American Oil and Gas Reporter - June 2018 - 32

State Legislative Reports

Colorado Deals With Pooling, Flowlines
DENVER-The Colorado Legislature
passed two bills that oil industry leaders
called meaningful and important, managed
a compromise on the state's energy office,
and avoided bills that would have placed
new restrictions on development as activity
steadily increases across the DenverJulesburg Basin.
A session that began with still fresh
memories of a fatal explosion one year
ago in Firestone, Co., which was determined by state inspectors to have been
caused by an improperly isolated well
and kept alive by opposition interests,
ended in May without any bills passing
that could be considered damaging to
the industry, confirms Dan Haley, president
and chief executive officer of the Colorado
Oil & Gas Association.
Haley acknowledges that it was a difficult session, "but ultimately, compromise
and bipartisanship carried the day."
Importantly, two bills were passed
that "will improve Colorado energy development practices," he adds.
During hearings on a bill to update
and clarify the state's pooling laws, Haley
says he was encouraged by the uniform
support from "conservationists, neighborhood representatives and industry leaders," and the ensuing bipartisan votes in
the Senate and House.
"It was a remarkable highlight from a
productive 2018 session," he assesses.
The 2018 session saw a total of 786
bills introduced, observes House Majority
Leader KC Becker, D-Boulder, in a Twitter
posting at the end of the session. According
to Becker, Democrats did "not get everything we wanted, but we will keep working
on the things that matter."
She adds that "reauthorizing the Colorado Energy Office, addressing orphan
wells, revamping the 811 system to include
oil and gas, and fixes to forced pooling
are all important steps."
Energy Office
A milestone for energy issues this
year came midway through the session
when the House passed a bill to reauthorize
the Colorado Energy Office (CEO) on a
48-14 vote.
SB18-003 revived the agency, which
originally was known as the Governor's
Energy Office, after the two chambers
could not agree on priorities last session.
This year, legislators approved funding
of $3.1 million in addition to the CEO's
annual $16.5 million appropriation while
32 THE AMERICAN OIL & GAS REPORTER

removing several renewable energy grant
programs and adding nuclear and fossil
fuel energy to its roster.
According to Senator Ray Scott, RGrand Junction, the bill's sponsor, it
eliminates several unused renewable energy grant programs while emphasizing
an "all of the above" approach to promoting energy.
Discussing what he saw as the biggest
accomplishments this year during a session
wrap-up hosted May 11 by COGA, Assistant Majority Leader Scott said approval
of a transportation bill and another, referred
to as a compromise that sustained the
public employee pension program, were
session highlights from his perspective.
Haley commented that passing the
pooling and flowline inspection bills
topped the list for COGA.
Pooling Modified
SB 18-230, sponsored by Senator
Vicki Marble, R-Ft. Collins, and Representatives Lori Saine, R-Firestone, and
Matt Gray, D-Broomfield, clarifies that
a drilling unit may contain more than
one well, protects nonconsenting mineral
owners from liabilities during drilling
and production, adjusts development cost
recovery schedules, and modifies conditions to be considered before pooling
orders are issued.
The bill, which passed the House with
a single no vote and the Senate by a
margin of 28-6, extends the notice period
operators must provide to 60 from 35
days before a mineral owner can be considered nonconsenting. A lease offer to
any mineral owner must include a stateproduced brochure that "clearly and concisely describes pooling procedures" and
options available to mineral owners, the
bill reads.
According to Representative Gray, the
provision that protects nonconsenting
mineral owners from liability for such
things as spills or fires during production
was critical to his sponsorship. Published
reports quoted Gray saying that mineral
owners often signed leases primarily to
protect themselves from liability, and that
previously, nonconsenting owners were
considered co-operators under Colorado
law and potentially liable for damages.
If signed by Governor John Hickenlooper, as Gray said he expected, nonconsenting owners would receive a 12.5
percent royalty on production until the
operator recovered 200 percent of well

development costs. Once that milestone
is crossed, nonconsenting owners receive
their full proportionate share.
An early version of the bill provided
nonconsenting owners a 15.0 percent royalty during the cost recovery period while
allowing the operator to recover 300 percent of development costs for horizontal
wells and wells deeper than 5,000 feet.
Both provisions were amended as compromises to gain support for the final
measure, Gray says.
"Pooling mineral interests is critical
for modern horizontal drilling practices,
but pooling laws had not been updated
since the middle of the last century,"
comments Haley. "This bill brings those
practices into the modern era with a
lengthier and improved public notification
process, as well as a clarified liability
waiver for those who prefer not to negotiate
or sign a lease."
The forced pooling bill was called
"an important start" by the leader of a
local opposition group, adding that compensating nonconsenting mineral owners
must be addressed further.
The final version of the bill was reported to have broad support, including
from the state Department of Natural Resources and the Colorado Municipal
League.
One Call Locates
The second bill that received widespread support during the second half of
the session was considered a keystone to
making Colorado's flowline regulations
"far and away the toughest and most
comprehensive in the country," says Scott
Prestidge, COGA director of communications and public affairs.
Sponsored by Representative Lori
Saine, R-Firestone, and Senator Scott,
the 811 Locate bill, SB18-167, strengthens
the state's line-location rules while adding
protections against public access to specific
line-location data.
The bill passed the House 61-1 and
the Senate unanimously the final week
of the session.
With the creation of the Underground
Damage Prevention Safety Commission,
an independent agency within the Colorado
Department of Labor and Employment,
SB 167's fiscal note anticipates $577,000
in additional spending by the state for
administration and compliance costs the
first year and $1.13 million in 2020.
Colorado's one-call line-locating serv-
American Oil and Gas Reporter - June 2018

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