Colorado nearing overhaul of oil, gas oversight

Colorado lawmakers are on the verge of passing a bill to give local governments a greater say in where and how oil and gas drilling takes place, a change industry executives say could curtail production in the state.

A final vote on the legislation, which could occur as soon as today, comes as an oil and gas boom in Colorado has put drilling rigs and other machinery in closer contact with residents worried about issues such as noise, air pollution and property values. Governor Jared Polis (D) supports the bill.

The Colorado Senate is set to vote this week on the measure, which was released a month ago and has rapidly advanced in a series of committee and floor votes. Oil industry groups complain the Democratic-controlled legislature is ramming through sweeping changes and failing to gather sufficient input on potential effects for industry they say contributes $31bn to the state's economy.

Anadarko, Noble Energy, Extraction Oil and Gas and PDC Energy are some of the top producers in the state. Colorado crude production in January averaged 500,000 b/d, five times more than it produced in 2010. Natural gas production over the same time increased by 16pc to an average of 5 Bcf/d last year.

The bill, Senate Bill 181, would overhaul laws that give the Colorado Oil and Gas Conservation Commission (COGCC) the ability to preempt local regulations affecting oil and gas facilities. The nine-member regulatory commission by law is now required to "foster" development of the industry and includes three members with industry expertise.

The bill would revise COGCC's mission to focus on regulating the oil and gas industry and pare down its size to seven members, only one of which would be an industry expert. It would also let local governments regulate siting of oil and gas facilities to reduce adverse effects on the public, while also allow them to inspect facilities and impose fines for leaks, spills and emissions.

Oil industry officials since the bill's release have successfully pushed to amend the bill to set limits on new rules that are allowed. Lawmakers added language, for example, that local governments can only regulate oil and gas facilities in "reasonable manner," a change that could address an industry concern with rules that are so restrictive that drilling is effectively prohibited.

The revised bill also tweaks rules around "forced pooling," which under existing law allows one lease owner to force nearby property owners to allow development of their mineral rights. The bill sets a threshold for forced pooling at 45pc of mineral interests in an area, down from 50pc under the original bill, and also excludes mineral interests from that calculation for an owner that cannot be located.

The bill could also lead to tougher rules for the potent greenhouse gas methane. It would require COGCC to consider adopting rules requiring industry to inspect facilities for leaks twice a year and to install continuous methane monitors at facilities with large potential emissions.

Oil industry officials worry the revised bill could undermine the industry's growth. Colorado Petroleum Council executive director Chris McGowne last week said the bill could hurt the state's economy by delaying permits and create a "de facto moratorium" on new oil and gas development.

The Colorado House voted to approve the amended bill on 29 March. That measure is now set for consideration in the Senate. If approved, the bill would advance to Polis for his signature.