SEMG/RRMS, and WES/WGP.  

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