Big changes for Colorado oil and gas industry
January 28, 2014
DENVER — Colorado's tensions over oil and gas production have threatened to boil over this year.
The state's influential and fast-growing industry faces the prospect of big crackdowns from the state Legislature and the possibility of statewide ballot measures curbing drilling.
So far, the legislative session has been short on big overhaul proposals. But does that mean the debate has died down? Hardly.
Colorado's energy industry still could see big changes coming — not all of them from the Capitol.
“When you buy a property, that doesn’t mean you’re buying to the core of the Earth.”
-- Doug Flanders of the Colorado Oil & Gas Association
The meteoric rise in energy production in populated areas of the state is driving new attention to the impacts of oil and gas extraction on health and the environment. Colorado's oil production broke 50-year records both of the last two years. And new technologies have allowed drilling much closer to homes and businesses.
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"No one wants to wake up to see a drilling rig across the street from your front yard. That has to be addressed, and I think there is interest in momentum," said Pete Maysmith, head of Conservation Colorado.
So far, Democrats who control the Legislature seem to be deferring to Gov. John Hickenlooper, who has urged lawmakers to go slow on efforts to increase oversight on the industry.
Instead, the Democratic governor is talking up his administration's plans for tougher air quality checks.
A big reason Hickenlooper wants lawmakers to stand down on big drilling measures is because his plans won't need a new law.
The Air Quality Control Commission, part of the Health Department and, therefore, the administration, has proposed oil and gas industry rules that include the first statewide methane emissions limits and new emissions controls on storage tanks, a major source of emissions of volatile organic compounds such as propane and ethane, which contribute to ozone pollution.
"We are really, I think, beginning to rebuild the trust between the oil and gas industry and the people, which I think is crucial, for all of us," Hickenlooper told the Colorado Association of Commerce and Industry Thursday.
But the changes won't take effect without controversy. The first public hearing has been scheduled for three full days, and it's been moved from the Health Department to a larger venue because of the anticipated crowds.
"The air quality rule is critical to how we're going to deal with oil and gas in Colorado," Maysmith said.
Some energy producers are on board with the changes, but not all. And there will be many rounds of negotiations over nitty-gritty details.
For example, the administration has projected the air quality upgrades will cost oil and gas producers about $30 million. The Colorado Petroleum Association puts the tab at $100 million.
"There are some significant areas that need further discussion," said Stan Dempsey, the association's president.
BAN IT ALL, IF YOU WANT
The biggest change facing the oil and gas industry this year could come directly from voters.
A proposed ballot measure would upend Colorado law and give local governments the ability to prohibit any commercial activity they deem a threat to their health, safety or welfare. The proposal comes from activists who pushed for a successful ballot measure in Lafayette to extend a moratorium on oil and gas extraction within city limits.
Sponsor Cliff Willmeng, of Lafayette, said activists proposed the ballot measure after finding no traction with state lawmakers to sponsor such a dramatic change.
"Nobody would touch it," Willmeng said. "This is something Colorado people have to take upon themselves."
The state title board has yet to review the ballot measure's wording, after which supporters would have six month to collect about 87,000 signatures to get it on ballots.
If the question makes it to ballots, expect furious opposition from business groups, because the change would apply not just to oil and gas extraction but any commercial activity.
Democrats haven't attempted to increase fines for rule violations, a stalled oil and gas crackdown from last year. But such a measure is widely expected.
Industry groups say they haven't seen specifics but are generally supportive of the idea of raising fines, which are now capped at $1,000 a day, one of the nation's lowest.
"It doesn't help anybody not to have the rules applied and enforced," Dempsey said.
Hickenlooper has mentioned several times that fines will be hiked. But he hasn't elaborated.
"We are working with legislators, industry and the conservation community to ensure we pass a bill this year that will strengthen penalties for violations of permits and rules," Hickenlooper said in his annual State of the State address.
ANOTHER LIKELY CHANGE
While lawmakers wait for a new proposal on drilling fines, they're already moving on a less controversial change.
The state Senate has approved a bill to require more notification to land purchasers and home buyers about the split estate, which is the legal expression for property ownership that doesn't necessarily extend to rights below the surface.
Sen. Mary Hodge, D-Brighton, brought the proposal because she said many don't realize the limits of their property rights.
The industry embraces the proposal, saying it might help reduce conflicts with landowners.
"When you buy a property, that doesn't mean you're buying to the core of the Earth," said Doug Flanders of the Colorado Oil & Gas Association.