The oil and gas industry is facing new headwinds in Colorado with a mixture of anxiety and downright angst, worried about new rules that could amount to a “proxy ban” on drilling in some areas and impact jobs.
And Gov. Jared Polis only amplified the concerns Wednesday at the Colorado Oil and Gas Association’s annual summit as he struck what energy leaders described as a dismissive and condescending tone and repeatedly called industry concerns “silly.”
The point of contention is the impact of Senate Bill 181, a measure approved earlier this year to revamp the state’s oil and gas regulations in a way that emphasizes environmental and health concerns and gives local governments more control in permitting drilling operations in Colorado.
The legislation to allow tougher rules and even temporary bans on drilling is creating instability in the energy market, according to oil and gas executives and analysts, but Polis rejects that idea. Instead, he repeatedly argued that the industry’s future is tied to global commodity prices — not politics and regulation — even though independent analysts suggest it’s both.
“It has nothing to do with me, and nothing to do with our state politics and less, even, to do with national politics,” he told energy leaders at the conference in Denver. He suggested that analysts should “be following the ins and outs of Venezuelan politics more than I’d be following the ins and outs of Colorado politics.”
The Democrat’s remarks defined his combative approach to the summit and left industry leaders audibly groaning in disbelief.
“I thought he would take more ownership about the impacts of 181 on the industry,” said Peter Mueller, the co-founder of EcoVapor Recovery Systems, a company that works to reduce gas emissions. The recent merger of two Colorado energy companies and potential for job losses come in part “because of the concerns about being able to invest in developing in Colorado, and that in turn comes from things like 181,” he said, echoing sentiments from other company executives.
The conference is the first major gathering of the state’s oil and gas industry since Democrats took control of the statehouse and used their newfound power to shift the paradigm in Colorado with legislation that could allow more limits on drilling and emissions to address climate change.
The industry pushed back against the legislation, and ultimately won substantive changes to lessen its adverse effects on drilling operations, but much remains unknown as the Colorado Oil and Gas Conservation Commission writes the new rules.
The debate about what changes will mean for industry continues
Jason Oates, the director of external affairs at Crestone Peak Resources, compared the rules in place before the new legislation to a football field where the industry knew where to find the sidelines and the goal posts because the state set the rules. Now with local governments at the helm, each play is different. And Oates is worried some regulations will effectively disallow drilling.
“We are in this period of very uncertain times where we are trying to understand: What does the field we are playing on really look like?” he said. In this environment, he added, “how do you make capital decisions, investment decisions, make operational decisions?”
The new power dynamic is “definitely going to make it more costly,” said Michael Orlando, the managing director and economist at econONE. “I don’t think it made it impossible to do business,” he continued, but “is 181 a pretext to shut down the industry? We’re going to find out.”
Jon Ecker, the chief executive officer at Genscape, an industry analyst, said his firm is still projecting greater production profits in the Denver-Julesburg Basin, which covers a large swath of the Front Range and Eastern Plains, than in most North American oil fields. But he added, half-jokingly, it may depend on what the governor says about the industry later in the day.
The contentious debate about the impact of the new energy rules in Colorado extended to a session with a panel of lawmakers who spoke before the governor took the stage. The six Republicans and three Democrats on the panel reprised the same talking points used during the legislative session earlier this year.
State Sen. Ray Scott, R-Grand Junction, called it “strangulation by regulation,” while state Rep. Chris Hansen, D-Denver, said the legislation was a response to the industry’s obstinance for years when it came to addressing concerns of residents.
Both parties acknowledged that Polis is leading the changes, pointing to his predecessor, Gov. John Hickenlooper’s willingness to work with the industry and not push regulations too far.
“I have to tell you, I miss Gov. Hickenlooper. He was so good to understand the industry. I don’t think Jared Polis has any understanding of this industry,” said state Rep. Perry Buck, who represents Weld County, where most of the oil and gas production occurs in Colorado.
Polis deflects questions as industry pleads for support
A year ago, in his campaign for governor, Polis attended the energy summit but struck a far different tone. He outlined an agenda that prioritized local control and larger buffer zones between communities and drilling operations, but also extended a hand to the industry.
The then-candidate repeatedly emphasized the need to respect hard-working oil and gas employees and resist the urge to retreat to ideological corners.
“I can’t promise that I will always agree with you on every issue, but I can promise you an open mind, honest feedback and a genuine commitment to find common ground,” Polis said in 2018.
This year, Polis took a different stance. Dan Haley, the president and CEO of the Colorado Oil and Gas Association, asked Polis to address a number of the industry’s concerns, but Polis dismissed most of them outright.
The governor argued the outlook for drilling in Colorado is more stable now because the legislation diminished the likelihood that industry critics would go to the ballot for additional efforts to curb drilling.
Polis signed Senate Bill 181 and declared that “the oil and gas wars that have enveloped our state are over.” But in reality, it shifted the battlefield to the local level, where some critics of the industry are pushing for bans on hydraulic fracturing, or fracking, to harvest natural gas.
The current “political rhetoric about ending fossil fuels” in Colorado and on the presidential campaign trail makes workers in Colorado nervous for their jobs, Haley told Polis. “What can you say to those people?” he asked.
“Well you know, I happen to be a Democrat so I worry much more about Trump’s tariffs and their impact on the infrastructure for the oil and gas industry and other industries, the closing down of overseas markets, the damage to the workforce readiness that he’s done with cracking down on immigration. So you can choose which side you worry about the economic threats from, but obviously I’m much more worried about who is president today than who will be president in a couple years,” Polis responded.
A moment later, after Polis rejected the suggestion that government regulation has the power to move markets, contradicting some economists, Haley asked the governor the question that served as the title for the conference session: “Can you still drill for oil in a blue state?”
“It’s just a silly question,” Polis said, adding that “it’s a geological question, it’s not a political question.”
Polis continued to parry questions and refused to acknowledge the industry’s concerns, leading an exasperated Haley to ask again: “People want to feel like they’re valued, their jobs are valued, and they are wanted in this state. And for a long time, and especially this year, we feel like we are not.”
“Your jobs are valued and you’re an important part of the diversity of the state,” Polis replied, 37 minutes into the discussion.
In his closing comments, Polis attempted to reassure the industry that it doesn’t need to worry about its future in Colorado. But the executives in the crowd remained unconvinced.
“We are working our way through a process. The devil is in the details,” said Rich Frommer, the president and CEO of Great Western Oil and Gas. His company has an inventory of permits that will allow future drilling and he said he remains hopeful that state officials will reach agreement on “common sense” regulations.
Afterward, Haley said it was important for the governor to acknowledge the industry’s role in the state’s economy. But he added: “It’s unfortunate that it look several attempts to get him to do that. You shouldn’t have to be coerced into valuing the livelihoods of your fellow Coloradans.”
He called the governor’s tone “honest and true to who he is.”
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