Bills give state more control over oil, gas industry

GREELEY – Weld County land developer Ed Orr knows how the rights of surface landowners and mineral-rights owners can come into very costly conflict. He now has his own oil-and-gas development business.

“I was forced onto the other side of the fence because I was worn out getting money extorted from me by people in the oil-and-gas industry,” he said.

Orr, owner of Orr Land Co. in Greeley, said he’s had to pay oil and gas companies “hundreds of thousands of dollars” over the years to get them to move their drilling rigs away from house lots and the middle of subdivisions.

SPONSORED CONTENT

Exploring & expressing grief

Support groups and events, as well as creative therapies and professional counseling, are all ways in which Pathways supports individuals dealing with grief and loss.

So he was glad to see the state legislature pass House Bill 1252, which aims to protect the interests of surface owners from excessive oil-and-gas drilling.

“I think it certainly has been long overdue,” he said. “I think it will probably give strength to the surface owner as a plaintiff to give them the ammunition in court to prevent damaging the surface more than necessary.”

HB-1252 was just one of several bills adopted by the Colorado General Assembly in the just-ended session that affect the state’s rapidly growing oil-and-gas industry.

Rep. Ellen Roberts, R-Durango, was a primary sponsor of HB-1252. The freshman legislator said she’s proud of the bill and believes it is “very fair to the various shareholders.”

Roberts credits the Durango-based Oil and Gas Accountability Project for helping pass the bill, previous versions of which had failed repeatedly. Rather than attempt to write compensation language into the bill, OGAP suggested having disputes between surface and mineral-rights owners settled in court with the burden of proof on the mineral-rights holder.

“I think it helped get the industry to ultimately support it because they weren’t being thrown to the wolves and every case was going to be sent to the courts,” she said.

Gwen Lachelt, OGAP director, said the result is “one of the most powerful laws in the land” regarding surface and mineral-rights disputes and will be precedent-setting in its scope. We believe it will result in less conflict, fewer delays and perhaps even more production.”

Other adopted and proposed bills focused on more arcane aspects of the industry, such as regulating production wastes (not passed) and making wellhead measurements more accurate (passed).

Biggest change

But the biggest change came in the form of HB-1341, which altered the composition of the state’s oil-and-gas conservation commission.

The bill, backed by Gov. Bill Ritter and the Department of Natural Resources, increased the number of appointed commissioners from seven to nine and emphasized representation from environmental interests, soil conservation and agriculture. It also specifically reduced the number of members with experience in the oil-and-gas industry.

Mike King, deputy director of the natural resources department, said the bill “came out of the governor’s campaign promise for reasonable and responsible development of fossil fuels in the state.”

King said the political shift from Republican- to Democratic-domination undoubtedly played a role. “My speculation would be there were a lot of bills attempted in the past that didn’t get traction, and with the change in the legislature and the governor’s office the political stars kind of aligned.”

King believes HB-1341 “will have the biggest impact on the way we develop oil and gas in Colorado,” which has seen the number of drilling permits approved by the oil and gas commission take a sixfold jump from 1999 through 2006.

“That’s the strongest bill that will make the most difference,” concurs Rep. Kathleen Curry, D-Eagle County, chair of the House Agriculture, Livestock and Natural Resources Committee, who co-sponsored the bill and several others aimed at tightening state control over the industry.

“Otherwise, we hopped around the edges of regulating an industry that’s expanded and outgrown the system we had,” she said.

Regional push

But Curry said she didn’t see the legislation coming out of the 2007 session as Democrat-driven. “You can look at the sponsors,” she said. “I see it as a regional push” by legislators from areas most affected by oil and gas activities.

“The industry was not completely happy, especially with HB-1341, but we gained their support on other bills,” she said.

One bill that specifically helped the oil-and-gas industry was Senate Bill 237, which requires surface-rights owners to notify mineral-rights owners of their development plans in the Greater Wattenberg Area, one of the state’s prime drilling zones . The basin includes Weld County, the No. 2 county for oil and gas drilling, surpassed only by Garfield County on the Western Slope.

Greg Schnake, executive vice president of the Colorado Oil and Gas Association, said the 2007 legislative session was historic in its regulation efforts. “It was much more comprehensive than we’ve ever experienced,” he said.

Schnake said SB-237 was an effort by COGA and the Association of Homebuilders to come to a compromise on how houses get built in the “seventh-largest gas belt in the nation.”

“It’s a unique bill brought forward by both industries,” he said.

Stan Dempsey, president of the Colorado Petroleum Association, said his organization was most concerned about HB-1341 but, after working on it with legislators, was able to come up with an acceptable version.

“We’re neutral on the bill,” he said. “We’re not very happy about it. We think it’s politicizing the oil and gas commission, but we dealt with the cards we were given.”

Dempsey said he’s worried that including the heads of the state’s departments of natural resources and public health on the oil and gas commission, along with expanding its membership, might slow down production.

“We just don’t think it’s going to function well and it will slow down oil and gas exploration in the state,” he said. “I’m not saying it’s harmful, but you really can’t reach a conclusion until you see it completely implemented.”

Dempsey said most of the other bills didn’t change much. “All of the other oil-and-gas bills concerning taxes and royalties were heavily amended and the effect is almost minimal. A lot of these bills were nothing-burgers to us after they were amended.”

Like Dempsey, Schnake said the bottom line on the session for the industry is that most efforts to drastically tighten regulation of the oil-and-gas industry were ultimately blunted. Of those bills that could have major impacts on the industry – HB-1341 and HB-1252 – the verdict is still out, Schnake said.

“We’re eternal optimists,” he said. “We’re hoping we’re not going to have a slowdown in the industry due to governmental controls. So we’ll be keeping an eye on that.”