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Colorado locked in cycle of anti-drilling ballot measures: House majority leader

Highlights

Proposition 112 would effectively ban new drilling

'No' campaign outspends supporters 30 to 1

Measure likely to return in 2020 if defeated in November

Washington — Colorado's oil and natural gas industry will likely defeat an effective drilling ban on November's ballot, a key state lawmaker predicted Friday, but she cautioned that the effort would return stronger in 2020 if state legislators do not find common ground on regulating abandoned wells and other issues.

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House Majority Leader KC Becker said on a Baird conference call that oil and gas interests are spending $30 million to defeat Proposition 112, compared with $1 million by supporters of the measure.

The proposition on the November 6 ballot would increase oil and gas drilling setbacks to 2,500 feet, from 500 feet, which would effectively ban most new drilling in the prolific Denver-Julesburg Basin, where the core acreage overlaps with the state's most populous areas.

Colorado's oil production would sink to 275,000 b/d by the end of 2023, a 54% drop from current projections, and gas output would fall to 1.9 Bcf/d, down 45% from the current outlook, according to S&P Global Platts Analytics.

The figures reflect natural well declines, assuming operators would leave currently producing wells in place but not drill any new wells after 2020, as Colorado's approved drilling permits are valid for two years. Colorado is the sixth top producer for both oil and natural gas.

Becker, who supports Proposition 112, said state lawmakers will be under tremendous pressure to enact some checks to oil and gas development even if the measure fails. She mentioned funding for orphan wells and changes to air and water monitoring as potential ways to address concerns.

"Just waiting until 2020 is going to create such high tensions, I don't think that's in anyone's interest," she said. "You'll see more happening at city councils all across the Front Range if we don't get something done right away."

Baird analyst Ethan Bellamy said Proposition 112 has thrown Colorado's oil and gas industry into turmoil.

Bellamy estimates the measure could affect as much as 550,000 b/d of Colorado production five years out, given a current best-case production outlook of 800,000 b/d sinking to 250,000 b/d if the measure passes.

"That's enough to impact the global supply outlook," he said in an earlier interview. "It has the potential to tip Colorado into recession and set off a nasty tax-cut battle."

-- Meghan Gordon, meghan.gordon@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com