Local governments seek stronger voice in oil and gas exploration | SteamboatToday.com

Local governments seek stronger voice in oil and gas exploration

— Sweet crude oil and natural gas are never harvested in isolation in Colorado.

Their careful and often complicated withdrawal from the earth is regulated by 175 pages of state rules, a team of 15 inspectors and the local governments that preside over the land where the precious resources are sucked from the ground.

"It's a highly regulated, highly technical, highly professional, science-driven industry, and our oversight is robust," Colorado Department of Natural Resources spokesman Todd Hartman said. "These are serious operators who are very serious about the work they do, and they often live in the communities where they operate."

But with the quality of air, water and the public health all potentially at stake, the relationship between the Colorado Oil and Gas Conservation Commission, which regulates the state's energy industry, and local governments in Colorado is being tested, and sometimes fractured, as oil and gas exploration increases and stretches into communities like Routt County and Steamboat Springs.

Two powers

The Colorado Oil and Gas Conservation Commission, or COGCC, is not alone in overseeing energy exploration in Routt County.

Local governments regulate the industry during the permitting process for oil and gas wells, but their power seems to end at the impact energy exploration has on roads and public services. In Hayden, for example, a recent request by Shell Oil to drive heavy equipment trucks on a town road was denied because of safety concerns.

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But the well sites the trucks travel to ultimately are regulated by the COGCC. The agency, which also is tasked with ensuring that operators follow state and federal water and air quality rules, polices the drilling operation from its impact on the environment to the types of fluids it injects into the ground.

The regulatory environment is complex, and foreign to many.

"There is a lot of misinformation about the industry and about the impacts, and we're dealing with that along with addressing legitimate concerns," Hartman said. "As drilling occurs in greater proximity to more people, then it can raise concerns, particularly in communities that don't have a lot of history in oil and gas" exploration.

A vast field

The COGCC polices the technical aspects of the drilling operation, including setbacks mandated for hydraulic fracturing operations. The commission's team of 15 field inspectors, who each cover multiple counties, creates extensive digital histories of all of the wells in their jurisdictions.

But the field of wells the inspectors must cover is vast, and the numbers grow each month.

Some engaged Routt County residents question whether COGCC's inspection team is large enough to monitor the compliance of the active wells that numbered 46,958 at the start of February and continue to grow each month. COGCC performed 12,239 field inspections across the state in 2011, down from 17,075 in 2010, according to the agency's January staff report.

"It's like your police force," said Rodger Steen, co-chairman of the Community Alliance of the Yampa Valley's Oil and Gas Committee. "The more people you have, the better your compliance is going to be."

Kris Neidel, the COGCC field inspector assigned to Routt County, is based in Steamboat Springs but also inspects wells in Moffat, Summit, Grand, Eagle and Jackson counties.

Steen said because of the complexity of well sites, he doesn't think there are enough boots on the ground to ensure all of the oil and gas operators are monitored sufficiently for spills and other hazards.

He said Routt County could use more specialized staff of its own to visit the wells more often.

"We believe there are inspection deficiencies here," Steen said, noting the size of the inspection team relative to the number of wells in Colorado. "The deficiencies can be minimized more and more with the addition of more specialized inspectors."

Finding a balance

The two bodies primarily responsible for regulating the industry have a complex relationship that today is being strained in some parts of the state as more drilling permits are issued along the Front Range and above the Niobrara Shale formation thousands of feet below the surface of Northwest Colorado.

Steen said that because what happens at a well site doesn't always stay contained at the well site, local governments should assert more control in regulating such things such as air pollution and water quality, items the COGCC maintains are the state's responsibility to monitor.

"The noise the wells make and the things they emit affect the entire county," Steen said.

But state regulators and some oil and gas operators fear the addition of several sets of local regulations that differ from county to county could prove to be exhaustive and unnecessary, and ultimately would be pre-empted by existing state rules.

Still, Stephen Lindsey, Quicksilver Resources' senior director of government and community relations, said it always is in the best interest of an operator to meet or exceed regulations.

"It's a balance between an economic engine, jobs and tax revenue for the state and local government, and the concerns that local populations have about the activity," Lindsey said about the regulatory environment.

His Fort Worth, Texas-based company will find out March 12 whether Routt County will approve a permit for a second exploratory oil well on Wolf Mountain about six miles northeast of Hayden. The county's Planning Commission gave its approval last week.

Routt County hosts 43 active wells, and only one was drilled last year. The COGCC approved 10 well permits here last year. One permit currently is pending.

While Routt County's Planning Department has a local governmental designee who works closely with the COGCC and operators like Quicksilver during the permitting process, the relationship between the COGCC, operators and leaders of other counties has not been as amicable.

Shades of gray

Robbie Guinn, vice president of SG Interests, a Houston-based oil and gas operator, said the line between the COGCC's regulatory authority and that of local governments in Colorado has proven elusive to his company.

"That line is gray, and the courts have not defined it very well," he said, noting it is costly litigation that so far has helped to clarify some of the cloudiness surrounding regulating authority in Colorado. "There needs to be more clarity."

SG Interests operates in five states and maintains close to 30 active wells in northwest Gunnison County, Guinn said. His company has taken exception to Gunnison's oil and gas regulations that require wells to operate at least 500 feet from water sources. COGCC rules put the setback from certain water bodies at 300 feet.

"One of the problems with local jurisdictions is if they have multiple sets of rules in addition to state regulations, the permitting process becomes so cumbersome that it is difficult to get a permit in a timely fashion," Guinn said.

SG Interests last year sued Gunnison County's commissioners, claiming the additional regulations they imposed, including the stricter setback from water sources and a longer permitting process, were preempted by state law.

However, Gunnison County celebrated a legal victory in January when a district court judge handed down a summary judgment that reaffirmed a county's oil and gas regulations are not assumed to be pre-empted by COGCC regulations, and that an operator must provide evidence that the rules hindered its ability to operate.

Guinn said Friday that the lawsuit is on hold while SG Interests and the county work to find other ways to "settle the matter."

Barbara Green, a land use attorney who has represented Gunnison County, said the summary judgment and other court cases before it show there is plenty of room for counties to have a louder voice in the regulation of oil and gas exploration. Because they are so unique and feel impacts from oil and gas exploration differently, counties should have unique regulations to mitigate any negative impacts of drilling, she said.

"It's not like the oil and gas commission is over counties with their regulations," she said. "They are coequal when carrying out the will of the state, and in some cases (counties) are superior to the state body."

She said what is clear is that no county has the authority to ban oil and gas operations completely, and their power to regulate the industry is derived from their land use codes. What is not yet clear is whether counties can ban oil and gas operations from certain zoning classifications or whether some county rules on the actual drilling process would be pre-empted by state law. She added that preemption of state law is never assumed and can be confirmed only if the operator can prove a county-imposed regulation creates an "operational conflict," a difficult feat that requires an evidentiary hearing.

State steps in

Gov. John Hickenlooper, who recently said the state's 64 counties shouldn't each have their own set of oil and gas regulations, on Wednesday signed an executive order to form a task force that will attempt to clarify the regulatory environment in Colorado.

According to the order, the 11-member task force will be represented by two members of the COGCC, as well as by leaders of the state Legislature and directors of such groups as the Colorado Conservation Voters and the Colorado Municipal League.

The group will work to harmonize regulatory authority over such items as noise abatement, air quality and setbacks, according to the executive order.

Steen said only time will tell if the new group will do anything to help protect the land, water and people of Routt County.

"The concept is good, but at this point, we really don't know what the commission will do," he said. "There's no guarantee this will help. If they're willing to bring (regulations) up to current technology and make the industry meet stricter standards, then I feel most counties will accept it. If they come up with no changes to the rules, then there will be no solutions generated to this problem."

Operators like Guinn were quick to welcome the formation of the task force.

"I think it's a positive step," he said. "The state needs to define (the regulatory) line. If it doesn't, there's going to be more and more litigation, which doesn't answer the question."

Not wasting time

Counties aren't waiting for the state to harmonize the muddled regulatory environment for them.

Routt County's Board of Commissioners met with COGCC interim director Thom Kerr on Feb. 21 to discuss the county's own desire for baseline water testing and quick responses to noise complaints, especially in rural Routt County, where piercing silence usually pervades.

"There's an expectation from the public we can leap buildings in a single bound," Commissioner Doug Monger said two weeks before that meeting. "There's a misrepresentation that we have all this power, when the frustrating part is we have the power given to us by the state Legislature, and only that power."

Commissioner Diane Mitsch Bush said that as the county rolls out a new template for approval of oil and gas permits, it is trying to avoid the costly and lengthy lawsuits that can arise when oil and gas operators think municipalities have overstepped their authority with local regulations. She said it continues to be a difficult task to find a balance between state and local control of the energy industry.

"If we regulate to our satisfaction, our regulations could be pre-empted (by state law) and lead to a court case," she said. "But if you err on the side of being overly concerned about pre-emption, then you can end up with polluted air and watersheds."

Still, she said she would rather support regulations to protect water and air quality rather than under-regulate.

Buying time

As wells and horizontal drilling operations creep closer to their population centers, some Colorado counties and municipalities are buying more time to examine their regulations to ensure they are prepared to mitigate any impacts from the energy industry.

Boulder County and the city of Colorado Springs recently imposed moratoriums on accepting new permits for oil and gas drilling.

New oil and gas exploration is suspended in Colorado Springs until May, and in Boulder County until August. The city of Longmont is staying new oil and gas permits.

With the exception of Mitsch Bush, Routt County's commissioners opposed a similar moratorium on new permits and instead expressed confidence in the regulations they already have in place.

However, an online petition that asked the commissioners to reconsider their opposition to a stay on new permits was signed by 3,431 Colorado residents, including 861 from Routt County, said Kyle Elston, the Stagecoach resident who started the petition.

"I think we have all the tools in our toolbox necessary to deal with the issues of oil and gas permits," Commissioner Monger said in January in response to the petition. "We probably have the strongest set of regulations in the state."

Educating the public

Tisha Schuller, president of the Colorado Oil & Gas Association, said the renewed interest in energy exploration continues to pack town hall meetings across the state, especially along the Front Range.

She said counties without a recent history of energy exploration are concerned about the impacts of oil and gas production and often are moving to adopt new sets of regulations to address the concerns of their constituents.

"The No. 1 piece of misinformation about oil and gas regulations is that the oil and gas industry is unregulated," she said. "That is a pervading sentiment. It's really scaring people. They bring their babies (to the meetings), and they are worried about their health. I want them to know the industry is regulated, and there are a number of controls."

She said initial meetings in municipalities about oil and gas exploration tend to start out heated, but as the conversations continue, they become more fact driven and ultimately more meaningful.

"In the beginning, the meeting is dominated by misinformation," she said. "But after about three meetings, the emotionally charged conversations turn to ones more about practical day-to-day engagement between the oil and gas industry and our community."

She said the COGCC and COGA are adding more personnel to work with local governments.

"What I found is that a year ago, local government wasn't even in COGA's job description," Schuller said. "This is quite a transformation for us as we recognize that this is where community members want to engage."

Schuller acknowledged that no matter the strength of the regulations or the amount of outreach and education her organization conducts, there always will be opposition to the energy industry.

"Not everyone is going to want the development as their neighbor, and there are going to be disagreements," she said. "But that doesn't stop us from wanting to engage."

To reach Scott Franz, call 970-871-4210 or email scottfranz@SteamboatToday.com

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