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HomeMy WebLinkAboutMemo - Mail Packet - 6/7/2022 - Memorandum From Cassie Archuleta And Kelly Smith Re: Oil And Gas - State And Local Regulations Update 1 Environmental Services 222 Laporte Ave Fort Collins, CO 80522 970.221.6600 970.224.6177 - fax fcgov.com MEMORANDUM DATE: June 2, 2022 TO: Mayor and Councilmembers THRU: Kelly DiMartino, Interim City Manager Tyler Marr, Interim Deputy City Manager Jacqueline Kozak-Thiel, Chief Sustainability Officer Caryn Champine, Director of Planning, Development and Transportation Paul Sizemore, Director of Community Development and Neighborhood Services Rebecca Everette, Planning Manager Lindsay Ex, Environmental Services Director FROM: Cassie Archuleta, Air Quality Program Manager Kelly Smith, Senior Environmental Planner SUBJECT: Oil and Gas State and Local Regulations Update Bottom Line The purpose of this memo is to provide City Council with an update regarding new regulatory options related to oil and gas development within City limits and the Growth Management Area (GMA). Staff is currently drafting local regulations while exploring the new State regulations to meet the objective of reducing or eliminating impacts from existing and new oil and gas development. New State Requirements The regulatory environment for oil and gas development has been rapidly evolving at the State level, raising questions about whether existing economically viable as they relate to the value of minerals produced. Most recently: In April 2022, the Colorado Oil and Gas Conservation Commission (COGCC) determined that proposed recompletions at existing oil and gas facilities within the Fort Collins GMA and in close proximity to existing homes could not be completed without first acquiring a State land use permit. This permit will require extensive consideration of surface impacts and is expected to limit future development. City and County staff advocated for these considerations, and the COGCC decision demonstrates a commitment to consider local agency input in its decision-making process. Effective April 30, 2022, the City has new authority to request a hearing before the COGCC to request an order to have a well plugged and abandoned that is either (1) causing adverse impacts to public health, safety, welfare, the environment, or wildlife resources, or (2) is no longer used or useful (uneconomic). City staff testified in support of these new rules at COGCC rulemaking hearings in February 2022. City and County staff plan to work collaboratively to explore these options with Prospect Energy and the COGCC. Also effective April 30, 2022, new COGCC financial assurance requirements for existing wells authorize the City to collaborate with Prospect Energy in developing a Financial Assurances Plan, due to the COGCC by October 1, 2022. This plan will require Prospect Energy to either plug and abandon wells, or post financial assurance for each well ($70-100K per well, over 10 years). This would include 10 wells within City limits, and many more in other parts of the oil field. 2 Proposed City Regulations Per local regulatory authority granted through SB-181, Council directed City staff to develop comprehensive local regulations for oil and gas development. In October 2021, Council expressed support for land use standards and setbacks requirements that go above State regulations and would effectively limit the potential for new development. Specifically, Council supported: Restricting oil and gas operations to the Industrial Zoned District Requiring a 2000-foot setback from Natural Areas, Parks, and all buildings designed for human occupancy; this also includes a reciprocal setback Local regulations would also limit changes that could occur at existing oil and gas facilities, particularly for those that do not conform to the established location requirements (industrial zoning and setbacks). If an operator proposes a change, the facility must first be brought into conformance with the location requirements. The City oil and gas regulations, in combination with State requirements, may effectively reduce or eliminate local oil and gas operations within the City and GMA. This could limit the need for the City to develop and implement resource intensive operational standards, instead leveraging new State requirements for ongoing operations. Next steps Based on Council interest in reducing or eliminating impacts from oil and gas operations within City limits, staff recommends continuing to explore the application of new State rules to require or encourage wells within the City limits or near city residents to be plugged and abandoned. Staff also recommends continuing to pursue local land use regulations that will limit future oil and gas development. Proposed next steps include: City staff will collaborate with County staff to analyze existing wells within the GMA to determine which are no longer used or useful and which pose the greatest threat to public health and safety and welfare. Staff will use this analysis to refer local wells to the COGCC to consider requiring plugging and abandonment. operator to explore current needs and future plans. Consultation will be done cooperatively with Larimer County and will be explored during 3rd quarter of 2022. Staff will update Council regarding results of operator consultation, COGCC hearings regarding potential orders to plug and abandon existing wells, and projected potential to mitigate or eliminate surface impacts through new COGCC requirements. These updates will be provided following consultations conducted in 3rd quarter. While preliminary draft oil and gas regulations have been developed, staff are continuing to refine recommendations based on implications of new State and County regulations and spatially analyze the impacts as they apply in Fort Collins and the GMA. The next Council Work Session to discuss updates to these regulations is scheduled for October 25, 2022, and proposed regulations will be informed by results of these consultations with the operator and the COGCC.