Setbacks

Colorado’s current regulations create a safe buffer between schools, hospitals and homes and industrial facilities like oil and gas rigs.

Summary

  • Colorado currently mandates that oil and gas facilities must be 500 feet (almost the length of two football fields) from any home and 1,000 feet from schools and hospitals.
  • Excessive setback distances, as proposed by the environmental lobby, are unreasonable and amount to effective bans on energy development in the state.
  • Imposing unreasonable setbacks hurts property values by depriving both mineral owners and surface owners of their rights and access to their property.
  • Imposing excessive setbacks – such as 2,500’, or nearly one-half mile – would be economically devastating to the state.
  • No candidates for governor from either major party support a 2,500′ setback.

Issue Background

“Setbacks” are minimum distances mandated by law that oil and gas facilities must be located from a specified structure or feature. While the industry recognizes that some buffer may be required between structures and active oil and gas operations, requiring excessive setback distances is a tactic used by anti-oil and gas activists to severely restrict any future oil and gas development in the state.

Current setback rules in Colorado were adopted by the Colorado Oil and Gas Conservation Commission (COGCC) in 2013, after a lengthy consultation and stakeholder process. The current rules increased the setback distance from 150 feet or 1.5 times the height of the derrick, to 500 feet from an occupied dwelling, or 1,000 feet from a “high occupancy building”, such as a school or a hospital. These setback distances are more than sufficient to provide for the safety of local residents.

Setbacks of 2,500 feet from any building, school property line, or water source are promoted by the extreme environmental movement, and a ballot measure is again being pursued in 2018 to place those setbacks on the ballot as Initiative 97. Such a measure would effectively ban any further oil and gas development from the state, as an overlay produced by the COGCC shows that virtually all available land in the state would be excluded from any oil and activity. This would cost the state $180 billion in economic activity and cost individual royalty owners $26 billion according to a study by commissioned by the Colorado Association of Mineral and Royalty Owners.

In addition, greater setbacks represent a violation of property rights for both the subsurface mineral owner and the surface owner. The mineral owner is obviously denied a right to access his or her property, as the setbacks would prevent surface activity necessary to access and develop those minerals, without regard to whether or not those minerals can be accessed in any other way – horizontal drilling, for example, does have physical limits.

Governing Principles

Respect for Property rights is the primary principle of concern in the setback issue.

Economic liberty and free enterprise are also involved, as excessive setbacks deny businesses and property owners the right to develop resources they own.

Solutions

  • Maintain current setback standards developed through an extensive stakeholder process and oppose special interest-driven measures to mandate new, economically devastating setback rules.
  • Support policies that ensure property owners are properly compensated if new laws or regulations prevent the use or access to mineral rights, and the benefits thereof.
  • Allow surface and mineral owners the flexibility to negotiate with each other concerning location of surface equipment.

Key Statistics

  • A Colorado Oil and Gas Conservation Commission (COGCC) analysis of a 2016 ballot proposal to impose 2,500’ setback from occupied buildings and areas of “special concern” found:
    • ~90% of surface acreage in Colorado would be unavailable for future oil and gas development or hydraulic fracturing under the proposed mandatory setback requirement
    • 85% of surface acreage in Weld County, the state’s largest oil and gas producing county, would be unavailable for new oil and gas development facilities or hydraulic fracturing operations
    • In the state’s top 5 producing oil and gas counties (Weld, Garfield, La Plata, Rio Blanco, and Las Animas) 95% of the total surface area would be unavailable for new oil and gas development facilities or hydraulic fracturing operations (COGCC, 2016)
  • The oil and gas industry generates over $25 billion dollars for Colorado’s economy. (Source: The University of Colorado, Leeds School of Business)

Resources:

Colorado Farm Bureau
Oil and Gas Well Setback Impacts and Challenges
http://www.naro-us.org/Resources/Documents/Setback%20Presentation%20NARO.pdf

Colorado Oil and Gas Conservation Commission (COGCC)
Report on 2016 setback ballot measure
http://cogcc.state.co.us/documents/library/Technical/Miscellaneous/Init_78_Proposed_2500ft_Setback_Assessment_Report_20160527.pdf

Protect Colorado
What’s on the Ballot?
https://www.protectcolorado.com/blog/ballot-measures/

American Petroleum Institute
COGCC Maps show absurdity of changing existing setback regulations
http://www.api.org/news-policy-and-issues/news/2016/05/27/cogcc-maps-show-absurdity-of-changing-ex

Denver Post
Royalty owners claim wider well setbacks would cost them $26 billion
https://www.denverpost.com/2018/06/12/royalty-owners-claim-wider-well-setbacks-would-cost-them-26-billion/