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Today in Energy

June 27, 2019

Colorado changes its regulatory structure for oil and natural gas production

monthly Colorado crude oil and natural gas production
Source: U.S. Energy Information Administration, Petroleum Supply Monthly and Natural Gas Monthly

In mid-April, Colorado’s governor signed a law changing the way the state regulates its oil and natural gas industry. Senate Bill 181, also known as Protect Public Welfare Oil and Gas Operations, amends the Oil and Gas Conservation Act and gives counties and municipalities increased regulatory authority over oil and natural gas development in their jurisdictions.

In 2018, Colorado produced 460,000 barrels per day of crude oil and 5 billion cubic feet per day of natural gas gross withdrawals, accounting for 4% and 5%, respectively, of the national totals. Colorado’s main oil- and natural gas-producing regions are the Denver Basin in northeastern Colorado and the Piceance Basin in western Colorado. The San Juan Basin that stretches across the Colorado-New Mexico border was once a major natural gas-producing area, but output from that area has declined in recent years.

Colorado shale plays and basins and municipalities
Source: U.S. Energy Information Administration, Tight Oil and Shale Gas Plays, and Colorado Department of Local Affairs, State Demography Office

As of the end of May 2019, Colorado had about 40,000 active oil and natural gas wells. More than one-third of those wells were located in Weld County, which stretches from the Denver metropolitan area to the Wyoming border. Other counties that have at least 3,000 active wells include Garfield, on Colorado’s western border; Yuma, on the eastern border; and La Plata, on the southern border. EIA’s Energy Mapping System provides the locations of each of these wells, based on data from Drillinginfo, Inc.

Colorado oil and natural gas wells and municipalities
Source: U.S. Energy Information Administration, based on U.S. Department of Commerce, U.S. Census Bureau, and Colorado Department of Local Affairs, State Demography Office

Under the new law, local governments have the authority to regulate the location of new oil and natural gas production facilities as well as the effects of oil and natural gas production, such as land use and surface impacts, including noise. The law also gives local governments the authority to inspect oil and natural gas facilities; impose fines for leaks, spills, and emissions; and impose fees to fully cover regulatory costs.

The law directs Colorado’s Oil and Gas Conservation Commission (COGCC) to create rules to ensure the structural integrity of wells, require certification of employees, increase public disclosure of well data, and specify when inactive infrastructure must be re-inspected before being put back into use. The COGCC is also directed to adopt rules that require producers to consider alternative locations for proposed oil and natural gas facilities that are near populated areas.

Although the law was signed in mid-April, the COGCC has until July 2020 to write the rules implementing the law. The state has not issued a moratorium on new drilling permits, but some counties—such as Adams County, just northeast of Denver—have issued temporary moratoriums.

well count and population in select Colorado counties
Source: U.S. Energy Information Administration, based on U.S. Department of Commerce, U.S. Census Bureau, and Colorado Department of Local Affairs, State Demography Office

Principal contributors: Laura Singer, Meg Coleman