Senate Bill 181 Still Foggy, Even During Implementation

The oil and gas overhaul, passed in April, still has the industry uncertain about the future

Senate Bill 181 has been described as bringing “sweeping” changes to Colorado’s oil and gas industry by giving more control to local governments and prioritizing health, safety and the environment. Four months into implementation, there have been a few changes and a lot more question marks.


One of the first — and most straightforward — changes required by SB 181 was an adjustment to the Colorado Oil and Gas Conservation Commission’s membership.

The commission, which is tasked with implementing the new legislation, was previously required to have three members with oil and gas industry experience. The new law immediately changed that composition, reducing the number of industry members to one and adding requirements to include commissioners with wildlife protection, environmental protection and public health expertise.

Gov. Jared Polis on May 17 announced new commission members to serve until July 1, 2020, when the COGCC will transition to a seven-member professional panel. Megan Castle, communications officer for the COGCC, said the reconstituted commission, along with other personnel changes, including a new chief of staff and senior policy advisor announced Aug. 8, are part of a broader culture change to reflect the COGCC’s new mandate.

ON A MISSION

That new mandate requires the commission to shift from “fostering” oil and gas development to “regulating” it in a way that protects public health, safety, the environment and wildlife. How the commission will approach rulemaking to incorporate and its new mission into its work appears to still be a topic on a lot of people’s radar.

“One of the bigger questions, from the industry perspective, and one of the rulemakings … that is going to be of specific interest is obviously the mission change, which is going to lay out and attempt to decipher how COGCC will interact with the local government authorities and how those processes will happen,” said Ana Gutierrez, a senior associate at the Denver office of Hogan Lovells focused on public lands, the environment and natural resources.

The COGCC on Aug. 1 released its latest timeline for rulemaking, which lists several rounds of stakeholder outreach and hearings stretching into April 2020. The areas to be regulated range from the technical aspects of flowlines and abandoned wells to processes for dealing with oil and gas development near populated areas.

Stakeholder outreach on the commission’s revised mission will take place over the next six months, with a rulemaking hearing to follow in February 2020.

ALL IN THE TIMING

Gutierrez said rulemaking on the mission change is one of the areas with “a lot of moving parts [and] a lot of input from a lot of stakeholders.” By focusing on technical rulemaking on topics like wellbore integrity and flowlines this fall, the commission can take more time to understand the scope of the tougher topics up for debate in 2020, such as the changes to the COGCC’s mission and the role of local governments, she said. 

But the COGCC’s new mission will need to be reflected in all of the commission’s new rules, which has led to questions about the best way to approach the various stages of the rulemaking process, as Wyatt Sassman, assistant professor at the Sturm College of Law at the University of Denver, pointed out.

“For example, do we create new rules about how to consider alternative sites before we do the changes to the rules that reflect the change in the mission? Or do we do it the other way around?” said Sassman, who specializes in environmental issues. 

“The rulemaking is where the rubber is going to hit the road to try and figure out how to incorporate not just the specific mandates of SB 181 that are intended to protect communities, but also this bigger mission change as well,” Sassman said.

The trouble of timing reared its head at the first rulemaking hearing in mid-June, which was narrowly focused on changes to procedural rules to allow administrative law judges to oversee certain COGCC hearings. Environmental and community groups opposed changes to the procedural rules, which they viewed as intended to expedite permits, before broader rules on health, the environment and other issues related to the commission’s new mandate could be adopted. The vote on the rule changes was delayed due to the controversy.

THE PERMIT PIPELINE

The question of what to do with pending permit applications before the new rules are finalized has also been complicated.

SB 181 allows COGCC Director Jeff Robbins to delay some permitting decisions to ensure the proposed project complies with the spirit of the new law. The law required the director to publish a list of “objective criteria,” finalized in May, that would trigger further review of a permit. These criteria — mostly related to a project’s proximity to municipal boundaries, schools, floodplains and other sensitive sites — will be in place until rulemaking is completed next year.

“One of the things that we’ve seen is that they’re not issuing permits in the same way they were, so there’s going to be a big backlog,” said Hogan Lovells partner Liz Titus, who specializes in energy and natural resources. 

“It could have the potential to affect the drilling schedule.”

Castle, the COGCC communications officer, said that while there was a backlog of permits immediately after the bill was passed, the commission has since taken measures to address the issue by increasing the number of people working on permit review and communicating with industry players on their priority projects each month.

MORE TO COME

Future rulemaking hearings are likely to prove even more contentious than the first, given their broader focus and potential for public impact.

Titus said the hearing on alternative siting analysis for projects located near populated areas, scheduled for April 2020, touches on a lot of the tensions that drove the passing of SB 181 in the first place.

“We’re unique here in Colorado, where we have oil and gas operations moving west toward the Front Range, and we have housing developments moving north and east toward what were rural areas,” Titus said.

“Finding locations in these newer developments is already difficult for oil and gas,” she added.

“I think this layer of rulemaking and additional local control that the bill puts into place — I don’t know that it’s going to make it any smoother.” 

— Jessica Folker

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