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Project Permitting under Senate Bill 19-181 in a Nutshell

Author: Lauren Thompson

Senate Bill 19-181 requires three rulemakings to be undertaken by the COGCC, as well as revising rules to comply with additional statutory changes made by the bill. Additionally, the Commission endeavored to streamline and overhaul the rules by reordering rules to be more logical, eliminating duplicative or unnecessary rules, and making updates to use clearer language and eliminate typos. The rules have had their effective date postponed until November 1, 2020.

The new rules and changes to the process will impact how the Commission organizes its processes, the substantive elements it must evaluate, and the priorities it must apply in its evaluation of proposed projects. The following is a brief synopsis of the proposed changes, particularly as they will affect the permitting process, as stated in a Statement of Basis, Specific Statutory Authority, and Purpose, New Rules and Amendments to Current Rules of the Colorado Oil and Gas Conservation Commission, 2 CCR 404-1 dated March 15, 2020 and under consideration as of this writing on May 11, 2020.

The COGCC has decided to tackle all three areas of rulemaking, mission changes, addressing potential cumulative impacts, and adopting an alternative location process, all during one rulemaking, dubbed the “Mission Change Rulemaking.” The legislative declaration directing the mission of the COGCC was changed by 19-181 from to “foster the responsible, balanced development, production, and utilization of the natural resources of oil and gas in the state of Colorado in a manner consistent with protection of public health, safety, and welfare, including protection of environment and wildlife resources,” C.R.S. § 34-60-102(1)(a)(I) (2018).

The new direction is to “regulate the development and production of the natural resources of oil and gas in the state of Colorado in a manner that protects public health, safety, and welfare, including protection of the environment and wildlife resources,” C.R.S. § 34-60-102(1)(a)(I) (2020), with C.R.S. § 34-60-106(2.5) adding that the Commission shall regulate in a reasonable manner to “protect and minimize adverse impacts to public health, safety, and welfare, the environment, and wildlife resources and shall protect against adverse environmental impacts on any air, water, soil, or biological resource resulting from oil and gas operations.”

AREAS OF REVISED RULES TO COMPLY WITH STATUTORY CHANGES:

  1. Role of local governments;
  2. Transition to a Professional Commission; and
  3. Revisions to statutory definitions.

The changes required under the Bill will reorganize the priorities of regulation by the COGCC from minimizing adverse impacts as well as was reasonably practicable and being able to take cost-effectiveness and technical feasibility into consideration, to being required to minimize adverse impacts as necessary to protect health, safety, welfare, the environment, and wildlife resources. The application of these differences will require different technical showings be made by applicants hoping to obtain permits to develop oil and gas in Colorado. It will also likely favor applicants who have established relationships with the local governments in the areas where they hope to site oil and gas locations.

Role of Local Government:

Actors will have to be able to show it filed an application with local governments and that the local government either disposed of the application or did not otherwise regulate the siting of oil and gas locations. There is a similar requirement regarding pooling applications. Regulations by local governments may now be more strict than state requirements, and the Local Government Land Use Control Enabling Act has been revised by Senate Bill 19-181 to enable local government regulations to “regulate the surface impacts of oil and gas operations in a reasonable manner to address matters specified in this subsection (1)(h) and to protect and minimize adverse impacts to public health, safety, and welfare and the environment.”

Professional Commission:

Mandates that members must now be appointed to this position as their sole employment and will receive compensation for performing their duties.

Examples of Changes to Definitions

The term “minimize adverse impacts” is representative of the change from prioritizing the consideration of practicability to prioritizing considerations of what is necessary to protect health, safety, and welfare.

The term “waste” will no longer be defined to include nonproduction where necessary to protect public health, safety, and welfare.

THE 300 SERIES RULES NOW EXCLUSIVELY FOCUS ON THE PERMITTING PROCESS

The 300 series used to include rules regarding rules on general topics (now in the 200 series), operations (now in the 400 series), safety (now in the 600 series), underground injection (now in the 800 series), and on environmental impacts (now in the 900 series).

Several profound differences in the new process for acquiring a permit are apparent from the proposed rules. The following of these will be discussed in a bit more detail below:

  1. Application of the new mission to protect and minimize adverse impacts;
  2. Redefining the interaction between local governments and operators;
  3. Streamlining the application process to a single-stream process for each project;
  4. Streamlining the process as to projects and pooling units; and
  5. Possibly requiring cumulative impacts and alternative locations analyses.

Application of the New Mission

The new Rule 301.a states that the Commission will authorize permits only if the operation protects and minimizes adverse impacts to public health, safety, welfare, the environment, and wildlife resources. Many of the other changes seem to be in place to safeguard the application of this mission statement even when the process relies on input by local governments, operators, and other stakeholders.

Redefining the Role of Local Governments

The new Rule 302 reflects the change in relationship between the COGCC and local governments and broader statutory authority of local governments over surface impacts, with Commission rules being intended only to set a minimum standard upon which local governments may build.

In applying for approval of a permit application, governed by new Rule 302.b, an operator must demonstrate to the COGCC that it has submitted its plans to the local government and disclose the local government’s siting disposition as falling in one of four categories. The COGCC is required to comport with the local government’s filing, but also to act to ensure that the project is subjected to evaluation based on its compliance with the protection and minimization of adverse impacts.

The establishment of the four categories appears to be to allow local governments to decide how much additional responsibility for the process each would like to shoulder. The four categories are:

  1. Local government does not regulate the siting of oil and gas locations;
  2. Meets a specific set of procedural criteria when regulating oil and location siting;
  3. Regulates siting but does not meet the criteria specified in category 2; and
  4. Regulates siting and denied the proposed location.

For applications categorized as 1, 3 and 4, the COGCC will conduct its own independent review to ensure that the planed location protects and minimizes adverse impacts, as the local government’s review was not determinative. In the event the local government came to a conclusion in category 2 and the operator certifies it as such to the Commission, and the Commission agrees with the evaluation, then the Director will defer to the site selection. Then, the process can continue to an Oil and Gas Development plan.

Another requirement for a disposition of category 2 by local authorities is that the local government conducted an alternative location analysis subject to Rule 604’s setback requirements. The Commission intends for local governments consider the analysis process that the Commission adopted for its own siting decisions in Rule 304.b.(2). This system is intended to avoid redundant analysis by local governments and the Commission, while also ensuring that local governments’ review processes adhere to a broader standard.

Setback requirements under 604.c pertain to setbacks from “high-occupancy building units and residential building units,” which were redefined to include multifamily dwellings based on Colorado Fair Housing Act’s definition at C.R.S. § 24-34-502.2(4).

One development that may help simplify the internal process of evaluating potential projects for operators may be a that the commission states that it intends under Rule 302.f to maintain a database of what different local governments do not regulate, what statutory rights they’ve opted out of, and what notices they have opted out of receiving, noting that the local governments can change their waivers at any time.

Single-Stream Permit System

Procedural requirements for Oil and Gas Development Plans have been adopted, which no longer require different types of permit applications to be processed using different procedures, instead requiring only a single-permit system. However, for permits to develop a particularly large area, a Comprehensive Area Plan under Rule 314 should be sought rather than an Oil and Gas Development Plan.

Converging Project and Spacing Unit Approvals

Rules regarding the establishment of drilling and spacing units are now consolidated in Rule 305 and have been expanded to encompass the requirement to protect and minimize adverse impacts to public health, safety, welfare, the environment, and wildlife resources.

Cumulative Impacts and Alternative Locations Analyses

A new component of the permitting requirements is the Cumulative Impacts Evaluation under Rule 303.a.(5). Because the required “narrative” and possible quantitative evidence, as well as any intended management and mitigation measures that are to be submitted to evidence the cumulative impacts. Because this is a new concept, the Commission’s staff will put out guidance on what such an evaluation must entail under Rule 314.d.(11), with 303.

The criteria for the requirement of an Alternative Location Analysis in permitting a particular project are that: (1) the Director has not deferred to a local government siting disposition and the location meets one or more of the criteria listed in Rule 304.b.(2).A.i-v; (2) the Director determines such an analysis is necessary to protect, especially mentioning environmental justice implications as a concern. The Director will have the operator’s outlines of plans outlined in Form 2A according to Rule 304.c outlining the practices it will employ to minimize and mitigate adverse impacts. Note that certain plans may be deemed unnecessary for site locations that are especially rural.

Takeaways

While some criteria have been set, the Commission is still facing a new rule structure that will require it to use some trial and error to set precedents that will better define what it really means in practice to adequately “protect and minimize adverse impacts to public health, safety, welfare, the environment, and wildlife resources.”

At the very least, not only the volume, but the types and character of submissions necessary for oil and gas permitting are going to be very different in Colorado after the new rules under Senate Bill 19-181 go into effect. All interested parties will need to refamiliarize themselves with how these new rules will apply and adjust their strategies for accomplishing their goals and protecting their interests. These changes, insofar as they are adopted according to stakeholder feedback, are currently anticipated to go into effect on November 1, 2020.

For more information on the COGCC’s rulemaking and guidance regarding Senate Bill 19-181, visit the Commission’s site at https://cogcc.state.co.us/sb19181_calendar.html#/overview.

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