Wednesday, May 8, 2019

Shale Law in the Spotlight – Colorado Legislature Revises Statutory Framework for Regulation of Oil and Gas Development

Written by Chloe Marie – Research Specialist

On April 16, 2019, Colorado Governor Jared Polis signed Senate Bill No. 19-181 into law, significantly amending the regulation of the oil and gas industry within the state. This new legislation aims to increase the focus on environmental and public health concerns in the oil and gas governance process.

Increases Consideration on Environmental and Public Health Concerns

Senate Bill No. 19-181 emphasizes that the primary interest of the Colorado Oil and Gas Conservation Commission [Commission] now is in regulating – as opposed to fostering – the development of oil and gas resources in Colorado. Under the new legislation, the Commission must regulate “in a manner that protects public health, safety, and welfare, including protection of the environment and wildlife resources.” This new legislative directive runs counter to the recent Colorado Supreme Court ruling in Colorado Oil & Gas Conservation Commission v. Martinez which held that the rulemaking authority of the Commission did not encompass a right to condition all new oil and gas development on a finding of no cumulative adverse impacts to public health and the environment.

Increases Authority for Local Governments

The new legislation also alters the permanent mission of the Commission by providing local governments with specified oversight of the siting and surface impacts of oil and gas development projects. In this respect, the bill provides local governments with the authority to inspect oil and gas facilities, to impose fines on operators for pollution, and to impose fees on operators for costs associated with the permitting and regulating of oil and gas production and the implementation of the monitoring and inspection program. Local governments also are responsible for providing technical expertise regarding the location and siting of oil and gas projects. At their discretion, local governments may request that the Commission Director assemble a technical review board in order to evaluate the effects of the local government’s technical input on the operator’s project application. 

With the passage of the new legislation, local governments will no longer be dependent upon the Commission to act before the municipalities can exercise their “1041 powers” with respect to land use planning for oil and gas development. In other words, local governments will have authority to license and control oil and gas development projects without any limitation from the Commission regardless of whether these projects may have statewide impacts. In addition, the legislation repeals prior statutory provisions that prevented counties from regulating noise generated by oil and gas production activities. Finally, the legislation addresses preemption by stating that both the state and municipalities have land use authority over development with the most stringent requirements, whether they are state or local, prevailing.

Directs Colorado Oil and Gas Conservation Commission to Develop Regulations

The new legislation mandates that the Commission develop and adopt regulations aimed at reducing methane and VOC emissions from oil and gas facilities. More importantly, the Commission is now required to impose stricter requirements for leak detection and repair inspections, pipeline inspection and maintenance, and methane emissions monitoring. Furthermore, the legislation directs the Commission to develop and promulgate a number of rules in a manner that is consistent with the Commission’s primary interest to protect people, wildlife, and the environment. In addition, the bill directs the Commission to adopt rules that require an alternative location analysis for oil and gas development projects that are to be located near populated areas. The Commission also is directed to develop rules addressing the potential cumulative impacts of oil and gas development, and it must amend its rules pertaining to inactive, temporarily abandoned, and shut-in well rules. It is only after promulgating these rules that the Commission can approve oil and gas permit applications.

Adjusts Membership of Colorado Oil and Gas Conservation Commissions

The bill also adjusts the composition of the nine-member Commission with the overall objective of giving increased representation to environmental interests. On or before July 1, 2020, the bill provides that the number of members required to have expertise in the oil and gas industry has been reduced from three to one. In addition, the Commission must now include members with expertise in environmental protection, wildlife protection or reclamation, and public health. Furthermore, out of the seven Commission appointments by the Governor, there may be no more than four of the same political party.

Does Not Affect Authority of Other State Agencies

While the legislation increases the regulatory authority of local governments, it is not intended to reduce the authority or jurisdiction of the Air Quality Control Commission, the Water Quality Control Commission, the State Board of Health, and the Solid and Hazardous Waste Commission to regulate their own matters.

Amends Waste Definition and Forced Pooling Provisions

Regarding other matters, the bill amends the definition of waste as applied to oil and gas by specifying that leaving some oil and gas deposits unproduced cannot be considered a waste if the Commission decides that not to produce oil or gas would contribute to the safeguarding of public health or to the protection of the environment or wildlife resources.

The bill also addresses forced pooling and stipulates that only owners of at least 50% of the mineral interests to be pooled or operators who have secured the consent of the owners can enter into a pooling order.


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