Colorado Fracking Regulations

Colorado FrackingSix prominent localities in Colorado have either considered or attempted to ban fracking. Like New York, in Colorado there sprung a dynamic, statewide anti-fracking campaign consolidating a network of smaller, active grassroots groups. Under the umbrella of Frack Free Colorado, CO’s campaign has set its sights on placing a statewide fracking ban on the 2014 ballot. Because unlike New York, any regulatory and restrictive authority claimed by municipalities is not recognized by the Colorado state government; local bans are frequently flipped and city councils threatened with lawsuits. Instead, Colorado has an extensive regulatory framework  in place to govern unconventional energy extraction, or a set of rules informed by a coalition of environmental groups who successfully pushed for revisions between 2007 and now. These first successes emerged in 2007, when Governor Ritter and a Democratic majority in the state legislature led an aggressive energy reform era. Colorado is energy-rich, but is not amongst the top-5 oil producing states. It is therefore less economically dependent on the industry. For this reason and Colorado’s split or diverse political culture, there exists a greater balance (ever shifting) in the play of interests between industry and environmentalists.

Colorado’s experience with oil & gas

By no means is Colorado a small energy player. In 2009, the state ranked sixth among natural gas producing states, employing (directly and indirectly) about 6% of the state’s workforce or 137,000 people. Other figures classify Colorado as the 5th largest gas producer and 9th largest oil producer, due to record levels of fracking and high production rates in 2012 – the highest in 55 years. The surge in drilling escalated after Gov. Ritter was replaced by Gov. Hickenlooper, a Democrat opposing any new regulations for oil & gas and who has openly encouraged the industry to continue drilling unabated. Only 1 of 9 new “fracking rules” were successfully passed earlier this year in the state legislature.

Let’s rewind the clock. Colorado’s energy deposits were a gift from the primordial waterway that stretched between the Gulf of Mexico and Alaska, leaving enormous traces of organic matter in its wake. Millions of years later, the mountainous state’s first oil boom followed the discovery of oil in the Florence area in 1862. Conoco formed for the purpose of exploiting those very field; in fact, Conoco company headquarters were situated in Denver until the 1930s. Over the years, Colorado maintained its position in the top 10 oil-producing states and was the 2nd state to produce oil commercially. Not long after the Florence discoveries, in 1901, two other major fields were discovered: Boulder county’s Pierre Shale and the Denver Julesburg Basin. Ironically, throughout the first half of the 20th century, Boulder country was one of the most lucrative areas for oil and gas production but is now the focal point for widespread opposition to the industry.

On the natural gas front, Xcel began providing the source for consumers in Colorado by 1928. But at the time, the prominence of petroleum eclipsed any commercial interest in gas. It wasn’t until many decades later that Amoco discovered the most productive natural gas field, the Wattenberg field, in the early 1970s. These reserves cover 2,900 square miles. And beneath the field is the Niobrara shale play, extending from Denver all the way north & east of Fort Collins. Conventional gas atop deeper, untapped unconventional gas.

Things began to pick up after the 1990s when word of the shale energy boom was carried in from the east coast. At this point, the rules in place to discipline the energy industry were fairly loose. For instance, policies approved in previous decades allowed energy companies to deduct over 87% of severence tax requirements to the state. They were also allowed to dramatically increase the density of coalbed methane wells drilled. The Colorado Oil & Gas Conservation Commission is the dominant agency that makes and dictates oil & gas regulations, and current attempts to shift the composition of its members and its mission have unleashed controversy. The agency has authority on virtually every facet of regulation: air, water, soil, public health, and wildlife. Multiple accounts reveal that, historically, the COGCC has had close ties with companies and industry officials, many of whom acted as commissioners. Now, only three members with ties to oil & gas sit on the board of the COGCC. Some believe experts are needed on the board, some believe rules will be skewed toward entrenched energy magnates at the expense of public interest.

Colorado’s oil & gas regulations, past and present

Land use and property rights

Like other states west of the Mississippi, Colorado has a split-estate property rights system. In the past, protections for surface owners were minimal; companies who acquired mineral estate had every right to access deposits beneath separately owned surface properties.”Reasonable Accommodation” directed companies to ensure minimal damage to surface property, and common law encouraged them to drill elsewhere if drilling were to disrupt an existing economic activity (such as farming).

The state now forces oil & gas companies to post a bond large enough to pay for any damages. Moreover (and uniquely), a surface owner can now challenge a COGCC decision to approve a permit application. This means that the surface owner can make a case for their concerns about well location and operational details. In the past, only companies could appeal decisions made against their right to drill.

The Oil and Gas Conversation Act

Revised in 2007, this law attempts to balance energy development with a cultural history of protecting wildlife and state forests. For instance, rules include that 1) the surface owner must be notified prior to any drilling; 2) consultation is not required for surface owners but is required with the local government, the Colorado Division of Wildlife, and the Colorado Department of Public Health and Environment; 3) proper reclamation of land and soil affected by operations is mandated; and 4) rules for permitting, construction, closure requirements for pits, waste management, and procedures for spill response & reporting are all included. Additionally, special drilling rules apply in surface water supply areas and operators are bound to correct for any waste or pollution generated by their commercial activities. In regards to the emissions-reducing practice of “green completion” (enforced in other states), not all operators in Colorado are required to adopt it when it isn’t “technically feasible”. Best management practices are encouraged, but it remains unclear how many companies working in Colorado adhere to the “green completion” method.

These rules apply to fracking, but only three fracking-specific rules are elaborated.

  • Certain chemical treatment disclosures are required (since April 2012), such as full disclosure to health professionals when there is reason to believe that chemicals may cause a public health threat.
  • Notice for landowners is provided.
  • Operators must provide the COGCC and a local government representative with a notice of intent to conduct a fracking treatment 48 hours prior to the scheduled treatment.

Setback regulations & the Wattenberg Rule

A leading concern for citizens in Colorado is how close fracking occurs near their homes, businesses, and schools. “Setback rules” used to dictate that wells could be drilled 350 feet from any structure in urban areas. Now, wells must be drilled 500 feet away from a living structure (and from trout streams) and 1,000 feet away from schools and hospitals. The agreed minimum distance in Colorado is fairly standard elsewhere, though Maryland and northern Texas enforce higher distances. Exceptions to the rule persist: agreements with a surface owner can push wells back to a corner of their property line, which could put the well within 500 feet of a neighbor’s property. This is legal. And a bigger chief exception is that existing well locations are not subject to the 500 foot rule, making it so operators can drill wells next to old sites that don’t have to meet new setback requirements.

The Wattenberg Rule also speaks to well placement and land use, specifically the permissible density of wells drilled per square acre in the densely populated Wattenberg field. Previously, the COGCC allowed only 5 wells per 160 acres in the region and now allows 8 wells per 160 acres. The catch is that the extra 3 wells must be directionally drilled and located 50 feet from any existing well.

Shifting regulations

Western Resource Advocates has long worked to compel the COGCC to update its oil & gas law. Some of the changes have already been listed; others include rules on groundwater protection (where there previously were none). Measures were passed under the Ritter administration in 2007 to enforce baseline water testing and monitoring. Specifically, 4 water wells that lie within 1/2 mile of a drilling site must each be tested pre and post-frack. The only caveat here is that large portions of the Wattenberg field are exempted from the rule (portions of Boulder, Larimer, and Adams county) and no water testing is required for water wells that lie beyond the 1/2 mile mark. However, companies must make attempts to minimize noise, smells, dust, traffic, and light from operations that occur in more populated areas. A longer review period for permits is also in effect.

Ritter successfully passed the Oil & Gas Commission Reform Act and the Colorado Wildlife Stewardship Act in 2007: the former diversified members of the regulatory agency and the latter forces oil & gas operators to adhere to the goals of and consult the state wildlife division in sensitive areas. Revisions made between 2007-2009 were contested by the Colorado Oil & Gas Association, which tried and failed to sue the COGCC for the new protections installed. During that time, the COGCC was reorganized to include environmental and health experts to better balance mineral development interests with the public interest. This was seen by various groups as a major victory, though a recent hearing on oil & gas legislation involved 23 energy lobbies and only 2 environmental lobbies.

“COGCC represents the agency part of an energy policy subgovernment that has historically maintained close ties to oil and gas company officials as well as members of the state house and senate natural resources committees. This has led to important policy decisions that have clearly produced economic benefits for energy producers.” (Dr. Charles Davis, CSU).

With a backlog of drilling permit applications now, the COGCC nevertheless approved another 1,201 wells so far in 2013 (a total of only 1,190 permits were granted in 2012). The current approval rates make for 13 times as many permits issued in 2008. Noble Energy hopes to invest $10 billion in the Denver Julesberg basin between now and 2017 for horizontal drilling & fracking projects.

 Latest round of oil & gas proposed bills

What else has passed lately? Not much, 2 of 10 significant pieces of oil & gas legislation were signed into law this May. House Bill 1278 changed standards for reporting spills and will increase reporting. It used to be that only spills of 5 barrels or more were reported; the threshold has moved down to 1 barrel. The second is Senate Bill 202, which requires the COGCC to hire enough inspectors so that every fracking location is inspected at least once a year. Other rules that were discussed but voted down would have required: additional groundwater sampling, more penalties for regulatory violations, a revision of the COGCC’s mission to prioritize health and environmental protection, and an increase in setback rules. The Colorado Air Quality Control Commission just announced that it will delay passing rules for tighter emissions controls on storage tanks and expanded pollution control requirements until next February.

Fracking bans across Colorado cities

Since 2011, Fort Collins, Boulder, LaFayette, Longmont, Loveland, and Broomfield have either considered, attempted to, or successfully passed a moratorium on fracking within city limits. But Colorado’s state agencies do not allow municipalities to do this; Governor Hickenlooper has threatened to sue any city that attempts to bypass or transgress the COGCC. Longmont was embroiled in 2 such lawsuits recently, after 60% of the city voted in favor of the ban. The Fort Collins city council lifted its moratorium on fracking in late May in response to threats but also because Prospect Energy agreed to city rules that are more stringent than the state’s. But Fort Collins is again considering a 5-year ban for the November ballot too. The story in Greeley is very different. Years ago, the city tried to ban drilling and lost in a court battle with the COGCC; lately its officials approved 18 oil & gas drilling wells near a school.

The state agency has also threatened to sue city councils for passing ordinances that restrict drilling in their boundaries. For example, though the Loveland city council is hashing out drilling site rules that properly buffer residential areas, the state could force the city to overturn these. To gain better insight into the tension between state and municipal authorities over fracking regulations, read this.

Regardless of Hickenlooper’s threats, many Coloradoan cities will put 2-5 year fracking bans on November ballots for public vote. Voters in Broomfield will also decide whether or not to allow the storage of fracking waste within city limits. In Loveland, the anti-fracking campaign acquired enough signatures on its petition to put to a vote a 2-year citywide ban come November. But will these attempts merely lead to more expensive lawsuits? In any case, the anti-fracking campaigns in Colorado have compelled state authorities to compromise with agitated voters and to consider ever more revisions oil & gas regulations.

The fine balance between industry and environmentalism in Colorado

Even as the environmental coalition pushes for citywide bans, Colorado isn’t slowing down on drilling in the meantime. 6,622 wells were producing in 2012, generating around $1 billion in public revenue yearly. The EIA estimates that the Niobrara formation may contain nearly 2 billion barrels of oil, or  $2.2 trillion worth of crude. Citizens alarmed by the rate of fracking but hesitant to support a muffling ban on the practice are worried that there are two few inspectors, risks for property damage, water shortage problems in the Colorado River Basin, potential effects for cherished mountain-recreational pastimes, and climate change risks associated with an increase in drilling. Ironically, many of the concerns affecting rural landowners has led to the development of unusual alliances between ranchers and environmentalists. The burgeoning constituency of concerned groups in Colorado – as well as a strong culture of local control and conservation – may act as a counterweight to the influence usually enjoyed by industry. But the lines of the fracking battle are starkly drawn. The push for bans is contrasted with an equally large pushback from citizens eager for the revenue, cheap energy, and jobs. As the election season draws nearer, fracking will feature conspicuously in debates: ban it or regulate it?

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