Category Archives: Colorado

Commission Rules Under Construction: COGCC Mission Change Whitepaper Released

Many changes are on the horizon, as the Colorado Oil & Gas Conservation Commission’s (“COGCC”) rules are under construction.  On November 1st, the COGCC released its Mission Change Whitepaper (“Whitepaper”).  For the full text of the Whitepaper, click here

The Whitepaper provides a broad overview of certain rule changes contemplated by the passage of Senate Bill 19-181, which among other things changed the mission of the COGCC from “fostering the responsible, balanced development” of oil and gas resources in the State of Colorado, to “regulating” it.

As a reminder, Senate Bill 19-181, now enacted as C.R.S. § 34-60-106(2.5)(a), specifically provides that “the Commission shall regulate oil and gas operations in a reasonable manner to protect and minimize adverse impacts to public health, safety, welfare, the environment, and wildlife resources and shall protect against adverse environmental impacts on any air, water, soil, or biological resource resulting from oil and gas operations.”

The Whitepaper is intended to “facilitate meaningful stakeholder conversations and rule language development.”  Some of the major proposals for future rulemakings as discussed in the Whitepaper are as follows:

  • Streamlining:  The 300-Series Rules (addressing drilling, development, production and abandonment) should be revised to provide for a single, comprehensive application covering drilling and spacing units, surface location sites, wells, production facilities and flowlines.  The decision-making power on applications may switch from the Director to the COGCC as a whole.  Notice procedures may also be streamlined to provide more parties with pre-application notice.
  • Standing:  The 500-Series Rules (addressing practice and procedure) may be expanded to replace current Rule 508 with a simplified rule that provides the opportunity for a hearing to all “affected persons,” being those parties having “a personal justiciable interest related to a legal right, duty, privilege, power, or economic interest affected by an application.”  Current Rule 509 provides relatively few parties with standing to protest applications, whereas modified Rule 509 would outline criteria that the COGCC would consider in determining whether a party has demonstrated a “justiciable interest” and, therefore, would be deemed an “affected person.” 
  • Safety:  The 600-Series Rules (addressing safety regulations) may establish a process safety management program applicable to all oil and gas operations under Rule 602.  Current Rule 912.a, prohibiting unnecessary or excessive venting or flaring of natural gas, may also be moved to the 600 Series and, rather than maintain the undefined thresholds of “unnecessary” and “excessive,” be revised to prohibit venting and flaring from a well for more than 60 days from the date of first production.

The stakeholder meeting to review the Whitepaper originally scheduled for November 7th has been cancelled.  Instead, feedback is being sought though individual stakeholder meetings and from comments submitted though the Public Comment Portal, found here.

Big changes are underway in the Colorado regulatory context.  Stay tuned for more as these changes develop.

A Line in the Sand: Weld County & Boulder County

As a resident of Weld County, I can tell you that there are sometimes stark contrasts between Weld and Boulder Counties.  Although neighbors, the two counties have very different views – and I do not mean of the mountains. 

One of the ramifications of S.B. 181 is increased local control, allowing Colorado cities and counties more control over drilling operations through local zoning ordinances and land use regulations.  Hence, a line in the sand is beginning to be drawn between Boulder and Weld Counties…

On May 1, 2019, the Weld County Board of Commissioners (“Weld County Commissioners”) issued a press release entitled, “Local Control Focus of Board Action,” which can be found here.  During the hearing that same day, the Weld County Commissioners reportedly started the process to give the Weld County government control over oil and gas permitting by “formally designat[ing] all of unincorporated Weld County as being under the purview of county government as it relates to mineral resources – particularly oil and gas.”

The press release follows the “Open Letter from the County Commissioners” from April 16, 2019, the same day that S.B. 181 was signed by Governor Polis, expressing Weld County’s understanding of the value of Colorado’s oil and gas industry, which can be found here

The proposed designation is set for public hearing on June 10, 2019, during which time the Weld County Commissioners will act on the same.  Per the press release, public comment and participation is encouraged at the hearing.  

It is clear that lines are being drawn…stay tuned as more develops!

Colorado’s SB 181: Wyoming’s New Economic Stimulus Package?

It is no secret that Wyoming’s economy is heavily reliant on the energy and natural resources sector.  In fact, the primary forces behind the economy of the Cowboy State are mineral extraction, in the form of coal, oil, natural gas and trona, and agriculture. 

Wyoming is an attractive place to do business due to state incentives like no income tax and low sales and property taxes; however, Wyoming may become even more of a hot opportunity state in light of the passage of Senate Bill 181 by its neighbor to the south, Colorado. 

Colorado has recently taken serious steps to increase oil and gas regulation and revamp the make-up of the Colorado Oil and Gas Conservation Commission.  As Governor Jared Polis signed SB 181 into law yesterday, April 16, 2019, many are trying to anticipate the impact that the bill will have on the oil and gas industry in Colorado.  The future of oil and gas is uncertain, due in part to the significant reforms mandated by SB 181.  For a full discussion of the sweeping impacts of the bill, check out our prior post here

I have heard several folks referring to Colorado’s SB 181 as “Wyoming’s Economic Stimulus Package.”  The comment has been said in jest, but it got me thinking…

Will the oil and gas industry shift more of its focus to the Cowboy State in the wake of SB 181?

There are several factors that support the theory that Wyoming will greatly benefit from Colorado passing SB 181, including:

  • Rural Nature of Wyoming – Wyoming is one of the least populated states in the country.  In addition, the population of the state is spread out – meaning the population density is very opposite to that of Colorado.  As a result, the friction that Colorado has faced with the oil and gas industry as its towns and communities have rapidly expanded into producing areas will be practically a non-issue for rural Wyoming.  In fact, the New York Times wrote an article last summer commenting on this issue of the increase of production in Weld County coupled with Colorado’s population boom entitled, “In Colorado, A Fracking Boom and a Population Explosion Collide.”  Wyoming is a much more attractive environment for operations than Colorado, given Wyoming’s lower population.
  • Attitude – Wyoming residents are, in general, supportive of responsible oil and gas development in the state.  Talk in Wyoming is positive and hopeful of the boom to come, and folks are making what preparations they can in the hopes of a boom in the oil and gas sector again – welcoming it with open arms. Wyoming residents recognize the value of the revenue that oil and gas operations bring to the state.   
  • Workers with Grit – Wyoming is known for its quality of worker; Wyoming folks work hard and with grit, as working outdoors in all weather conditions requires.  

Wyoming presents a favorable opportunity for the energy and natural resources sector to grow, but will the oil and gas industry shift its focus to the Cowboy State in the wake of SB 181?

It is likely that Wyoming will benefit from the passage of SB 181 in Colorado, but only time will tell if SB 181 will be Wyoming’s new economic stimulus package…stay tuned!

In the Know: Update on Colorado’s Senate Bill 181

As discussed in our March 13 post, which can be found here, Senate Bill 181, introduced on March 1, proposed significant changes to Colorado’s long-standing oil and gas regulatory system.  After a number of amendments from Senate and House membership, Governor Polis signed S.B. 181 into law on April 16, 2019. 

Here’s an overview of key amendments that brought the bill to its final form:

(1)        More direction and support in implementing local regulation

S.B. 181’s original revamp of local authority under C.R.S. § 26-20-104, which gave localities the power of “regulating oil and gas development” in order to generally “minimize adverse impacts… on public health and the environment” remains mostly intact.  However, S.B. 181 amendments have limited that power to “regulating the surface impacts of oil and gas development,” and have also tailored local impact minimization measures “to the extent necessary and reasonable to protect public health, safety, and welfare and the environment…” 

S.B. 181 now creates C.R.S. § 29-20-104(3), which establishes atechnical review board procedure to provide qualified input on local well siting determinations. This new system will allow a locality or operator to request that COGCC-appointed experts report on the technical and operational suitability of the locality’s preliminary or final well siting decision. 

  • C.R.S. § 29-20-104(3)(b) makes clear that local governments will not be required to reconsider or amend siting decisions based on technical review board reports.
  • More specifics regarding technical review board procedures and membership can be found in the revised C.R.S. § 34-60-104.5(3).

(2)        More direction in enacting new emissions rules

S.B. 181 now includes important additions and refinements to the COGCC’s new mandate to adopt emissions regulations under C.R.S. § 25-7-109. 

COGCC rules to minimize emissions of methane, VOCs and NOx must be adopted under C.R.S. § 25-7-109(10)(a).

C.R.S. § 25-7-109(10)(b) now directs the COGCC to revisit its existing rules and consider stricter requirements with respect to: leak detection and repair; pipeline inspection; emissions from pneumatic tools (e.g. gas-driven pumps and compressors); and continuous methane monitoring “at facilities with large emissions potential, at multi-well facilities, and at facilities in close proximity to occupied dwellings.” 

  • Notably, S.B. 181 no longer requires emissions monitoring installation at every “oil and gas facility”in the state.

(3)        Future restructuring of COGCC

S.B. 181’s original changes to the nine-member COGCC, which de-emphasized oil and gas industry experience among the qualifications of its seven appointed, volunteer commissioners, will be effective until no later than July 1, 2020. By then, the COGCC will be restructured to seven total members, including five appointed commissioners of balanced credentials who will become full-time state employees.

  • At least one member of the restructured COGCC must have substantial experience or formal training in: the oil and gas industry; planning and land use; environmental and wildlife protection or reclamation; and public health.  More specifics regarding the future makeup of the COGCC are set out in the new C.R.S. § 34-60-104.3.  

(4)        Minor Adjustments to Pooling Application Amendments

S.B. 181 originally introduced amendments to C.R.S. § 34-60-116 that would have required a 50% minimum consent threshold on forced pooling applications and a 15% statutory royalty on oil and gas for non-consenting, unleased owners. The final bill instead requires consent to be pooled from parties comprising 45% of the interest of reasonably locatable owners and a statutory pooled royalty of 13% on oil and 16% on gas.     

Adams County Unanimously Approves Temporary Moratorium on New Oil and Gas Permits

Yesterday, Wednesday March 20, 2019, the Board of County Commissioners for Adams County, Colorado (the “Board”) held a special public hearing on whether to impose a temporary ban on local oil and gas permit applications in the wake of Colorado’s Senate Bill 19-181.  Senate Bill 19-181 was passed (with amendment) by the Senate and is currently under consideration by the House.

Following a nearly three hour hearing that included statements given by numerous industry and community stake holders, the Board unanimously adopted a temporary moratorium on new oil and gas permits.  This moratorium, which became effective immediately, lasts for six months and applies to all permits for which applications have not yet been submitted to the Board.  Permit applications already filed with the Board are not affected.

In its resolution, the Board expressed concern with a potential flood of new permit applications and Senate Bill 19-181’s impending changes to local government authority to regulate oil and gas development.  If Senate Bill 19-181 is passed into law this legislative session it is expected to take effect on July 1, 2019. 

Click here for the full text of the Board’s resolution (via the agenda).

For more information on Senate Bill 19-181, check out the prior post on this blog by Jim Tartaglia, titled “In The Know: Primer on Colorado’s Senate Bill 181,” which can be found here.

In the Know: Primer on Colorado’s Senate Bill 181

On March 1, 2019, Senate Majority Leader Steve Fenberg and House Speaker KC Becker introduced Senate Bill 181, which proposes significant changes to Colorado’s oil and gas regulatory framework.  This bill has initiated immediate public debate that is sure to continue as it proceeds through the legislature. 

While it may undergo revision during that process, here is a summary of the changes that Senate Bill 181 (as originally proposed) would usher in:

(1)        Redefining the COGCC

  • C.R.S. § 34-60-102 articulates the legislative goals of the Oil and Gas Conservation Act (the “Act”), which currently declares it “in the public interest” to “foster” oil and gas development “in a manner consistent with protection of” public health and safety, and to promote oil and gas development in a way that avoids “waste” of the state’s natural resources.
    • S.B. 181 would amend that declaration by directing the COGCC to “regulate” oil and gas development “in a manner that protects” public health and safety, and redefining “waste” to establish that non-production of oil and gas does not constitute “waste” that the COGCC must work to minimize.
  • C.R.S. § 34-60-128 currently directs the COGCC to administer the Act “so as to minimize adverse impacts to wildlife resources affected by oil and gas operations,” and in doing so the COGCC must consider the “cost-effectiveness and technical feasibility” of its mitigation-based decisions.
    • S. B. 181 would amend the definition of “minimize adverse impacts” in C.R.S. § 34-60-103(5.5) to remove cost-efficiency and technical feasibility entirely from the COGCC’s necessary considerations in administering the Act.
  • S. B. 181 would also restructure the COGCC’s membership qualifications set out in C.R.S. 34-60-104 by (i) reducing the minimum number of those with industry experience from three to one (and in turn eliminating the mandate that industry member experience include petroleum engineering and geology); and (ii) increasing the membership qualifications that must be achieved with respect to public health and environmental protection.  The COGCC would remain at nine total members.

(2)        Expanding Local Control

  • S.B. 181 would overhaul C.R.S. § 29-20-104 by clarifying the power of local governments to regulate land use and the siting of oil and gas facilities and broadly expanding local authority to protect against potential, adverse impacts of operations, including the authority to conduct regular on-site inspections, monitor emissions and other externalities often associated with well sites, and impose administrative fees and non-compliance penalties.
    • In line with the above, S.B. 181 would end the long-standing exemption for oil and gas facilities from compliance with local noise ordinances [C.R.S. § 30-15-401].
    • Similarly, S.B. 181 would eliminate parts of C.R.S. §§ 24-65.1-202 and -302 that currently empower the COGCC to establish primary jurisdiction over designated “areas of state interest.”
  • S.B. 181 would also reconfigure the COGCC’s procedures under C.R.S. § 29-20-106 to introduce a new condition to the COGCC’s permitting procedure by requiring that, prior to filing any drilling permit application with the COGCC, all permit applicants provide evidence of prior application to and approval by relevant local governments authorizing the proposed drilling site.
  • S.B. 181 would also require under the amended C.R.S. § 29-20-106 that the COGCC establish a new regulatory process to conduct an “alternate location analysis” for new oil and gas facilities that may be proposed “near populated areas.”  

(3)        Increased Facility Monitoring

  • S.B. 181 would create a new legislative mandate that the state’s air quality control commission adopt new regulations that require on-site “continuous emission monitoring equipment” for all oil and gas facilities located in the state.
  • S.B. 181 would create a new legislative mandate that the COGCC establish rules “to ensure proper wellhead integrity” of production wells and revisit its existing rules governing flowlines and shut-in or abandoned wells in light of the commission’s redefined legislative directive. 

(4)        Revising Pooling Applications

In addition to the above general, fundamental changes sought by S.B. 181, the bill also makes notable revisions to Colorado’s compulsory pooling system: 

  • First, a pooling order could no longer be sought by “any interested person,” but instead would require that all pooling order applicants obtain consent to pooling from those owning more than half of the interest to be pooled.
  • Second, any pooling order issued by the COGCC must prohibit the operator from using any surface area owned by a nonconsenting, pooled owner (absent that owner’s written permission for such surface use).
  • Also, S.B. 181 would increase the statutory royalty due to nonconsenting, pooled owners from 12.5% to 15% [C.R.S. § 34-60-116(7)(c)].

(5)        Implementation Concerns

  • S.B. 181 includes the new C.R.S. § 34-60-106(1)(f)(III) that many see as a potentially lengthy moratorium on new drilling permits by allowing the COGCC to delay permit issuances until it “has promulgated every rule required to be adopted by legislation enacted in 2019” that may impact oil and gas development under C.R.S. Article 60, and all such rules have become effective.

As most local readers will know, the sweeping Senate Bill 181 has already become a topic of vibrant public debate in our state.  After clearing its first two Senate committees last week, the bill’s potential and final form should become clear in the near future. 

Please check back for updates on Senate Bill 181!

Guest post author: Jim Tartaglia

What Factors are Influencing Colorado’s Future Role in the U.S. Energy Sector?

It is no secret that Colorado is, and has been in recent years, a hot state in the domestic energy sector. 

One of the reasons that the state has been a hotbed for development is due to the potential that the state has for oil and natural gas production.  According to the U.S. Energy Information Administration (“EIA”) profile on Colorado, which can be found here:

  • Crude oil production has quadrupled in Colorado since 2010
  • Colorado hold about 4% of total domestic crude reserves
  • Colorado is the 5th largest natural gas producing state
  • 11 of the country’s 100 biggest natural gas fields are located in Colorado

Colorado has serious potential for future oil and gas production.

As we discussed in our post, Proposition 112 Was Defeated, But That is Not the End, Colorado recently rejected a measure that could have had significant negative impacts on the members of Colorado communities.  However, as we discussed, Proposition 112 is not the end to the challenges facing the industry…as highlighted below. 

Predicting the future is obviously difficult.  We do not have a crystal ball or some special insight that gives us all of the answers.  Predicting is, just that – estimating things based upon the data and information we know and taking into account the numerous factors that we cannot anticipate and do not know, but that may make a significant impact

That being said, despite these difficulties, many are trying to predict what the future of the energy sector in Colorado will look like.  For example, these are some recent headlines in Colorado:

In addition to potential future regulations, the state has the Wildgrass case looming – Wildgrass Oil and Gas Committee v. State of Colorado et al., case number 1:19-cv-00190, currently pending in the U.S. District Court for the District of Colorado was filed January 23, 2019.  What is at issue is the statutory pooling of nonconsenting mineral owners in the form of a challenge to the constitutionality of C.R.S. § 34-60-116, the statutory/involuntary pooling statute. 

We will continue to monitor the Wildgrass case and we will be providing periodic updates as to the same – for an introduction into the case, Oil & Gas 360 posted an article entitled, Colorado: New Lawsuit Targeting Mineral Rights Pooling was Filed by Setback Proponents which also includes a Law 360 article entitled, Mineral Owners Want Forced Drilling on Their Lands Outlawed.

Needless to say, these matters will certainly have an impact on Colorado’s future role in the domestic energy sector, the operations of operators in the state and also the interests of mineral interest owners. 

Proposition 112 Was Defeated, But That is Not the End

Colorado’s Proposition 112, which gained national notoriety this fall, the full text of which can be found here, was a ballot initiative that proposed the nation’s strictest setback – a blanket 2,500 feet setback for new wells.  Luckily, the highly publicized Proposition 112 was defeated at the polls this November, as it could have had significant negative impacts on not only the industry as a whole, but on the lives of many Coloradans.  The extreme and controversial measure was even discussed in The New York Times article entitled, In Colorado, a Bitter Battle Over Oil, Gas and the Environment Comes to a Head, shortly before voters hit the polls. 

Residents of Denver saw people taking to the sidewalks and streets to oppose Proposition 112 and to spread the word of how detrimental the measure would be if passed – industry workers, landmen, executives, engineers, lawyers and the like all sported “Vote ‘No’ on 112” signs.  As a resident of Weld County, I personally did not see any “Vote ‘Yes’ on 112” signs until driving north to Fort Collins or west to Boulder. 

By way of a summary, Proposition 112 would have had substantial impacts on the oil and gas industry in Colorado, including the following:

  • It would have greatly reduced the available locations for new oil and gas development
  • Colorado’s tax revenue, unemployment rate and overall health of the state economy would have taken a major hit
  • Most notably, the measure would have had major negative impacts that would have rippled throughout Colorado communities – our families would have felt its negative impacts the most. 

What many forget is that it is not just those families who work in the oil and gas sector who would have suffered – local restaurants, hotels, gas stations, and many others who serve the industry would have lost a significant flow of income.  This also does not include the mineral owners whose asset could have remained undeveloped – they stand to lose the benefit of owning such a resource if it can not be developed.  An excellent summary of the potential impacts of Proposition 112 was put together by the Colorado Oil and Gas Association (“COGA”) and can be found here.  

Proposition 112 was reportedly rejected by a margin of 57% to 42%.   Those in favor of restricting oil and gas operations in Colorado will likely attempt future ballot measures aimed at the same…the takeaway is that the defeat of Proposition 112 will likely not be the end

The roots of this measure started to grow as early as 2010, with local Colorado communities starting to get interested in pushing fracking moratoria.  It is unlikely that this movement toward heavily restricting oil and gas development in Colorado will end any time soon.  Many think that the oil and gas industry is currently poised to educate the public now that it has defeated Proposition 112 and use the opportunity to prevent future misinformation and obstruction of the industry.  Coloradans for Responsible Energy Development is one such effort.

Stay tuned – we will keep you informed of any new developments and regulations affecting the industry in Colorado.