A bid by the state’s largest oil and gas producer to drill 26 wells within 2,000 feet of 62 homes in Firestone was rejected Thursday by Colorado regulators.

It was the first major test of the state’s requirement that oil and gas drilling be set back at least 2,000 feet from homes and schools. Both supporters and opponents of Kerr-McGee’s plan agreed during public testimony that the decision would be precedent setting.

The Colorado Oil and Gas Conservation Commission turned down the Kerr-McGee application to drill a total of 33 wells on two pads in Firestone saying that the company had not shown its plan was protective enough or that there had been an adequate evaluation of alternate sites.

The vote was 4-1, with Bill Gonzalez, who is a former oil industry executive, casting the lone vote in support. Still, Gonzalez said, “the applicant could have done a much better job.”

The commission did not preclude Kerr-McGee from submitting a new application with more detail on how it would protect residents, or other possible locations for the drilling pad.

“We’re disappointed with the Colorado Oil and Gas Conservation Commission’s decision to deny our permits,” Jennifer Brice, a spokeswoman for Occidental Petroleum Co., which operates Kerr-McGee, said in a statement.

“Our next steps include reviewing all available options to develop the mineral resources Coloradans rely on for their energy needs,” Brice said.

The 2,000-foot setback was the result of the 2019 law, Senate Bill 181, that changed state regulators’ mission from promoting oil and gas development to protecting public health, safety, welfare and the environment.

“Kerr-McGee’s application was an affront to all the work that went into passing that bill and adopting the new setback rules,” said Andrew Forkes-Gudmundson, deputy director of the community group the League of Oil and Gas Impacted Coloradans.

“It was neighborhood drilling at its worst,” Forkes-Gudmundson said in a statement.

The setback rule, however, came with an option of drilling closer than 2,000 feet if the operator took protective measure that would be substantially equivalent to being 2,000 feet away.

The commission has approved two variances to the rule, each involving only a few homes, but Kerr-McGee’s proposal in Firestone would have impacted a more densely populated area.

Initially, the project, known as the McGavin pad, was to be located within 2,000 feet of 87 homes, with the closest home 763 feet away. The site was also adjacent to two golf courses and a popular walking trail.

The decision “sets a deeply troubling precedent that casts doubt on the efficacy, and even the purpose, of the Mission Change rules,” Lynn Granger, executive director of the industry trade group API-Colorado, said in a statement.

At Thursday’s hearing Kerr-McGee announced that it had changed the design of the pad so that only 62 homes would be within 2,000 feet.

In the middle of a February hearing on the application Kerr-McGee, after rejecting state health officials’ call for the use of electric drill rigs, non-polluting drilling muds and pipelines to remove waste water, said it would adopt all three.

“The application is a moving target,” Commissioner John Messner said Thursday, adding that such a proposal with so many “moving parts is not appropriate.”

“The application doesn’t meet the burden of proof,” Messner said.

The two elements that were at issue were some metrics that showed the protections at the site were comparable to the setback and that Kerr-McGee had seriously evaluated alternative locations.

Kerr-McGee had agreed to adopt a set of best-management practices recommended by the Colorado Department of Public Health and Environment, but provided no data on how those reduced risk or protected public health.

Similarly, the company provided an alternative site analysis, but under questions from commissioners, company officials conceded that the analysis focused on the two sites where they wanted to drill and the others were “just ideas.”

“I felt like there could have been other locations,” Commission Chairman Jeff Robbins said.

Commissioner Priya Nanjappa told Kerr-McGee representatives, “we asked for information and didn’t get it … what you provided, at least for me, was not the information I needed.”

The Firestone planning commission had recommended rejecting the McGavin pad, but approving the seven-well, Columbine pad, which had seven homes within 2,000 feet.

The Firestone Board of Trustees, however, approved both pads and town officials spoke in favor of Kerr-McGee’s application on Thursday. Part of the deal, however, was that Kerr-McGee would deed about 80 acres of land to the town if it did not object to the drilling plan.

“I find that the town board possibly could have been influenced by the land dedication,” Robbins, who was formerly an attorney representing municipalities and counties.

The McGavin site is a few miles south of where a severed flow line from an oil and gas well caused a home in a different Firestone subdivision to explode, killing two people. Kerr-McGee was fined $18.25 million for the 2017 explosion, the largest fine on state record.

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Mark Jaffe

Special to The Colorado Sun Twitter: @bymarkjaffe