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Colorado oil and gas regulators finalize new rules for the drilling industry — and themselves

The Colorado Oil and Gas Conservation Commission changes include a requirement that most new drilling be set back at least 2,000 feet from homes and schools

A pickup truck drives toward an illuminated drilling rig very close Highway 66 north of Longmont on June 29, 2019. (Andy Colwell, Special to the Colorado Sun)
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Colorado’s regulatory arm for the energy industry on Monday formally set itself on a new path to prioritize public health and safety, and the environment when making decisions on oil and gas drilling permits.

The changes to the Colorado Oil and Gas Conservation Commission are the result of Senate Bill 181, which was passed by the legislature and signed into law by Gov. Jared Polis in April 2019. The bill ordered the panel to realign its rules with the new mission of “regulating” oil and gas, while considering impacts on the surrounding geography, instead of “fostering” its development.

Monday marked the end of a months-long process that, before the coronavirus pandemic arrived in Colorado, was expected to conclude over the summer. The changes include a requirement that most new drilling be set back at least 2,000 feet from homes and schools, which the oil and gas industry fiercely opposed.

“This has been a long, exhaustive and exhausting process for all involved,” Dan Haley, president and CEO of the Colorado Oil and Gas Association, said in a written statement. “It has been, at times, contentious, tedious, illuminating and frustrating, but ultimately, we were grateful to take part in the process, to engage stakeholders throughout our great state and to work toward reasonable solutions.”

MORE: Gov. Polis signs Democrats’ sweeping oil and gas bill into law, marking major shift in regulatory authority over drilling

For the first time, the commission will also consider environmental justice in its decisions and involve communities in the permitting process for wells that would be nearby. A 2019 study from the Colorado Department of Public Health and Environment found that in some worst-case scenarios, residents may experience short-term health impacts due to carcinogens released from wells within 2,000 feet of their homes

The commission in September increased the minimum setback of new drilling from existing homes and schools from 500 feet. There are exceptions, but in general, an application to drill closer than 2,000 feet will be denied.

“It is a new day for impacted Coloradans, where they have a voice in the impacts and risks that they face,” Sara Loflin, executive director of the League of Oil and Gas Impacted Coloradans, said in a written statement.

MORE: Colorado draws 2,000-foot statewide oil and gas drilling setback. But it comes with a big “however.”

The commission also added a set of rules aimed at protecting wildlife by limiting where companies can drill, in particular by minimizing operations in migration corridors, avoiding critical habitats and protecting wetland areas and watersheds. Over 80% of Colorado’s wildlife species rely on wetlands, yet they make up less than 3% of the state landscape.

Beau Kiklis, public lands advocate for Conservation Colorado, called the new rules “historic” in their environmental consideration and hopes that other states can follow Colorado’s example.

“I have to tip my cap to the agency for not shirking their responsibility on that one,” Kiklis said. “They went above and beyond to ensure that was included in their final package of rules.”

Other changes to state regulations include a ban on routine venting and flaring, when a well operator burns off the methane that emerges with drilled oil instead of capturing it and taking it for use off-site. Flaring is rare in Colorado but widespread in some states, such as Texas and North Dakota. Alaska is the only other state with such comprehensive regulations around flaring.

MORE: “Flaring” at oil and gas wells to be curtailed as Colorado regulators adopt some of nation’s strictest rules

The overhaul may give companies applying for drilling permits a more streamlined application process. But if there is a dispute over the location of the project, a company may be required to provide an alternative site analysis, where it must look at other potential locations for its development. A company may also have to do a cumulative impact assessment, where both the applicant and the state look into the environmental and health impact of not just one well, but all of the wells in an area, to see how adding another well to the mix would affect the surrounding community.

Senate Bill 181 overhauled the commission’s structure, changing it to a five-person full-time group from a panel of nine volunteers. The last major overhaul occurred in 2008.

MORE: Here’s who Gov. Polis just named to sit on the new, full-time panel regulating Colorado oil and gas

Polis’ five appointees started their work on July 1, almost immediately jumping into a weeks-long process of rewriting the commission’s rules. Even under the delayed timeline, the mission change and rulemaking process took longer than anticipated. 

Lynn Granger, executive director of the oil and gas industry group API Colorado, said that while the outcomes left some groups wanting, it’s mostly just a relief that it’s over.

“It’s been a long haul,” Granger said. “Taking as much time to get it right as needed was incredibly important.”

The commission has still yet to address rules around well bonding and clean up, as well as worker safety, but is expected to do so in the coming months. And even once all the regulations are finalized, Granger and Kiklis say the real litmus test will be how they’re implemented and enforced.