A bill proposing to significantly alter the make-up of a Colorado commission that manages oil and natural gas operations, as well as to redefine the term “waste,” cleared the state House Friday. A spokesman for the Colorado Oil and Gas Association (COGA) called it “one of the more dramatic pieces of legislation” that the energy industry is facing nationwide.
The measure (HB 1341), which producers largely oppose, is now headed to the Senate. It would cut to three from five the number of energy industry members on the Colorado Oil and Gas Conservation Commission, while increasing the overall number of members on the panel to nine from seven. It also would revise the definition of “waste” associated with oil and gas production.
Democrats widely supported the measure, while House Republicans sought to block it at every turn. While quick approval by the Colorado House was expected, the Senate is likely to be more deliberative, said Stan Dempsey, president of the Colorado Petroleum Association (CPA). “The Senate is going to be more thoughtful and take a closer look at the impact of the legislation on the economy of the state of Colorado.”
COGA has several concerns with the bill, said spokesman Greg Schnacke. It would make the heads of Colorado’s Department of Natural Resources and Department of Public Health and Environment, who are members of the governor’s cabinet and are charged with formulating energy policy, voting members of the commission. “We think that’s a separation of powers issue.”
In addition, “this bill fundamentally changes the law on waste…It makes whether or not you can get gas out of the ground subject to…restrictions” involving public health, safety, the environment and wildlife, Schnacke said. “It could absolutely result in less gas being produced. From our perspective, this is a big departure from the law in the country.”
The CPA also opposes the bill because it “would have a negative effect upon the development of Colorado oil and gas resources,” Dempsey said. “We think it could slow down the issuance of permits” in the state.
“It’s creating uncertainty in terms of the regulatory structure in Colorado,” he said. “If you radically change the regulatory structure in Colorado, companies that are looking to invest in Colorado will say, ‘We’ve got other places to develop our assets. We’ll wait this out.'”
The bill comes at a time when natural gas production in Colorado is “booming.” The state issued an estimated 6,000 permits for oil and gas drilling last year, according to Dempsey.
But HB 1341, and other legislative measures and proposed anti-industry ballot initiatives, are gaining Colorado a reputation of being unfriendly to oil and natural gas. “It raises the question of whether or not we are welcome,” he said. The bill “is certainly disconcerting to our members.”
COGA’s Schnacke agreed. “People are starting to notice that Colorado has a number of forces out here that are not conducive” to oil and gas development, he noted.
The commission, by shrinking the number of industry representatives, “would lose the expertise and technical [knowledge] that it needs to do its job,” Dempsey said. In addition, CPA members find the proposed increase in the number of commission members “problematic” as well, he noted. “Our members have said to us a smaller commission works best.”
Gov. Bill Ritter campaigned on the promise that he would reform the commission, which has been dominated by industry in past years. In addition to the industry majority on the commission, the public has complained that there is a lot of oil and gas production near residential areas, especially in the western part of the state.
The House bill, as proposed, would provide for a more diverse membership on the commission. It calls for the panel to include three members with substantial experience in the oil and gas industry, with two of them having a college degree in petroleum geology or petroleum engineering; one member who is a local government official; one member with a background and expertise in environmental or wildlife protection; one member with a background and expertise in soil conservation or reclamation; and one member who is actively engaged in agricultural production and who may be a royalty owner, as well as the executive directors of Colorado’s Department of Natural Resources and Public Health and Environment or their designees.
The measure, in revising the definition of waste, calls for the commission to consider public health, safety, environment and wildlife issues in order to determine the amount of resources to be recovered.
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