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HomeMy WebLinkAboutMemo - Mail Packet - 6/11/2019 - Memorandum From Cassie Archuleta And Kelly Smith Re: Oil And Gas Operations Update1 Environmental Services 222 Laporte Ave Fort Collins, CO 80522 970.221.6600 970.224.6177 - fax fcgov.com MEMORANDUM DATE: June 5, 2019 TO: Mayor and Councilmembers THRU: Darin Atteberry, City Manager Jeff Mihelich, Deputy City Manager Jacqueline Kozak-Thiel, Chief Sustainability Officer Dean Klingner, Planning, Development and Transportation Interim Director Lucinda Smith, Environmental Services Director Tom Leeson, Community Development and Neighborhood Services Director FROM: Cassie Archuleta, Air Quality Program Manager Kelly Smith, Senior Environmental Planner SUBJECT: Oil and Gas Operations Update The purpose of this memorandum is to provide an overview of:  Current oil and gas operations in the City of Fort Collins and within the Growth Management Area (GMA),  New authorities granted at the local level related to the recent adoption of Colorado Senate Bill 19-181 (SB181, Protect Public Welfare Oil and Gas Operations),  Gaps within our current regulatory framework as a result of SB181, and  Next steps in evaluating and filling regulatory gaps. Bottom Line The recent adoption of SB181 has marked a fundamental shift in local authorities’ ability to regulate oil and gas development. Staff is beginning to explore opportunities to further reduce or eliminate surface impacts from oil and gas operations within City limits and the Growth Management Area (GMA). Interest in additional oil and natural gas development at existing wells within City limits is imminent, and consideration of temporary measures is recommended while full implications of new opportunities are evaluated. Oil and Gas Regulations Oil and gas development in Colorado is regulated by the Colorado Oil and Gas Conservation Commission (COGCC). Prior to adoption of SB181, local authority was limited by the COGCC’s authority which preempted local regulatory actions and legal rights to develop mineral resources. In 2013, Fort Collins voters approved a 5-year moratorium on hydraulic fracturing, but this was overturned by the Colorado Supreme Court on May 2, 2016. Ways that the City currently regulates oil and gas operations include:  The City has an Operator’s Agreement (OA) in place with Prospect Energy. This agreement contains requirements for air sampling and other Best Management Practices (BMPs) for new wells drilled within Fort Collins City limits.  The City’s Land Use Code includes setback requirements for new development around existing wells and other oil and gas infrastructure (called reciprocal setbacks). The COGCC regulations include setbacks for new wells. DocuSign Envelope ID: 4ADEC66E-C8B6-432A-9BEA-02586999C9E5 2 SB181, adopted on April 18, 2019, has changed the regulatory framework, which has triggered new rulemaking activity for the COGCC. Key elements of new rulemaking will include:  Elevation of public health, safety and environmental concerns over mineral development interests  Increased local authority to regulate the siting of oil and gas locations to minimize adverse impacts to public safety, health, welfare and the environment  Increased local authority to regulate land use and surface impacts Draft recommendations for new COGCC rules are expected in the Fall of 2019, for potential consideration in January 2020. New local government authority includes the ability to regulate surface impacts of oil and gas operations in a reasonable manner and to protect and minimize adverse impacts to public health, safety, and welfare and the environment. Because the law is new and local governments are just starting to draft and adopt regulations, the full scope of local regulatory authority is yet to be determined. Current Fort Collins Oil and Gas Operations Prospect Energy is the only oil and gas operator within Fort Collins City limits. The Prospect Energy wells are located in northeast Fort Collins, in an oil field that was discovered in 1924. Currently, there are 10 wells in northeast Fort Collins considered “active”, 3 of which produce oil, 5 are used to inject water to bring oil to the surface, and 2 are considered “shut-in” or active but not currently in use. The most recent well was drilled in 1992. Hydraulic fracturing processes can be used at existing wells periodically to stimulate production as part of what is called a “re-completion process”. Most recently, in 2017, Prospect Energy re- completed a well just outside of City limits within the GMA, and an additional permit application for this same location (outside of City limits) is currently pending approval by the COGCC. Within City limits, a re-completion permit application is likely imminent (anticipated in June 2019) for an existing “shut-in” well, which could potentially introduce new oil and gas production and hydraulic fracturing at a location within 350’ of a platted subdivision (Country Club Reserve). Current Regulatory Gaps While the City does not have many wells, the few that exist are within residential areas. Some potential regulatory gaps include:  Additional development at existing wells. The City’s Operators Agreement (OA) with Prospect Energy applies to new wells, but not to re-completions which could introduce new infrastructure for oil and/or gas development at existing oil wells. Additionally, the current OA only applies to Prospect Energy, and not to other operators with potential development interests in Fort Collins.  Siting for new wells. The City does not currently regulate siting for new wells; only new residential development around existing wells. This was previously pre-empted by State rules. No new wells are currently anticipated in Fort Collins, but there is potential for additional surface uses at existing wells (e.g., storage tanks and pump jacks). Without local regulation regarding oil and gas surface use, COGCC could approve surface uses that encroach upon the reciprocal setback requirements that the City has adopted for new homes. DocuSign Envelope ID: 4ADEC66E-C8B6-432A-9BEA-02586999C9E5 3  City owned property outside of City limits. The City does not have regulatory land use authority related to oil and gas development in City owned properties outside of City limits, such as the Soapstone Prairie Natural area  Development within the GMA. No current understanding exists with Larimer County regarding new development within the GMA. Next Steps Council priorities, as discussed at the May 4, 2019 Council retreat, include a reduction or elimination of surface impacts in the GMA, and evaluation of implications of SB181. Per this direction, staff proposes to:  Work with a newly formed Larimer County Oil and Gas task force, to explore potential regulatory options for the GMA. Staff is already coordinating with Larimer County to be part of a Technical Advisory Committee (TAC) for this new task force  Explore surface use requirements for new wells within City limits  Explore opportunities to further reduce or eliminate surface impacts from existing wells. Pending new policy work and recommendations, which could proceed into 2020, staff plans to work with the COGCC to explore options for temporary holds on new development and permit activity within City limits, and work with the County to explore options within the GMA. If options for temporary action are viable and desired by Council, staff will bring options to Council for consideration. DocuSign Envelope ID: 4ADEC66E-C8B6-432A-9BEA-02586999C9E5