From the Denver Business Journal

The Colorado Senate amended the major oil and gas reform bill, making it a little more industry friendly as it won its round of approval in the full senate.

More work is still to be done on the bill, said Senate Majority Leader Steve Fenberg, a Boulder Democrat who’s the co-sponsor of the bill, but the reforms are already oil and gas regulations that work for local communities, the industry and for families.

“This bill does not solve every problem,” he said. “But I think there’s a major step forward here.”

Senate Minority Leader Chris Holbert, R-Parker, thanked Fenberg for being willing to listen to opponents of the bill and make the first significant amendments during bill’s rapid progress through the legislature.

“There has been progress,” he said.

The bill, Senate Bill 181, would change the mission of the Colorado Oil and Gas Conservation Commission from fostering the oil and gas industry to regulating it to protect public health and the environment. The bill would also give cities and counties — which currently cede most authority over oil and gas to the state — broad powers to regulate surface well sites.

The oil and gas industry remains leery of the bill, worried it could dramatically slow new drilling and, over time, significantly shrink the industry.

“We opposed this bill as introduced and, after 11 hours of floor debate and amendments today, nothing has convinced us to support it,” said Dan Haley, CEO of the Colorado Oil and Gas Association, Tuesday night.

Weld County officials in particular, had been vocal about a bill provision granting the most authority over well sites to the government entity — whether local or state — that has the most protective rules.

Officials in Weld County, where more than 90 percent of the state’s oil wells are drilled, suggested SB-181 would have let the state trump local governments and stop counties from welcoming oil and gas drilling.

Change from most protective to local governments can have rules that are more strict

On Tuesday, Fenberg amended the 27-page bill to remove the language giving authority to the most protective rules. The amended version states that local governments can have rules that are more strict than the state’s.

Amendments also included a provision requiring local government rules be “necessary and reasonable” for protecting health and safety, a change meant to address industry concerns local governments use their authority to stop new drilling.

Debate over the bill started out contentious on the Senate floor Tuesday, as opponents predicted the bill would eliminate 120,000 or more jobs in coming years and be particularly hard on the local tax base of oil and gas producing counties, which are rural.

“This bill is about to destroy my county economically,” said Sen. John Cooke, a Weld County Republican whose son is a petroleum engineer, said during early testimony. “This is legislatively induced recession.”

He labeled the oil and gas reforms “economic warfare” and “economic racism.”

Cooke expressed doubt about health and safety motivating the reforms, noting multiple state health department studies in recent years have found no public health dangers associated with drilling, despite the oil industry’s significant growth over that time.

Meanwhile, 58 percent of the assessed value of property in Weld County is connected to oil and gas, and the industry paid $156 million in county property taxes to 16 local school districts.

But later in the day, during a nearly three-hour dinner recess, intense negotiating over amendments moved into senate offices around the Capitol.

How to handle the permit backlog

A major industry concern is how the bill handles a backlog of over 6,300 drilling permit applications pending at the COGCC, a backlog created as companies in recent months submitted a record number of applications trying to lock in drilling permits before state rules changed.

The bill gives the COGCC director the ability to put off approving permits until new agency rules can be adopted that reflect the new law, which industry worries could stop new permits being approved for months.

Fenberg argued exempting that backlog of applications essentially puts off the health and safety benefits of SB-181 for as many as 10 years. “We need an industry that can thrive, but not at the risk of hurting people,” Fenberg said.

Fenberg predicted only a handful of local governments will try to regulate well sites, and he assumes they will be reasonable and rational about it knowing lawsuits from industry are likely.

He dismissed accusations the reforms are a disguised attempt to stop the industry.

“If the intention here was to kill the oil and gas industry, I could’ve written that bill in less than a page,” he said.


From the Denver Post

Colorado Landscape for Big Oil Shifts with Extra Drilling Reviews, Looming New Regulatory Mission for COGCC

Yet fossil-fuel companies still are receiving approvals and won a major victory on forced pooling

Fossil-fuel drillers operating along Colorado’s Front Range are navigating increasingly turbulent conditions, with added state scrutiny of projects near people and the imposition of an $800,000 penalty on Extraction Oil and Gas for failing to conduct proper pressure tests of wells to prevent potentially catastrophic blowouts.

But those drillers still are getting the green lights that have led to more than 53,000 active wells in Colorado. And the industry prevailed at a hearing Tuesday over a 1951 state law that clears the way for Extraction to begin a contested large-scale multi-well operation in Broomfield over the protests of mineral property owners who object to the drilling.

Colorado’s emerging tougher oversight of industrial expansion reflects a shift in priorities under Gov. Jared Polis for the Colorado Oil and Gas Conservation Commission, the agency long charged with “fostering” efficient industry exploitation of natural resources. The COGCC recently faced a backlog of 10,215 applications for new wells that companies plan to drill closer than ever to Front Range cities just north of metro Denver.

As commissioners dove into Extraction’s use of the “forced pooling” law to compel property owners to grant access to oil and gas under their homes in Broomfield, state lawmakers were considering legislation that would overhaul the COGCC’s mission.

The bill given preliminary approval by the Senate on Tuesday night includes an update of the drilling-without-consent law designed to suit modern conditions in which companies use horizontal drilling as far as two miles from a central industrial pad to reach hundreds of mineral properties.

Colorado’s tussle over this forced drilling recently spilled into federal court, where U.S. District Judge Brooke Jackson ordered state officials to hold a hearing for residents that COGCC officials last year repeatedly delayed.

State lawmakers’ proposed overhaul also would convert the COGCC’s mission, replacing the current fostering of development with a mandate to protect public health and the environment.

Increased review of drilling permits

Over the past six weeks at the COGCC, acting director Jeff Robbins — appointed by Polis — has launched a new protocol that requires extra scrutiny of industry projects within 1,500 feet of houses, those inside municipal boundaries and those that could damage environmentally sensitive terrain such as wildlife habitat.

“I wanted an additional level of review for permits that meet the criteria,” Robbins said during COGCC’s hearings this week.

Last week, Robbins signaled broader changes at COGCC when he testified to state lawmakers. “I see the commission becoming more involved with local governments,” he said, acknowledging his previous work representing communities before the commission.

The $803,800 fine that the COGCC imposed on Extraction on Monday for its conduct at wells in Weld and Larimer counties contrasts with fines on companies in the past that typically ranged less than $10,000.

On Monday, the COGCC granted special protection for greenspace in Broomfield used by thousands of residents — granting an “outdoor activity area” designation that city and county officials had requested so that drillers will not intrude near soccer fields and recreational hiking and biking trails.

Compared with previous COGCC oversight, local communities clearly can have more influence now on decisions, said Matt Lepore, the former COGCC director who now serves as an industry consultant, as he grabbed a burrito during the commissioners’ lunch break Tuesday.

“I don’t know if it is better. But is the COGCC more responsive and open to questions that haven’t been allowed in the past? I think so,” said Joe Salazar, former state lawmaker and director of the anti-industry group Colorado Rising, who was representing aggrieved residents of Broomfield’s Wildgrass subdivision.

“That federal order from Judge Jackson probably has shaken the COGCC a little. It also has shaken their culture a bit. We are now, as protesters, able to ask questions that clearly have not been allowed in the past and present evidence and documents that clearly were not allowed for a protester to even gather, let alone present,” Salazar said.

Before the COGCC Tuesday, Salazar raised concerns about the financial condition of Extraction and alleged a lack of sufficient insurance for their massive project in Broomfield.

The problem is that oil and gas companies carrying high debt “could abandon their projects,” he said. “Or, if a disaster occurs, they’re not going to have the money on hand to fix the mess. Right now, Extraction’s insurance is extremely low. It is a million bucks. These companies should be insured for tens of millions in case there’s an accident where people get hurt or killed. These companies file for bankruptcy and the public would get left in the cold.”

Yet in Colorado’s shifting regulatory environment, the COGCC still has issued permits allowing 22 of the 23 drilling applications that commission staffers so far have flagged for extra scrutiny.

And the COGCC’s decision Tuesday clearing Extraction to begin drilling in Broomfield after overriding protests by mineral property owners complied with industry wishes. Colorado’s existing forced pooling law lets companies drill under multiple properties to extract oil and gas as long as they win the consent of a single owner.

Forced pooling in Broomfield

Broomfield residents went home in dismay after imploring commissioners to take a stand on a practice they called coercive.

Extraction’s initial approach triggered outrage, Mark Lindner said. “Then when just a single person signs, that outrage turns to fear.” Lindner said telephone calls to residents at that stage began to reveal “capitulation,” followed by “shame” as residents who’d signed deals to win payments around $1,500 stopped talking. “I went back to outrage,” he said. “I refused to sign…”

“This isn’t a bargain. You take it or leave it. There is no room for debate. That’s how they present it… There isn’t anything you can negotiate. You are just forced… The deck was stacked against me. I had no power to negotiate.”

When Kathy Plomer bought her home in Broomfield in 2008, she had no idea a company would come knocking to drill for oil and gas.

“I own the mineral rights under my home, yet I have no say when they are used… I have no option to say no. And no vote.” She has refused to sign a deal with Extraction. “I do not want to be a partner with the oil and gas industry. … The most important thing to me is the safety of my family.”

In federal court, Judge Jackson has scheduled a time to review the constitutionality of Colorado’s law “if necessary” to resolve issues. Salazar said residents plan to press their case: “It will be necessary.”

COGCC members deliberating on the case Tuesday said they were uncomfortable applying the old law. “There’s a fundamental inequity in the bargaining power,” Commissioner Erin Overturf said before casting the lone vote against approval for Extraction.

Commissioner Kent Jolley remarked that “our pooling statute is gonna get tweaked and it probably needs to be tweaked, but we are dealing with it as it is now… Every effort should be made to get people on board. It shouldn’t just be a business strategy to grab minerals.”

For more than 25 years, Commissioner Howard Boigon said in an interview, the COGCC “has been dedicated to protecting public health, safety and welfare as part of its mission. In that sense, I don’t think it is changing. There are concerns in many quarters, but we’ve had these concerns expressed before and we’ve undergone many rulemakings and battles.”

Committed to working with local communities

Industry lobbyists, closely engaged in Colorado’s statehouse and before the COGCC, observed the increasing turbulence and have put out new pro-industry television ads opposing reform. Six months ago, the industry spent tens of millions in an election campaign blitz to defeat a voter initiative to increase local control over oil and gas development near people.

Colorado Oil and Gas Association president Dan Haley on Tuesday acknowledged a shifting landscape and defended the industry.

“Our industry remains committed to working with local communities, regardless of whatever changes happen at the COGCC,” he said in a prepared response to emailed queries. “Our commitment to meeting each community’s unique needs will remain fundamental to our mission.”

Industry lobbyists at the American Petroleum Institute, which runs the Colorado Petroleum Council, declined to discuss Colorado’s evolving approach.

Extraction officials declined to discuss their project. “We’re pleased with the commission’s ruling consistent with established regulatory standards, state statute and commission practice,” company spokesman Brian Cain said in a texted response to queries.

At the hearing, Extraction officials told the COGCC their drilling inside Broomfield won’t worsen air pollution significantly compared with “background” benzene pollution measured north of metro Denver at Platteville. They said company crews had secured leased access to 87 percent of Wildgrass mineral properties by offering bonus payments, often around $1,500, and up to 20-percent shares of royalties while wells produce.

Eric Christ, Extraction’s vice president and corporate secretary, defended his company’s financial health.

“We’ve got readily accessible capital through our commercial lending arrangements,” he told the commissioners, referring to Goldman Sachs, Bank of America and Wells Fargo.

[EDITOR’S NOTE: read the amended bill here.]



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