The Colorado Oil and Gas Conservation Commission (COGCC) has embarked on a significant new rulemaking that promises to have big impacts on oil and gas operations in Colorado. On September 21, 2012, the COGCC rolled out a conceptual outline of potential amendments to the existing COGCC setback rules, and on October 1, the Commission gave the go ahead to begin a rulemaking to amend the setback rules. Proposed rules were published October 15. The COGCC will hold the first hearing on November 14 (with continuation dates of December 10-11, and January 7-8 if necessary) and a prehearing conference will be held October 26 at 9:00 a.m. Applications for party status to the rulemaking are due to the COGCC by November 2. There are significant concerns surrounding this rulemaking, not the least of which is its expedited timeline. The COGCC indicates it will aim to have a finalized rule by January 2013 – a mere three months from now.

The rulemaking is an apparent response to the much publicized community concerns over increased oil and gas drilling, not only in Colorado but across the country. The combination of technological enhancements and market demands has opened up oil and gas resources that have heretofore been either unavailable or uneconomical. Add in Colorado’s ever-expanding population and the result has been oil and gas drilling located closer and closer to local communities, residences, schools, and other population centers. Despite the economic benefits this increased drilling has clearly brought, there have been concerted and consistent calls across Colorado for more stringent regulation – if not outright drilling bans. The setback rulemaking is the outgrowth of these tensions.

With respect to the upcoming setback rulemaking, perhaps most concerning is the fact that neither the COGCC nor any other regulatory body has provided data or other support demonstrating that existing setback requirements are insufficient, or have failed to protect public health and the environment or alleviate nuisance problems (odor, dust, noise). Indeed, the COGCC already has in place robust statewide general and high density setback requirements, which by most accounts have been effective. Nonetheless, if the conceptual overview serves as prologue, the setback rules ultimately adopted could be substantially more stringent than what is already on the books. For example, both the conceptual overview and the proposed rules place requirements on obtaining consent or providing notice to nearby surface property owners in addition to owners of high density and other buildings. And, although the COGCC has couched the rulemaking as one focused on mitigating nuisance concerns only (e.g., odor, dust, noise) the proposed rules appear to impose additional emissions control standards, including prescriptions for emission control devices as well as required reduced emissions completions (or “green completions”). It remains to be seen whether the COGCC even has the authority to require technological emission controls, or whether the proposed rule will in any way conflict with the existing maze of state and federal emission standards under the Clean Air Act and the Colorado Air Pollution Prevention and Control Act.

For now, the setback rulemaking is a reality that promises to significantly impact how oil and gas operators conduct Colorado operations. Early concerns have been raised about the rulemaking’s potential unintended consequences, including hampering an already struggling construction industry, resulting in significant waste of oil and gas resources and foregone revenues, as well as impacts to the agricultural industry associated with redirecting drilling to rural areas. It will be critical for the oil and gas sector as a whole, as well as individual operators, to play an integral role in this rulemaking to ensure that the ultimate outcome properly accounts for the costs associated with more stringent setback requirements, does not result in significant waste, and is based on empirical data and sound principles.