Senate Bill 19-181, entitled “Protect Public Welfare Oil And Gas Operations,” has passed a total of three Senate hearings including the Transportation & Energy Committee, the Finance Committee and the Appropriations Committee, along with Senate floor votes completed on March 13. As of March 29, it has passed through three House committee hearings including the House Energy & Environment Committee, the Finance Committee and Appropriations Committee and the House floor votes. On April 1, SB19-181 will return to the Senate again for concurrence on added amendments and a vote on the bill as a whole. Then it will go to the Governor’s desk for his signature prior to becoming a new Colorado law. Once signed, the Colorado Oil and Gas Conservation Commission (COGCCC) will engage in the lengthy process of rulemaking in order to implement the legislation.
On March 28, 2019, the bill passed a second reading in the full House chamber, during a sometimes rather heated evening session. There were numerous attempts to either weaken it or to satisfy oil and gas interests. All amendments attempting to weaken the bill failed to pass although a few votes were close. There were at least four representatives who either won their seats by a small margin of votes last November or are in swing districts. Those representatives seemed to make sacrificial votes to keep constituents happy, knowing the vote would go the “right way” anyway.
The industry has been lobbying certain representatives in its attempts to obtain the votes to lessen the impacts of this bill by passing limiting amendments or keeping the bill from proceeding on to the next committee or vote. So far, the industry has spent over $600,000 on advertising to convince voters to contact their representatives to ask them to either stop or weaken SB19-181. An accounting of the proposed amendments can be found under the “Amendments” tab here: https://leg.colorado.gov/bills/sb19-181 You can find both those which passed and failed.
Many of the approved amendments were minor or technical changes requested by various agencies to clarify parts of the bill or to avoid potential problems with interpretation. Most of the added amendments had been suggested by those sponsoring the bill, both in the House and Senate.
Probably the most significant of the amendments is one which changes the structure of the COGCC from its current form to a “professional body.” Currently, seven commissioners serve part time and maintain other full time jobs. This amendment will change a commissioner’s position to a full time, paid position with funds for salaries coming from the industry. The oil and gas industry was in favor of this change so there was some concern. Sponsors of the bill assured supporters that this amendment would have a good outcome going forward.
As both impacted citizens and oil and gas operators can attest, the work of the commissioners is monumental. Applications are often delayed because commissioners cannot spend the necessary time to complete work in a timely manner. There are often postponements and changes to the COGCC calendar. It is understood that the COGCC staff does a large part of this work in the background and therefore commissioners are not as involved as they should be. With the new changes, commissioners will play a much larger part in this work and with the appointments of new people over the next year, it should be less of a rubber stamp committee.
On July 1, 2019, the years of service for four of the current commissioners will expire. Three will remain. Those who remain are: an attorney, a soil conservationist and a rancher/mineral owner. These three will serve out their terms until July 1, 2020.
Additionally SB19-181 redefines who will serve on the COGCC. The new COGCC will consist of nine members. The Governor will appoint seven of them who will be confirmed by the Senate. Additional members will be Dan Gibbs, Department of Natural Resources Director, and Jeff Robbins, the COGCC Director. The Colorado Department of Public Health and Environment (CDPHE) Director will also serve but not vote.
The seven remaining seats will be as follows:
– an oil and gas representative,
– a local government official,
– an environmentalist,
– a wildlife expert,
– either someone from agriculture (including a small farmer) or a mineral owner,
– an oil and gas technical expert or a soil conservationist,
– a public health official/expert/representative (but a different person than from the CDPHE).
There will be no more than four people from one political party, meaning the split will be 4-3 either way.
This is a distinctive break from what the COGCC has been in the past. Additionally a new technical advisory panel will be formed by the COGCC. This panel will be available to local governments as they deem it necessary to obtain opinions while negotiating with oil and gas companies. Many of these changes were vehemently opposed by the industry. Supporters of the bill contend that with passage of the bill, the COGCC will change from a largely pro oil and gas committee to one which should be more balanced with a much wider perspective.
On March 28th, there were numerous attempts to change, omit or replace SECTION 20 of the new oil and gas bill. SECTION 20 is known as the Safety Clause. It reads: “The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.” Efforts to remove, change or replace this clause continued for the better part of an hour by opponents of SB19-181. In the end, SECTION 20 was sustained and remains an important clause.
SB 19-181 will make major changes to the Oil and Gas Act of Colorado and the rules which govern the Colorado Oil and Gas Conservation Commission. Some of the important features are:
1) Changes to the COGCC mission statement which removes old language including changing the word “Foster” to “Regulate.”
2) SB19-181 redefines the word “waste.” Previously the Commission could not allow “waste” of mineral resources. Now “waste” is tolerable if it protects health and safety.
3) SB19-181 gives municipalities and counties control of all businesses in their jurisdiction. Previously oil and gas operations were exempt from local control. This also eliminates preemption by the State.
4) Changes to those who sit on the Colorado Oil and Gas Conservation Commission. (See above.)
5) Changes to Forced Pooling laws. Instead of requiring only one person to lease their mineral rights to the operator in a spacing unit, the operator will need to have secured 45% of the acreage in a spacing unit before the COGCC approves a forced pooling order, referred to as a threshold. Royalties will change from strictly a 12 1/2% minimum to 16% minimum for oil and 13% for gas after operator recovery of 200% of costs. However, before this section was amended, the bill was originally written with a 51% threshold and 15% overall royalty rate.
6) The new COGCC Director will form a new technical panel which will be available to consult with local governments as needed.
7) The Safety Clause. (See above.)