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Colorado voters reject oil, gas drilling setback rule 58-42

Denver — Colorado voters overwhelmingly rejected a measure which would have required drilling of oil and gas wells to be at least 2,500 feet away from occupied structures and vulnerable areas, such as parks and waterways, instead of 500 feet, after the local oil and gas industry poured more than $30 million into defeating the measure.

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The measure was losing 57.7% to 43.3% as of Tuesday night, according to the Colorado Secretary of State's Office. It needed 50% or more to pass. If the proposition had passed, it would have crushed oil and gas production on state land, according to the Colorado Oil and Gas Conservation Commission.

Colorado's drilling setback proposal would have banned most new drilling in the prolific Denver-Julesburg Basin, located just north of Denver. Surface area available for drilling would plummet by 78% in Weld County, the core of the DJ Basin, and 85% on all state-owned lands, according to the COGCC.

Oil and gas industry supporters were worried that the setbacks would have crippled an industry that employs nearly 30,000 people directly and contributes $31.4 billion to the state's economy each year.

"We're grateful that Coloradans stood with the energy sector to oppose this measure. I want every Coloradan to know that we are committed to developing our resources in a responsible manner that protects the environment and keeps our employees and communities healthy and safe," said Dan Haley, CEO of the Colorado Oil and Gas Association.

In preparing for the worst, several producers applied for as many drilling permits in advance of the election as possible, as the permits would be grandfathered in and have a shelf life of two years. The oil and gas industry invested about $36 million into defeating the proposition. In comparison, the opposition group, Colorado Rising, spent less than $1 million in promoting Proposition 112.

If the proposition had passed, the state's oil production would sink to 275,000 b/d by end-2023, a 54% decline from current projections, and natural gas output would fall to 1.9 Bcf/d, down 45% from the current outlook, S&P Global Platts Analytics estimated.

"We appreciate our fellow Coloradans' support for responsible energy development," said Chip Rimer, senior vice president of global services at Noble Energy, one of the top Colorado producers. "This measure was an extreme proposal that would have had devastating impacts across the state on jobs, education and numerous other programs important to each of us. Moving forward we will continue working together with all stakeholders to develop solutions that ensure we can continue to deliver the energy we need, the economy we want and the environment we value."

The victory for the industry occurred despite an extremely high output by Democratic voters, which resulted in Democrats winning most major statewide elections, including governor, secretary of state, state treasurer and attorney general.

However, Proposition 112 was denounced by the current Democratic Governor John Hickenlooper, as well as by both gubernatorial candidates, including Tuesday night's winner Democrat Jared Polis.

"Out-of-state interest underestimated Colorado voters," said Tracee Bentley, executive director of the Colorado Petroleum Council, a local division of the America Petroleum Institute. "The voters understood this was a hit to Colorado's economy." -- Brandon Evans, bevans@spglobal.com

-- Edited by Geetha Narayanasamy, newsdesk@spglobal.com