‘Local-control’ draft bill seeks oil/gas compromise

DENVER – The latest draft of a bill proposed by Gov. John Hickenlooper that has divided the oil and gas industry seeks to give Colorado cities and counties greater authority on energy development within their borders.

Hickenlooper released the second draft of his proposal last week, which seeks to give city and county governments a greater say in matters such as buffers between oil wells and buildings, noise abatement and inspections. The state Oil and Gas Conservation Commission generally regulates oil and gas drilling operations, allowing local governments only a limited role in oil and gas controlling development.

Hickenlooper’s proposal contains language authorizing cities and counties an expanded role, including in the following areas:

– Counties and cities could enact their own setbacks between wells and buildings as long as they balance the recovery of oil and natural gas;

– Charge fees to inspect and monitor oil and gas development;

– Pass stricter health and safety standards than state rules, though the state may strike them down;

– Enact moratoriums on oil and gas operations only for a reasonable amount of time for decision-making and planning purposes.

The bill has drawn support and opposition alike from energy companies operating in Colorado. Last week, a coalition of 19 energy companies sent a letter to Hickenlooper indicating strong opposition to the measure.

Encana Corp. (NYSE: ECA) (TSX: ECA), Chevron Corp. (NYSE: CVX), BP Plc (NYSE: BP), XTO Energy Inc., Bill Barrett Corp. (NYSE: BBG) and other signed the letter, which says no other industry has under continuous major rulemakings since 2006.

“Since that time, Colorado has adopted stringent rules on setbacks, noise abatement, wildlife protection, reporting mechanisms, drilling plans, financial assurances, groundwater monitoring… and too many more to list,” reads the letter.

Companies such as Encana have argued against a patchwork of rules that they believe would lead to confusion, instead favoring regulation by the state.

Encana spokesman Doug Hock noted that the bill drew opposition from a variety of companies, from small operators to supermajors.

“I can’t think of another industry in the state that has gone through as much regulatory scrutiny as we have,” he said.

Eric Brown, a spokesman for Hickenlooper, said in an email that he had not seen the letter, but he noted that input from various groups will factor into a decision whether to move forward at the appropriate time.

The opposition letter came a day after a separate letter of support to Hickenlooper sent by seven companies, including the top two producers in Weld County, Noble Energy Inc. (NYSE: NBL), and Anadarko Petroleum Corp. (NYSE: APC).

“We support this legislative compromise because it provides an acceptable balance,” the letter reads. “It gives communities an appropriate voice in the regulation of oil and natural gas development, while protecting the property rights of mineral owners, farmers, homebuilders and other surface owners.”

The companies contend that Hickenlooper’s proposal would help avert passage of ballot initiatives that would give communities increased control over oil and gas development, in some cases authorizing them to ban oil and gas.

“Your proposal will also help avoid ballot measures that, if adopted, would become constitutional provisions that leave no room for negotiation or compromise,” the letter reads.


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