Colorado oil and gas industry prepares for battle at the ballot box as production booms

Oil and gas companies in Colorado are on track to reach record production levels this year. But when industry representatives gathered on the top floor of the Hyatt in Denver on Thursday, the mood was sober.

That’s because the political winds could shift in November. A proposed anti-fracking ballot initiative would outlaw drilling in over half the state. Republicans, who are generally friendly to the industry, could lose their one-seat majority in the state Senate, giving Democrats full control of the state legislature. And the governor’s mansion could be occupied by a man who has fought the industry in the past.

A top concern for the $31 billion industry in Colorado is Initiative 97, a proposed ballot initiative that would require new drilling rigs to be placed no closer than 2,500 feet from homes, schools and other “vulnerable areas” such as playgrounds and open space. The current setback is 500 feet for homes and 1,000 feet for school buildings. Under the proposed regulations, about 85 percent of all non-federal land in Colorado would be off-limits to oil and gas development, according to a July 2 report by the Colorado Oil and Gas Conservation Commission, an agency that both promotes and regulates oil and gas.

The Colorado Democratic Party is endorsing the ballot initiative. But Democratic leaders, including Gov. John Hickenlooper and U.S. Rep. Jared Polis, who is running for governor, oppose the measure. Opponents of the initiative say it would deprive a potential source of income from landowners with mineral rights. 

Former Secretary of the Interior Ken Salazar, an Alamosa native who was a guest speaker at the annual roundtable, said the initiative would be “unconstitutional.”

Salazar, who expanded national parks and wildlife refuges and championed utility-scale renewable energy projects while serving in the Obama Administration, is now a partner at a Denver law firm, WilmerHale, where he has represented Anadarko Petroleum Corp. The company owned the leaking pipeline that caused fatal Firestone explosion in April 2017.

Across the state, oil and gas rigs and residential neighborhoods are coming closer together, prompting calls for greater public health and safety protections. In the Front Range, Salazar said, new residential developments are encroaching on existing oil and gas areas.

“The consequence of that is that you have a greater degree of awareness and a greater degree of conflict that we’ve seen now for the last 10 years,” Salazar told The Colorado Independent.

This year is not the first attempt at a setback measure.

In 2014, Polis, who Salazar is supporting for governor, backed an initiative that would have required drilling rigs to be placed at least 2,000 feet from homes. At the request of Gov. Hickenlooper, a former oil and gas geologist who opposed the proposed setbacks, Polis agreed to drop the ballot initiative in exchange for a task force on oil and gas issues. Later in 2016, a 2,500 setback initiative failed to get enough signatures to make it on the ballot. 

As the event was underway, Colorado Rising for Health and Safety, a coalition of environmental and community groups backing the setback initiative, was holding a press conference about five blocks away at the State Capitol to announce that a political consultant hired to gather the signatures, Mike Selvaggio, left the state, taking an estimated 20,000 signatures with him.

State Rep. Joe Salazar (no relation to Ken), is an acting attorney for Colorado Rising. He told The Colorado Independent that seven boxes of signatures were returned around 5 p.m. on Thursday. He’s yet to confirm if the boxes include all the expected signatures. 

Salazar filed a lawsuit in Denver District Court. He said he will use the discovery process to investigate whether the oil and gas industry was involved.

The group has until Aug. 6 to obtain 98,492 signatures needed to get the question on the ballot. 

Salazar dismissed the claim the proposed ballot measure would be unconstitutional. He said no constitutional right is absolute.

“We are seeing houses explode. We are dealing the death of workers in fracking areas. We’re seeing earthquakes happening,” Joe Salazar told The Colorado Independent.

Colorado Alliance of Mineral Royalty Owners challenged the ballot measure in the Colorado Supreme Court in March, saying it would be misleading to voters and violated election laws. The court dismissed the challenge in April.

Companies like Anadarko, Noble Energy Inc. and PDC Energy have together already donated more than $10 million this year to an independent expenditure committee fighting the setback ballot initiative, according to filings with the Colorado Secretary of State’s office. The group, Protecting Colorado’s Environment, Economy, and Energy Independence, said Initiative 97 “effectively bans oil and natural gas development in the state.”

There are two other competing initiatives that could end up on the ballot this November. One would reinstate a provision in state law that gives the state — not local governments — the final say to regulate oil and gas drilling. Another would ensure property owners are compensated for any loss in property value caused by new regulations.

Protect Colorado has the same address as the Senate Majority Fund, a group that works to elect Republicans to the state Senate through political advertisements.

Republicans successfully defeated several oil and gas regulatory bills last session. One would have required state regulators to consider public health and safety when issuing drilling permits. Another would have increased the 1,000-foot setback from school buildings to school property boundaries. Another would have required state regulators to give local governments maps of natural gas flowlines.  And another would have increased spill and leak incident reporting requirements. 

All bills were voted down in Republican-controlled Senate committees on party-line votes.

But several vulnerable seats held by Republicans are up for grabs this November.

“We are cautiously optimistic,” said Tracee Bentley, executive director of the Colorado Petroleum Council, who moderated the event.  

Oil and gas companies are heading toward a record-breaking production year, according to data collected by the Colorado Oil and Gas Conservation Commission. Whether that growth continues, Bentley said, will be determined by “policy decisions that are going to be made in November.”

Left to right: Jack Gerard, the president and CEO of the American Petroleum Institute, U.S. Deputy Secretary of Interior David Bernhardt, and Former Secretary of the Interior Ken Salazar. Photo by John Herrick

Industry executives, lobbyists, attorneys and lawmakers were at the event on Thursday. Also speaking was U.S. Deputy Secretary of Interior David Bernhardt, who oversees the management of the country’s public land. He supports deregulation to boost oil and gas development, including rolling back protections under the Endangered Species Act. 

“I think we’ve moved at a pretty good clip when it comes to looking at where we are in terms of our deregulation policies,” Bernhardt said. He added, “My direction is to keep the president’s promises and that is what we’re going to do.”

Jack Gerard, the outgoing president and CEO of the American Petroleum Institute, said the Trump Administration’s 25 percent tariff on European steel could increase costs for projects because companies buy steel from Germany. This uncertainty, he said, makes it difficult to plan long term. 

“It sends a chilling effect throughout the industry — particularly for the big players that use a lot of steel for a lot of infrastructure,” Gerard told the Associated Press.

Salazar and Bernhardt spent about an hour together in a closed-door meeting ahead of the luncheon. Salazar said he and Bernhardt disagree on many issues, including drilling in the Arctic Wildlife Refuge, which Salazar opposes.

Salazar said he did not know enough about proposed drilling east of the Sangre de Cristo Mountains to comment. The proposed drilling sites would be about a mile away from Great Sand Dunes National Park on the opposite side of the mountain range. 

Title photo: Oil and gas development in new housing subdivision on Collier’s Hill. Photo by Ted Wood/The Story Group.