Understanding SB19-181 and Its Impact on Colorado’s Oil and Gas Regulations

by Mason Smith on in Blog, Energy

After being signed into law by Governor Jared Polis, Senate Bill 19-181 has sparked uproar and uncertainty across the state of Colorado. Even the Denver Post describes the bill’s passage as something that will dramatically change oil and gas regulations in Colorado. However, not everyone is clear on what this bill actually means. In reality, this new law has far-reaching implications that affect individuals both inside and outside the industry.

What’s in the Bill?

While laws are often filled with confusing language, SB19-181’s Bill Summary opens with a clear intention: “The bill prioritizes the protection of public safety, health, welfare, and the environment in the regulation of the oil and gas industry by modifying the oil and gas statute and by clarifying, reinforcing, and establishing local governments’ regulatory authority over the surface impacts of oil and gas development.” This means that individual counties within Colorado have more power than ever before to determine things like drilling permits, fees, and fines.

In order to implement the law, the Colorado Oil and Gas Conservation Commission is tasked with writing specific rules for counties to abide by. Unsurprisingly, that is a very complicated process. The commission’s very first meeting, intended to be merely procedural, extended to two days and resulted in the postponement of any decisions. It’s estimated that it will take over a year to formally write the rules and get this law fully in place.

Despite the delays, SB19-181 is already affecting several counties. Local governments are seizing the opportunity to exercise their new power and regulate energy extraction in their jurisdiction. Some, like Weld County, are taking it as an opportunity to better support oil and gas drilling. Responsible for 90% of Colorado’s oil and 30% of the state’s gas, the county designated unincorporated parts as a mineral resource area of interest.

On the other side of the county border, Boulder County sees a different opportunity. Section 15 of SB19-181 amends previous law by establishing that local government requirements may be more stringent than state requirements. Based on that, Boulder County commissioners imposed a moratorium on staff accepting or processing new oil and gas drilling applications. The county has paused these applications as they seek to update their own regulations within the new law, and it effectively stops new drilling in Boulder County.

What Does It Mean for Colorado?

Whether some local governments tighten oil and gas regulations and others loosen them, there is a lot at stake. The oil and gas industry supports over 232,000 jobs in Colorado. That equates to $23 billion in wages and $31 billion in money flowing into the state economy. Changing regulations through SB19-181 will most directly threaten the people working in the oil and gas industry, but there will be vast ripple effects past just those who drill, service wells, or own mineral rights.

Businesses in the industry are rightfully concerned that their growth could be stunted. Strategies may need to change depending on how local laws shake out, and many organizations may take a ‘wait and see’ approach by pausing certain operations until the future is clearer. Consider that in May 2018 there were 327 drilling permits approved in Colorado while in May 2019 there were only 41. That massive drop was caused by mere uncertainty before SB19-181 was even signed into law. As companies are either denied permits or refrain from applying for them, many will be affected.

Numerous Colorado industries rely on the purchasing power of those in oil and gas. Places like restaurants, grocery stores, movie theaters, car dealerships, and many others can feel the pain if disposable income stops flowing into the pockets of oil and gas workers. For example, one hotel relies on oil and gas clients for 60% of its business. With all the uncertainty in the air, one of their clients has already cancelled all their rooms until they determine how SB19-181 will affect them. On top of that, there are concerns that the bill will impact downtown Denver’s office market where oil and gas companies lease 4.5 million square feet of space.

Moving Forward Under SB19-181

Denver’s industry make-up is more diverse than ever, yet it’s clear that changes to such a prominent sector can have dire consequences for many people. In the mid-1980’s, the price of oil fell dramatically and plunged Denver and Colorado into a full-on recession. It took years for the region’s economy to recover, and if SB19-181 is abused by local governments, there’s a danger that history will repeat itself. As the rules of the law are developed, it’s wise for oil and gas companies, their employees, and even regular citizens to keep up with the news. Read the law in full, get involved with your local government, and you’ll be in a position to know exactly how SB19-181 affects you.

It’s a crucial time to have the right oil and gas executives on your team. Let us connect you to the best in the industry.


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