October 25, 2019

Senate Bill 19-181: Colorado enacts first-of-its-kind oil and gas legislation

Dale Ratliff

Proposed ballot measures and judicial opinions bring oil and gas regulation to the political forefront in Colorado

Colorado recently adopted legislation that will significantly change how the state regulates oil and gas development. This article explores the recently enacted legislation and its potential effects on the state regulatory system. But to start, a brief summary of how Colorado got here is important.

On May 2, 2016, the Colorado Supreme Court issued corollary opinions in City of Fort Collins v. Colorado Oil & Gas Association and City of Longmont v. Colorado Oil & Gas Association, holding that the Colorado Oil and Gas Conservation Act preempted local bans and moratoria on hydraulic fracturing.

On November 6, 2018, Colorado residents voted to defeat proposed ballot measure Proposition 112. Proposition 112 proposed to amend the Colorado Oil and Gas Conservation Act to create a statutory 2,500-foot setback for oil and gas development from all occupied buildings and “vulnerable areas” and provide local governments with increased authority to adopt more restrictive setbacks than the state requirement.

Then, on January 14, 2019, the Colorado Supreme Court issued a long-awaited opinion in Colorado Oil & Gas Conservation Commission v. Martinez. The court upheld the Colorado Oil and Gas Conservation Commission’s (COGCC’s) determination that a petition for a rule prohibiting oil and gas development unless it could occur in a manner that posed no cumulative environmental or climate-change impacts exceeded its statutory authority under the Oil and Gas Conservation Act. The court held that the Act as drafted did not “allow the Commission to condition one legislative priority (oil and gas development) on another (the protection of public health and the environment).”

The Colorado General Assembly enacts sweeping reforms in Senate Bill 19-181

On November 6, 2018, Coloradans elected Democratic governor Jared Polis, and Democrats swept every major statewide race—providing Democrats with control of both the legislative and executive branch. As a result, the legal and political developments discussed above set the stage for oil and gas regulation to be prioritized by the Democratic General Assembly.

On April 16, 2019, Governor Polis signed into law Senate Bill 19-181. SB-181 is perhaps the most sweeping and progressive oil and gas legislation passed since the boom in hydraulic fracturing throughout the United States.

A shift of priorities and increased authority for local governments

In a direct response the Colorado Supreme Court’s recent Martinez opinion, SB-181 revises the legislative declaration of the Oil and Gas Conservation to Act to shift the “balance” and direct the COGCC to prioritize public health, safety, welfare, and the environment over oil and gas development. Where before, the COGCC was to “foster the responsible, balanced development” of the state’s oil and gas resources, consistent with the protection of public health, welfare, and the environment, the act now directs the COGCC to “regulate the development and production of the natural resources of oil and gas in the state of Colorado in a manner that protects public health, safety, and welfare, including protection of the environment and wildlife resources.”

SB-181 also seeks to provide local governments with increased authority to regulate oil and gas development within their jurisdictions. SB-181 revises the Colorado Land Use Control Enabling Act to provide local governments with explicit authority to regulate the location and siting of oil and gas facilities and other environmental components of oil and gas development, including water quality, air quality, and reclamation. And it includes an express provision stating that local government and state agencies share regulatory authority over oil and gas development, and that “a local government’s regulations may be more protective or stricter than state requirements.”

Colorado is currently in the very early stages of navigating the concurrent jurisdiction envisioned by SB-181. Adams County, for instance, recently proposed the first suite of new regulations under SB-181. The county’s proposed adoption of the requirements raises interesting legal questions about local-government authority under SB-181 and about how state and local agencies will navigate the concurrent jurisdiction envisioned by the bill. In response to the proposed regulations, the Colorado Department of Public Health and Environment sent a public notice to local governments and oil and gas operators reminding them of CDPHE jurisdiction over environmental impacts and encouraging local governments and oil and gas operators to continue to work with CDPHE to implement the requirements of SB-181.

A packed schedule

Perhaps the most significant—or at least immediate—consequence of SB-181 is the multitude of rulemakings that will now follow in its wake. SB-181 requires both the COGCC and the Colorado Air Quality Control Commission (AQCC) to engage in a suite of rulemakings to implement the bill’s various mandates.

Pursuant to the various directives in SB-181, the COGCC and AQCC have tentatively scheduled rulemakings through April 2020 to:

  • Adopt additional requirements related to storage tank controls, pneumatic controllers, and leak detection and repair (LDAR), among other items;
  • Revise COGCC regulations for flowlines and inactive, temporarily abandoned, and shut-in wells;
  • Review and revise its rules to ensure they property implement the priority shift in the COGCC’s mission;
  • Adopt rules that allow the COGCC to evaluate and address the potential cumulative impacts of proposed oil and gas development; and
  • Adopt an alternative location analysis as part of the permitting process.

These are complicated topics that will add new layers to the COGCC’s comprehensive set of regulations and permitting process. For example, the requirement to conduct an alternative site and cumulative impact analysis for all proposed drilling permits raises questions about the adoption of a mini-NEPA into the state’s permitting procedures. Determining how this should work will be no easy task. And the expedited schedule under which the COGCC has proposed to conduct these rulemakings—concurrently with the AQCC’s mandated rulemaking—raises valid concerns about whether the agency and stakeholders will have the necessary time and resources to dedicate to these important matters.

Dale Ratliff

Dale Ratliff is an environmental associate at Lewis Bess Williams & Weese in Denver, Colorado.