Oil and gas commission launches major overhaul of state drilling regulations

Reaching for a way to describe the challenge facing the Colorado Oil and Gas Conservation Commission at an Aug. 24 hearing, agency director Julie Murphy picked a Colorado-appropriate metaphor.

“The only way that I could think about summarizing what the last decade, or year, or month has been for so many of us … is to think about it like the Decalibron,” Murphy said, referring to the popular Colorado hiking trail that summits four 14,000-foot peaks in a single loop.

As the COGCC on Monday began an extensive rulemaking process to implement changes required by Senate Bill 19-181, the oil and gas reform bill passed by Colorado Democrats last year, Murphy likened the commission’s progress to a hiker having bagged three of the four peaks — with some of the most challenging terrain still ahead.

“Where we are is a long way down the path, but certainly a momentous amount of work remains before us,” she said.

Commissioners and staff at the COGCC, which oversees oil and gas development in Colorado, intend to accomplish much of that remaining work over the next eight weeks, during a series of regulatory hearings that will update many of the agency’s rules to bring them in line with the requirements of SB-181.

The “Mission Change” rulemaking is named for a key statutory change made by the bill, which amended a previous Colorado law directing the COGCC to “foster” oil and gas development and instead charged the commission with “regulating” the industry to protect health, safety and the environment.

That small language tweak is expected to have dramatic ramifications for the COGCC, which had long argued, in regulatory and court proceedings, that it lacked the authority to aggressively restrict oil and gas drilling, even as a backlash against industry operations grew throughout the state in the 2010s.

With the passage of SB-181, that’s no longer the case, as several of the bill’s sponsors and other Democratic elected officials reminded the commission during a public comment period on Monday.

“We, the Legislature, gave you a very ambitious task last year: to fundamentally change the way this body regulates the oil and gas industry, to protect public health, safety, welfare, the environment and wildlife,” Colorado House Speaker KC Becker, a Democrat from Boulder, told commissioners. “If a proposed oil and gas development cannot occur in a manner that protects public health and safety, it shouldn’t be approved.”

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Changing COGCC regulations to reflect that legislative directive will require rewriting much of the agency’s 284-page rulebook, and the implementation of SB-181 is already behind schedule, due in part to a pause in commission proceedings caused by the coronavirus pandemic. After brief comments from Murphy and commission chair Jeff Robbins, Monday’s hearing officially launched the rulemaking process with as many as nine hours of scheduled testimony from 133 members of the public, including more than a dozen state and local officials. More than 90 organizations — from oil and gas companies and environmental groups to local governments and water utilities — have been granted formal “party status,” and will make extended presentations to the commission in the coming weeks.

It’s a packed schedule, and on several major issues at stake in the rulemaking, environmental activists and industry supporters remain as bitterly divided as they have been throughout much of Colorado’s oil and gas wars. Robbins, however, urged all parties involved to have faith in the process as Monday’s hearing began.

“There is disagreement on some of the issues that are before us,” he said. “But I think there is universal agreement that we — all of us — will undertake the right next steps to accomplish the monumental task the commission has before it.”

‘Robust conversation’

The COGCC’s rules and regulations are broken down into numbered categories, from the 100 Series rules — which merely define terms like “oil well,” “drilling pit” and “sensitive area” — to the 1200 Series, which relate to wildlife protection.

Nearly every one of these rules categories is expected to undergo significant revisions in the coming months, beginning with changes to the 200–600 Series rules in a three-week hearing ending on Sept. 11.

Starting Tuesday, commissioners will hear presentations from staff and outside groups on the 300 Series rules, which govern the agency’s permitting processes. In draft rules proposed by COGCC staff, the rules would be overhauled to give the commission more explicit authority to deny permits, create a process for “alternative location analyses” for controversial well sites, and require scrutiny of the “cumulative impacts” of oil and gas development on air and water quality, wildlife and natural ecosystems.

Another major set of changes, set to be considered near the end of the three-week hearing schedule, concern the COGCC’s safety regulations, and could include an increase in mandatory “setback” distances between new oil and gas wells and occupied buildings or environmental features.

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Oil and gas interests have vehemently opposed any increase in setback distances, arguing that the issue was settled in 2018, when Colorado voters rejected a ballot measure that would have imposed a rigid 2,500-foot setback minimum across the state. In advance of Monday’s rulemaking hearing, the COGCC canceled a briefing for commissioners on the health impacts of oil and gas drilling following complaints from industry groups that the presentation would “prejudice” the commission’s views on possible setback increases.

The agency’s draft rules would leave the statewide setback from single-family homes at its current distance of 500 feet, while increasing the current 1,000-foot setback from “high-occupancy buildings” to 1,500 feet. The draft rules would also require 1,500-foot setbacks from any area with 10 or more residential units, and 2,000-foot setbacks from schools.

“I look forward to a pretty robust conversation around setbacks as we move forward through the next couple of weeks,” Murphy said. “This is a big, important, meaty issue that will require a great deal of reflection.”

Dispute over local control

Industry supporters and local officials from oil- and gas-rich counties slammed the commission’s proposed rules in public testimony on Monday, arguing that SB-181’s emphasis on “local control” of oil and gas development should empower rural areas of the state to enact local regulations that are less restrictive than the COGCC’s rules.

“This one-size-fits-all doesn’t work for us,” Mesa County Commissioner Rose Pugliese told COGCC officials. “Western Colorado is not the Front Range, and we shouldn’t be policed like we are. And we’re in the best position as elected local government officials to deal with our neighboring counties and municipalities to support energy development, in a very responsible way.”

State Senate Majority Leader Steve Fenberg, an SB-181 co-sponsor, rejected those arguments in his own testimony, telling commissioners that the bill was written only to allow local governments to pass drilling rules that are more restrictive, not less.

“A local government can have a different regulation only if they are more strict,” Fenberg said. “In other words, the state regulations are a floor, and the local government can go beyond that floor if they wish.”

Local control issues and other industry objections will be hashed out at length during formal presentations and deliberations in the coming weeks. Before public comment began on Monday, Robbins expressed his hope that the commission will remain on schedule, and ensure that all parties involved can “take evenings off with family, to catch up or to get some sleep.”

“I’m not trying to scare any of us, but I’m just being honest (about) the work ahead,” he said. “I truly and firmly believe that we’ve got this.”