Colorado Gov. Jared Polis has signed into law the fast-tracked and controversial oil and natural gas reform bill, which revises oversight and instills increased power in local governments.
While industry opposition remains strong, there were hints that the legislation may not be as onerous to the industry as initially thought, as many operators hold a lot of permits to drill, and production and development already underway should face no hurdles.
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,” he said.
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 have 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 board of the Weld County Commission, which oversees the major producing area of the state, was blunt. It does not like the law, it said in an open letter issued on Wednesday.
“In Gov. Polis’ inauguration speech, he said, ‘Our mission now is to make Colorado a place for all families to have a chance to thrive…’ Except, as we now know, he wasn’t talking about you. Disappointed? Yes. Angry? Absolutely. Surprised? Not at all.
“If the governor and the Boulder legislators thought Weld County would be silenced or minimized, if they thought we wouldn’t speak up in support of our families, we just have one thing to say: talking heads and photo ops at the Capital will never overshadow those with boots on the ground in Weld County...
“We know the value of the oil and gas industry, even if others in this state don’t. We appreciate the hard work the men and women, employed by the industry do day-in and day-out to make sure we have heat and light in our homes, as well as fuel to power our cars, trucks and tractors. We value the revenue the industry provides to its families, enabling them to enjoy financial stability… We appreciate the national security this country enjoys because of locally produced oil and gas.”
For months, the board said, there has been “emotional rhetoric from those who don’t understand the facts of this industry, nor do they care to. For months, you have endured misleading allegations that the industry isn’t doing all it can to protect life, safety and the environment as if it wasn’t your life, your safety and your environment as well.”
The commission said it stands ready “to work with the oil and gas industry, as we have since the early 1920s, to develop a system that provides certainty and stability to the process.” At the planned board meeting on Monday (April 22), the board said it planned to publicly pledge support for the industry.
The enacted 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.”