Energy regulations making their way through Legislature

Kelly Sloan

Kelly Sloan, The Business Times

A group of measures regulating energy development is making its way through the Colorado Legislature this session.

At least six bills, most aimed at increasing regulation in a state that already imposes some of the strictest energy development regulations in the nation, are being considered at the State Capitol in Denver, where Democrats control the House and Senate.

The most contentious measures include:

  • House Bill 1267, which increases the maximum daily fine for oil and gas violations from $1,000 to $15,000; sets a minimum fine of $5,000 per violation per day for violations that have an adverse effects on public health, safety or welfare; and eliminates the maximum fine cap. 
  •  House Bill 1269, which strengthens language mandating the Colorado Oil and Gas Conservation Commission (COGCC) protect public health, safety and welfare; redefines “waste” to exclude reduced production that results from regulation compliance; and prohibits a newly appointed commission member from having any direct ties to the oil and gas industry, such as working as an employee or director of an operating or service company.
  •  House Bill 1273, which directs new funding to local governments for oil and gas development effects, repeals the prohibition on local governments to charge a tax or fee to conduct inspections or monitor oil and gas operations that are the responsibility of the COGCC, requires oil and gas operators to pay to the commission a local government designee fee when applying for a drill permit so local governments may be reimbursed for their costs associated with maintaining a government designee and authorizes local governments to collect an environmental or public health and welfare oversight charge on new oil and gas development when a development permit is issued.
  •  House Bill 1275, which directs the state board of health commission to conduct a study that reviews existing data regarding the effects of oil and gas operations on human health in Arapahoe, Boulder, Larimer and Weld counties and one or more control areas by March 15, 2014; authorizes a mill levy on oil and gas production to pay for the review; and also could include a finding on whether a cease-and desist order should be entered against continued oil and gas operations, emission of air pollutants or discharge of water pollutants from specific oil and gas facilities. An oversight committee would be created to review the recommendation.
  •  House Bill 1278, which requires a spill of one barrel or more of oil or exploration and production waste be reported within 24 hours after the spill has been discovered to COGCC, the entity with jurisdiction over emergency response within the local municipality (or the local county if the spill didn’t occur within a municipality), the surface owner and the owners of land adjacent to the spill. The report must include constituent compounds involved in the spill.

Dave Ludlum, executive director of the West Slope Colorado Oil and Gas Association, said much of the legislation goes too far and that the House, where these bills originated, misses the bigger economic picture. “What we are seeing is the House of Representatives taking an extreme approach without regard to the ramifications.”

Ludlum noted as an example HB 1269, which in part redefines what he calls a critical term. “The proposal to change the definition of ‘waste’ to no longer include reduced production goes against everything that the COGCC and similar commissions around the country were actually set up for,” Ludlum said. In the early days of U.S. energy production, lack of knowledge resulted in haphazard drilling that depressurized oil and natural gas formations too quickly, leaving up to 80 percent of the resource unrecoverable. “States around the country have long recognized the public and societal interest and importance of making sure we don’t waste our energy resources,” Ludlum added. “This redefinition opens the door to the commission imposing regulations that would actually result in leaving an otherwise recoverable amount of energy off limits.”

State Rep. Ray Scott, a Republican from Grand Junction,  said the Democrat-sponsored energy bills are designed in part to cater to the party’s liberal base. “They are trying to satisfy environmentalists in places like Boulder, Carbondale and Denver, just like they did under former Gov. (Bill) Ritter.”

But Scott sees another possible reason behind the legislation. “These bills show a reckless disregard for what the oil and gas industry does for local revenue, for K-12 education and the like.” Scott said the legislation will have the ultimate effect of reducing revenue. “The Democrats can then use the reduction in income to justify their goal of repealing (constitutional tax and spending limits) and raising taxes.”

Scott said there’s more yet to come, including bills to address hydraulic fracturing and expand on new COGCC rules adopted last summer regarding well setbacks from buildings and statewide groundwater sampling.