County trying to find balance with state over gas drilling regulation

Federal agencies also show
concern over possible preemption

It’s a simple question related to big-picture regulation of gas operations: Can the federal or state government adopt a set of regulations for natural gas development that strikes a fair balance between environmental protection and resource extraction in each of Colorado’s 64 counties, from the Eastern Plains to the Western Slope?

The answer might not be so simple.
After investing months in rewriting the state’s rules for resource development, with buy-in from the counties—including Gunnison County—the industry and other stakeholders, the Colorado Oil and Gas Conservation Commission (COGCC) would like to think its rules are comprehensive and far reaching.
The last of the COGCC’s stated goals in its Strategic Plan is to “demonstrate balanced leadership in the regulation and promotion of oil and gas development in Colorado at the local, state and federal levels.”
The commission’s first goal is to “Promote the exploration, development and conservation of Colorado’s oil and gas natural resources.” In places like Weld County, which sits over what is known as the Wattenberg gas field, natural gas production has been identified as a priority.
Locally, the production of natural gas falls somewhere below human and environmental health and welfare as priorities.
Elsewhere the priorities might be the opposite.
“Some communities see [gas development] as a more integral part of their future and are therefore more amenable to oil and gas operations,” says Chip Taylor, executive director of Colorado Counties Inc., a statewide organization that lobbies and works for the interests of local governments.
Gunnison County has natural gas resources, too, mostly in the far northwest corner in an area surrounding the North Fork Valley. At least those are the resources that have been explored and developed. According to some maps, the gas-rich Piceance Basin stretches nearly as far south as Highway 50.
But Gunnison County also has a lot of other natural resources, like water, wildlife and spectacular views. An effort has been under way for almost a decade to find a balance between the impacts of industry and a community reliant on tourism and an intact environment.
“It’s no surprise that a number of the communities that have substantial tourism economies are concerned with idea of having landscapes covered with wells and ponds and other things associated with gas development,” Taylor says. “Gunnison has some of the more restrictive regulations and I can understand why they’re interested in protecting that. But that’s kind of the source of the rub between local regulation and state regulation.”
Another source of the rub might be that the county has any regulations related to gas development at all, and then went about amending those regulations last year despite the changes the state had already made.
Starting in 2008, the COGCC undertook an effort of its own to revamp its rules related to gas development that involved hundreds of hours of testimony and page upon page of comments from people in support of the industry, or concerned by it.
To help government grasp the new rules, the Department of Local Affairs published a handbook called Oil and Gas Regulations: A Guide for Local Governments, which calls the COGCC’s rulemaking a “Herculean effort” and extols the time that was spent listening to stakeholders and working through the complexities of rulemaking with “an industry with vast financial resources.”
Two industry men, executives of the Anadarko Petroleum Corporation, wrote the section of the handbook titled “Working with the Industry,” meant for an audience of local government officials who have a gas resource waiting to be developed.
The handbook encourages local governments “to get to know the COGCC rules and understand the local government’s rights under the rules. It is then imperative for the local government to participate in the COGCC process to the extent possible.”
It goes on to say, “By using the COGCC process and then working with the industry, the local government will work more efficiently to protect the health and safety of its citizens.”
However, after using and being a part of the COGCC rulemaking process and then working with industry, Gunnison County still felt the health and welfare of its citizens might be better served by some location-specific regulations.
According to the DOLA handbook, local governments can enact their own rules for gas operations if those rules don’t conflict with the rules of a higher authority, like the state or federal governments. Such a conflict is known as preemption.
In a 1992 ruling, the Colorado Supreme Court said, “The purpose of the preemption doctrine is to establish a priority between potentially conflicting laws enacted by various levels of government.”
If the laws of a lower government come into “operational conflict” with those of a higher authority, working up from municipal governments to the federal government, the rules of the lower government are preempted.
The county has been in the preemption fight before and at the conclusion of Board of County Commissioners of Gunnison County, Colorado v. BDS International LLC in 2006, an appeals court said, “Colorado courts have previously held that the state regulatory scheme does not impliedly preempt all local regulation of oil and gas operations…”
Related to federal preemption, the ruling makes it clear that Congress did not intend to preempt all local regulation in the area of oil and gas operations.
The prevailing regulations are now the focus of another lawsuit that was brought against the county in district court earlier this month.
As for the existing regulations the suit takes aim at, Taylor says the county “touched on a couple of areas the industry is very sensitive about, mainly the disclosure requirements and the riparian setbacks.”
The issue of setbacks from water bodies is what brought the county’s Regulations for Oil and Gas Development to the table last summer, after SG Interests requested that the county amend its rules to more closely mirror the state’s, which were more lenient when it came to the proximity of a gas operation to water.
And while the amendment process that ensued tightened regulations where the state already claimed jurisdiction it also beefed up the county’s reporting requirements.
Although many of the amended regulations run alongside the state’s in many ways, the county’s process still adds to the time it takes to permit approvals, and that runs counter to Objective #2 in the COGCC’s Strategic Plan, which is “Expedite the processing of oil and gas well drilling, recompletion and disposal/enhanced recovery well permit applications.”
There has also been some concern raised by the federal agencies related to the county’s regulations.
The U.S. Forest Service and Bureau of Land Management, which manage some of the area’s surface and mineral rights, respectively, aren’t so sure the county’s regulations are entirely free of the threat of preemption.
In a letter to the county commissioners dated June 8, forest supervisor Charlie Richmond and district manager Lori Armstrong wrote, “…certain elements of Gunnison County’s draft regulations, if applied to federal lands and/or federal minerals underlying privately owned surface, would extend the county’s jurisdiction.”
They went on to give examples of where the conflict might arise and concluded, much as the DOLA handbook had, that “We feel the operators, other permitting agencies and the people of Gunnison County would be better served if the County recognized their existing role in established review processes.” The letter then suggests expanding the county’s participation in the COGCC review of applications.
As Taylor sees it, the case SG Interests brought against Gunnison County earlier this month is focused in two areas: the county’s existing regulations and “the fact that the COGCC went through an extensive process of adopting regulations [after input from several counties] that the industry considers onerous.”
Another set of regulations on top of the state’s new rules would be even more onerous, he said. But from the counties’ perspective, Taylor says, there will always be an effort by the counties to have the state or courts determine operational conflict, and preemption, on a case-by-case basis.
“The counties are always maintaining an operational conflict standard because it does maintain their authority and I would expect we would continue to do that until everybody would be satisfied,” he says.
In counties where there’s an established presence of businesses on top of substantial natural gas reserves like Boulder, Adams, Arapahoe and Douglas, Taylor says “As [gas development] moves to the Front Range it seems to be getting more attention as it impacts more of the lands that have been slated for development. [Those counties] have started getting anxious about what is coming their way and what the scope of their authority is.”
Gunnison County is past the point of being anxious and has put up its defense. Now the county is “engaged in conversations with the state to try to work out the best way to approach both entities regulating oil and gas,” says county manager Matthew Birnie.
In a statement, the county says, in part, “The Colorado Oil and Gas Conservation Commission and the Gunnison County Board of County Commissioners have begun discussions to attempt to clarify, coordinate, and harmonize the application of their respective regulatory programs to oil and gas development within the County.”
If SG Interest’s lawsuit against the county comes out in their favor, Taylor doesn’t think there will be a lot of counties trying to regulate the gas industry to the extent Gunnison County does. If, however, the county gets even a partial victory it will open the door to counties that want operational conflict determined on a case-by-case basis.
“The state has expanded its jurisdiction. But does that mean it excludes local regulation?” Taylor posed the question. “I think everybody is wanting to get that question answered.”