Counties lose in attempt to regulate oil and gas practices

The Colorado Statesman

A series of bills aimed at balancing local versus state control of oil and gas regulations in Colorado were quickly drilled to their demise by the Legislature this month, along with legislation seeking to tighten controls over hydraulic fracturing practices by the industry.

The most recent attempt at defining whether local governments should be given the authority to regulate oil and gas practices was killed Monday on a Republican party-line vote of 6-4 by the House Local Government Committee. Rep. Sal Pace, D-Pueblo, was absent from the vote.

House Bill 1277, sponsored by Rep. Matt Jones, D-Louisville, would have given some control over oil and gas regulations to local governments. The simple two-page bill would have clarified that local governments are still required to work with the Oil and Gas Conservation Commission.

Opponents raised concerns over having a patchwork of rules and regulations spread across Colorado’s 64 counties. Debra Anderson, the secretary and treasurer for the Rocky Mountain chapter of the National Association of Royalty Owners, said giving control of policing the industry to local governments would only lead to confusion.

“If we were to have all 64 counties in Colorado coming up with their own set of regulations, one can only imagine how difficult it would be for the producer to go from county, to county, to county, and to develop a mineral under all these different county rules,” testified Anderson.

The Colorado Department of Natural Resources agreed that it would be difficult to coordinate rules and regulations with local governments. Andy White, legislative program manager for the Department, said the Colorado Oil and Gas Conservation Commission already works with individual counties and municipal governments on proposed rules and concerns.

“DNR and COGCC has worked closely with local governments over the past year, especially as county commissioners and city councils have been increasingly concerned about oil and gas development, to try to work with them, rather than have a number of rules and regulations pop up in a number of different communities across the state,” said White.

Supporters of the industry do not want to drive exploration efforts away from Colorado, noting that a patchwork of confusing and burdensome regulations might push the industry into neighboring states like Wyoming.

The oil and gas industry in Colorado had an estimated economic impact to the state of $1.1 billion in public revenue as of 2010, according to a report by the Leeds School of Business at the University of Colorado, obtained by The Colorado Statesman and slated for release in the next few days. The industry was also responsible for 102,554 jobs in Colorado as of 2010, according to the report.

Severance tax revenue is expected to total $197.6 million in the 2011-12 fiscal year, and $189.2 million in the 2012-13 fiscal year, according to the Office of State Planning and Budgeting.

Given the industry’s impressive impact to the state, business and industry leaders say now is not the time to be complicating rules and regulations.

“Uncertainty in regulations in the industry inhibits job growth, it inhibits companies from making those additional investments in our state,” Carly Dollar, a lobbyist for the Colorado Association of Commerce and Industry, testified during the hearing.

Dollar and other critics of the legislation — including the Colorado Petroleum Association, the Colorado Oil and Gas Association and the DNR — had support from several Republican lawmakers, but Rep. David Balmer, R-Centennial, led the charge.

“If we in Colorado were to pass this bill, we would be the outlier, we would be the one who says, ‘Take your rigs to other states that want oil and gas development.’ And I think that’s the wrong message to send to not only the rest of the country, but to our own citizens,” he remarked.

Democrats, however, argued that protecting the environment is just as much of an attraction. Jones defended stringent regulations on the oil and gas industry by pointing out that businesses are attracted to a high quality of life.

“What I’m seeing is a reasonable, responsible way to handle the issue so that we can move forward,” said Jones. “We don’t want to diminish our quality of life, which also has negative effects on job promotion.”

Sen. Ted Harvey, R-Highlands Ranch, fundamentally disagrees with Jones’ approach to oil and gas regulations. He had run a bill in the Senate that would have specified that the regulation of oil and gas operations is a matter of statewide concern, to be regulated by the Oil and Gas Conservation Commission, not local jurisdictions.

Senate Bill 88 would have stated that state law preempts local regulation of oil and gas operations. The Senate Local Government Committee killed the legislation on Feb. 16 by a vote of 4-1. Sen. Ellen Roberts, R-Durango, broke with her party and joined Democrats in opposing the legislation.

For Harvey, the issue is about protecting the industry, while finding the most secure way to regulate its behavior.

“There is a huge effort across the state for counties and municipalities to implement more stringent rules and regulations on the oil and gas industry, and there is years and years and years of case law that already states that the state, and specifically the Colorado Oil and Gas Conservation Commission, preempts the counties from implementing more stringent rules than the state does,” said Harvey.

Hydraulic fracturing has fractured support

Much of the concern revolves around hydraulic fracturing issues, and whether local governments have more insight into the drilling activities taking place in their communities.

The oil and gas debate has recently shifted from rural parts of Colorado to metro areas along the Front Range in the last year as hydraulic fracturing has become more widespread. In Arapahoe County, citizens have become increasingly concerned with plans to drill dozens of wells in eastern Aurora. As a result, several counties are for the first time raising concerns over oil and gas exploration in Colorado.

The process is called fracking because it fractures rock by employing the pressure of a fluid — often times including chemicals, sand and water — to increase the extraction rates in recovering oil and natural gas. The technique has resulted in harsh criticism, with media reports suggesting that it contaminates groundwater. In Colorado, health officials say there has never been a documented case of fracking that has contaminated groundwater, and the industry has gotten the support of Democratic Gov. John Hickenlooper.

Still, noting the growing concerns, lawmakers this year are attempting to address the fears with legislation. The House Local Government Committee on Feb. 6 killed two pieces of legislation that were aimed at controlling fracking in Colorado.

Rep. Su Ryden, D-Aurora, sponsored House Bill 1176. It would have required a fracking well setback of at least 1,000 feet from any school or residence. The House Local Government Committee killed the legislation on a vote of 8-3. Democratic Reps. Jeanne Labuda, D-Denver, and Pace joined Republicans in opposing the legislation.

Rep. Roger Wilson, D-Glenwood Springs, also pushed tougher restrictions on fracking by proposing legislation that would have prohibited the storage of fracking fluids in an open pit. The legislation would have permitted the Oil and Gas Conservation Commission to allow use of open pits if it determined that there is no risk. But the House Local Government Committee killed the legislation on a vote of 7-3. Labuda again joined Republicans in opposing the legislation. Rep. John Soper, D-Thornton, was excused from the vote.

A final controversial fracking bill, Senate Bill 107, had not yet been scheduled as of Wednesday. Sponsored by Sen. Morgan Carroll, D-Aurora, the legislation would require the Oil and Gas Conservation Commission to establish rules to protect groundwater from hydraulic fracturing practices. Operators would be required to submit water quality reports, and to take out a so-called “environmental bond” that would be forfeited if the operator causes damage to water supplies. Fracking would also be prohibited within a half-mile of any surface water, unless the operator uses a closed-loop pit system.

Barbara Green, an environmental and land use attorney who is representing the Northwest Colorado Council of Governments, said the rising concerns in individual communities is an example of the need for extending regulatory powers to local governments. She said local governments are unable to wait for the Legislature or the Oil and Gas Conservation Commission to take action.

“For the local people, this is the only forum they really have,” said Green. “When you take away their right to have a hearing on oil and gas operations, they get suspicious.”