Colorado Oil And Gas: Battleground State

[Editor's note: A version of this story appears in the April 2019 edition of Oil and Gas Investor. Subscribe to the magazine here.]

Genuine fear ran through Colorado’s oil and gas industry in the runup to last November’s election.

At first, the ballot initiative, ultimately referred to as Proposition 112, hadn’t been widely viewed by the industry as a threat. The proposition was a masterpiece of subterfuge. It appeared to be an effort to push back drilling nearly half a mile from homes and schools. The legislation’s true, if masterfully veiled intent, was to kill off oil and gas on virtually all state lands.

An internal study group at one of the largest Colorado upstream companies concluded that the proposal lacked the signatures to bring it forward, according to a Colorado-based employee who is not being named because he was not authorized to speak on behalf of the company.

But environmental activists had set the stage in 2018 for an epic takedown of Colorado’s oil and gas industry. By the time it was clear the proposition would qualify for the November ballot, “we were in scramble mode,” the employee said.

A company leader delivered a blunt message to staff: “Look, this could be our jobs. This is a reality. You better start caring.”

The industry, which in Colorado supports more than 230,000 jobs and pays $1 billion in annual state taxes, mobilized.

Companies contributed nearly $38 million to Protect Colorado, a committee opposed to the ballot measure. Rank-and-file and management-level employees stood on street corners, holding political signs that pleaded for their jobs. Companies raced to lock in drilling permits and grandfather in wells in case they lost the vote.

In the span of six months, from June to November, the Colorado Oil and Gas Conservation Commission (COGCC) recorded receiving 5,544 permit applications—nearly matching the total number of permit requests for all of 2017.

“This was do or die,” said Tracee Bentley, executive director of the Colorado Petroleum Council.

“People didn’t understand the impact that [Prop 112] would actually have,” Bentley told Oil and Gas Investor. “The industry, obviously, put a lot of resources in to it, but we felt like we didn’t have a choice.”

Prop 112 would have made 84% of Colorado’s state lands inaccessible to future oil and gas development, according to COGCC. In the state’s top five producing counties, an estimated 94% of land would be off limits to new development, according to the Colorado Oil and Gas Association.

The battle over Proposition 112 turned ugly and, at times, vicious. In the gutter of the Internet, oil and gas industry operations were compared to ISIS terrorists defacing sacred religious sites.

Robert S. Boswell, chairman and CEO of Laramie Energy LLC, a private E&P operating in the Piceance Basin, said Colorado families received social media messages and fliers saying fracking would pollute the planet and “your children are going to be exposed to contaminants that can poison your water,” and other sorts of things that are just disinformation.

“Often these people then say, send us $100 and we’ll fight these ‘evil companies.’ Ironically this is how they make their money,” Boswell told Oil and Gas Investor. “They’re paying themselves by putting out disinformation to scare people while using some earth saving name.”

High-profile supporters of Proposition 112 included former Vice President Al Gore, Vermont Sen. Bernie Sanders, and actors Mark Ruffalo and Leonardo DiCaprio.

The Colorado oil and gas industry went intensely local, countering with Hall-of-Fame quarterback John Elway, former Gov. John Hickenlooper, local mayors, pipefitters, and both candidates running for governor, who all voiced opposition to the proposition.

Prop 112’s defeat in the November election was a victory for upstream companies, but ultimately an anticlimactic one. Less than four months later, it remains clear that the battle lines have simply shifted from voting booths to the courts and a legislature now controlled by the Democratic Party.

During its Feb. 28 earnings call, PDC Energy Inc. COO Scott Reasoner said the company was engaged with the new legislature and Democratic Gov. Jared Polis.

“We have full knowledge that there is an energy bill being drafted. We anticipate next month we are going to see something,” Reasoner said on the call. “What that looks like we don’t know.”

The industry didn’t know, either. On March 1, the day after PDC’s earnings call, a senate bill was introduced, blindsiding Bentley and other Colorado oil and gas officials who had not been allowed to provide input.

In a matter of days, despite the protests of industry, the bill breezed through two legislative committees along party lines. If passed, the legislation would pose another crippling blow to many producers, industry advocates and other industry observers say.

Bentley warns that the bill’s language calls for a halt to all permitting of existing and new applications until “every rulemaking outlined in this bill has been completed and each rule is in effect.”

“The bill requires a minimum of six rulemakings, which could drain resources and take multiple years to conduct and implement. At a minimum, this could result in a multiyear ban on oil and gas development in the state,” she said.

Even if the bill doesn’t move to the governor’s desk for signature, the new proposed law demonstrates the continuing risk for Colorado E&P companies, Moody’s Investors Service analyst Arvinder Saluja said in a March 6 commentary.

“Though we still expect that the affected E&P companies and Colorado industry association will keep meeting with political leaders and regulators in the state to negotiate elements of the proposal, the bill was written without apparent input from the energy industry, and its sudden appearance for consideration in a committee hearing heightens the legislative and regulatory risks for Colorado oil and gas producers.”

Collision Course

In the remote lakes of the spectacular Rocky Mountain National Park west of Denver, protected from oil wells and gas lines, the water is dirty, the pollutants unmistakably human in origin.

In areas reachable by hiking, chemicals may threaten the reproductive health of aquatic species and the broader web of interconnected food chains.

Researchers writing in the “Science of the Total Environment” in 2018 said they detected caffeine, pesticides and the painkiller oxycodone among 149 pharmaceuticals, 22 hormones, 137 pesticides and dozens of other chemicals. Most were likely introduced into the area through urination or blown there by the wind.

In the Piceance Basin, oil and gas activity has been responsible for contamination, as well. In one of the few detailed studies of its kind, a 2018 U.S. Geological Survey (USGS) report found that a leaking gas well contaminated shallow groundwater with thermogenic methane. The source of the leak, which had been undetected at ground level, was a natural gas well drilled in 1956 before it was plugged and abandoned in 1990.

Where human activity and the environment intersect, there are always consequences. But trace amounts of steroids, hormones, drugs and pesticides found in Boulder Creek in 2006, for instance, are effectively invisible. Modern hydrocarbon production, with towering well derricks, rumbling trucks and much-reviled fracking, is not.

New communities and oil development in the Denver-Julesburg (D-J) Basin have inevitably brushed up against one another. Boswell said the meeting of industrial development and communities was a factor that “precipitated a lot of the local concern.”

Boswell said Colorado has also become a bellwether state in some ways as its demographics have changed. “We’ve gone from a red state to a blue state,” he said.

An influx of people into Colorado’s Front Range —an eastern mountain range that is part of the Southern Rocky Mountains—has seen population density increase with more government employees, union workers and teachers that are political organizing groups, Boswell said.

“There’s been a stronger influence coming out of the population density and demographics of the Front Range vs. the overall state,” he said.

The industry has tried to communicate with communities and listen to and address concerns.

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SIDEBAR:

ESG Is In The Air

In early December, Royal Dutch Shell Plc took a bold but perhaps inevitable step in tackling climate change by becoming the first oil and gas company to announce it would tie executive pay to carbon emissions.

European companies are typically more sensitive to environmental matters and Shell had previously made commitments to reduce its carbon footprint by about 20% by 2035. But the Dutch company’s move toward linking as many as 1,300 executives’ pay to carbon measures has a strong incentive, according to Cowen & Co. equity research. The company developed its goals with Climate Action 100+, an investor initiative with more than $33 trillion in assets under management.

Climate Action includes more than 320 investors that are intent on engaging the world’s largest greenhouse gas companies to improve governance, curb emissions and strengthen climate-related disclosures. Shell shareholders will vote on the plan and other reporting measures in 2020.

While there is disagreement over why climate change is occurring, most oil and gas executives believe it is and that companies ought to act to reduce emissions.

“It’s clear the industry is trying to keep pace with investor demands and sentiments as well as what’s happening on the global stage,” said Matt Handford, senior manager, America Climate Change and Sustainability Services at EY.

A 2017 EY survey highlights the misperceptions of the U.S. oil and gas industry by consumers, with 67% of oil and gas executive respondents saying their companies “can and should be part of the climate change solution.”

The disconnect is strengthened by consumer skepticism, with just 31% of consumers saying the industry wants to be involved and 29% who said don’t believe the oil and gas companies want to help.

Environmental, safety and governance (ESG) reporting has become increasingly important to institutional investors, who want to see how companies are anticipating non-financial risks as governments transition toward a low-carbon future, Handford said.

“It’s a risk exercise,” Handford told Oil and Gas Investor.

As the upstream sector is increasingly a focus of that reporting, ESG is something companies are increasingly thinking more strategically about, he said. Reporting on ESG matters has taken on a more prominent role as it’s moved from fringe, activist movements intended to “create noise about a topic” by pushing environmental initiatives to proxy votes.

“The trend we are now seeing is institutional [investors] and large pension funds are now taking up those causes,” Handford said.

A survey about ESG disclosures by EY found that investors increasingly rely on reports from companies’ own sustainability reports, while the use of equity research from broker-dealers, press coverage and other external sources is decreasing or unchanged.

“Nearly all responders (94%) reported that integrated reports are very useful (88%) or essential (6%) sources of nonfinancial information,” the survey found.

The oil and gas industry served as a pioneer in producing sustainability reports. Companies such as BP Plc have produced sustainability reports since the mid-1990s, long before other industries did so.

The industry also collects information about safety for internal performance to reduce lost time and avoid injuries or fatalities.

“It’s also one of the most heavily regulated industries globally wherever they operate,” Handford said. “Environmental compliance has always been a key focus. Industry majors, mid-size independents and even some of the smaller domestic operators are tracking this information internally.”

Nevertheless, the current focus on climate change, flaring and other emission activities has the industry trying to wrap its arms around what investors want from the information they collect, he said.

“I think there’s uncertainty about why investors want this information and what are they going to do with this information,” he said. “And there’s no real consensus on an external framework of reporting.”

Handford noted multiple reporting initiatives, each requiring different sets of data, have created a challenge of pulling together a meaningful set of measures that investors can rely on while not placing companies in the position of playing fortune teller.

“There’s a difference between just disclosing some numbers and saying, ‘What does this mean to us as an organization?’ and how does this affect our capital spending, strategic objectives, which plays we focus on, what states are doing, what regulations are doing,” he said.

Industry is rightly cautious about how it approaches the reporting, particularly since scenario planning is more of a hypothetical exercise based on a complex world with various governments, The Paris Agreement and federal and state regulations, he said.

“I think oil and gas companies are typically saying ‘Let’s not jump the gun here. We want to provide a considered viewpoint to investors based on information we think will be relevant to them,’” he said.

Rather, companies should have an analytical view to demonstrate how they’re able to manage non-financial risks.

“If you’re able to articulate a strategic viewpoint about how government will impact your ability to operate as a going concern, now, in the near-term future and long-term future, you’re better off to an investor than a peer that is unable to do that,” he said.

The alternative, and perhaps the biggest danger for companies courting investors, is going on a roadshow where the CEO and CFO each have different answers about how they’re tackling carbon risk.

Or, worse still, “they don’t have answers,” Handford said.

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“So it’s evolved and that’s natural,” Boswell said. “But part of what we’ve experienced is activism, and some of the activism has come from people who just take the position that hydrocarbon fuels are bad. They have said that they want to stop drilling and completions, and the use of hydrocarbon fuels in the state of Colorado.”

Boswell said that some money spent in support of Proposition 112 came from out of state and from various contributors that “are difficult to trace.” Potentially, even some foreign parties may have contributed, “and you wonder what influence these outside parties may be having on energy policy in the states,” he said.

Foreign interests have taken aim at the oil and gas industry in the past. In August 2018, Renee DiResta, director of research for New Knowledge, told the U.S. Senate Intelligence Committee that the oil and gas industry is among two specifically targeted by state actors.

“We have seen evidence of campaigns targeting agriculture and energy as two industries of interest to foreign powers,” she said. “On energy, we’ve seen anti-fracking narratives, anti-fracking bots, by countries affiliated—countries with strong oil interests. In agriculture, that’s taken the form of spreading fear about GMOs.”

An Oil and Gas Investor analysis of donations shows nearly a third of its contributions—about $525,600 out of $1.6 million—originated from out of state residents and organizations. Colorado Risings’ largest single contribution—$170,000—appears to be connected to the Sergey Brin Family Foundation. Sergey Brin is a co-founder of Google Inc.

The foundation’s contribution is now under scrutiny by the Colorado Secretary of State’s elections division following a complaint filed by Charles Heatherly, former policy director for Colorado State Senate Republicans. Heatherly’s complaint calls the handling of the donation a “case about secret political spending” and accuses Colorado Rising of trying to hide the source of its contribution through a series of amended reports. In early February, the elections division said the complaint would be reviewed while the Secretary of State—whose candidacy was supported by Colorado Rising—will not be involved in the investigation.

The oil and gas industry has tried to correct what Boswell said is “disinformation” while also trying to point out the positives of hydrocarbon development in the state.

Colorado Rising, for instance, said that “99% of Colorado’s state revenue is generated from industries other than oil and gas development.” However, that leaves out local property tax collections. In fiscal year 2016 to 2017, local governments collected $496.7 million from oil and gas development—about 82.5% of all local property taxes, according to the Legislative Council Staff, the nonpartisan research arm of the Colorado General Assembly.

Still, Boswell said he’s most concerned with the grassroots concerns expressed by Coloradoans (preferred usage is Coloradans) and after offsetting what he calls “disinformation with correct facts and figures” he wants to point out the positives of hydrocarbon development, including jobs, cleaner power generation and the use of hydrocarbons in synthetics and transportation.

“Those are facts that are important, and we need to point out that the state of Colorado has ... regulations that have been put in place over the years that address most of these issues,” he said.

August Surprise

In art, advertising or storytelling, verisimilitude gives the appearance of something real, authentic or truthful. The book “Abraham Lincoln: Vampire Hunter” gives readers a certain realism to grasp as the 16th U.S. president wades through a comically absurd premise.

Proposition 112 was a similar recipe of fiction lightly sprinkled with truth.

“Remember, Proposition 112 is not a ban on fracking,” Colorado Rising’s website declared. “Even though the above-ground drill head might be 2,500 feet away, the horizontal part of a drilled well often travels underground for up to and perhaps exceeding 2 miles.”

In fact, the proposed changes to state law were remarkably clever. Prop 112 delivered oil and gas an August surprise in the run-up to the 2018 Colorado elections.

To get on the ballot, Prop 112’s advocates gathered many signatures, not through broad consensus but by concentrating efforts in more receptive, heavily populated and left-leaning areas.

Bentley said proponents of Prop 112 “understand that it’s really only a small, very populated part of Colorado who would ever sign on to something like this.”

The proposition in Colorado was partly a result of the peculiar nature of the state’s laws for getting measures on the ballot. Prop 112 proponents simply chose the path of least resistance.

In Colorado, ballots can include two types of initiatives: amendments to the state constitution and statutory initiatives that have the weight of laws passed by government. While amendments to the constitution require fewer signatures than statutory measures, constitutional amendments require far broader support.

Colorado’s requirements for statutory ballot measures are, at best, esoteric or, as Bentley put it, “really goofy.”

As Bentley recognized the strategy was to introduce a statutory initiative, “we knew that there was a very real possibility that they would easily collect enough signatures,” she said.

By law, a statutory measure requires 5% of the number of votes cast for candidates running for Secretary of State. In 2019, for example, a statutory initiative could be added to the ballot by collecting 124,000 verified signatures.

A constitutional amendment, however, has a higher bar even though it requires fewer signatures—about 76,000. That’s because constitutional amendments require at least 2% of registered voters from each of the state’s 35 senate districts.

In the right locations, such as left-leaning Denver or Boulder, the signatures needed for statutory amendments can be collected in a matter of days, Bentley said.

The challenge was to inform enough of the state’s independent voters and Democrats just how damaging Prop 112 could be and do so within a matter of a couple of months, she said.

The Petroleum Council, a division of the American Petroleum Institute, partnered with Coloradans for Responsible Energy Development, a nonprofit educational organization started by oil and gas operators including Anadarko Petroleum Corp. and Noble Energy Inc. and began working on a message that would resonate with voters. Chief among those was explaining just how ruinous the proposed law would be to the oil and gas industry and billions of dollars in economic activity.

Prop 112 was a web of trip wires connected that could incapacitate virtually any drilling in the state. It didn’t place a “ban on fracking” as proponents declared. Like any good trap, it instead left oil and gas drillers with almost nowhere to go.

“As written, if you don’t understand the technicalities that were very craftily put in there,” the set-offs might seem reasonable, particularly for schools.

While the proposition set back drilling from homes, schools and hospitals by nearly half a mile, it also did the same for “vulnerable areas,” according to an analysis by the COGCC, which regulates oil and gas drilling in the state.

Those vulnerable areas included playgrounds, permanent sports fields, amphitheaters, public parks, public open space, public or community drinking water sources, irrigation canals, reservoirs, lakes, rivers, perennial or intermittent streams and creeks.

Bentley said she’s been involved in many campaigns during her career but the response to Prop 112 was the most thorough she’s ever seen.

The chief counteroffensive consisted of two avenues: explain what Colorado would look like if Proposition 112 passed, but have local leaders do the talking.

“A lot of our research showed that if 112 were to pass ... certainly the oil and gas industry would take a direct hit, but when revenue ceased due to 112 coming in, the communities were really going to take it.”

Healthcare, construction jobs, education and transportation would suffer as local tax revenue dried up.

“So much oil and gas revenue goes toward all of those services,” Bentley said. “We literally had some schools we would have had to shut down because 99% of their operating budget comes from oil and gas tax revenue. And when people heard that, they were like, ‘Oh wow, this will devastate our communities.’”

Opposition to Prop 112 crossed party lines. Democrat Colorado governors, including 2020 presidential candidate John Hickenlooper, Bill Ritter and then gubernatorial candidate Jared Polis opposed the measure.

So did Pipefitters Local Union 208, which historically supports the Democratic Party but is a strong partner to oil and gas.

“Putting labor up on TV and asking a very well-known face, the head of the pipefitters, was very impactful,” she said. Popular Colorado Springs Mayor John Suthers, who enjoys wide support from Democrats, Republicans and unaffiliated voters, also joined in opposition. “So of course, we put him on the radio asking people to vote no on 112,” she said. “And we did that similar, you know, across the state, and then we did the same thing for digital.”

Even though the proposition was defeated by Colorado voters by 10 points, “I definitely wanted a bigger margin. Nevertheless, with such a narrow divide in Colorado state politics, a 10 percentage-point win is sizeable.”

Bentley said she believed the defeat of Prop 112 has been settled in the minds of voters. Still, in December, the oil and gas industry went further, working in collaboration with schools and community groups to expand drilling setbacks near schools.

Who Rules: State Or Local?

Sloganeering, the lazy practice of using empty, rhetorical devices, has produced “drill baby drill” and “keep it in the ground,” both of which have only made divisions over a difficult topic more acute.

A good slogan, however, is less costly and time-consuming than a practical policy debate—and more dangerous.

“Brexit is a great example,” Matt Beckmann, managing director, Ascent Consultants, told Oil and Gas Investor. “Remain vs. leave is very simple in form. In practice, though, it is a disaster. Voters were totally unaware of the real consequences of their vote.”

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SIDEBAR:

The Colorado Effect

Colorado Senate Bill 181 would make sweeping changes to the state’s oil and gas industry—and drag energy companies in other states along.

“In addition to potential impacts on Colorado-specific investments, the proposed bill is illustrative of the way oil and natural gas may be regulated in other parts of the country,” said Ali Zaidi, an attorney at Kirkland & Ellis LLP who focuses on identifying, mitigating and managing climate and environmental risks.

“The proposed bill is the product of a unique political confluence in Colorado—a series of big events and a set of new actors,” said Zaidi.

Although Colorado’s approach won’t be carbon copied, elements of what Colorado does could become a reference point and starting place for new regulation in other states—particularly where development is taking place near population centers and elected officials are similarly aligned across the legislature and governor’s mansion.

“Consensus processes in Colorado’s past around methane, for example, served as a template for other states,” he said. “It remains to be seen, whether these proposed changes, similarly scale.”

Other states have taken similar action.

On Feb. 4, New Mexico State Sen. Antoinette Sedillo Lopez, D-Albuquerque, filed a bill that would place a four-year moratorium on oil and gas drilling.

In an op-ed in the Albuquerque Journal, Sedillo Lopez wrote that the bill is not a ban on fracking because it would only affect new permits. Her office did not respond to a request for comment.

“All existing permits will continue,” she said. “The bill requires that relevant state agencies prepare reports on actual and potential impacts of hydraulic fracking on New Mexico’s land, water, air and public health.”

New Mexico’s Legislative Finance Committee (LFC) estimates that the legislation would cost state and local governments a minimum of $3.5 billion in revenues during the four-year moratorium. Industry revenues are expected to make up 35% of New Mexico’s total state general fund revenues for fiscal-year 2019.

“Substantial changes to how this industry operates in New Mexico—such as a temporary ban on hydraulic fracturing—would cause severe revenue losses,” the LFC wrote in a Feb. 9 report. “Without a source of revenues to replace these losses, this bill would have a substantial negative budgetary impact.”

Environmental activists have dismissed those concerns, noting that since New Mexico is already among the worst states in terms of education, oil and gas money hasn’t helped. The bill is being pushed by a group called Pause On Fracking, an affiliation of social media and Internet platforms that lists no direct contact information. The group’s website is registered to Jenni Siri, an activist and graphic designer for a group supporting Sen. Bernie Sander’s 2020 presidential campaign.

The Pause On Fracking website encourages like-minded supporters to forward pre-written letters of support to New Mexico lawmakers and even fully written Twitter comments,

Despite assurances the moratorium is just a pause, supporters include WildEarth Guardians, a nonprofit organization which lists, among other goals, a transition to 100% renewable energy by 2035.

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Pro-energy supporters need to update and revise their communications strategy to include an environmental or green component, while opponents of fossil fuels need to recognize that an overhaul of the entire energy grid and economy is not realistic with current technological and commercial realities, he said.

While that message was hammered home in the fight over Prop 112, it seems to have fallen away as Colorado legislators again take aim at the oil and gas industry. New legislation will reorder not just the oil and gas industry in Colorado but the COGCC itself.

In his March 6 report, Moody’s Saluja noted that Colorado’s bill cedes state authority over oil and gas to local communities and alters the state’s oil and gas commission, as well. Membership qualifications for the nine-member commission would reduce the number of commissioners who have industry experience from three down to one.

The bill also changes a key word in COGCC’s mission to “regulate” rather than “responsibly foster” oil and gas development. As noted, taking out the word foster has massive implications. A similar effort by the out-of-state group Oregon Children’s Trust argued in court that Colorado must first complete a health and environmental assessment to ensure no people are harmed in any way, shape or fashion before a permit is issued.

“There are some Democrats who would like to take that idea and take it legislatively,” she said, foreshadowing the bill that emerged March 1. “That will have the exactly same effect as 112. That’s probably one of the larger threats out there.”

Outside of lawmakers’ attempts to thwart oil and gas activities in the state, a campaign by local and professional activists has taken to the courts and government agencies to stall, frustrate and harass the industry.

Ursa Operating Co., for instance, applied for a state permit for its BMC A Pad in December 2017, followed by a land use change permit in Garfield County, Colo., on May 2018. The development is near the Battlement Mesa community near Parachute, Colo. The pad is in the Piceance Basin.

“If you overregulate us to a point where we start picking up and moving or we just can’t get permits anymore, it’s your state budget, governor, that’s going to suffer.” —Tracee Bentley, Colorado Petroleum Council

Two groups, Battlement Concerned Citizens and Grand Valley Citizens Alliance, have filed a lawsuit, against the COGCC in Denver District Court to halt Ursa’s pad development. Ursa is not a named party to the suit.

The suit cites a number of concerns, including environmental impact, potential water contamination and “hundreds of comments asked the Commission to deny the project and approve a safer location,” according to a copy of the suit on the Western Colorado Alliance for Community Action website.

The suit also notes that Battlement Mesa is a planned residential community marketed as “a quiet retirement community.” However, the average age of residents is about 38 years old and many of the residents in the community work for Ursa or other oil and gas companies.

A letter by Ursa contends it has gone above and beyond its obligation to abide by state rules and regulations. The company held multiple meetings with local residents to share its plans to develop mineral resources and address local concerns. Ursa also worked with Garfield County to develop 27 conditions of approval as part of obtaining a permit.

Ursa also conducted site reviews, on-sites, and land assessments to ensure that the location complied with existing federal, state, county and local regulations and land use codes; including both cultural and environmental setbacks.

After a “Hail-Mary” attempt to reconcile residents’ demands, the oil and gas commission approved the pad development only to see the lawsuit filed against the commission.

P. Kelly Muldoon, vice president of land and business development for Ursa Resources Group II LLC and an ad hoc advisory consultant for the Colorado Oil and Gas Association, said he’s most troubled by the lack of scientific evidence that’s been used to halt oil and gas projects, such as Ursa’s pad development.

Despite that, “they almost shut down something that had been in the process and was one of the most reviewed pads in the state,” Muldoon said.

Muldoon said he sees a political narrative driving the agenda instead.

“I think that the talking points are getting a lot more attention than the science, and I think that’s a bit of a concern,” he said.

Muldoon said the upcoming court battle feels like another attempt to delay development.

Over a phone interview, Muldoon’s exasperation came through as he noted that the company had followed all established rules and regulations. The company spent 200 hours with local residents, tried to meet every community demand and spent hundreds of thousands of dollars in the process.

Yet, in the end, “a few individuals can still shut down an entire industry,” he said.

“What's the scary part of it is, it’s not the rules. It’s the unpredictability of whether the rules are going to be enforced,” he said. “Even if they don’t shut us down, they’ll slow us down enough that oil and gas companies are just going to leave the area. I can’t plan a budget and a drilling program and an operations program if the rules that are already in place aren’t going to be our guidelines to operate under.”

The thought leads him to question why oil and gas would want to invest in a state governed by unpredictability.

“I think that’s what it seems like, is that if they make it an inhospitable enough environment, oil and gas industry will leave on their own, and not realizing the consequences of oil and gas leaving this state.”

March Surprise

Oil and gas advocates argue the primacy of oil and gas regulation belongs at the state level, where Colorado has funded and developed expertise for regulating development.

With Democrats in control of the state’s legislature and executive branch, Bentley said she expects Gov. Polis to understand that as well.

“If you overregulate us to a point where we start picking up and moving or we just can’t get permits anymore, it’s your state budget, governor, that’s going to suffer,” she said. “And you’re going to have to go explain to people why you let this happen. I think he fully understands that.”

Yet a week after speaking with Oil and Gas Investor, Bentley and the rest of the Colorado oil and gas industry were caught off-guard by surprise legislation proposed in the state senate that offered no input from stakeholders—including the industry, local governments, environmental groups and regulators.

“In my over 15 years of working with the Colorado state government, not having a thorough stakeholder process is unprecedented, especially for a bill that targets one industry but impacts every Coloradan,” she said. “We are deeply disappointed that House and Senate leadership do not appear to value the stakeholder process nor the importance of having all stakeholders at the table on one of the most consequential proposals in Colorado history.”

On March 3, Bentley and Dan Haley, president and CEO of the Colorado Oil & Gas Association (COGA), expressed dismay in a joint statement that “sweeping anti-oil and natural gas legislation” would head to a state senate committee a day after being introduced.

“No good can come out of legislation that is revealed on a Friday night and rushed through the legislative process,” they said.

Beckmann said the preliminary text of the bill creates the opportunity for “subjectivity to influence both regulation and the permitting process.”

“That will lead to inconsistent application of rules at the state level, and microjurisdictions of individual local communities creating a complex network of rules which will drive up compliance costs substantially,” he said.

Months before the new legislation, the Colorado E&P employee said working in the state is becoming more and more difficult. And he expected something new to be thrown at the industry.

“Every two years it seems like we’re facing some sort of attack against our industry,” he said.

Darren Barbee can be reached at dbarbee@hartenergy.com.