Colorado oil and gas proposals: Powder keg or procedural nightmare?

By Michael Sandoval 

A drilling rig bores down into the energy-rich shale underneath Weld County. Sound walls, such as those encircling this rig, are erected around many drilling sites in Colorado to shield neighbors from industry operations.  Photo courtesy of the American Petroleum Institute.

A drilling rig bores down into the energy-rich shale underneath Weld County. Sound walls, such as those encircling this rig, are erected around many drilling sites in Colorado to shield neighbors from industry operations. Photo courtesy of the American Petroleum Institute.

For the past six months, the 21 members of Governor John Hickenlooper’s oil and gas task force have traveled across the state of Colorado, worked through a half dozen meetings, met hundreds of community members, listened to scores of speakers, and endured dozens of presentations.

This blue-ribbon commission was the “compromise” the governor said, for a contentious and costly battle at the ballot box in November 2014. Four ballot measures, both pro-and anti-industry, and backed by powerful politicos–including Democratic Congressman Jared Polis–appeared to be headed toward an inexorable face-off.

Anti-fracking environmentalists, backed by Polis, pushed two initiatives that would have established a new setback for oil and gas operations and called for an environmental bill of rights, allowing “more restrictive and protective” local laws and regulations to supersede state regulations.

The two pro-industry measures represented a reaction to the dozens of proposals that had earlier flooded the ballot measure process. They included adding a fiscal note for any citizen ballot measure to show costs to taxpayers, and ensuring that local governments enacting rules that prohibited oil and gas development would no longer receive state tax revenues derived from areas allowing development elsewhere in Colorado.

The governor’s compromise gambit has held, for the time being. The ballot measures disappeared from November’s vote, and so far only one bill–HB 1119–introduced in the 2015 session of Colorado’s legislature, would address mineral royalties liability under a local fracking ban.

But the can kicked down the road last August could become a powder keg late in the legislative session, or another round of ballot battles in the fall, if the task force’s recommendations draw more heat than agreement.

Making recommendations

By the end of the February, the task force members will decide how many of the more than 50 regulatory and legislative proposals that have been introduced by task force members will move on to the governor’s office in the group’s final report, as they deliver their suggestions for “fixing” the regulatory environment for Colorado’s oil and gas development, and more specifically, hydraulic fracturing deployment.

At the penultimate meeting of the task force, comprised of local government officials, industry executives, environmental activists, and other “concerned” community members, a handful of proposals appeared to be headed for inclusion in the report to be delivered into the governor’s hands.

On January 30, Governor Hickenlooper sought to clarify some confusion within the members of the task force about just which proposed measures should be passed on — would it be those with two-thirds of the vote, or a much broader portfolio of measures obtaining a simple majority.

“I want to make sure that my expectations and charge to the task force are clear. The executive order recognized that these issues are complex and encompass a vast spectrum of views and ideas of the people in this group. Therefore, consensus on all proposals may not be possible. Consistent with the executive order, I encourage you to strive to achieve support from two-thirds of the task force membership on as many proposals as possible, regardless of whether the implementation tool is legislation, regulation, policy, or allocation of human or other resources… However, as it states in the executive order, I also expect to receive reports on each of those items on which a two-thirds vote is not obtainable,” Hickenlooper wrote to task force members.

In essence, of the 56 different items for consideration at the task force’s ultimate meeting on February 24, all will be forwarded to the governor for consideration, separated into “majority” and “minority” reports. Those proposals reaching 14 votes will automatically be included in the official final report.

Members of the task force told The Denver Business Journal’s Cathy Proctor that even with such a high number of items up for discussion, there is concern that the task force might miss the mark on addressing some of the key issues that gave birth to the task force in the first place.

“I think there’s a lot on the table, I hope we can address the underlying issues: local authority and the ability to address issues in communities, the large facilities, and the health and the safety issues,” Jon Goldin-Dubois told Cathy Proctor of the DBJ. Goldin-Dubois is the president of Western Resource Advocates.

“I have concerns that we seem to be stepping around the major issues at the heart of the conflict,” he said.

Others, like Anadarko Petroleum’s Brad Holly, senior vice president for the Rocky Mountain region, believe that the task force’s diverse membership would deliver some proposals that have “unanimous” support from the group, and that everyone was “committed to the process”.

On the table

Among the most promising of the proposals, in terms of initial task force support would be a legislative fix to add to the staff of the Colorado Oil and Gas Conservation Commission (COGCC) to increase frequency of inspections, handle permitting more efficiently, and enhance the commission’s ability to handle additional work as the state’s oil and gas surge continued. At least four of the proposals dealt with adequate COGCC staffing concerns, with one hoping that this would “improve local government understanding”, while another believed it would “enhance the public’s confidence in the agency’s ability to timely inspect well, enforce violations of commission rules, and respond to complaints and spills”.

Another area of agreement appeared to be the call for additional health studies of the effects of oil and gas development in Colorado. Additional studies, whatever their merit, can often have substantial price tags, and often require a considerable amount of time to conduct — a fact acknowledged in one proposal that suggested shutting down oil and gas activities until the Colorado Department of Public Health and Environment “is able to complete a comprehensive assessment of the effects of these activities on the public health”.

“Colorado citizens need to be assured that fracking is safe before it is allowed to continue,” wrote task force member Jim Fitzgerald, who is a rancher and activist.

“Much doubt and confusion exist in the subject of health effects of oil and gas chemicals and activities. This is caused by many factors, not the least of which is a lack of good data. There is no substitute for good professional inquiry using the best science and broad dissemination of trusted health information to prevent misunderstanding and to prevent harmful exposures and disease related to toxic substances. Ordinary people are entitled to know if their health is at risk and they are also entitled to know that their health is not at risk. Knowledge is the best tool to prevent fear and fear-mongering,” wrote task force member Russ George, a former speaker of the Colorado State House and executive director of the Department of Natural Resources.

George’s proposal, one of at least three, called for up to 10 different studies ranging from cancer and asthma risk to toxicity of fracking chemicals used. A similar proposal demanded that decisions be made “based on data, not conjecture or spin”.

Other proposals floating to the top: state clearinghouse for oil and gas industry information, conducting studies related to oil and gas industry truck traffic, and creating a “dispute resolution or mediation process” between entrenched local governments and operators unable to reach agreement independently.

Grab bag

From enhancing public safety to reducing truck traffic, calling for additional studies or reporting the amount of water used in oil and gas operations, the oil and gas task force members must draw up a menu for the governor, legislature, state agencies and interested parties among industry and activists alike to chew on over the coming weeks and months.

Legislative fixes are no guarantee, given a divided legislature — Democrats control the State House and Republicans hold the State Senate. In addition, the legislative session itself ends May 6. Proposals requiring expansion of state agencies and additional staff, or other fiscal layouts, could languish until 2016.

Controversial legislative action, or failure, could lead to proposals becoming the latest round of ballot measures locally in 2015 or statewide in 2016.

Hickenlooper may seek to implement proposals from the final report, or even the minority report, through executive action. This could invariably draw reaction by legislators or precipitate its own ballot battles.

However, and if ever, any of the oil and gas task force’s proposals make their way to Colorado’s regulatory environment, the future of an industry critical to the state’s economic progress remains as changeable as Colorado’s infamous unsettled weather.

Michael Sandoval is an energy policy analyst and investigative reporter for the Independence Institute, a free-market think tank based in Denver, Colorado.

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