Despite oil and gas industry pushback, Colorado Gov. Jared Polis is expected to sign into law within the next two weeks legislation that would give local authorities more oversight over exploration and production (E&P) operations.
The Colorado General Assembly on Wednesday passed Senate Bill (SB) 181, which was fast-tracked in a month's time by the new Democratic majority and forwarded to the governor’s desk.
The state Senate concurred with House changes, but overall, the legislation failed to cede to strong opposition from the energy industry.
"SB 181 is the most comprehensive oil and gas legislation Colorado has seen in decades, and while a few critical amendments were added that begin to address some of industry's concerns and provide a degree of certainty, our industry remains firmly opposed to this bill," said leaders of the Colorado Oil and Gas Association (COGA) and the Colorado Petroleum Council (CPC) in a joint statement.
COGA CEO Dan Haley and CPC’s Ben Marter said the legislation "threatens" the E&P sector's role as a pillar in the state's economy. However, they complimented the state lawmakers involved for listening to their concerns. The industry was promised a seat at the table in the subsequent "highly complex regulatory rulemakings following the bill's enactment."
"That will be critical to minimizing the bill's negative impacts on our state, and we hope the process can begin immediately," Haley and Marter said.
After a streamlined process, the House last week approved the plan to give local government expanded oversight into future oil and gas development while updating the state's role to establish standards for the Colorado Oil and Gas Conservation Commission (COGCC) and make it a full-time board appointed by the governor.
About a dozen amendments narrowed the local authority to require action by cities and counties to be "reasonable," and more difficult to impose total bans on drilling. Similarly, there is now language that requires that the COGCC be "re-professionalized" in its makeup and authority.
Throughout the accelerated legislative process, SB 181 drew vocal opposition and spurred an effort by current and former county elected officials to get a measure on the November statewide ballot that would essentially repeal the legislation.
The legislation is part of a long line of statewide ballot measures and local government ordinances aimed at the issue of more local control over energy operations, including a series of bans on hydraulic fracturing that began in 2013. Colorado voters last November rejected by a 57% margin Proposition 112, a measure that would have prevented some drilling in the state.
The new law, if enacted, would add about $3 million in annual costs to the state budget.
The impact for local governments is expected to lead to the biggest potential changes. However, limits to authority were added calling for "reasonable" actions by local authorities; action in a "reasonable manner," and local rules/standards that are "necessary and reasonable."
The actions also are explicitly limited to the local county or city's own boundaries, preventing city-county disputes.
The bill changes the minimum amount of unobligated funds in the environmental fund in any given fiscal year, and it changes the COGCC’s leeway in authorizing multiple drilling units in pooling only if more than half of the mineral interest-holders agree to be pooled.
The COGCC’s emphasis would be on protecting public health and the environment instead of "fostering" development of natural resource industries.
The bill also expands the role of the Air Quality Control Commission (AQCC), with the commission mandated to establish rules to minimize methane and other emissions from oil and gas facilities.
Operators also would be required to install continuous monitoring equipment for hazardous air pollution. Eventually, this could create additional permitting requirements for operators, depending on what AQCC rules are adopted.