Is the Third Time the Charm? - Initiative #97 Seeks a Five-Fold Increase in Setback Distances Between Homes and New Oil and Gas Development in Colorado
Following on the heels of failed attempts in 2014 and 2016, proponents of greater restrictions against new oil and gas exploration and production activities in Colorado are once again seeking to increase the regulatory setback distance between homes and new oil and gas development in the state. Currently, proponents of a ballot initiative – Initiative #97 – are working to obtain enough signatures to place the proposal on the Colorado ballot in November 2018. If placed on the ballot and approved, the measure would increase setback distances five-fold – from 500 feet to 2,500 feet. Backers of Initiative #97 have until August 6, 2018 to collect some 100,000 or more valid signatures to assure its placement on the November 2018 ballot. If placed on the ballot and approved, Initiative #97 could have a devastating impact on new oil and gas exploration and production activities in Colorado.
Background Leading Up to Initiative #97.
- Establishment of a 500-Foot Setback in 2013.
In early 2013, the Colorado Oil and Gas Conservation Commission (“COGCC”) approved new rules establishing more stringent setback distances in Colorado between new oil and gas development and occupied buildings. Aimed at mitigating the perceived effects of drilling near occupied buildings, the new rules included setback distances of 500-feet from “Residential Building Units,” such as single-family residential homes and 1,000 feet from “High Occupancy Building Units” such as schools, hospitals and nursing homes. Mitigation measures relating to noise, lighting and dust were incorporated into the 2013 rules. The rules became effective in August 2013.
- First Attempt to Increase the 2013 Setback Distance: Initiative #88.
Attempts to increase the setback distance established under the 2013 rules began almost immediately after adoption of those rules and continues today. In 2014, an initiated constitutional amendment, known as “Initiative #88,” was pursued with the intent of placing it on the Colorado state ballot in November 2014. Initiative #88 sought to change existing setback requirements in the State Constitution to require any new oil or gas well to be located at least 2,000 feet from the nearest occupied structure but allowing a landowner to waive the setback requirements for any structure located on the owner’s property.
However, negotiations were conducted among state-elected officials, including Governor John Hickenlooper (who was concerned with the possible state-wide economic harm that might result in the event this and other initiatives were approved) and U.S. Representative Jared Polis (a key proponent of both the 2014 and 2016 ballot initiatives, who is now the Democratic Party nominee for Governor of Colorado). As a result of those negotiations, the governor agreed to create a task force that would conduct an extensive review of oil and gas activities in localized settings in hopes of finding a sound alternative to the ballot measures, and Initiative #88 was withdrawn.
A governor-appointed Oil and Gas Task Force was established in September 2014 and, after extensive review of various issues surrounding oil and gas operations, the Task Force submitted nine non-binding recommendations to the governor in early 2015 that largely focused on increased collaborative efforts between the oil and gas industry and local governments regarding pending and future oil and gas activities. Several of those recommendations made their way into state law.
- Second Attempt to Increase the 2013 Setback Distance: Initiative #78.
Despite the actions taken by the Task Force, a second initiated constitutional amendment, known as “Initiative #78,” was filed in late 2015 as a prelude to the next Colorado state ballot in November 2016. Initiative #78 sought to once again change regulatory setback requirements for new oil and gas development in the state. Specifically, the proposal would require a 2,500-foot mandatory setback between new oil and gas development facilities and any “Occupied Structures,” including homes, schools, and hospitals, in addition to “Areas of Special Concern,” including lakes, creeks and rivers, regardless of whether situated on federal or non-federal lands.
Initiative #78 became a source of intense debate among advocates and opponents of increased regulation of oil and gas activities in the state, and spurred the development and issuance of a COGCC-commissioned report in May 2016. In the report, the COGCC estimated that if successfully passed, Initiative #78 would eliminate approximately 90% of the state’s surface acreage, including federal lands, for new oil and gas development.
In August 2016, after the Colorado Secretary of State’s signature validation process, Initiative #78 was determined to have fallen short of the slightly more than 98,000 valid signatures necessary to be placed on the November 2016 ballot.
Spotlight on Initiative #97.
- Third Attempt to Increase the 2013 Setback Distance: Initiative #97.
The latest incarnation of a more stringent setback rule, Initiative #97, was initially filed with the Colorado Office of the Secretary of State in January 2018 and the initiative was approved by the state office in March 2018, clearing the proposal for signature gathering. The general signature submission deadline for the initiative is August 6, 2018, and it is expected that more than 100,000 valid signatures will be required in order for the proposal to be placed on the state’s November 2018 ballot.
- How Initiative #97 Compares Similarly with Prior Proposals.
While Initiative #97 seeks to change the Colorado Revised Statutes rather than modify the state’s constitution, its aim remains consistent with former Initiative #78 – requiring a 2,500-foot buffer zone around “occupied structures,” including homes, schools and hospitals, and “vulnerable areas,” including playgrounds, permanent sports fields, public parks and open spaces, public drinking water sources, reservoirs, lakes, rivers, perennial and intermittent streams, and creeks. The term “vulnerable areas,” as used in Initiative #97, is analogous to the “areas of special concern” term used in Initiative #78.
The term “oil and gas development” is broadly defined under Initiative #97 to mean:
- exploration for oil, gas or other gaseous and liquid hydrocarbons;
- drilling, production and processing of oil, gas, or other gaseous and liquid hydrocarbons;
- the treatment of waste associated with such exploration, drilling, production, and processing; and
- hydraulic fracturing.
Presumably, to the extent “new” oil and gas development occurs, it will be required to adhere to the 2,500-foot buffer requirement, subject to the federal land exclusion, as further explained below. While the term “new” is not defined under the proposed initiative, Initiative #97 states that it takes effect upon official declaration of the governor, is self-executing, and will apply to oil and gas development that is “permitted” on or after the effective date. Consequently, it appears that any oil and gas development that is “permitted” (an undefined term under the proposal but one that appears to mean a permit to drill a well) on or after the effective date of Initiative #97 will be subject to the requirements thereunder. Additionally, Initiative #97 expressly states that the reentry of an oil or gas well previously plugged or abandoned constitutes new oil and gas development.
Finally, as was the case for Initiative #78, Initiative #97 would once again allow state or local governmental entities to adopt provisions requiring new oil and gas development to be located a larger distance away from occupied structures or vulnerable areas than the 2,500-foot distance established under the new proposal. In the event that two or more local governments with jurisdiction over the same geographic area were to establish different buffer zone distances, the larger buffer zone would control.
- How Initiative #97 Differs from its Predecessors.
Initiative #97 differs from its predecessors in two very important respects.
- Expansion of the “vulnerable areas” definition
Initiative #97 would allow state and local governments (the latter including counties, cities and towns within the state) to designate “any additional vulnerable areas,” without any further guidance on the subject. For example, under Initiative #97, vulnerable areas do not include riparian areas, even though riparian areas were included as areas of special concern under Initiative #78. Riparian areas are generally viewed as interfaces between waterways and lands; typically, vegetation that is adapted to wet conditions. Under the new proposal, state or local governments may elect to broaden the vulnerable areas definition to include riparian areas.
Given that a number of cities and towns in Colorado, including Boulder, Broomfield, Lafayette, Longmont and Fort Collins, have all attempted, unsuccessfully, to restrict or outright ban hydraulic fracturing in the recent past, it is not unreasonable to expect that there could be a proliferation of localized or even state amendments to the vulnerable areas term, should the initiative succeed.
- Federal land exclusion.
Initiative #97 would require a 2,500-foot buffer around occupied structures or vulnerable areas only to the extent the new oil and gas development was not on federal land. Federal lands are specifically excluded from coverage under Initiative #97, unlike the case when Initiative #78 was being pursued. According to a new 2018 study pursued by the COGCC, this proposed federal land exemption, which in Colorado would cover an estimated 36% of the state’s total surface area, does keep land available for new oil and gas development in western Colorado, but has little impact on lands east of the Rockies.
- Expansion of the “vulnerable areas” definition
The Potential for Devastating Consequences: Future Oil and Gas Development upon Implementation of Initiative #97.
During 2018, the COGCC conducted a geographic information system (“GIS”)-based impact assessment for Initiative #97 and developed a report, similar to the May 2016 report prepared by the agency in connection with former Initiative #78. The methodology and data sources for the 2018 study remain nearly identical to those used for the May 2016 report. The 2018 report does not directly analyze the extent to which mineral development would be impacted by the decrease in surface acreage available for new oil and gas development facilities or hydraulic fracturing activities. Rather, the COGCC relies upon GIS assessments to focus on the effects of the proposed setback distance on land surface.
Results of the COGCC’s 2018 study reveal that, if the 2,500-foot buffer sought under Initiative #97 were implemented,
- if federal lands are considered, an estimated 54% of Colorado’s total land surface would be unavailable for new oil and gas development; and
- if the focus is placed solely on non-federal land in Colorado, an estimated 85% of the non-federal lands would be unavailable for new oil and gas development.
Focusing on the top five oil and gas producing counties in the state – Weld, Garfield, La Plata, Rio Blanco and Las Animas counties – adoption of Initiative #97 and its 2,500-foot buffer would remove from new production 61% and 94% of the respective total land surface and non-federal land surface available in the combined five counties:
|Colorado County||% of Total Surface Area Eliminated||% of Non-Federal Surface Area Eliminated|
Removal of the indicated total surface area and non-federal surface area lands across Colorado, and in the five top producing counties in the state in particular, from new oil and gas development would have a significantly adverse impact on the oil and gas industry in the state. There are public reports indicating that oil and gas exploration and production operators in the state are filing for new drilling permits at or near record rates, which may be due, in part, to concerns regarding the impending Initiative #97. Filing for those drilling permits now would beat the effective date for new oil and gas development under Initiative #97, should the proposal make its way onto the ballot and then pass in November 2018.
D-Day: August 6, 2018.
All eyes are cast upon August 6, 2018, which is the deadline for obtaining the valid signatures necessary to place Initiative #97 on the November ballot. Somewhere in the neighborhood of 100,000 valid signatures are necessary. It is expected that the Colorado Secretary of State will announce the signature totals soon after August 6, 2018. If Initiative #97 is successfully placed on the ballot, citizens of the state can expect three months of intensive campaigning for and against the proposal.
Stay tuned for further developments.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.