'Deja vu' for Colorado's oil and gas industry as group files new ballot initiatives

Denver — Last April, Colorado Governor Jared Polis (D) said, "...it is our hope that the oil and gas wars that have enveloped our state are over," but the conflict appears far from over as the same group behind Proposition 112 has filed six new ballot initiatives with the state, with five of those pushing for longer drilling setbacks.

Proposition 112, which called for drilling setbacks from occupied structures and vulnerable areas to increase from 500 feet to 2,500 feet, failed at the ballot box 57% to 43% in November 2018. The victory for the state's oil and gas industry was not without costs, though, as major companies such as Extraction Oil and Gas, Anadarko, Noble Energy and others spent a combined $40 million-plus to campaign against the proposition.

Similar to Prop 112, most of the proposed ballot initiatives, filed Tuesday, involve drastically increasing setbacks for all new oil and gas development.

"The people of the state of Colorado hereby establish that all new oil and gas development not on federal land must be located at least 2,500 feet from an occupied structure or vulnerable area," reads one of the propositions proposed by the group Colorado Rising. "Homeowners may waive this requirement for their principal residence. For purposes of this section, the re-entry of an oil or gas well previously plugged or abandoned is considered new oil and gas development."

Current drilling setbacks are 500 feet from homes and 1,000 feet from schools, hospitals and playgrounds.

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DEJA VU

"This is deja vu all over again," said Dan Haley, CEO of the Colorado Oil and Gas Association. "Last election, Coloradans decisively defeated an energy industry ban that would have shredded private property rights and put working families on the unemployment line. Now, keep-it-in-the-ground activists are back, pushing the same extreme measure and a few '112 lites.' I'm confident Coloradans will again stand with working families and decline to sign these disastrous petitions."

"Governor Jared Polis and political leaders on both sides of the aisle rejected the measure in 2018, and I expect that will happen again given the grave consequences, and also considering nearly every aspect of our industry is currently under an intense regulatory microscope as state officials work to fully implement Senate Bill 181, the sweeping oil and natural gas bill pushed through the Legislature last year."

SB 181, which Polis signed into law last April, transferred more authority from the state to local governments in approving new drilling sites. It was under the context of this bill in which Polis hoped to end the state's "oil and gas wars" with issues being resolved in city halls rather than statewide ballot initiatives.

The new legislation did not go far enough for some organizations.

"We have earnestly participated in the legislative and rulemaking process for the past year and have seen little improvement in the overall protections for Colorado residents and the environment from industrial fracking activity," said Anne Lee Foster, spokeswoman for Colorado Rising. "The Colorado Oil and Gas Conservation Commission has only completed one rulemaking in the last year, and the result was disappointing, with many concessions granted to protect corporate profit. We have little faith in these government agencies to reject corporate influence and make scientifically backed regulations. Therefore, we will again take on the enormous task of running a ballot initiative."

A study conducted by the COGCC found extending setbacks to 2,500 feet would eliminate 85% of non-federal land in Colorado from any future drilling activity. This includes 85% of non-federal surface area in Weld County, the heart of the Denver-Julesburg Basin.

Weld County currently produces about 500,000 b/d and is responsible for 89% of the state's oil production, according to S&P Global Platts Analytics. The county also produces 2.2 Bcf/d of natural gas, or about 43% of the state's total.

HIGHER BONDS

One of the ballot questions submitted to the Colorado Legislative Council this week also calls for increasing the minimum amount a company must produce to a minimum of $270,000 per new well to cover future costs such as plugging, reclamation or remediation. Currently, bonds for individual wells in Colorado range from $10,000 to $20,000, depending on well depth, according to the COGCC.

Groups routinely submit several versions of a ballot initiative before settling on one that appears to have the best chance of passage.

-- Brandon Evans, bevans@spglobal.com

-- Edited by Bill Montgomery, newsdesk@spglobal.com