Colorado Gov. Jared Polis on Tuesday signed into law a controversial oil and natural gas reform bill, which revises oversight of the industry and instills increased power in local governments.
Senate Bill (SB) 181 was fast-tracked through the assembly despite strong industry opposition.
Polis, a Democrat who ran for governor promising to overhaul energy laws, spoke during the signing ceremony of the need for citizens to move forward. The measure is "a major step to ensure the health and safety of our communities and give local communities a meaningful voice in the activities that happen in their neighborhoods."
Polis said the measure would remove uncertainty for the state’s huge oil and gas industry, allowing for capital formation, job creation and increased employee safety.
"We are all coming together in back of this bill, including the hard-working men and women of the oil and gas industry," he said.
Some amendments made the measure more acceptable to the industry, but the Colorado Oil and Gas Association (COGA) and the Colorado Petroleum Council (CPC) still are expected to push for a ballot measure in November to repeal the legislation.
To achieve the governor’s objectives “means removing politics from the technical process of providing energy to Coloradans," said COGA CEO Dan Haley. The bill’s ultimate impact will be determined by "many complicated regulatory rulemakings" at the state and local level, and COGA plans to work with all the stakeholders to "ultimately get it right." He expressed the hope that "public discourse around oil and gas development" will be reset, and "we can begin talking in earnest about our shared values."
The new law "fundamentally alters" the state energy industry, said CPC spokesperson Ben Marter. However, the CPC pledged to work with the governor and lawmakers. “SB 181 remains deeply flawed,” Marter said, but elected officials “have pledged to work with the industry to create a reasonable regulatory framework.”
The legislation reduces the authority of the Colorado Oil and Gas Conservation Commission (COGCC), while updating the state’s role in establishing an overhauled commission appointed by the governor. The reformed COGCC will emphasize protecting public health and the environment over "fostering" natural resource development.
New rules have been established for forced pooling when operators combine mineral rights for drilling, even when some property owners object. Operators had only needed the consent of one owner, but the bill changed it to 45%.
The law also expands the role of the Air Quality Control Commission, which is required to implement rules to minimize methane and other emissions from oil and gas facilities.
SB 181 also requires operators to install continuous monitoring equipment for hazardous air pollution.
Analysts with Tudor, Pickering, Holt & Co. Inc. (TPH) said they were encouraged by the governor’s comments during the signing event. The firm noted that Polis said "with the signing of this bill, it is our hope that the oil and gas wars that have enveloped our state are over.” House Majority Leader K.C. Becker and Broomfield Mayor Randy Ahrens echoed that sentiment, TPH pointed out.
“Since citizens are still free to attempt introducing new ballot initiatives, the hope is that these words reflect lawmakers' satisfaction following success in enacting new regulations on industry... and that this will prevent supporting any overly-restrictive initiatives that may surface,” the TPH team said.
Analysts will watch to see how things play out in 2020, “and in the meantime we'll first be watching for how the forthcoming COGCC changes impact permitting. Though operators are well permitted over the near-term, the consensus expectation for growing pains makes sense as changes are made to the committee and process.”