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Energy

New energy legislation didn’t end Colorado’s “oil and gas wars.” It just relocated them.

All’s not well that Gov. Jared Polis was hoping would end well with wells and nobody's happy.

The oil and gas industry holds a rally outside of the Colorado Capitol on Tuesday, March 5, 2019, ahead of the first committee hearing for Senate Bill 181. The legislation would add signficant new regulation to the industry and is being brought by Democrats. (Jesse Paul, The Colorado Sun)
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When Colorado Gov. Jared Polis signed sweeping new oil and gas legislation into law in April, he said he hoped the state’s “oil and gas wars” were over. But if the first rulemaking under the law is any indication, the war has merely moved to a new battlefield.

The Colorado Oil and Gas Conservation Commission chose to first revamp the rules dealing with the hearing process and forced pooling – which enables a driller to consolidate mineral rights even if a property owner does not consent – so they will comply with the law created under Senate Bill 181.

The commission is set to hold a hearing Monday on the proposed revisions to these rules, known as Series 500, but even before the first presentation, the process has been jolted by a flurry of motions by the industry and countermotions by community groups.

“There was some impression by the commission that this could be something easy and quick to get done,” said Katherine Merlin, an attorney with Colorado Environmental Advocates, a Boulder-based law firm that represents community groups. “It hasn’t turned out that way.”

The key innovation in the revisions is the addition of administrative-law judges and hearing officers to field disputed cases, freeing the commission to continue with its new rulemaking. But proposals on all sides go further than that.

In their prehearing statements, many of the environmental and community groups focused on the need for the rules – even the process rules – to reflect the change in the COGCC’s mission from fostering oil and gas development to the protection of the environment, public health and wildlife.

Jeff Robbins is the new director of the Colorado Oil and Gas Conservation Commission. He was appointed in January by Gov. Jared Polis.

“The 500 Series rulemaking has 99 parties,” COGCC executive director Jeff Robbins wrote in an email. “Some of these parties have asked the commission to undertake the public health, safety, welfare and environment rulemakings contemplated by SB 181 in the course of the 500 Series rulemaking. To do so would be outside the scope.”

In their filings, industry groups and oil companies are seeking to limit what they see as parties or testimony that were not directly relevant to a particular permit request. They also want to streamline the process so approvals come more promptly.

At 5 p.m. June 6, the day before the final meeting of participating stakeholders, the Colorado Oil and Gas Association and the Colorado Petroleum Council, two of the state’s main trade associations, filed a motion to remove most of the environmental and community groups’ statements, saying they went “far beyond” the scope of the rulemaking.

In turn, community groups filed a motion to remove all of industry’s recommendations for streamlining permit approvals, saying that those also went beyond the scope of the rulemaking.

Merlin filed a motion, supported by 18 community and environmental groups, to continue the rulemaking, in essence putting the rulemaking on hold while issues are sorted out.

Before dealing with the rules themselves, the commission is going to have to wade through at least a half-dozen motions.

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Political theater? COGCC malpractice? Everyone’s unhappy.

If anything can be said of the process so far, it is that all sides appear equally displeased.

“This is an utter disappointment,” said Joe Salazar, executive director of Colorado Rising, a grassroots group opposed to drilling. “Legislators were thoughtful in drafting Senate Bill 181, and for them to find out the COGCC has screwed it up as monumentally as it has is going to be a disappointment to them.”

The industry sees the situation differently, though not more happily. “We need to address the task at hand in each rulemaking and not allow for the process to get bogged down by political theater,” COGA president Dan Haley wrote in an email.

In an interview, petroleum council executive director Lynn Granger said, “We think that all parties involved ought to keep to the scope of the rulemaking we are involved in, or we won’t get anywhere.

“We want to give director Robbins a chance to set the process, so hopefully we won’t see this again. We just have to work out some of the issues we are seeing now.”

Various parties offer a variety of reasons for this state of affairs. Some attorneys contend that the COGCC created its own woes by not following its own rules or directives.

The COGCC, by law and commission rules, should have sought stakeholder input before issuing the draft revisions, but it held its first meeting with interested parties on May 15, the day the proposed rules were issued, according to Merlin.

An oil well is defined how? And a gas well?

Many of the issues being fought over now could have been settled in advance, she said.

Then the order for the rulemaking says that motions would be prohibited without the approval of the hearing officer. But the industry filed its motion without that OK, and the next day, the hearing officer, Jonathan Peskin, accepted it.

“That opened the door for other motions,” said Steven Louis-Prescott, an attorney at Astrella Law who is representing mineral owners.

A roughneck works at a drill site in Broomfield County on Thursday, April 4, 2019. Residents in the area cited issues with force pooling rules as they attempted to slow oil and gas development. (Andy Colwell, Special to the Colorado Sun)

Senate Bill 181 requires a driller to have the consent of 45% of the mineral owners in an area before it can be “forced pooled” and to have made a “good faith” offer to all mineral owners. It also set new royalty rates for forced pool minerals, 13% for gas wells and 16% for oil wells.

The law, however, doesn’t say what constitutes consent or good faith. Nor does it say how to define an oil well and a gas well, critical information since almost all Front Range wells produce some of each.

Louis-Prescott filed a statement for his clients on these issues, as well as the question about the handling of old leases that forbid pooling. The Colorado Alliance of Mineral and Royalty Owners filed a statement raising many of the same issues. The industry’s initial motion sought to toss out many of their statements as well.

Another reason for the tension is the expanse of Senate Bill 181. “It tends to make a very large rulemaking despite the efforts to narrow it,” Louis-Prescott said.

For some of the community groups, the problem is the industry. “They are playing by the same old playbook,” said Sara Loflin, executive director of the League of Oil and Gas Impacted Coloradans, or LOGIC, an umbrella organization for grassroots groups. “For the first time, community and environmental groups have a seat at the table and the industry is pushing back.”

In its prehearing statement, LOGIC – along with Conservation Colorado and three Western Slope community groups – sought to add hearing officers to serve as community liaisons in proceedings.

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In its motion, LOGIC identified about a dozen industry proposals for setting hearing and approval deadlines in the permitting process that it contends also go beyond the scope of the rulemaking.

“If the playing field is level, the whole series is open,” Loflin said. “If it isn’t, there are industry proposals, like streamlining, that shouldn’t be part of the rulemaking.”

Granger said: “If we’ve included something that is outside the scope, we are willing to take a look. We should do that on both sides.”

Some groups such as Be the Change and 350 Colorado, both of which are opposed to drilling, argue that the commission started in the wrong place with process regulations, rather than first taking up substantive rulemaking on health, air emissions, setbacks and the cumulative impacts of drilling.

“How can you approve permits without knowing the cumulative impacts?” Salazar asked.

A woman holds a sign at a rally on Tuesday, March 5, 2019, in support of Senate Bill 181, Democrats’ effort to add regulations onto the Colorado oil and gas industry. (Jesse Paul, The Colorado Sun)

Others, however, see it as a good place to begin.

“The procedural changes proposed in the 500 Series rules are necessary to ensure that the commission has the time and resources available to embark on future rulemakings that address the protection of public health, safety, welfare and the environment,” Robbins said.

The process rules, Merlin said, are key. “They are the what, the how, the where, the when and who that appears before the commission.”


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