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
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
release, public comment and participation is encouraged at the
It is clear that lines are being
drawn…stay tuned as more develops!
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!
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
overview of key amendments that brought the bill to its final form:
(1) More direction and
support in implementing local regulation
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
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
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
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. §
(4) Minor Adjustments to Pooling Application
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.
Watching commodity pricing is a
bit like watching a rollercoaster – it goes up one minute, down the next, then
up again and down. Today’s oil prices
are no different. We started the day up
a bit, and this afternoon we are down a bit – the rollercoaster continues. If you were looking for a lazy river-like
pace, with its predictable turns and steady current, commodity pricing is not
the ride for you.
This morning, Bloomberg Energy reports the
following oil prices, which are up a bit from yesterday:
A number of things have
contributed to pricing’s rollercoaster effect, including:
and Demand – U.S. Inventories are High. According to the U.S. Energy Information
Administration’s (“EIA”) Monthly Crude and Natural Gas Production report
released March 29, 2019, which can be found here, U.S. crude oil
production is increasing. In fact,
according to the EIA’s Today in Energy from April 9, 2019 entitled, “U.S. Crude Oil
Production Grew 17% in 2018, surpassing the previous record in 1970,”
“[a]nnual U.S. crude oil production reached a record level of 10.96 million
barrels per day in 2018.”
Cuts – Plus Global Issues. According
to CNN Business article entitled, “There’s
Trouble in OPEC and Oil Prices are up 50%,” trouble in 3 OPEC nations,
namely, Venezuela, Iran and Libya, have contributed to domestic oil price
and a More Cautious Approach.
According to CNN Business article entitled, “Wall
Street Taught Oil Drillers Restraint. That Could Lift Oil Prices,” some of
the price volatility could be related to the more cautious approach some
companies are taking, with the hopes of keeping higher oil prices
sustained. The article also reports
that the sense of restraint in the oil patch could lead to breaking the
There are of course other factors
that may come into play, including politics, pipeline constraints, whether OPEC
continues supply cuts and global supply and demand impacts.
While it is difficult to predict where the rollercoaster is headed, yesterday’s CNBC article entitled, “Prepare for $80 oil this summer as ‘wounded bulls’ rise, RBC warns,” forecasts that “international oil prices will average $75 a barrel in 2019 and consumers may find themselves contending with bouts of $80 crude this summer, RBC Capital markets said.” One thing is for sure, we are along for the ride!
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.
We are constantly trying to predict the future of oil prices – that is just the nature of the beast in this business. So many things begin, and end, with the price of oil for us. Luckily, the U.S. Energy Information Administration (“EIA”) is literally in the business of analyzing and predicting the future of oil prices. Thank goodness, because there are so many factors that go in to predicting commodity pricing, this is not an easy feat!
The EIA’s Short-Term Energy Outlook (commonly known as “STEO”) was released on March 12, 2019 – the full report can be found here.
Brent crude spot prices reportedly averaged $64 per barrel in February, which marks a $5 per barrel uptick since January.
The EIA forecasts that Brent spot prices will average $63 per barrel in 2019 and $62 per barrel in 2020.
These forecasts are great news because they predict price stability, in general, through 2020.
Moving on to the Crude Oil
Markets Review featured in the STEO, which can be found here, the
takeaways are as follows:
The STEO reports that the U.S. active oil rig count reached a 10-month low of 834 rigs as of March 8, suggesting the rate of U.S. crude oil production growth could slow.
Yet, the EIA forecasts U.S. crude oil production will increase by 1.3 million b/d in 2019 and by 0.7 million b/d in 2020.
In addition, the STEO notes the potential for at least two wildcards – OPEC and U.S. production levels, as well as the pace of global oil demand growth. The STEO forecasts that these factors “present considerable uncertainty to oil market balances and price expectations.”
on the current forecast,
however, the EIA expects global inventory builds and rising OPEC spare capacity
will limit significant upward oil price pressures in 2019 and in 2020.”
While it is difficult to predict
what lies ahead for oil prices, stay tuned – we will have our fingers on the
pulse of oil prices. Many factors
influence oil prices and we will keep you apprised of new developments!
March is Women’s History Month. In 1919, the 19th Amendment gave women the right to vote. While we are celebrating the 100-year anniversary of women’s suffrage in the United States, it gives us a great opportunity to spotlight my home state of Wyoming.
Wyoming is not just known as the “Cowboy State” or home to the Salt Creek Oil Field – once the largest producing oil field in the world that boomed and also busted, yet still produces oil today. Wyoming is also nicknamed, “the Equality State.”
2019 marks the 150th anniversary of women’s suffrage in Wyoming – a truly wonderful anniversary, as women were recognized as having the right to vote in Wyoming a good 50 years before women in the rest of the country were guaranteed the same right.
It allowed women to serve on juries as early as
The first female governor in the United States
Tayloe Ross, elected in Wyoming in 1924.
In addition, the women of Wyoming have always been a different sort – full of grit, tenacity and strength. As part of our spotlight on Wyoming this month, a recent project created by Wyoming native, Lindsay Linton Buk, entitled Women in Wyoming must also be highlighted.
The project features “portraits and interviews of women who shape the West” and brings attention to the contemporary women in my home state who are remarkable role models. The project is broken into 3 amazingly inspiring chapters – trust me, it is worth checking out! Give it a listen:
Chapter 1 – Breaking Boundaries – my favorite feature is on Wyoming’s first female Supreme Court Justice, Marilyn Kite
Chapter 2 – Filling the Void – my favorite feature in this chapter focuses on Dr. Diane Noton
Chapter 3 – Power – my favorite feature in this chapter is on Mickey Thoman, “cowgirl, mentor and ranching matriarch of the Thoman Ranch in Sweetwater County, Wyoming” (which is also my home county)
Each Chapter contains 5 separate stories – each with truly breathtaking photographs taken by Lindsay Linton Buk herself, and each story is recounted in the subject’s voice and displayed in podcast format. You get to actually hear the tales told in the subject’s voice, which is really a once in a lifetime opportunity to listen to true stories told by these amazing Wyoming women. This project is so unique and full of energy – it is an absolutely wonderful and inspiring project created by a Wyoming woman to bring these powerful stories to light – it is a “must see.” Check it out!
As part of the Rocky Mountain
Energy Essentials blog, we typically discuss the energy and natural resources
sector of Wyoming; however, Wyoming has been on the forefront in more ways than
just the oil and gas and other extracted minerals area. Its nickname of the Equality State pays
homage to that!
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.
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.
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
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
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. §
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
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
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 alloil 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
(4) Revising Pooling
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)].
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
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.
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
Colorado hold about 4% of total domestic crude
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.
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.
It Takes the Right Ingredients: The Recipe for Sustainable Oil Prices and the Perfect Cake Have Common Elements
In baking, much like in many areas of life, all of the ingredients must come together in perfect harmony. Baking is not just about measuring out the right amount of quantities of what you are adding in, baking it at the right temperature and hoping for the best. No, baking also requires patience, finesse and foresight – but above all, it requires planning and the right ingredients.
Achieving sustainable oil prices is much the same – numerous components must all come together in harmony for sustainable growth and stable pricing to be the result. A little patience, finesse, foresight and planning don’t hurt the process either. One or two factors do not, alone, cause a stable price environment – it is the combination of many ingredients, each playing a role.
I recently got my layer cakes
down pretty well; however, then I got a little over-confident and substituted
in eggnog on a whim while baking a Christmas-themed layer cake. I did not think through the role that
room-temperature milk actually played in a cake, nor did I think through the
impact that the substitution may have on the other ingredients. Luckily, my cake still worked out, but it was
just a little off.
Lesson Learned: Sometimes you just cannot substitute one of the crucial ingredients on a whim.
Some, But Not All of, The Crucial Ingredients for Sustainable Oil
When one sits down to think about
what all goes into the recipe for sustainable oil prices, it is easy to see how
opinions on this subject can differ so greatly.
There does seem to be a general consensus on a few of the critical
Supply and Demand
International Relationships and the Global
Infrastructure and Drilling Efficiencies
Supply and Demand
Although some question whether supply and demand have that significant of impact on pricing, most people recognize that this simple and basic economic principal is a foundational component of the sustainable oil prices recipe.
While it is widely accepted that high oil prices leads to more drilling, thereby increasing supply, some question whether OPEC’s supply cuts have a true impact on price. Others feel that production cuts support prices and give momentum to increases in price.
A recent article featured on Investing.com entitled, Oil Prices Gain 2 Percent, Extending Rally From December Lows, reports that the slight recent increases in oil prices are “drawing support from an agreed supply cut by the Organization of the Petroleum Exporting Companies, [as] well as some non-member countries such as Russia and Oman” and discusses in detail that “[t]he aim of the production cut is to rein in a surge in global supply, driven mostly by the United States, where production grew by nearly a fifth to over 11 million bpd in 2018.”
International Relationships and the Global Economy
Now, more than ever, the global economy and the state of international relationships play a critical role in whether oil prices will be volatile. We frequently consider circumstances in Venezuela, Iran, Saudi Arabia, Russia and other far-away countries when we look at predicting the future of oil prices. Forbes discusses the international relationship impact on oil prices in its recent article entitled, Oil Markets Are In For a Wild Ride in 2019.
Infrastructure and Drilling Efficiencies
Planning, from an infrastructure standpoint, such as pipelines, plays an important role on the stability of pricing as well. Advances in technology that promote drilling efficiencies are similarly essential.
The unavailability of pipelines has been an issue for years. In fact, a recent article in Bloomberg entitled, Permian Shale Oil Boom Holds Good News and Bad News for OPEC, discusses current pipeline constraints in the Permian and also limitations in the United States export infrastructure in detail.
Further, advances in drilling technology have resulted in efficiencies that have helped profitability increase. A recent article in Forbes entitled, U.S. Shale Oil and Natural Gas, Underestimated its Whole Life, mentions the benefits of drilling efficiencies in oil price consistency and future production.
Bottom line – both sustainability in commodity prices and baking each require the right ingredients.