Oil-gas group: Tougher drilling rules could cost billions

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DENVER | An oil and gas advocacy group warned Tuesday that Colorado taxpayers could face billions of dollars in compensation claims if voters approve tough new restrictions on where wells can be drilled.

The primary backers of the measure disputed the claim and accused the group of using scare tactics.

The Colorado Alliance of Mineral and Royalty Owners, which represents individuals and corporations that own oil and gas rights, wants to kill a proposal that would increase the minimum distance between new wells and occupied buildings to 2,500 feet (762 meters). The current minimum is 500 feet (150 meters).

The primary backer, Colorado Rising, has until Aug. 6 to submit nearly 98,500 signatures to get the measure on the ballot.

The dispute is the latest skirmish in Colorado’s long-running battle over who should regulate the oil and gas industry, and how much.

Technological advances including hydraulic fracturing, or fracking, and directional drilling spurred an oil and gas boom in Colorado, but they also roused strong vocal opposition because many drilling rigs and wells have been placed near schools and houses.

The debate is especially intense in the urban Front Range corridor north of Denver, where a the state’s largest oilfield, the Wattenberg, overlaps fast-growing communities.

The royalty owners group said the Wattenberg field has about $180 billion in untapped petroleum, and royalties for the owners of the mineral rights are worth $26 billion. The figures came from a report by Netherland, Sewell & Associates, a Texas consulting firm that analyzes petroleum assets.

If new rules keep the oil and gas in the ground, owners of the rights could file compensation claims against state and local governments under the “takings” clause of the 5th Amendment, the group said. The amendment says private property cannot be taken for public use “without just compensation.”

Government tax revenue would also suffer, the group said.

“Not only do these estimates represent a staggering value that could be taken without compensation from mineral owners by proposed ballot initiatives, but they represent funds taken from tax coffers that fund schools, roads and other community services that we all value,” said Neil Ray, president of the royalty owners group.

The proposal for longer setbacks states it would apply only to new wells, but Ray said it could force oil and gas companies to shut down some existing ones if they need major maintenance.

Anne Lee Foster, a volunteer organizer with Colorado Rising, dismissed that notion, saying the measure exempts existing wells.

“It very explicitly states new oil and gas development,” Foster said.

Colorado Rising called the report on the Wattenberg field’s value “just a scare tactic.”

“Keeping wells out of neighborhoods may cost the industry more, but it is clearly the right thing to do in order to protect Colorado families from deadly explosions and toxic emissions,” the group said in a written statement.

The royalty owners also said the longer distances could leave most of the state off-limits to drilling. They cited a 2016 study by Colorado regulators that said an earlier proposal for a minimum of 2,500 feet (762 meters) would prevent future drilling in 90 percent of the state.

Foster said that study doesn’t apply to the new proposal. The 2016 regulations would have covered the entire state, but the new proposal exempts federal land, which covers 30 percent of Colorado.

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