Colorado Governor Faces Skeptical Oil & Gas Audience

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SUGAR LAND, TEXAS--August 30, 2019--Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Colorado Oil & Gas companies really miss John Hickenlooper, the Centennial State's former two-term Democratic governor. That was evident at the Colorado Oil & Gas Association's (COGA) (Denver, Colorado) 31st annual Energy Summit, held August 27-28 in Denver.

Hickenlooper's standing with the state's Republican-leaning oil and gas industry benefitted from his training as a petroleum geologist and his pragmatic, middle-of-the-road approach to many issues, including oil and gas regulation. During his two terms as Colorado governor (2011-2019), Hickenlooper negotiated a voluntary reduction of methane emissions from oil and gas operators that improved air quality. He also pushed back on ballot initiatives that could have crippled the industry.

Colorado's current governor, Democrat Jared Polis, brought a very different viewpoint with him when he entered the governor's mansion earlier this year. And that difference was on display when Polis addressed COGA on August 28.

Last November, Colorado voters defeated a ballot initiative, Proposition 112, which would have placed more restrictions on oil & gas operations in the state. But the state also elected a "Blue Wave" of state lawmakers, placing leadership of the state Senate in Democratic hands, returning a Democratic majority in the state House of Representatives and electing Polis.

Earlier this year, the legislature passed, and Polis signed, a bill, S.B. 181, which is likely to fundamentally transform the way oil and gas is extracted in Colorado, one of the nation's largest energy-producing states. For decades, the mandate of the state agency overseeing the industry had been to maximize extraction of hydrocarbons. But S.B. 181 ordered that state agency to prioritize health, safety and environmental considerations when issuing drilling permits. The new law also allows for greater "local control" over oil and gas land-use permitting. For more on how Colorado's oil and gas industry is changing, see April 9, 2019 article - Colorado Oil & Gas Industry Faces a New and Different Regulatory Future. Industrial Info is tracking 54 active oil and gas Production, Pipeline and Terminals projects being developed for Colorado, with a total investment value (TIV) of about $2.4 billion.

The state is embarking on what is expected to be a two-year process to write the regulations implementing S.B. 181.

Polis mocked as "kind of silly" the title of his session, "Can You Still Drill for Oil in a Blue State?" "That's like asking if you can still build wind turbines in Texas," the governor told about 600 attendees in his luncheon talk August 28. "It's inherently an economic and geological question, not a political one. It's all about the rocks and the economics."

COGA President and Chief Executive Dan Haley asked Polis a number of questions during an informal fireside chat that lasted about 45 minutes. Haley repeatedly pressed the governor for straightforward, declarative answers to the industry's main question: their future in a Polis administration. Roughly 30 minutes into the session, Polis finally relented and said, "Your jobs are valued and you're an important part of the diversity of our state."

Haley said, "The social and political climate in Colorado seems to have changed. People (in the industry) feel nervous and wonder if they're seeing the end of the fossil fuel business." Polis replied, "As a Democrat, I worry more about President Trump's trade wars and immigration policies."

The governor said the industry was overly concerned about potential drilling bans. He said local control is important for several industries, not just oil and gas. In an allusion to the controversy over "local control" engendered by S.B. 181, Polis commented: "problem solvers on the ground should be empowered to solve local issues. I don't want an unelected regulatory board in Denver making decisions for other communities."

Noting that nine Colorado communities have enacted moratoria or bans on oil and gas drilling since S.B. 181 was passed, Haley asked the governor if that was the type of "local control" he sought. Polis replied, "There's nothing in S.B. 181 that discussed bans or moratoria." He added that he opposed Proposition 112, last year's ballot initiative that several attendees described as "an existential threat to the industry."

Polis also said he was more concerned about the complexities of getting the state to 100% renewable energy by 2040 than he was about the potential loss of oil and gas jobs stemming from S.B. 181.

"We want to be a leader, not a follower, on climate change," Polis said. "There are enormous economic benefits to being a leader on climate change."

The governor also repeatedly disputed Haley's assertion that the political risk facing the state's oil and gas operators had increased following enactment of S.B. 181. "There's no question there is less uncertainty now compared to prior years," when stringent ballot initiatives were being fielded by the industry's opponents, Polis said. "There is considerably less political risk today than previously."

Interviews conducted at the conference suggested otherwise. One investor told Industrial Info, "I know a lot of firms that won't invest in Colorado oil and gas right now. Personally, I'm OK with it, but not everyone at my firm is." Another attendee, an operator with long ties to Colorado, said, "I'm not feeling particularly welcome here."

To Haley's question as to whether Colorado was still open for business from the oil and gas industry, Polis replied the industry's future depended on geopolitics, commodity prices and supply and demand fundamentals. "If I were in your shoes," he added, "I would be following the ins and outs of Venezuelan politics more that the ins and outs of Colorado politics."

Polis' comments about commodity prices, geopolitics and Venezuela were mocked by Republican Senate and House members speaking in the hallway after the governor's lunchtime appearance. Polis "uses that line about commodity prices, geopolitics and Venezuela to avoid dealing with the concerns the industry has about its future," a Republican House member said.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook-Twitter-LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at https://www.industrialinfo.com/.