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Colo. Senate passes 'sweeping' oil and gas regulation restructuring bill

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

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Colo. Senate passes 'sweeping' oil and gas regulation restructuring bill

The Colorado Senate voted to approve a bill that would give local entities more regulatory authority over oil and natural gas drilling operations and well locations in the state.

Colorado Senate lawmakers on March 13 passed State Senate Bill 181, which would reduce the authority of the Colorado Oil and Gas Conservation Commission, or COGCC, and would hand some control over oil and gas production activity to local governments. A section of the bill gives local entities authority over siting, land use and impacts of oil and gas operations, a change from current law, which gives COGCC ultimate authority over drilling permit reviews and approvals.

The bill, which was introduced March 1 by Democratic lawmakers in the state, would also change rules on so-called forced pooling, a measure that combines parcels of land from property owners for use in oil and gas extraction and then portions out revenues to the landowners involved. SB 181 would require more than 50% of landowners to agree to the terms of forced pooling, changing the current state law requiring approval from just one landowner.

Senate Majority Leader Steve Fenberg previously said that the drilling regulations had lagged technological advances made in the industry over the past years. "This is the most sweeping oil and gas reform the state has ever seen, but at the same time, it's incredibly reasonable and common sense," the Democratic State Senator said in a Feb. 28 briefing. "We haven't really done anything since the '50s."

Moody's Investors Service was critical of the bill, previously saying it would pose a threat to the industry in its current form. "The bill was written without apparent input from the energy industry, and its sudden appearance for consideration in a committee hearing heightens the legislative and regulatory risks for Colorado oil and gas producers," the ratings agency said.

Moody's said it expects the bill to mostly affect the Front Range urban corridor, including Denver, while more rural ares are likely to experience less changes.