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March 1, 2019 SENATE BILL 19-181 INTRODUCED – ADDITIONAL PUBLIC WELFARE PROTECTIONS REGARDING THE CONDUCT OF OIL AND GAS OPERATIONS

On March 1, 2019 at 4:30 p.m., Senate Bill 19-181: ADDITIONAL PUBLIC WELFARE PROTECTIONS REGARDING THE CONDUCT OF OIL AND GAS OPERATIONS was introduced by Senator Fenberg and Representative Becker. SB19-181 proposes sweeping legislative amendments to the Colorado Oil and Gas Act that would have a significant impact on development and operation of oil and gas in Colorado. SB19-181 is set for a general committee hearing at 2:00pm Tuesday March 5 with the Senate Transportation & Energy Committee. The key provisions of SB19-181 are as follows:

• Provides that the Commission and Director shall not issue a permit until the Commission has promulgated every rule required to be adopted by oil and gas bills enacted in 2019 and the rules have become effective; except, the Director may issue a permit if the Director determines that the permit does not require additional analysis to ensure the protection of public health, safety, welfare and environment or require additional local government or state agency consultation.
• Expands local government land use authority to the siting of oil and gas locations and regulation of surface impacts, including the right to inspect and impose inspection fees on operators; further allows counties the authority to mitigate impacts and regulate noise, security, traffic, and other impacts.
• Provides that the Commission’s exclusive authority to regulate oil and gas does not alter, impair or negate the authority of a local government to regulate land use related to oil and gas operations, particularly the siting of an oil and gas location.
• Amends preemption law by specifying that both state agencies and local governments have the authority to regulate oil and gas, and provides that if there is a conflict, the more protective standard controls.
• Amends the legislative declaration of the Oil and Gas Conservation Act to provide that it is in the public interest to regulate oil and gas development to protect public health, safety and welfare/environment (removes “foster” from the mission).
• Requires the Commission to protect and minimize adverse impacts to public health, safety, welfare and the environment and to protect against adverse environmental impacts.
• Amends the makeup of the Commission effective July 1, 2019 to: one industry member, one member with experience in wildlife protection, one member with experience in environmental protection, one member with experience in soil conservation/reclamation, one member who is an agricultural producer or royalty owner, and one with experience in public health, and requires the COGCC Director to hire up to 2 Deputy Directors
• Requires that with a Form 2 APD, the operator must file either (1) proof that the operator has already filed a local government permit to approve the siting of the location, or (2) proof that the affected local government does not regulate the siting of oil and gas locations.
• Requires the Commission to eliminate the current cap on fees and to set a permit application fee in an amount “sufficient to recover the Commission’s reasonably foreseeable direct and indirect costs in conducting the analysis necessary to assure that permitted operations will be conducted in compliance with all applicable requirements of the Act.”
• Provides that it is not hydrocarbon “waste” if nonproduction is necessary to protect public health, safety, welfare and environment.
• Repeals the Commission’s requirement to take into consideration cost-effectiveness and technical feasibility to minimize adverse impacts.
• Directs the Commission to adopt rules to require financial assurance “sufficient to protect adequate coverage for all applicable requirements of the Act”.
• Requires the Commission to adopt rules to require alternative location analyses for facilities located near “populated areas” and that evaluate and address “cumulative impacts” of oil and gas development.
• Requires the Commission to promulgate rules to ensure proper wellhead integrity, including testing of well joints; allow public disclosure of flowline information; determine when inactive and shut-in wells must be inspected before being put into production or used for injection.
• Requires a pooling Applicant to demonstrate proof of ownership of more than 50% of the mineral interest (including consenting interests).
• Requires a spacing Applicant to either prove the Applicant already filed an application with the affected local government to approve the siting of the facility, or proof that the affected local government does not regulate the siting of oil and gas facilities.
• Provides that the operator cannot use the surface owned by a nonconsenting owner without permission from the nonconsenting owner.
• Increases statutory royalty from 12.5% to 15%.
• Directs the Commission to ensure that the unobligated portion of the Conservation and Environmental Response Fund does not exceed 50% of total appropriations from the fund for the upcoming fiscal year, and that there is an adequate balance to support the Commission and environmental response needs.
• Directs the Air Quality Control Commission (CDPHE) to adopt rules to require continuous emission monitoring equipment at oil and gas facilities and to minimize emissions from the entire oil and gas fuel cycle.