Home » Articles » Senate Bill 181 and its Impact on Oil and Gas Development in Colorado – Part I

Senate Bill 181 and its Impact on Oil and Gas Development in Colorado – Part I

Part I: Realignment of the COGCC and Delegation of Control to Local Governments.

On Tuesday, April 16, 2019, Governor Jared Polis signed into law Senate Bill 181 ‘Concerning Additional Public Welfare Protections Regarding the Conduct of Oil and Gas Operations, And, In Connection Therewith, Making an Appropriate.’ The bill, referred to here as SB 181, was introduced on March 1, 2019 and contains wide-ranging amendments to the laws that regulate the state’s oil and gas industry, known as the Colorado Oil and Gas Conservation Act (the “Act”).[1] This two-part article is not intended to examine every aspect of SB 181, but instead aims to equip the reader with high-level takeaways on SB 181’s most important topics. In Part I, this article will discuss the new directive and make-up of the Colorado Oil and Gas Conservation Commission (the “COGCC”), as well as SB 181’s delegation of control to local governments.

1. SB 181 rewrites the directive and make-up of the COGCC.

A. Discussion.

The COGCC is a 9-member panel that regulates the oil and gas industry in the state of Colorado. Prior to the passage of SB 181, the COGCC’s mission was to foster the responsible development of Colorado’s oil and natural gas resources in a manner consistent with the protection of  public health, safety, and welfare, including the environment and wildlife resources.

SB 181 realigns that mission so that the COGCC must regulate the responsible development of Colorado’s oil and natural gas resources in a manner that protects public health, safety, and welfare, including the environment and wildlife resources.

In addition to changing the COGCC’s mandate, SB 181 also reshuffled its required membership by adding a member with substantial experience in wildlife protection[2] and a member with formal training or substantial experience in public health in place of members with substantial experience in the oil and gas industry.

B. Potential Implications.

The change in the COGCC’s directive is an example of the General Assembly legislating over existing case law to prioritize public health safety.  In COGCC v. Martinez,[3] the Colorado Supreme Court held that the COGCC need not prioritize its obligation to protect public health safety and welfare over its obligation to foster the development of oil and gas. The COGCC’s new directive makes it clear that any regulation of oil and gas development must affirmatively protect public health, safety, and welfare. What does this all mean? The new-look COGCC must protect public health, safety and welfare instead of prioritizing oil and gas development. Looking forward, these changes may increase the amount of protests and contested hearings at the COGCC and could restrict long-term oil and gas development in Colorado.

2. SB 181 delegates control over oil and gas surface development to Local Governments.[4]

A. Discussion.

SB 181 gives Local Governments the authority to “regulate the surface impacts of oil and gas operations in a reasonable manner to… protect and minimize adverse impacts to public health, safety, and welfare and the environment.”[5] Perhaps SB 181’s biggest impact is that now, Local Governments may approve (or disapprove) of the location of oil and gas facilities within its boundaries. Prior to SB 181, the COGCC authorized oil and gas facility locations state-wide and preempted Local Governments from making the determination. The new arrangement in a post-SB 181 world is now more akin to traditional land use authorization processes like zoning and construction permitting. Additionally, SB 181 permits Local Governments to inspect oil and gas facilities, impose fines for leaks, spills, and emissions, and impose fees to cover costs of permitting and regulation.

B. Potential Implication.

SB 181 does not empower Local Governments to issue out-right bans on oil and gas development. It remains to be seen, however, whether a Local Government’s implementation of its own regulatory scheme can or will result in a de facto prohibition. While SB 181 permits Local Governments to impose stricter regulation than the COGCC, it does not require them to do so. With SB 181’s focus on Local Government autonomy in mind, it’s easy to image a hodgepodge of oil and gas friendly and unfriendly municipalities, not unlike the local disparity resulting from the legalization of marijuana in this state. Since oil and gas particles do not identify as industry-friendly or unfriendly, it seems likely that oil and gas development on a friendly/unfriendly boundary will only add to the divisiveness and contentiousness of the oil and gas debate in Colorado.

In Part II, this article will review SB 181’s changes to the forced pooling process in Colorado, outline the COGCC’s obligation to pass new rules, and summarize SB 181’s overall impact on oil and gas development in Colorado. Readers wishing to review SB 181 in detail can find the entire bill at https://leg.colorado.gov/bills/sb19-181. Please contact Zac Grey for questions on SB 181, oil and gas in general, or to arrange a speaking engagement on this topic.

[1] C.R.S §34-60-101, et. seq.

[2] The old make-up required one member with substantial experience in environmental or wildlife protection. The new make-up separates the two and requires one of each.

[3] Colorado Oil and Gas Conservation Commission v. Martinez, 433 P.3d 22 (2019).

[4] SB 181 generally defines a Local Government as a “municipality or city and county within whose boundaries an oil and gas location is sited or proposed to be sited.” C.R.S. §34-60-103(5.3).

[5] C.R.S §29-20-104(1)(h).

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