Curious Colorado: More Of Your Senate Bill 181 Questions Answered

Apr 3, 2019

The Senate passed sweeping oil and gas legislation on Wednesday, confirming several House amendments requested by industry representatives concerned about its economic impacts. The bill now heads to Gov. Polis’ desk, where he’s expected to sign it.

We asked you through KUNC’s Curious Colorado what questions you have about Senate Bill 19-181. Check out the first set of questions and answers here. We compiled more answers below to help clear things up:

J.D. Ruybal, Windsor: (What is) the “fair and reasonable” being added (to the bill)? Is this not just another vague legal term?

As bills move through the legislative process, lawmakers often amend the language within them multiple times. It’s usually a part of compromising with bill opponents. This is also the case with SB 181.

Over the past couple of weeks, lawmakers have added the terms “necessary and reasonable” to the bill. The addition was requested by oil and gas industry lobbyists. This qualifier specifically refers to any new rules local governments (i.e. cities and counties) decide to enact with their newfound powers.

It’s meant to ensure local governments aren’t banning industry development for no reason. Here’s an example of some legalese from the bill:

"Minimize adverse impacts means, to the extent necessary and reasonable, to protect public health, safety, and welfare and the environment by avoiding adverse impacts from oil and gas operations and minimizing and mitigating the extent and severity of those impact that cannot be avoided." 

Anonymous, Penrose: Will the oil and gas industry be able to influence local elections?

The bill has nothing to do with local elections. It focuses on amending state laws around the industry’s operations. The only vote required to pass it has taken place at the state capitol in Denver.

However, to answer your question - yes. The industry is already and will continue to be a big player in local elections. In November 2018, pro-industry groups dumped tens of millions of dollars into TV ads, rallies and campaign materials to oppose Proposition 112 . They’ve also funded local TV ads opposing SB 181, even though it isn’t a ballot measure being considered by Colorado voters.

Anonymous, Jefferson County: Passing the bill will at best slow, or stop, drilling in select Colorado areas for "weeks, months or possibly years.” With the amount of money that oil/natural gas production puts back into the Colorado economy, how have our legislators determined this loss of revenue will be made up?

Let’s be clear: the bill does not immediately stop the thousands of active wells already operating in Colorado.

What might happen is that cities and counties may put a stop to processing drilling permits for new wells while they draft local laws around oil and gas production. That’s exactly what’s going on in Adams County right now. County commissioners there just approved a temporary moratorium until they can suss out changes to their local rules.

This brings up one of the main arguments against the bill from the oil and gas industry - that tax revenues will suffer because of the slowing down of drilling permit approvals. I haven’t seen any economic impact studies on the effects of this bill, but I imagine we will see them in the very near future.

For some context, here’s what the state’s Department of Revenue says it receives in severance taxes from oil and gas drilling in Colorado:

 

Credit Colorado Department of Revenue

The bill’s supporters have said that economic impacts to the state will be minimal.

James Poole, Loveland: Is anyone looking out for the interests of the owners of mineral rights leased by oil companies?

Yes, parts of the bill address mineral rights owners. Specifically, the threshold for “forced” or “statutory” pooling .

That's when companies can drill in a certain area without consent from all associated mineral rights owners. The practice has been around for decades, but is facing fresh criticism as Colorado's population balloons and oil and gas development creeps closer to neighborhoods north of Denver.

Simply put, the bill proposes raising the threshold a company needs before it can pool an entire group of mineral owners. The bill would require at least 45 percent of owners within a "drilling unit" to lease their rights in order do that.

Right now, that number is far less — just one willing mineral owner is needed to start the pooling process.

SB 181 also proposes raising a nonconsenting owner's initial royalty rate from 12.5 percent to 15 percent.

The bill’s supporters say the change will give everyday mineral rights owners more say in the development of their property.