The Petram Group Releases its View on the Impact of SB181 on Colorado Mineral Rights Owners and the State's Oil and Gas Industry

DENVER, June 28, 2019 /PRNewswire-PRWeb/ -- Today, Colorado is one of the largest oil producing states in the United States, ranking 6th in output with 130MM barrels of oil produced in 2017. Oil production has quadrupled since 2010, and the state holds about 4% of total U.S. crude oil reserves. This growth has led the oil and gas industry to becoming a significant source of state revenue and employment, contributing an estimated $1Bn in taxes and adding nearly 90,000 jobs to the state's economy.

This increased oil and gas activity has not come without controversy, however. Most Colorado mineral rights owners have been following the recent legislative proposals that will impact the state's oil and gas development with great interest, as any rules or regulations that impact development will directly influence the value of oil and gas assets. There have been several proposals in recent years to attempt to impose stricter regulations on oil and gas development in Colorado. Proposition 112, the initiative that would have increased oil and gas drilling setbacks from homes, business, waterways and other sensitive areas failed to pass in 2018 by a margin of 57% "against" and 43% "for". This seemingly meant oil and gas production would march on as it had in recent years in Colorado. However, in April 2019, the newly-elected governor executed Senate Bill 181 ("SB181") which has been referred to as "the most comprehensive oil and natural gas legislation Colorado has seen in decades."

SB181 has two primary components that impact Colorado mineral rights owners: it increases authority of local governments to regulate the industry and restates the mission of the Colorado Oil and Gas Commission ("COGCC"). Previously, the power to approve drilling permits was at the sole discretion of the COGCC based on state-wide rules and regulations. With the passing of SB181, local governments now can create their own rules and regulations that must be met in order for permits to be approved. A second important result of the bill is the change to the COGCC's mission statement. Previously, the COGCC's mission was to "foster the development and production of the natural resources of oil and gas in the state of Colorado in a manner that protects public health, safety, welfare, the environment and wildlife resources", it now reads that their mission is to "regulate the development and production of the natural resources of oil and gas in the state of Colorado..."

The Petram Group believes the ultimate impact that the passing of SB181 will have on Colorado's oil and gas industry remains to be seen. The COGCC has until July 2020 to write and formally adopt the rules implementing the bill. Until then, some counties, including Adams County, have issued temporary moratoriums on new permit approvals until there is further clarity into what this implementation will look like.

For Colorado mineral rights owners, the uncertainty that the passing of SB181 has created has almost certainly diminished the value of their minerals, at least in the near-term. Without clarity into what regulations they are going to be subject to, operators are going to be more hesitant to invest significant capital in Colorado acquiring and developing acreage if they do not have assurances of being able to produce the associated oil and gas.

SOURCE The Petram Group

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https://www.petramgroup.com/