Two major bills setting out new frameworks for determining environmental versus drilling and land rights, signed into law by Colorado Gov. Bill Ritter Tuesday, could have a significant effect on the future development of the state’s oil and gas resources.
The measure making headlines was the Oil and Gas Commission Reorganization bill ( HB 1341), which expands the number of Colorado Oil and Gas Conservation Commission members from seven to nine, while reducing industry representation and adding public health, environment and wildlife impacts to the commission’s mission. The bill, the subject of intense debate, in the end was hammered into a format that drew grudging support, or at least reduced opposition, from environmentalists and the energy industry (see Daily GPI, April 26).
But another new law, the Surface Rights Act (HB 1252), also could change the balance of power by giving surface rights owners greater leverage over mineral rights owners in split estate situations. The new law requires that oil and gas companies reduce disturbance and damage to the land, using the newest technologies and environmental best practices.
If they fail to minimize disruption of the surface, the surface rights owner could have legal grounds to bring suit against the companies exploiting their mineral rights. In addition, the energy companies, as opposed to landowners, will bear the burden of proof in any legal action when it comes to demonstrating their “reasonable use” of the land’s surface.
Denver energy attorney Lance Astrella advised the Oil & Gas Accountability Project (OGAP), an environmental advocacy group that backed the new land use rules. He said that under the new law, surface owners can now stipulate that energy drillers use directional drilling to drill numerous wells from one well location. Astrella estimated that directional drilling could lessen disruption of the land surface by 80% in areas such as the northern Front Range of Colorado.
Landowners also will have the power to require energy developers use “adequate” pollution control equipment, adopt “green” fracturing processes and use pitless/closed loop drilling systems. The bill “deals with operational issues on a case-by-case basis and encourages negotiation between the landowner and operator,” Astrella said.
Greg Schnacke, executive vice president of the Colorado Oil & Gas Association, told Daily GPI that HB 1252 is definitely a departure from previous years’ surface compensation bills that failed to pass. He said the new law is “an elastic thing that will evolve over time” with the intent of the law to most likely be determined by judges in the court system.
Schnacke noted that aside from HB 1252, most energy operators work with “due regard for surface owners.” He said energy companies have been able to negotiate surface agreements with 80-90% of landowners. Schnacke said HB 1252 will put into law the “good neighbor policies” that many energy operators have already employed with landowners.
Other Rockies states and the federal Bureau of Land Management have looked at changing the balance of power in split estate situations (see Daily GPI, Jan. 3, 2006).
The two measures affecting the energy and environmental interests were among 12 bills signed into law by the governor Tuesday in public ceremonies staged in various towns in the state.
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