Colorado oil industry gets overhaul by regulators

By Catherine Traywick on 4/3/2019
Oil derrick. Photo: Anadarko.

DENVER (Bloomberg) -- Colorado’s legislature passed a sweeping overhaul of the state’s oil and natural gas laws, giving local governments more power to regulate drilling in one of the nation’s top crude-producing regions.

The bill, which was opposed by oil and gas companies, now heads to the desk of Democratic Governor Jared Polis, a longstanding proponent of tightening public health and safety standards around oil and gas development. The reforms passed Wednesday come as Colorado pumps record volumes of crude, primarily from the Denver-Julesburg basin situated on the outskirts of Denver.

Under the measure, explorers such as Anadarko Petroleum Corp. and Noble Energy Inc. could face new levels of oversight from local governments, which would be able to regulate the siting of surface infrastructure and impose other rules around drilling. The legislation also shifts the focus of the state’s energy regulator from fostering oil and gas development to protecting public health, safety and the environment.

What Bloomberg intelligence says

Greater local control over regulating oil and gas operations, including the citing of drilling locations, would likely put some acreage out of reach for companies such as PDC and SRC Energy, particularly closer to more urban areas. -- James Blatchford and Brandon Barnes, energy policy analysts.

The shale boom has vaulted Colorado to the nation’s no. 5 oil producer, ahead of both Alaska and California in crude output. But proximity of oil and gas development to Denver’s suburbs has raised concerns about health and safety, especially after an Anadarko gas line explosion in 2017 killed two people and leveled a home.

While the legislation passed Wednesday would change the way drilling is permitted -- and was vehemently opposed by the oil and gas industry -- it could alleviate some public concern around development, according to Washington-based Height Securities.

It "would restore investor certainty by stabilizing the volatile politics in ‘Not In My Backyard’ communities along the Front Range," analysts at Height said in a note last week. "By addressing local issues related to health, safety, and nuisance, Colorado officials can ease the tension between industry and residents."

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