Fracking Fight Coming Back to Colorado?

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Legislative, regulatory, legal and potentially electoral fights over Oil & Gas development in Colorado look likely to resume in 2018 if not before. Governor John Hickenlooper recently presented a list of seven action items he wanted to see implemented following two recent explosions involving Oil & Gas assets that killed three people and injured four. The industry is considering the governor's wish list, but municipalities are charging ahead with new regulations on operators, which seem likely to spur court fights.

Industrial Info is tracking about 85 Oil & Gas Production, Pipelines and Terminals projects under development in Colorado, collectively valued at about $1.1 billion. A business environment that turns against development in the Centennial State could inject added risk and uncertainty into those projects. For related information, see May 23, 2017, article - How Will Natural Gas Explosion Affect Colorado Oil & Gas Development?

In recent years, Colorado's fast-growing Front Range communities, which sit atop portions of the Denver-Julesburg Basin, have lost court fights to regulate operators more strictly than the state's lead regulatory agency, the Colorado Oil & Gas Conservation Commission (COGCC) (Denver, Colorado). For related information, see September 2, 2016, article - Oil & Gas Industry Urged to Continue Personal Outreach After Measures to Restrict Drilling in Colorado Fail to Make the Ballot and August 7, 2014, article - Oil & Gas Industry Sees Brisk Business in Colorado after Withdrawal of Voter Initiatives.

Although Colorado is not the only state where operators are using hydraulic fracturing to extract Oil & Gas, it is one of the few places where drilling is taking place close to residential subdivisions. Although drilling has been going on in Colorado for decades, until about 10 years ago drilling in east-central Colorado, along the so-called Front Range, took place mostly in rural, less-populated areas. But those areas have experienced strong population growth over the last decade at the same time that hydraulic fracturing became more widespread. For that reason, some areas have experienced sharp conflicts between environmental groups and homeowners, on the one hand, and the Oil & Gas industry on the other. In many cases, elected officials are caught in the middle.

On August 22, Governor John Hickenlooper, who has a background as a petroleum geologist, unveiled seven initiatives for the state's Oil & Gas industry that, he said, were "a responsible and appropriate response that places public safety first." After the April 17 accident in Firestone, Hickenlooper said, "we committed to do all we could to ensure that what happened to the Martinez and Irwin families never happens again."

Five weeks after the Firestone explosion, which killed two and injured one, an oil tank exploded, killing one worker and injuring three. That tank was located in Mead, Colorado, about 12 miles northwest of Firestone.

Hickenlooper, who is term-limited and whose term expires in 2018, offered seven initiatives on August 22 to improve the safety of Oil & Gas development in the state. Some of those efforts can be implemented by COGCC or other executive-level agencies, such as the Colorado Department of Public Health and Environment (DPHE) (Denver, Colorado), while others will require legislation.

Hickenlooper's seven initiatives fall into these areas:

• Strengthening COGCC's flowline regulations
• Enhancing the 8-1-1 "one-call" program
• Creating a nonprofit orphan well fund to plug and abandon orphan wells and provide refunds for in-home methane monitors
• Prohibiting future domestic gas taps
• Creating a technical workgroup to improve safety training
• Requesting peer-review of some COGCC rules
• Exploring an ambient methane leak detection pilot program

Some in the Oil & Gas community question or oppose Hickenlooper's effort to plug "orphan wells," citing the cost. The state reportedly has about $445,000 in available funds to help plug the state's estimated 800 abandoned wells. However, the state's available funds are enough to only plug about 10 abandoned wells per year. "It's a can that has been kicked down the road for decades," Hickenlooper said of plugging abandoned wells. The effort could take from five to 10 years. The governor also wants the industry to pay for in-home methane monitors for concerned homeowners.

"The governor proposed a targeted and proportional response" following an Oil & Gas explosion in Firestone, that "aimed to fix what went wrong and set out a path forward that includes more stakeholder engagement," COGCC Director Matt Lepore, told a conference organized by the Colorado Oil & Gas Association (COGA) (Denver, Colorado) August 23.

Measures requiring legislation could face challenges: Republicans, who tend to support Oil & Gas development, hold a majority in the state senate while Democrats, who tend to be less supportive of the industry, have a majority in the state house. The two sides have been unable to agree on Oil & Gas legislation in recent years, and, judging from comments made by state lawmakers at the COGA conference, those differences aren't going away any time soon.

A few hours after Hickenlooper unveiled his seven initiatives, a panel of 15 state legislators, 13 Republicans and 2 Democrats, fielded questions from an audience of about 100 attendees at the COGA conference August 22. There was a pronounced split between Republican and Democratic lawmakers over perennial issues like severance taxes, mineral rights, local control and the proper level of regulatory oversight of the industry.

In an interview following that session, Colorado Representative Matt Gray, who represents a suburban Denver district fighting Oil & Gas development, said, "There are nine ways for bills to die and only one way -- bipartisanship -- for a bill to succeed." Gray, a first-term lawmaker, said he thought there was a less than 50% chance that lawmakers will be more bipartisan in 2018 than they were in 2017. "It's much easier for the industry and its opponents to go to their respective corners and throw water balloons at each other. That's a well-developed muscle. Bipartisanship requires development of a different set of muscles." He foresees an "all-or-nothing" dynamic governing Oil & Gas matters in the 2018 Colorado legislature.

Gray's comments followed comments from Republican lawmakers that the explosions in Firestone and Mead will not lead to a fundamentally different dynamic in the state Capitol. "This industry is too important to the state" for Colorado to enact onerous laws or regulations that hamstring the industry, said one GOP lawmaker. Senate Republican leader Chris Holbert of Parker said his GOP-led chamber is "the answer" to protecting Oil & Gas development in the state, according to a report in The Denver Post. "I can't promise to you that nothing bad will happen, but the 18 Senate Republicans are here as your friends." A third Republican lawmaker complained that regulatory agencies like COGCC and the DPHE compete to see which could enact the most restrictive regulations on the industry.

In the same week as Hickenlooper unveiled his seven initiatives and Colorado state lawmakers addressed the COGA 29th annual Energy Summit, the city council of Thornton enacted a drilling set-back measure that exceeded the set-back requirements established by COGCC, the state agency regulating Oil & Gas development. Other so-called Front Range communities, including Lafayette, Broomfield and Erie, are considering or have enacted measures meant to minimize the impact of Oil & Gas development within their boundaries.

The city of Erie, located about 10 miles from Firestone, enacted a measure in late July allowing citizens to file complaints against Oil & Gas operators for producing bad odors. The measure is set to become effective in late August. The industry resisted that measure, and litigation seems likely.

Earlier this year, the city council of Lafayette considered a "Climate Bill of Rights," one part of which would prevent the arrest of citizens who engage in non-violent protest against Oil & Gas development in the community. That provision was later removed from the proposal.

According to The Denver Post, city councils in Erie, Broomfield, Lafayette and Thornton all are considering rules requiring the industry to provide public maps of its flowlines within each municipality's boundaries. The industry and Gov. Hickenlooper are resisting that, citing safety and privacy concerns.

"Colorado residents fed up with what they see as the state's failure to protect people and the environment are fighting fossil-fuel development inside their towns by making new rules requiring odor control, bigger setbacks and company disclosure of underground oil and gas flowlines," the paper reported.

Environmental organizations, which have organized ballot initiatives constraining the industry in recent years, said it's too early to say if they will try to introduce legislation when the state lawmakers go back to work next January, or run candidates in the November 2018 election.

"For people affected by Oil & Gas drilling, the feeling is, 'if the feds won't do something and the state won't do something, then we will'," Garrett Garner-Wells, state director of Environment Colorado, told Industrial Info in an interview. "The accidents in Firestone and Mead are making people take a hard look at the worst potential consequences of a heavy industrial process." He said his group is not drafting legislation or backing an anti-development candidate -- at this time.

Another group active in opposing Oil & Gas development in Colorado, Food & Water Watch, said it is not drafting legislation or running a candidate for public office -- yet. The accidents in Firestone and Mead "are causing people to pay more attention to Oil & Gas development," Lisa Trope, senior organizer for the group, said in an interview. She added that was her impression from conversations and anecdotes, but there was no market research to back that up. "We don't tend to back candidates," she said. "Right now, we're focusing on public education for the need for clean energy."

"This issue hits close to home for a lot of people," she said about Oil & Gas development and hydraulic fracturing. "It continues to come up. It's not going anywhere. We'll have to wait and see what happens."

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 http://www.industrialinfo.com/.