Colorado Lawmakers Weigh Dramatic Overhaul of Oil Drilling Laws

(Bloomberg) -- A proposal to overhaul Colorado’s drilling laws has its first hearing today, pushing the bill one step closer to a vote by the Democrat-controlled state legislature.

The legislation, supported by Governor Jared Polis, would significantly change the way drilling is permitted and amend elements of state law that have been instrumental in developing Colorado’s most prolific oil play, the Denver-Julesburg basin. Anadarko Petroleum Corp., Noble Energy Inc. and Extraction Oil and Gas Inc., are among the biggest acreage holders in the basin.

Colorado Lawmakers Weigh Dramatic Overhaul of Oil Drilling Laws

While Colorado has some of the strictest environmental regulations of any oil-producing state, the law has generally favored development, granting the energy regulator broad authority over siting and drilling. Below are a few of the key changes proposed:

Current LawProposed Change
ENERGY COMMISSIONCommission’s role is to foster development and enable maximum efficient production rates.Commission’s mission is to protect public health, safety and the environment. 
STATE PREEMPTIONThe state’s interest in energy development preempts the interests of cities and counties. Regulator can unilaterally authorize siting.Cities and counties have new authority to regulate siting of oil and gas facilities. Operators would need to apply for local permits before applying for state permits. 
FORCED POOLINGMineral interests can be forcibly pooled if one owner in a drilling unit consents. Mineral interests can be forcibly pooled if 50 percent of owners in a drilling unit consent. 
ROYALTY RATESNon-consenting mineral owners receive 12.5 percent of royalty rate.Non-consenting mineral owners receive 15 percent of royalty rate.
NUISANCE Oil and gas producers are exempt from counties’ authority to regulate noise Exemption would be repealed. Cities and counties would be able to regulate a variety of nuisance impacts of development

As the proposed changes center on public health and safety, they would disproportionately affect Denver-Julesburg producers, whose acreage overlaps with Denver’s expanding suburbs.

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