Colorado's revamped Oil and Gas Conservation Commission has delved into its most ambitious project ever: rewriting the rules around regulating the industry. It's a topic that has provoked ballot measures, millions of dollars in advertising from the industry and years of battles between Democrats and Republicans at the state Capitol.
The rules are tied to a sweeping change in the COGCC’s mission, mandated under Senate Bill 19-181. The law changed the COGCC’s mission from a body that advocated for oil and gas development to one that regulates “the responsible development and production” of oil and gas and in a manner that protects public health, safety and welfare, wildlife and the environment.
It also changed the COGCC itself, replacing its nine-member voluntary body with a seven-member group, with five who are full-time paid professionals. The other two members are non-voting, representing the Department of Natural Resources and the Department of Public Health and Environment.
The first week of hearings under the new commission — focused primarily on permitting, notification and locational reviews that are known as "300 series" rules — has seen traditional battles between the oil and gas industry and environmental groups. Caught in the middle: local governments that face a “Hobson’s Choice”: protect the oil and gas tax revenues that provide substantial support for local government operations and public schools or protect the environment and safeguard public health, including air and water quality.
But it isn't just authority that comes into play: the group will have to address criteria for alternative location analysis, water rights, permitting and the most contentious issue of all: setbacks.
And the commission can expect plenty of advice from stakeholders: Dozens of organizations filed prehearing statements and testified during the first week of hearings, representing the oil and gas industry, environmental groups, local governments on both sides of the issue, public water suppliers and wildlife, fishing and hunting groups.
But the question remains, and won't be answered until at least December: whether the rule changes are enough to stave off another round of ballot measures, either from the industry or from environmentalists who say the rules don't bring them what they want most — a "keep it in the ground" ban on oil and gas development.
It’s all about authority — and who has it
The law not only changed the relationship between COGCC and the industry, it also changed the relationship between COGCC and local governments. The COGCC retained its exclusive authority over subsurface activities, including drilling. But the law gave local governments more authority over surface activities, should the local government choose to put in those regulations.
That tussle took center stage during the first week of hearings.
SB181 states that local governments and state agencies have regulatory authority over oil and gas development. The 29-page bill also states that local governments can have more “protective or stricter” regulations than the state’s, but not less.
The oil and gas industry has interpreted the law differently, claiming that the law gives local government primacy over the state in oil and gas development.
Under SB181, oil and gas operators must get permits both from the state and from the local government. That could lead to cross-purposes, according to a presentation on August 26 from Adams County officials.
They asked the COGCC to revise some of its rules on consultation with local governments to avoid such a scenario. Local governments should be able to “engage or solicit feedback from the COGCC during a local government permitting process to avoid conflicting permitting outcomes,” the county presentation said. As written the rules allow an operator to engage the COGCC in the local government permitting process, but the reverse — allowing the local government to do the same with the COGCC — is not allowed.
Weighing the alternatives
Alternative location analysis occurs when a proposed well site is located near a populated area. Adams County officials also asked for a revision that would require operators to come up with at least three alternative sites that are at least 1,000 feet from each other.
The Adams 12 school district also asked the COGCC for more information around oil and gas activity. “The COGCC and industry should create an expectation that school districts will be notified of all proposed oil and gas locations within their district boundaries,” their statement said.
But rural communities also want a say in how the rules will govern the industry, particularly those that heavily depend on oil and gas revenue.
There are 22,000 active wells in the communities represented by the Western and Rural Local Government Coalition. The organization includes 15 Western Slope and Eastern Plains counties and eight rural cities and towns in those counties.
“We rely on revenues from oil and gas activity for essential services and programs,” the group’s presentation said. They’re also supportive of cost-and environmentally-effective regulations based on a robust stakeholder process.
The presentation, which also had the backing of the city of Greeley, Las Animas County and the Colorado Association of Home Builders, noted the draft rules provide for notice and coordination with local governments, but that’s not enough.
The group proposed a rules change that said if the COGCC director has substantial evidence that shows an oil and gas location approved by a local government fails to protect public health, safety, welfare, wildlife and the environment, the director must set up a hearing with the commission, the operator and the local government. At that time, the commission can determine whether the siting proposal will protect and minimize adverse impacts to public health. That burden of proof, however, will be on the COGCC director.
One rule, Rule 604, increases setback distances between oil and gas sites and schools to 2,000 feet. Residential buildings have setbacks ranging from 500 to 1,500 feet, depending on the number of building units.
WRLG claimed the 2,000-foot setback is arbitrary, and that the COGCC “should not police relationships between local governments.”
In discussing a cumulative impact rule that addresses traffic, noise, light and dust, the WRLG claimed that is a matter for local government concern and advised the COGCC not to “second guess” local land use professionals.
Water is always an issue
County Attorney Dave Baumgarten of Gunnison County, which is not part of the WRLG, told the commission on Aug. 26 the commission ought to amend its rules to allow for notice and consultation with water rights holders. A water rights holder, Baumgarten said, is susceptible to damage and equal in rights to other property rights holders. That status should be recognized, he said.
On Thursday, a coalition of a dozen Front Range public water suppliers showed their support of the 300 series rules.
Attorney Stacy Brownhill, speaking on behalf of the group, said they support changes in the 300 series, noting most of their concerns around notification and consultation had been addressed. Those changes include requiring operators to engage in a formal consultation process with public water systems, a change the public water operators support. “These are two smart changes, requiring operators to provide notice to and consult with water systems is in everyone’s interest. Operators and public water supplies alike want to avoid contamination of public water supplies,” she added.
Hydrologist Matthew Seitz said shallow oil spills are a particular concern to the South Adams Water district as well as the other public water providers. Shallow oil wells lack some of the infrastructure — such as clay — that helps contain spills, he explained.
South Adams gets its water from shallow aquifers, and since the 1980s has had to deal with spills from volatile organic compounds (not oil and gas). These VOC spills have caused the district to shut down two wells that once produced about 2,000 gallons of water per day, Seitz said. He encouraged the commission to rely on local experts to consult with industry applicants to make sure water supplies are protected.
Federal versus state authority
Kinder Morgan, a pipeline company, pleaded for changes around oil and gas activity on federal lands, as did the American Petroleum Institute. Among them: a claim that the state cannot veto federally-approved land use. They asked that the COGCC change a rule that makes it clear that the commission cannot deny a comprehensive area plan (which outlines an oil and gas development) located on federal-owned or managed surface lands already approved by a federal land manager. However, the COGCC could consult with the appropriate federal agency as well as the operator, according to Ana Gutierrez of Hogan Lovells, representing Kinder Morgan.
The commission should also add a rule on site-specific data, mapping and analysis on geologic hazards, such as fault lines, rock falls, mudflows and unstable slopes.
In response, Assistant Attorney General Joel Minor said relevant federal statutes dating back to 1920, as well as case law, do recognize state authority to regulate oil and gas activity on federal lands. That includes state authority to protect the environment and wildlife resources on federal lands, he said.
Attorney Katherine Merlin, presenting on behalf of environmental groups, including 350 Colorado, Physicians for Social Responsibility and WildEarth Guardians, pointed to an earlier presentation from the industry on the alternative location analysis. Merlin indicated the alternative locations discussed by the industry for a location proposed by Anadarko were unacceptable.
Every location proposed violated at least one commission rule, including a preferred location only 450 feet from an occupied building, she said. “This example appears to validate our group’s greatest fear," Merlin said, "that all harms will be acceptable and every rule is a mere suggestion as long as that acceptable harm is relative to some other potential for greater harm.”
The commission must rely on objective standards drawn from the best available science, she said. The group suggested more rules, such as protecting emissions standards, continuous monitoring at all oil and gas sites, public warning systems for “upsets” and emergency situations and meaningful penalties against polluters for health and safety violations.
Most significantly, however: the group said the commission must work on phasing out permitting within the next decade, as a means of addressing methane emissions and greenhouse gases, and as a way of transitioning away from fossil fuels.
Lisa McKenzie, a public health expert and clinical assistant professor at the School of Public Health, told the commission about studies, including in Colorado, that attribute hazardous air pollutants and noise emissions to oil and gas well sites. A study of a large Greeley site observed that noise, measured 1,000 feet from the site, “consistently exceeded levels associated with sleep disturbance and cardiovascular disease during all phases of development and into production.”
She also noted a 2018 health risk assessment said adverse health impacts increase at 2,000 feet and rise steeply at shorter distances. She also cited a study of 3,000 Colorado infants that reported those with congenital heart defects were 1.7 times more likely to have a mother living in areas with intense oil and gas development. This risk almost doubled in rural areas, she said.
“No single study” can prove oil and gas development caused or did not cause a particular health defect, McKenzie said, but she said the fact that so many studies have now observed increased health effects tied to oil and gas indicates that there is an adverse effect.
The commission also heard from those who believe their health has been impacted by oil and gas development.
Susan Phillips Speece of Anthem Ranch, a 55+ community near Erie, testified that health data indicates setbacks should be at least 2,500 feet. She said there are 18 wells on the Livingston Pad that are 1,260 feet behind her home, and another 65 wells within two miles. “The residents of Anthem Ranch are at the mercy of the winds,” Speece said.
Speece also suggested that airports be added to the list of structures with setbacks. Erie Airport is just north of Anthem Ranch. Gusting winds could result in disaster if a drilling rig is adjacent to an airport and winds blow the plane off its flight path. This isn’t a hypothetical, she explained: Crestone Peak is currently seeking a permit to begin drilling immediately east of the runway.
Weld County, the 800-pound gorilla
Weld County is the state’s largest producer of oil and second in production of natural gas, and county officials, including commissioners, were among the most vocal opponents of SB181. In contrast to Boulder County, which wants to more tightly regulate oil and gas, Weld County has no such interest. The county takes in $143 million per year in property taxes tied to oil and gas, and that represents about 25% of the county’s budget.
“Your voice is very important in this process,” Robbins told Jason Maxey, the county’s director of oil and gas energy.
In a prehearing statement, the county commissioners went back to the argument made by many in the industry, that SB181 does not say a local government’s regulations must be less stringent than the state’s. The law also does not say that the COGCC “may override siting dispositions made by the local governments.”
The county implemented new regulations around oil and gas after SB181 went into effect, the commissioners noted. They outlined the process, which they said is intended to protect public health and reduce cumulative impacts of noise, pollution and traffic, for example.
“Importantly, throughout the application process,” the commissioners wrote, the COGCC, Colorado Parks and Wildlife, and CDPHE are “repeatedly asked to participate and provide comments. Their input is critical to the success of the siting decision made by the Weld County hearing officer. It gives the COGCC, CPW and CDPHE the opportunity to ensure that the final site disposition achieves the fundamental principle: the protection of health, safety welfare, the environment and wildlife resources.”
But, they added, the “success of any partnership is dependent upon good collaboration, cooperation and communication. Additionally, the partners must respect each other’s relative authority and not step on each other’s toes.”
The county believes the draft rules “fail to properly recognize local government land-use authority and are deficient in the collaboration, coordination and communication aspect of the partnership” between the county and state agencies. That includes draft rules in the 300 series that “second-guess” site decisions, the commissioners wrote.
Finally, the county asked that the COGCC adopt a rule in the 300 Series “that requires COGCC staff to actively participate in the local government’s land-use process. For Weld County, this would mean attending pre-application meetings, participating in pre-hearing consultations, providing comments to application referrals, and being present during hearings where the siting decision is made by Weld County’s hearing officer.”
Maxey told the commission that Weld County did not wait to react after SB181 went into effect. “Our county commissioners wanted to make sure we did what we could, within the boundaries of the rules, to make sure oil and gas [activity] continued” while protecting public health, safety, welfare and the environment. That included creating the oil and gas energy department.
And the county has multiple opportunities for working with the COGCC, Maxey said, to prepare operators for what they need to address in their application and to provide more certainty in the permit process.
When considering the rules, Maxey said, please defer to the local government, especially when it has enacted rules and regulations as robust as those from Weld County. "There’s no reason" that the state cannot agree with the permitting being done in the county, he said.
Late Thursday, and as of press time, the commission began deliberations on the 300 series rules, which continued into Friday. That will be followed by presentations from many of the same groups on the 500 series rules that deal with procedures for the professional commission, and the relationship between the commission and administrative law judges. That work, including deliberations, continue into the week of Aug. 31.