As the governor was signing a bill to bring sweeping changes to Colorado’s oil and gas regulatory structure, Davis Graham & Stubbs was hosting its annual energy M&A financing forum to discuss the industry’s outlook.
The event’s panels focused on trends and industry forecasts with DGS partners and oil and gas executives, but the final session of the day carried extra weight given its timing. Colorado Oil and Gas Conservation Commission executive director Jeff Robbins discussed how Senate Bill 181 affects the industry minutes after leaving the bill’s signing ceremony on Tuesday.
Robbins, who was named interim director of the commission in January and dropped the interim title in March, took a rosy outlook on the bill’s impacts on the energy industry. In a Q&A with David Neslin, of counsel at DGS, Robbins discussed how the commission will change, his response to concerns of control shifting to local governments and what to expect for the rulemaking process ahead.
After seeing two rounds of amendments, the final bill makes health and the environment a priority in determining whether to grant oil and gas drilling permits, a provision that has been in the bill since the beginning. The bill also restructures the COGCC and gives more land use control to local governments.
SB 181 brings together stakeholders representing local government, the industry and the environment to see what they think is important for rulemaking, Robbins said. And he told the audience of industry professionals that he doesn’t see the legislation as giving all the control to environmental interests. “We need a more robust, transparent process,” he said. “The legislation doesn’t say to land more left but more in the middle.”
Robbins said he is not expecting the bill to affect development in the state, and the commission has been working to get criteria put in place to determine when to evaluate permits in order to allow permitting to move forward before new regulations are created. While the bill was pending, permitting has still continued, and the commission has given permits for 90 drilling locations already in 2019, which, he said, is on pace with last year.
He did say, however, that the impacts to operators is likely to be different depending on where they are in the state and the local government’s approach. Robbins said he’s currently spending a lot of time meeting with local governments, but many oil and gas operators already have a head start in building relationships with local governments. In granting permits, the commission is still using a priority system to make sure it’s spending time evaluating applications for high-value wells.
Robbins also discussed changes to the commission that are coming with the implementation of SB 181. There will be a new focus and a new commission, Robbins said.
“We have to seat commissioners and have Colorado understand what that new environmental ethic is and how it will be applied,” Robbins said. The COGCC is still in the business of approving resource development, though, he assured attendees.
The commission will need to seat nine new volunteer commissioners who will remain on the commission until new rules, as outlined in the bill, are developed. The commission will also begin using administrative law judges to evaluate technical disputes — a positive development, according to Robbins, since the commissioners will be able to devote more time to focus on rulemaking.
As for that rulemaking, the bill requires the commission to create new rules: specifically to minimize air emissions; ensure wellbore integrity of oil and gas production wells; allow public disclosure of flowline information; and determine when inactive or abandoned wells must be inspected. And Robbins warned stakeholders in the audience that the public comment period on those new rules is likely to be short in order to keep things moving, he said.
Robbins said he was pleased with where the legislation ended with an amendment that helps the commission defend against lawsuits similar to Martinez v. COGCC, which questioned the priority of health and environment in oil and gas development. The bill states that local governments must regulate the surface impacts of oil and gas operations in a “necessary and reasonable manner.” He said he also likes that the bill involves a technical review board so that local governments — which are now tasked with siting oil and gas operations — can get a report from the commission about the technical impacts of a surface permit.
And in response to concerns that governments will have too much power — a concern many within the industry might share — he pointed out that the legislation doesn’t allow a government to preclude development. It still requires local governments to use their land use authority in a reasonable manner, as the commission does.
— Tony Flesor