In this Capitol Report:
Initiative 97, Oil-and-Gas Well Setback Measure, Qualifies for November Ballot
Last Wednesday, August 29th, the Colorado Secretary of State’s Office announced that Initiative 97, “Setback Requirement for Oil and Gas Development,” had qualified for the November ballot.
The measure would amend state statutes, not the Colorado Constitution. Under Amendment 71, which the voters approved in 2016, 55 percent of the vote is required to amend the Constitution. Amendment 71, however, did not change the constitutional requirement that a majority vote—50 percent plus one—is required to pass an initiative that amends state statutes. (Amendment 71 also stipulates that a proposed amendment that repeals part of the Constitution—but does not change the Constitution—requires only a simple majority vote.)
Advocates of the measure turned in 172,834 signatures. The total number of valid signatures is 98,492. A 5 percent random sample of the total yielded a projected number of 123,195 valid signatures, which is 125.08 percent of the minimum requirement of 98,492. To qualify, an initiative must have at least 110 percent of the minimum required number of signatures.
One of the most controversial ballot measures that will face Colorado voters this fall, Initiative 97 directly pits environmental organizations, community organizations and homeowners against the oil-and-gas industry and the owners of mineral rights in the latest battle of a years-long war over energy production, specifically the proximity of the production to residential areas, schools and environmentally sensitive lands.
The measure would increase by five times to 2,500-feet the distance between new oil-and-gas wells and residential homes, schools, hospitals and “vulnerable areas.”
The proposal is being advanced by an organization called Colorado Rising. An issue committee, Colorado Rising for Health and Safety, had raised more than $527,000 by August 6th. (The Secretary of State’s committee registration for the Committee is #20185033525.)
The lead organization opposing the initiative is Protect Colorado. An issue committee–Protecting Colorado’s Environment, Economy and Energy Independence–has been formed to fight such ballot measures as Initiative 97. As of August 1st, it had raised about $13.1 million from energy companies. (Its Secretary of State identification number is 20145026709.)
A report issued in July by the non-partisan Colorado Oil and Gas Conservation Commission stated that the initiative would prevent 85 percent of non-Federal land in the state from being explored for oil-and gas production.
More than half of the land in the state would be off-limits to new energy development.
COGCC is charged by the legislature with balancing oil-and-gas production with protecting the environment, wildlife and public safety-and-health.
Here’s the COGCC report summary:
- An estimated 54% of Colorado’s total land surface would be unavailable for new oil and gas development by adopting the buffer zone setbacks and federal land exemption proposed by initiative #97. Of the non-federal land in Colorado, 85% would be inaccessible using these same criteria.
- 78% of Weld County surface land (85% of non-federal land) would be off-limits to new oil and gas development. In Colorado’s top five oil and gas producing counties combined, 61% of the surface acreage (94% of non-federal land) would be unavailable.
- “Vulnerable areas” buffers, which initiative #97 defines to include a range of surface hydrologic features, would have a significantly larger impact than “occupied structure” buffers on making surface lands inaccessible to new oil and gas activity.
In addition, a report by the REMI Partnership found that Initiative 97 would cost the state 100,000 jobs by 2030 and harm the state’s economy. The Partnership includes the Common Sense Policy Roundtable, Colorado Concern, Colorado Bankers Association, Denver South Economic Development Partnership and Colorado Association of REALTORS.
Here’s the Legislative Council’s “Fiscal Impact Statement” description of the proposal:
Summary of Measure
If approved by voters, the measure requires that new oil and natural gas development not on federal land be located at least 2,500 feet from an occupied structure or vulnerable area. A state or local government may require a setback greater than 2,500 feet. If two or more local governments with overlapping jurisdictions establish different setback requirements, the larger setback is applied.
Oil and gas development is defined as the exploration for, and the drilling, production, and processing of gas and liquid hydrocarbons. This includes gas flowlines, and the treatment of waste associated with oil and gas development. Renewed production of an oil or gas well that had previously been plugged or abandoned is considered new development.
Occupied structures means any building intended for human occupancy, including homes, hospitals, and schools.
Vulnerable areas include playgrounds, permanent sports fields, amphitheaters, public parks, public open space, public and community drinking water sources, irrigation canals, reservoirs, lakes, rivers, perennial or intermittent streams, and creeks. The state or a local government may designate additional vulnerable areas, which must then be considered for any setback site calculation.
Background
Setback requirements for oil and natural gas facilities. The required distance from an oil and natural gas facility and a home or other structure is commonly known as a setback requirement. Current state regulations, approved in 2013, prohibit oil and natural gas wells and production facilities from being located closer than:
- 500 feet from a home or other occupied building; and
- 1,000 feet from high-occupancy buildings such as schools, health care institutions, correctional facilities, and child care centers, as well as neighborhoods with at least 22 buildings.
Currently, the 500-foot setback prohibits oil and gas development on about 18 acres surrounding a given point, and the 1,000-foot setback prohibits development on about 72 acres. This measure increases the setback to a minimum of 2,500 feet, or about 450 surrounding acres.
State and local revenue from oil and natural gas. Companies that extract mineral resources, including oil and natural gas, coal, and metallic minerals, pay severance taxes to the state. Oil and natural gas producers also pay income taxes, sales taxes, use taxes, and local property taxes.
The Title Setting Board, however, amended the Initial Fiscal Impact Statement by the Legislative Council. Here’s the Board’s amendment:
Abstract of Initiative 97: SETBACK REQUIREMENT FOR OIL AND GAS DEVELOPMENT
This initial fiscal estimate, prepared by the nonpartisan Director of Research of the Legislative Council as of January, 2018, identifies the following impacts:
The abstract includes estimates of the fiscal impact of the initiative. If this initiative is to be placed on the ballot, Legislative Council Staff will prepare new estimates as part of a fiscal impact statement, which includes an abstract of that information. All fiscal impact statements are available at www.ColoradoBlueBook.com and the abstract will be included in the ballot information booklet that is prepared for the initiative.
State and Local Government Revenue and Expenditures. The measure is highly likely to decrease the amount of severance tax, royalty payments, and lease revenue that state and local government collects in the future, and the amount of state and local expenditures of that revenue.
Economic Impacts. This measure constrains well location throughout the state except on federal lands and is likely to reduce future oil and gas development in the state. The current 500 foot setback prohibits oil and gas development on about 18 acres surrounding a given point. The measure increases the setback to a minimum of 2,500 feet or about 450 surrounding acres. To the extent that the measure reduces development, there will be less oil and gas employment, less demand for associated services, reduced rent and royalty income to mineral owners, and reduced profits for operators. Increasing the setback distance may preserve property values for homeowners most affected by the setback and, to the extent less development improves health outcomes for affected residents, may increase productivity and reduce medical costs.
More Information and News Media Coverage
For news media coverage and additional information, read:
“Initiative to increase setbacks for new oil and gas drilling qualifies for Colorado ballot,” by Ben Botkin, The Denver Post, August 29th.
“Oil well setback measure qualifies for Colorado ballot,” by Greg Avery, The Denver Business Journal, August 30th.
“Initiative 97: Oil and gas setback proposal makes November ballot,” by Marianne Goodland, Colorado Politics, August 29th.
Controversial Property-Compensation Initiative Qualifies for November Ballot
Initiative 108, which has ignited a political firestorm between local governments and the petition’s advocates, mineral-rights owners and the oil-and-gas industry, has qualified for the November ballot.
The title of the initiative is “Just Compensation for Reduction in Fair Market Value by Government Law or Regulation.” The measure would amend state the Colorado Constitution.
Under Amendment 71, which the voters approved in 2016, 55 percent of the vote is required to amend the Constitution. Amendment 71, however, did not change the constitutional requirement that a majority vote—50 percent plus one—is required to pass an initiative that amends state statutes. (Amendment 71 also stipulates that a proposed amendment that repeals part of the Constitution—but does not change the Constitution—requires only a simple majority vote.)
On Tuesday, August 28th, the Secretary of State’s Office announced that Initiative 108 would make the ballot. Advocates turned in 209,111 signatures. A 5 percent random sample yielded a projected number of valid signatures of 137,029, which is 114.73 percent of the required minimum of 98,492. The percentage of projected valid signatures must be at least 110 percent of the required minimum.
The measure would amend the Colorado Constitution’s provision concerning governmental use of the power of “eminent domain.” Eminent domain is the authority in the Colorado Constitution that allows governments to acquire private property for such public uses as schools, government structures and roads with “just compensation” to the property owners. The amount of compensation, according to the Constitution, is determined by a “board of commissioners” or “by a jury.”
Initiative 108 would require State and local governments to pay private-property owners for actions that governments take through regulation or law that reduce the “fair-market value” of property.
Legislative Council Analysis
Here’s the analysis of the proposal as contained in the Initial Fiscal Impact Statement, which was written by non-partisan staff of the Legislative Council:
Summary of Measure
Eminent domain is the power of government to take private property for public use. A common application of this power is taking private property for roads, public schools, or other government buildings. The Colorado constitution and state statutes prohibit the taking or damaging of private property for public use without just compensation to the property owner. This initiative amends the constitutional language controlling eminent domain.
Initiative 108 amends the constitution to prohibit the reduction in fair market value of private property by government law or regulation, or for public or private use, without just compensation.
State Revenue
Procedurally, when a governmental body seeks to acquire private property through eminent domain, a court or a court-appointed commission is required to establish the amount of just compensation. Filing fees to initiate proceedings with the court system creates new state revenue. This measure will result in additional court cases, and therefore additional fee revenue; however, because the number of future court cases brought by private property owners in response to future government laws or regulations is unknown, no estimate can be made.
State Expenditures
State expenditures will increase each time a court in the Judicial Branch decides that a law or regulation has reduced the fair market value of the private property, and therefore, that the state must provide just compensation. The amount of new expenditures required to compensate property holders cannot be estimated; however, this fiscal note assumes this increase could be significant for all branches of state government.
Workload in the Judicial Branch will increase to adjudicate cases, as well as in the Department of Law each time the Attorney General is required to defend the state against a takings claim. This fiscal note assumes that the initiative is not retroactive, and applies only to alleged damage occurring after the measure’s effective date.
Local Government Impact
Similar to the state, local government workload and expenditures could increase significantly for each law, regulation or regulatory condition, that local courts rule has reduced the fair market value of private property, and therefore, that the local government must provide just compensation. Local courts also collect a fee for court filings. An increase in court cases will result in an increase in local government revenue.
Economic Impact
The measure will increase the cost of future laws, regulations or regulatory conditions. Public compensation for lost market value will allow certain property owners to maintain a consistent economic position despite changing regulatory conditions that might have reduced the productive value and the economic gains from their property. Governments will be required to cut spending on government programs and / or increase revenue from taxation or fees. This fiscal note does not attempt to predict a behavioral change by government in response to an increased requirement to compensate private property owners.
Proponents
If Initiative 97 (the 2,500-foot setback measure for oil-and-gas wells) should be approved by the voters this November, then Initiative 108–should it also be approved by the voters–would provide the energy industry and mineral-rights owners with financial compensation for the reduced fair-market value of their property because oil-and-gas production would be greatly restricted (see below).
The advocates for Initiative 108 include the Colorado Farm Bureau, the Colorado Alliance of Mineral and Royalty Owners (CAMARO) and the energy industry. The lead energy-backed organization advocating the initiative is Protect Colorado.
Opponents
Sam Mamet, veteran Executive Director of the Colorado Municipal League, told Mark Jaffe of Colorado Politics that “My advice to counties and municipalities is if this passes, don’t do anything . . . no zoning, no ordinances.” An article has been published sharing his concerns. An issue committee, “Save Our Neighborhoods,” has been formed to oppose Initiative 108. No contributions had been made to the Committee as of August 1st.
More Information and News Media Coverage
For news media coverage and additional information, read:
“Measures on property compensation, payday loans make Colorado’s fall ballot,” by Marianne Goodland, Colorado Politics, August 28th.
“Oil and ag industries inch closer to changing 11 words in Colorado’s constitution to ‘protect’ property rights,” by Ed Sealover, The Denver Business Journal, August 28th.
“Proposals impacting payday lenders, property owners qualify for ballot,” by Brian Eason, The Denver Post, August 28th.
“Initiative 108 Submitted to Colorado Secretary of State,” Colorado Capitol Report, August 17th.