The Oil and Gas Industry Isn't a Fan of Democrats' New Reform Bill

After offering a detailed preview of their oil and gas reform bill in a press conference at the State Capitol last week, Democrats finally released the full text of the bill late on Friday afternoon, leading to a weekend full of polarized reactions and setting the stage for one of the most consequential legislative battles of the year.

The 27-page bill, introduced in the legislature's upper chamber as Senate Bill 181, contains few surprises. It does what Governor Jared Polis and other top Democrats last week said it would: propose the most significant overhaul of Colorado oil and gas law in almost seventy years, granting more regulatory authority to local governments and placing greater emphasis on health and safety protections. The bill has just two co-sponsors, House Speaker KC Becker and Senate Majority Leader Steve Fenberg, and is poised to move quickly through the legislature, with a hearing before the Senate Transportation and Energy Committee scheduled for tomorrow, March 5.

That timeline drew immediate criticism from the oil and gas lobby. In a joint statement on Sunday, the Colorado Oil and Gas Association and the Colorado Petroleum Council called on Democratic leadership “to not rush this bill into committee on Tuesday and instead allow a diverse set of stakeholders more time to review the comprehensive and technical piece of legislation.”

Environmental groups like the Sierra Club, Conservation Colorado and the League of Oil and Gas Impacted Coloradans have all released statements in support of the legislation. Colorado Rising, the anti-fracking group behind last year's Proposition 112, says it will take a neutral position on the bill.

"There are a number of positive items in the bill that we like," said Joe Salazar, the group's executive director, on a conference call held by activists today, March 4. "But we don't think the bill goes far enough to protect our communities from fracking. We're not going to say, 'Rah-rah, this bill's the greatest thing since sliced bread.' But it does go a long way."

The bill’s “local control” provisions amend state law to explicitly grant city and county governments broad power to regulate oil and gas development within their borders. Local governments would be able to use their land-use authority to enact health, safety and environmental rules and control “the location and siting of oil and gas facilities,” as well as to inspect, fine and collect fees from operators. That would include allowing municipalities to impose their own minimum setback requirements between new facilities and occupied buildings or other protected areas, lawmakers said last week.

Another key provision would direct the Colorado Oil and Gas Conservation Commission to give higher priority to health and safety considerations in its rulemaking and permitting processes. The state’s Oil and Gas Conservation Act, first passed in 1951, currently requires the COGCC to “foster” the development of oil and gas “in a manner consistent with” health and safety; Democrats’ bill would instead order it to “regulate” development “subject to” the protection of health and safety. Environmental and community activist groups hope this new language will force COGCC regulators — and, if necessary, the courts — to take tougher stances against the industry.

One under-the-radar section of the bill would help make sure of that by altering the composition of the COGCC itself. The commission currently consists of seven appointed members, three of which must have “substantial experience in the oil and gas industry.” The bill would lower that requirement to just one commissioner, replacing the other two with experts in wildlife protection and public health; it would also eliminate the requirement that a fourth member of the commission be a mineral-rights owner who earns royalties from oil and gas production.

These changes to the mission and makeup of the COGCC could have far-reaching implications for the oil and gas industry and the communities in which it operates. When the commission was last restructured in 2007 — at the onset of the so-called shale revolution, a dramatic increase in oil and gas production enabled by new drilling techniques — the reforms led to a yearlong, highly technical rulemaking process that adopted or updated dozens of agency regulations. The full impacts of the Democrats’ COGCC makeover, if it’s passed, isn't likely to be felt until a similarly lengthy process is undertaken by the new commission.

Activists want to ensure that that process won't give industry groups the chance to water down any new regulations. "The COGCC has been operating a certain way for a long time," said Salazar. "Even with a sea change, even with a different mission, what we're concerned about is that they're going to have a hard time changing their culture."

Other provisions in the bill would reform the practice of “forced pooling,” raising the threshold required for a pooling order from just one mineral-rights owner in a drilling unit to a majority; require public disclosure of the locations of flow lines like the one that caused a fatal home explosion in Firestone in 2017; and direct the COGCC to "adopt rules to minimize emissions of methane" and other greenhouse gases from oil and gas facilities.

Ahead of the first of several committee hearings in the state Senate — where Democrats hold just a two-seat majority — activists are putting pressure on lawmakers not only to pass the bill, but also to resist any attempts by Colorado's powerful oil and gas lobby to weaken it.

"We have to see that this bill passes cleanly," Salazar said. "If oil and gas tries to water this bill down, then we're going to have issues."