Proposition 112: What’s next? With Prop. 112 in the rearview mirror, what’s next for oil and gas regulation in Colorado?

Colorado voters rejected both Proposition 112 and Amendment 74 in November, leaving in place the status quo for the oil and gas industry — for now.

Given the results on Election Day, neither strict new setback regulations nor a system for compensating mineral rights holders for value lost due to new regulations will be adopted immediately. However, lawmakers, local leaders and oil and gas industry representatives all recognize that the concerns that got these issues on the ballot in the first place are not simply going to vanish.

Proposition 112, which was supported by only about 44 percent of Colorado voters, would have pushed new oil and gas drilling activity farther from certain open spaces, homes and other types of buildings, and waterways. Drilling activity would have been restricted to no closer than 2,500 feet from occupied structures and areas such as parks. The existing setback regulations are 500 feet from residential properties and 1,000 feet from structures such as schools and hospitals.

Despite the measure’s failure statewide, voters in Boulder and Broomfield counties supported it. Voters in Weld and Larimer counties voted against Proposition 112.

Amendment 74, an industry-backed measure opposed by about 54 percent of Colorado voters,  would have triggered changes to the Colorado constitution to require governments to compensate property owners should the value of their property be reduced by laws or regulation. It was seen as a countermeasure to Proposition 112. 

While the state won’t be immediately adopting new oil and gas regulations, local municipalities are considering doing just that.

Cities, towns taking the lead

A scene currently playing out in Superior illustrates local efforts to assert some control over what oil and gas operators can and can’t do in a community.

In October, United Kingdom-based oil and gas operator Highlands Natural Resources Corp. applied for permits to drill as many as 31 wells on an undeveloped parcel inside town limits off McCaslin Boulevard.

Locals packed a Superior Board of Trustees worksession Nov. 12 to make their opposition to drilling in the town heard.

“We are absolutely 100 percent opposed to oil and gas drilling in Superior,” Mayor Clint Folsom told the crowd.

Broomfield Mayor Randy Ahrens, a former oil and gas engineer, also spoke out against expanded drilling in the area.

He recalled an incident years ago when he met with an oil and gas industry representative who touted the potential for drilling activity to bring $1 million in new tax annual revenue to Broomfield.

“I told him, ‘We’d pay you a million dollars to go away,’” Ahrens joked.

While Broomfield has not implemented a ban on drilling, it has adopted a set of best practices to minimize negative impacts on residents, he said.

Soon after that November meeting, Highlands Natural Resources withdrew its drilling application.

However, the potential for future applications to drill on the Superior site remains a concern. This has town leaders considering adopting a drilling moratorium, similar to measures taken recently in nearby municipalities such as Erie and Lafayette.

“We are going to turn over every stone and investigate every angle to make sure (drilling) doesn’t happen,” Folsom said.

A decision to impose a drilling moratorium or ban could come with its own challenges.

“A lot of our local governments here in Colorado have been sued successfully by the oil and gas industry … over whether or not local governments have the ability to say no to oil and gas development,” said Matt Sura, an attorney who advises municipalities and organizations opposed to drilling activity.

“We’re stuck in this conundrum where the state has these really lax regulations,” while many local governments would prefer stricter rules, he said.

Following the defeat of Proposition 112, oil and gas industry representatives have repeatedly pledged to work with municipalities to help leaders better understand the drilling process. However industry groups remain wary of additional regulation.

“Local governments have a significant amount of regulatory authority, and given the intricacies associated with drilling (two to three) miles beneath the surface, it quickly becomes complicated and filled with important technical nuance that requires a good amount of conversation before any new regulations are added to the books,” Colorado Oil and Gas Association president Dan Haley said in an email. “That includes discussions with geologists, engineers, and environmental management staff within industry, as well as with state regulators to make sure local oversight rules are not only functional, but possible.”

Weld County commissioners recently approved a measure aimed at streamlining the county’s pipeline approval process. The ordinance, passed in October, allows oil and gas operators to work more closely with planning staff and eliminates some of the time-consuming reviews previously conducted by elected officials or members of the Weld County Planning Commission.

A COGA representative spoke in support of the measure and offered Weld County leaders assistance with further pipeline-related issues, according to minutes from the October commission meeting.

“We want to serve as a partner when local jurisdictions have questions, and we want to make sure we help get them the answers and the resources they need. That goes for our state legislators as well,” Haley said.

Statewide scenarios

There are multiple forces at play that could impact the future of oil and gas activity across Colorado.

In October, the Colorado Supreme Court heard arguments in what is known as the Martinez case. That case — initially brought in 2013 by a group of six teenagers, including Boulder brothers Xiuhtezcatl Martinez and Itzcuahtli Roske-Martinez — hinges on a question of whether the Colorado Oil and Gas Conservation Commission must verify that new drilling operations do not negatively impact public safety and health prior to issuing permits.

The teens, along with anti-fracking interests, want the COGCC to make human and wildlife wellbeing a priority, not simply one of a host of factors, when deciding on permits.

The commission has argued that state lawmakers have tasked the COGCC with balancing environmental wellbeing with mineral owners’ property rights and other oil and gas industry considerations.

Reversing a lower court decision, the Colorado Court of Appeals last year sided with the teenagers. Colorado Attorney General Cynthia Coffman, on behalf of industry representatives with the Colorado Petroleum Association and American Petroleum Institute, then appealed the decision to the state’s high court.

Coffman, a Republican, will soon be replaced by Attorney General-elect Phil Weiser, a Democrat. During his campaign, Weiser said Coffman erred in appealing the Martinez case and pledged to establish a special unit to provide municipalities with advice for negotiating with oil companies.

The state’s highest court is expected to take months to issue a decision on the Martinez case. But if the court sides with the teens, it “drastically changes the way the commission regulates oil and gas operations across Colorado,” Colorado Solicitor General Frederick R. Yarger said during October’s oral arguments.

While the court mulls its decision, the COGCC is holding hearings on a different set of new regulations.

These regulations, initially proposed in 2017 by Erie-based League of Oil and Gas Impacted Coloradans, would require new oil and gas wells and production facilities be sited no closer than 1,000 feet from the perimeter of a school or child care center property line. Current rules impose the 1,000 setback from school buildings, rather than the property line. The next COGCC hearing on the matter is scheduled for Dec. 17.

Colorado Gov.-elect Jared Polis and the state’s General Assembly, which convenes for its next legislative session in January, also wield considerable power to potentially change oil and gas regulations.

House Majority Leader Rep. KC Becker, whose home district includes part of Boulder County, told the Denver Post after the election that the oil and gas industry needs to “get real” about accepting new regulations.

“I’m not looking to drive out the industry from the state, but we have to respond to the need of communities so they feel safer,” Becker told the Post. “If we don’t do something at the legislature in the next two years, the issue will be back (at the ballot box) and with a greater level of funding.”

Polis did not publicly support Proposition 112, but he has come out in favor of stricter oil and gas regulations in the past.

Speaking to the Post after the election, Polis said he supports “making sure the local communities have a say in where and how fracking is done in their community.”

Could that mean other communities in Northern Colorado and Boulder Valley could follow Superior’s lead and explore drilling moratoriums or other restrictions on the industry? It’s certainly possible.

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