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Colorado misses deadline to extend agreement over oil and gas regulation on federal land

GRAND JUNCTION, COLO–Colorado’s Memorandum of Understanding (MOU) between the Bureau of Land Management (BLM), the U.S. Forest Service (USFS) and the Colorado Oil and Gas Conservation Commission (COGCC) regarding state regulation of oil and gas development on federal lands has expired, leaving in question how new state regulations mandated under Senate Bill 181 (SB181) passed in 2019 will fit with federal mineral extraction policies.

The MOU was signed by Governor Bill Ritter ten years ago and lapsed December 31 when the state chose not to extend it.

“We don’t anticipate any conflicts with the state and it really is in the state and BLM’s interest to respect each other’s rules for oil and gas development on public lands,” said BLM Acting Region 7 Communications Director Jayson Barangan. “It is part of the multiple use mandate and we manage for that to ensure that the public gets a benefit out of it.”

“I’m happy to hear that they did not renew the MOU because that lets everybody come to the table and have a very open discussion about what the future looks like,” said state Sen. Ray Scott, R-Grand Junction in an interview with Complete Colorado Thursday. “Job loss is obviously my biggest concern in Mesa County.”

The expired MOU allowed Colorado to tell federal lands operators to get a second permit from the state.  The criteria were much the same for both, so it was an expensive, duplicative effort.

“There’s really no reason for that,” said Scott. “Their permit process is very comprehensive, it does a great job and it protects the environment and allows extraction industry to move forward with development of natural resources.”

Since SB181 was made law, oil and gas operators have been fleeing the state for more cooperative and stable regulatory climates, particularly in the Permian Basin of Texas. The resulting cutoff of demand for ancillary local services for drillers has shut down many local companies in Grand Junction and across the western slope.

In a January 7 story by Complete Colorado, an “unnamed energy executive” is quoted as telling the Dallas Federal Reserve office, “It is very difficult to find any projects that make sense economically. I am getting increasingly selective on what deals in which I will invest. Increasing regulatory pressure in Colorado has resulted in a complete loss in value of wells in that state, and in my mind, it has become a ‘no investment’ state.”

“So much pressure is being put on these federal land operators west of the Continental Divide, of course it has become a zero-investment situation,” said Scott. “These folks are not major companies like Exxon and Mobil and Chevron, they have to depend on investment bankers.”

“We’ve had a severe job loss tracking at about 1000 jobs right now we’ve lost and still bleeding jobs,” said Scott. “That’s probably equivalent to 10,000 jobs lost in Denver. It’s a huge deal for my district and my constituents. We need some certainty for the industry. We can’t afford to lose that many jobs in a town like Grand Junction.”

The BLM was unwilling to address hypotheticals about the impact of a possible complete ban on oil and gas extraction, but said nothing is going to change in their land management decisions for now.

Scott asked, “How can the federal government have an MOU on federal land that goes directly against what the President is saying he wants, which is energy dominance?”

“The MOU does not create or limit any decision-making authority of the state or federal agencies. It’s a guiding document that spells out how we cooperate with the state,” said Barangan. “We remain committed to working with the state and local governments to manage oil and gas development as well as other uses.

“We’re working closely with the COGCC through their rulemaking process to address any unique management opportunities presented by oil and gas development on public lands,” Barangan continued. “The new rules by the state are being evaluated and may affect the specific language of the MOU.”

“I think this is a big step towards giving the industry some stability,” Scott said. “Hopefully it will loosen up investment opportunity and help stop job loss and create new jobs.”

Barangan said that he hopes a new MOU will be completed sometime in 2020.

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