Earlier this week, Colorado Gov. Jared Polis signed controversial Senate Bill 19-181 into law, making significant changes in how Colorado oil and gas production is regulated. Highlights include giving local governments more control over drilling within their boundaries, altering the long-standing doctrine of state pre-eminence; and changing the mission and make-up of the Colorado Oil and Gas Conservation Commission (COGCC), the state regulatory body.
State regulators already have begun the year-long rule-making process needed to implement the new law. Colorado cities and towns also are working to update regulatory frameworks, with some announcing moratoria on permits to allow time for new local regulations to be developed.
Opponents of SB 181 fear a slowdown, if not a shut-down, for Colorado’s thriving oil and gas industry, with resulting harm to the state’s economy, jobs and tax receipts. But Jeff Robbins, COGCC executive director, says his goal is “to keep the business of the COGCC moving while implementing Senate Bill 181.”
To those who say the sky is falling, some observers point out that passage of SB 181 removes regulatory uncertainty threatening the prospects of Colorado energy producers.
Time will tell whether Colorado’s new oil and gas development law will be a bane or a boon. Based on our experience working with operators in the DJ Basin (and elsewhere), this much seems certain:
- Operator agreements with local governments, already a welcome indicator of the ability of municipalities and energy producers to co-exist, will become an even more prevalent path to production. These agreements create opportunities for local governments and operators to have productive discussions not only about where energy is produced but also with what mitigation procedures in place for temporary impacts, and with what benefits to the community.
- Operators must think flexibly and creatively about give-and-take in negotiating with municipalities – in particular, about upsides for host communities beyond very substantial revenue for taxing entities, including school districts and first responders. It may require developing a matrix of asks and offers that enable both sides to emerge from negotiations with a win. We believe the industry must do a better job of identifying and offering upsides for communities.
- New regulations at the state and local levels will require more stakeholder engagement as part of the permitting process. Operators who are adept at seeking feedback from surface owners and other stakeholders, presenting alternative sites and means of mitigation, and hosting community forums, stakeholder meetings and in-person or telephone town halls, will have an advantage as dialogue becomes more important.
- Elected officials require political cover to enact operator agreements or to give staff the authority to do so. Individual operating companies and Colorado’s energy industry at large must redouble efforts to demonstrate sufficient levels of public support for energy production to counter-balance the inevitable opposition. Turning out supporters to speak at city council meetings is not easy, but operators must find and engage cooperative mineral rights or surface owners, officials from taxing entities, and citizens who believe in Colorado oil and gas to speak up, contact elected officials, talk to neighbors, post on social media and write letters to the editor. The alternative is the appearance of unanimous opposition.
Forward-looking operators already are thinking about how to expand capacity for communication, persuasion and community engagement, as a new regulatory era for Colorado oil and gas is set to begin.