Colorado looks to incorporate environmental justice into new oil, gas rules

As Colorado implements and defines a slate of new rules affecting the states' oil and natural gas industries, officials are also looking to tackle "environmental justice" issues, forcing companies seeking well permits to take into account the proximity and number of minority and low-income residents living nearby, which would make it the first major oil-producing state to do so.

The Colorado Oil and Gas Conservation Commission, or plans to study proposed oil and gas well drilling projects more closely when proposed near minority and low-income communities under rules being adopted to more comprehensively protect public health. Last week, the COGCC began holding a series of public hearings to finalize all new rules affecting the industry from the sweeping mandates set in Senate Bill 181.

The Democratic-controlled state legislature passed Senate Bill 181 in spring 2019. The bill shifted the focus of the COGCC, the state's oil and gas regulatory agency, from prioritizing production to protecting public safety and health, wildlife and the environment. The COGCC also has to start considering the cumulative effects of oil and gas field development rather than a single well or drilling pad.

Commissioner Karin McGowan said during the hearings last week she considers it important for the state to infuse environmental justice into its regulations.

The industry continues to engage the state during the codification process of SB 181.

"The industry is committed to the rulemaking process set forth by Senate Bill 181, and we will continue to engage with all stakeholders," said Lynn Granger, executive director of Colorado Petroleum Council. "The uncertainty and instability are tough right now. We are all working really closely right now with the commission to keep operations going, but there is a lot of concern."

The COGCC hearings on the proposed rules adapting to SB-181 will continue throughout September. A final decision on the swath of regulations reform is expected sometime in October.

Governor Jared Polis, a Democrat, said earlier this year he expects codification of SB 181 to "end the oil and gas wars" in the state. He was referring to the recurring ballot initiatives pushed nearly every election cycle attempting to limit oil and gas drilling in the state. More recently, under the economic downturn suffered due to the coronavirus pandemic, he pledged to opposed all ballot initiatives regarding the oil and gas industry through 2022.

Until the new regulations are completed, the COGCC has tightened scrutiny of permitting well sites proposed within 2,000 feet of an occupied building. This has already prompted the number of drilling permits issued to decline considerably in 2020 compared to this time in 2019.

Production has also declined, although that is more related to operators voluntarily reducing rig activity during the crude price crunch. Over the past four months, natural gas production in Colorado's Denver-Julesburg Basin has averaged 2.28 Bcf/d, according to data by S&P Global Platts Analytics. It averaged 2.52 Bcf/d over the first four months of the year. Oil production fell from 481,000 b/d over the last four months compared to 521,000 b/d over the first four months of 2020. It is not expected to start rebounding until well into 2021, according to current projections based on drilling activity.