Setback measure named Proposition 112 on the Nov. ballot

Friday Sept. 7 was one of the upcoming deadlines on the life path of initiative #97—the 2,500-foot mandatory statewide oil and gas setback.

That was the last day for designated representatives of an initiative petition to withdraw the petition from consideration by filing a withdrawal letter with Secretary of State. This had to be done no later than 60 days before the petition is to be voted upon, according to the Secretary of State’s election calendar.

If a political deal had been struck with the people behind 97 that resulted in the initiative being pulled by its backers, it had to happen by Friday, Sept. 7. But apparently no deal was in the offing, because Friday came and went with 97 intact.

For the November ballot, initiative 97 is now to be known as Proposition 112

Henceforth, when it appears on the ballot, 97 will be called Proposition 112.

The Secretary of State’s Communication Director Lynn Bartels confirmed this today: “No one filed a notarized letter with our office,” Bartels told Oil & Gas 360® in an email.

“That said, there are 30 days to appeal ballot measures. The ballot gets certified today so if something is removed because of legal action, the measure would still be on the ballot but the votes wouldn’t count,” Bartels said.

This makes it certain that 97 will at least be printed on the ballot, even though there are still 30 days in which to appeal it. The same news applies to initiative 108 – the “takings amendment.”

That means the clock is ticking until October 10, 2018, if Prop. 112 would be appealed.

Some items on the timeline as Prop. 112 travels toward election day

  • 21-September (Friday) Last day to file written comments concerning local ballot issues with the designated election official in order to be included in the ballot issue notice. (By noon the Friday before the 45th day before the election)

NOTE: The county clerk is the coordinated election official for coordinated elections held in November of each year and is responsible for coordinating the Article X, Section 20 Ballot Issue notice mailing. The Secretary of State’s office further clarified that the local subdivision (city, town, district) takes comments from proponents and opponents and they then write the language and provide it to the county clerk if the election is coordinated.

  • 21-September (Friday) Last day for a petition’s representatives to submit a summary of favorable comments for the ballot issue notice. Comments must be submitted to the designated election official. (No later than 44 days before the election)
  • 21-September (Friday) First day a county clerk may begin issuing a mail ballot to any eligible elector who requests one in person at the county clerk’s office. (No sooner than 45 days before election)
  • 15-October (Monday) First day that mail ballots may be mailed to voters, except for UOCAVA voters. (Not sooner than 22 days before the General Election)
  • 19-October (Friday) Last day to send initial mail ballots to voters for the General Election, except for UOCAVA voters. (No later than 18 days before the General Election)
  • 6-November (Tuesday) All ballots must be received by the county clerk by 7:00 p.m. Mountain Time

Oil & Gas 360® talked to the average voting-aged “man/woman on the street”

The ballot question associated with initiative 97 will ask voters if they want to preserve public health, safety, welfare, and the environment by requiring all new oil and gas development in the state of Colorado to be located 2,500 feet away from occupied structures, including homes, schools and hospitals, playgrounds, permanent sports fields, amphitheaters, public parks, public open space, public and community drinking water sources, irrigation canals, reservoirs, lakes, rivers, perennial or intermittent streams, and creeks, and any additional vulnerable areas designated by the state or a local government?

Oil & Gas 360® sent a reporter to downtown Denver’s 16th Street Mall during the busy mid-afternoon on Friday Sept. 7 to engage in conversations with random individuals. The idea was to capture a quick snapshot of the understanding that the public has about initiative 97.

Colorado’s 2,500-Foot Setback Zipped by a Deadline on Friday Sept. 7

What do random Coloradans think about initiative 97 calling for a mandatory 2,500-foot setback for new oil and gas development? Photo: Oil & Gas 360

Our reporter talked to five random people – two twenty-somethings and three middle-aged (average Coloradans – none of the individuals was an industry employee or an activist).

  • All five said they would undoubtedly vote ‘yes’ to extend the buffer zones for new oil production locations to 2,500 feet.
  • Each of the five individuals saw the larger setbacks as an important precaution to ensure the protection of water and air quality in populated areas.
  • One individual said, “I think that the setbacks are a really good idea. Why would anybody vote ‘no’?”

However, none of the individuals was aware that increasing the buffer zone to 2,500 feet would essentially put an end to drilling on Colorado’s non-federal lands altogether.

Our reporter asked them about the negative economic impact of voting ‘yes’ on the setback question.

“The people that lose their jobs will probably enter into renewable energy because there will be a greater need for cleaner energy,” one of the five individuals said. “I know it won’t be easy at first but it’s for the best.”

It’s obviously not a scientific sample selection, but it makes you believe that anything could happen on Nov. 6.

The five random potential voters that we spoke to concurred that because the initiative does not mention the full economic effects that passing the measure would have on the energy industry in Colorado, the average Coloradan is more likely to vote ‘yes’ on 97.

What the analysts said about 97

SunTrust: What’s Incremental to Our View

“We think that the chances of 97 becoming law as written are de minimis; even if validated [EDITOR’S NOTE: this analyst note was issued when the Sec. of State announced the measure had its signatures turned in. They were subsequently validated by the Secretary of State] it has four hurdles left to clear: (Pulled, Passed, Changed, Trumped).

We would note that the industry is prepping to spend an astonishing amount of money to stop 97 ($25-$50mm is our estimate). We are buyers of the Wattenberg, trading to group multiples implies an average move of ~70%.

As we said in our 8/13 note, it has been likely that Prop 97 will make the ballot. However, the harder hurdles are coming up. The first of which is whether [Democratic gubernatorial candidate Jared] Polis can cut a deal to get Prop 97 pulled from the ballot. This would need to be done by 9/5, and is also probably not likely.

In our opinion, Polis will be desperate to have it pulled as the campaign to defeat 97 will dramatically increase Republican turnout in an off-year election. That being said, Polis and Colorado Rising (97 backer) have some bad blood as Polis pulled the setback initiative in 2014. So, a deal might be hard to come by, although Polis and the Democrats will likely pull out all the stops to try. As a reminder, many Democrats still blame the 2014 initiative for increasing Republican turnout and costing two term [Democrat] Senator Mark Udall his seat.

If it isn’t pulled, the two biggest hurdles, and the two most likely to happen, are the vote itself and having the legislature change the language of the bill after it passes.

Setbacks had ~40% support in both ’08 and ’16, and the industry will spend much more this go around.

Further, Polis does not back prop 97 and, because of its effects on the turnout, it is having a hard time attracting donations from liberal donors. We are happy to go on record to say that if it clears this step, we will begin to get worried.

However, even if it does get >50% of the vote it can be altered by a simple majority of the legislature. This can be done several ways, the most palatable would likely be current Governor Hickenlooper calling a special lame duck session and altering the language of the bill. Alternatively, it could be dealt with in regular session, which starts in January (i.e. a month after the law would go into effect).

We continue to be buyers of several Wattenberg stocks (NBL/HPR/PDCE/SRCI/XOG). We would also note that the mood seemed to be turning at EnerCom. Most people felt that validation was a “toss up”, but hedge funds generally thought that shorting after the validation gets more risky as news flow is less predictable, and some specialist longs thought that the “last” leg down after validation was the right entry point. We would also note that insiders have been buying at a clip we have never seen before. This is SRCI’s CEO and CFO’s first buys since ’16 and the first buys for all HPR insiders listed.

Tudor Pickering Holt & Company: #97 Makes the Ballot – as expected; watching for data on voter sentiment ahead of November

The initially-reported signature count was real, buyside/industry consensus has played out, and #97 is on the ballot. The widespread view from here is that #97 fails at the polls, especially with #108 in play, but the next event will be in early Nov when we find out how the votes ultimately shake out.

From an industry standpoint, we anticipate an all-out effort on the education campaign towards emphasizing the potential economic impacts of (i) the setback initiative effectively banning O&G across the state and (ii) the liability to the state and local governments associated with #108 passing into law.

From a trading standpoint, there could be a knee-jerk negative reaction on the headline of the setback initiative moving forward and making progress, with voter sentiment important towards handicapping how November and future setback attempts play out.

Tudor Pickering Holt & Company: CO Initiative #108 Makes the Ballot – positive for industry

Yesterday afternoon, the CO Secretary of State announced that Initiative #108 (the “takings measure”) has made the November ballot, scoring in at ~137k valid signatures vs. the ~98.5k minimum.

The Colorado Farm Bureau is the chief sponsor of #108, which would amend the constitution towards requiring property owners to be compensated for any reduction in property value caused by state laws or regulations. Less-discussed in recent conversations, the #108 result is a solid positive for the O&G industry as the voter education campaign (as a response in a scenario in which #97 also makes the ballot) [EDITOR’S NOTE: 97 Made the ballot] can now more confidently include figures indicating the degree to which the state economy would be negatively impacted if both #97 and #108 were to become law.

How are 51% of Colorado voters likely to vote on the setback question?

It’s not out of the question that more voters in the November election may respond positively in the name of preserving public health, safety, welfare, and the environment, by saying ‘yes’ to the question of locating all new oil and gas development 2,500 feet away from occupied structures, including homes, schools and hospitals, playgrounds… .

As one of the random Friday afternoon interviewees told our reporter, “Why would anybody vote ‘no’?”



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