An end to Colorado’s oil wars?

“With the signing of this bill, it is our hope that the oil and gas wars that have enveloped our state are over and the winner is all of us,” Gov. Jared Polis said in April when he signed Senate Bill 181 into law.

The bill, a sweeping reform of Colorado’s oil and gas regulations, was hailed by supporters as a breakthrough for environmental and health protections and cursed by critics as a nail in the coffin for the state’s oil and gas industry.

In the month since the passage of SB-181, those opposing factions have begun to back away from their initial positions a bit with environmental groups arguing the bill doesn’t go far enough and oil companies acknowledging they will likely not be forced to immediately close up shop.

“Today marks a new chapter in Colorado’s history. For the first time ever, our state is on track to put the health and safety of workers and residents, and our environment ahead of oil and gas industry profits,” Conservation Colorado executive director Kelly Nordini said after Polis signed the bill into law. “This policy is nearly a decade in the making, and we applaud our elected leaders who fought for so long to make it a reality.”

But rank and file members of environmental groups have been pushing regulators to go further and implement blanket drilling bans or moratoria.

“We feel the [Colorado Oil and Gas Conservation Commission, which oversees regulation of the industry] is still in the business of protecting the oil and gas industry and protecting public health and safety,” said Phillip Doe, environmental director for conservation advocacy group Be The Change. “We are very unhappy with what is going on.”

In what likely comes as a relief to the industry, the Colorado Oil and Gas Conservation Commission does not appear willing to implement a statewide moratorium.

“Numerous members of the public have asked me and asked the commission to immediately ban or put into place a moratorium on any and all new permits until all of the rules have been adopted,” COGCC director Jeff Robbins said during a recent commission hearing. “That, I believe, is contrary to the intent of Senate Bill 181.”

Colorado Department of Natural Resources executive director Dan Gibbs agreed.

“It was never the intent of the legislature for us to pause our work,” he said of COGCC’s drilling permit approvals.

One of the main concerns oil and industry leaders and SB-181 critics raised throughout the debate over the bill was the pull out of major oil and gas producers from the state and particularly from Weld County.

That has yet to occur on a significant scale. In fact, large producers such as Chevron Corp. (NYSE: CVX) have expressed renewed commitment to continue operations in the state.

Chevron even made a play to acquire Anadarko Petroleum Corp. (NYSE: APC), the largest oil and gas operator Weld County. Chevron was ultimately outbid for Anadarko by Occidental Petroleum Corp. (NYSE: OXY).

There were rumors in the aftermath of SB-181’s passage that DCP Midstream was going to abandon plans for a new $350 million gas compression station in Greeley. Those rumors proved unfounded and the company has said it does not plan to abandon its Weld County operations.

Other oil and gas companies have expressed a desire to work with local governments to find common ground on future drilling projects.

“Senate Bill 181 was recently signed into law by Colorado’s governor, which should help bring certainty of our operations to investors,” SRC Energy Inc. (NYSE: SRCI) CEO Lynn Peterson told investors recently. “While SRC does not support all parts of the bill, the company is moving forward with its operations, while recognizing that significant work remains with respect to the COGCC rulemaking process.”

Peterson added: “We highlight that all of our acreage is in Weld County, which is a strong supporter of our industry.  We will continue to work together to create a greater Colorado as well as a stronger oil and gas industry.”

At a recent COGCC hearing, Colorado Oil and Gas Association president Dan Haley said, “COGA and its members are prepared to be active participants” in working with regulators to develop common sense rules.

SB-181 critics began vowing to repeal the measure before it even reached Polis’ desk. Weld County Board Chairwoman Barbara Kirkmeyer was among those calling for a ballot initiative in November that would roll back the bill.

Drafts of that initiative was rejected by the Colorado Secretary of State’s Office because they attempted to address multiple issues. Colorado law requires that ballot initiatives include just a single topic.

But just because the initiatives won’t appear in November doesn’t mean there won’t be pushes to repeal SB-181 in the future.

Kirkmeyer and Arapahoe County Commissioner John Brackney have said there is a good chance a repeal measure will appear on 2020 ballots

SB-181 gives local governments more control over the approval of new drilling in their communities. Weld County leaders have taken steps to ensure local oil and gas development remains robust.

In May, Weld County commissioners initiated the process of bringing the entirety of unincorporated Weld County under the purview of county government as far as mineral issues are concerned.

“All through the legislative process, the public was told Senate Bill 181 would give control to local governments,” Weld County Commissioner Mike Freeman said in a prepared statement. “Today, we start down the path to make sure Weld County government officially has local control over oil and gas permitting.”

A resolution codifying this will be voted on in June.

“We are taking control back from the state, as they have outlined in SB-181, and are defining clearly for the public and the industry that Weld intends on utilizing the tools, laws and policies afforded to us to maintain the working relationship we have had with the energy industry to the benefit of our oil and gas families and local small businesses,” Freeman said.

While SB-181 sets the framework for new oil and gas regulation, the specific rules are not yet set in stone. The COGCC will spend the next year making those rules.

In the meantime, new drilling permits will be evaluated based on a new set of criteria. That criteria, announced in mid-May, establishes review provisions that include proximity to schools, waterways, parks, schools and other structures. The COGCC can also provide additional review of drilling applications if local governments request more information.

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