Body
Department of Community Development
Reference: Oil and Gas Regulations
To: Mayor Richard N. McLean and Members of City Council
Through: Manuel Esquibel, City Manager
Prepared By: Holly Prather, AICP, Community Development Director
Margaret Brubaker, Esq., Legal Counsel for the City
Matthew Sura, Esq., Legal Counsel on Oil/Gas Related Matters
Date Prepared: February 12, 2015
PURPOSE
To hold a public hearing and consider at first reading an ordinance approving an amendment to the Municipal Code, Chapter 17. Land Use and Development Code regarding oil and gas regulations.
BACKGROUND
Since 2008, the state of Colorado's oil and gas industry has seen tremendous changes. The state Colorado Oil and Gas Commission has passed numerous new oil and gas rules - going through at least one rulemaking a year for the past six years. The technology of hydraulic fracturing and horizontal drilling opened up tremendous new reserves of oil and gas on the Front Range - changing the way oil and gas is being developed, and where it is being developed. Proposals to drill within municipalities caused concerns among residents that led to several communities enacting bans and long-term moratoria on the practice of hydraulic fracturing. Adams County and Arapahoe County are being targeted for far more oil and gas development than ever before, requiring municipalities within those counties, including the City of Brighton, to enact new regulations to keep up with all of the changes over the past six years.
State Regulations
In 2008, the Colorado Oil and Gas Commission (COGCC), a division of the Colorado Department of Natural Resources, went through a major rulemaking that put in place significant new requirements for the industry and established new state permitting processes. In 2012 and 2013, the COGCC considered and approved two major amendments to the statewide rules: the "Groundwater Rules", which address water sampling and monitoring and became effective May 1st, 2013; and the "Setback Rules", which address setbacks applicable to drilling and well servicing operations, high density areas and designated outside activity areas and became effective August 1st, 2013. Other recent COGCC rulemakings include spill reporting and penalties and enforcement rules.
In 2013, the Colorado Air Quality Control Commission passed regulations to combat regional ozone problems and reduce methane emissions. The new regulations are expected to reduce pollution emissions from the oil and gas industry by at least 33%.
Citizen Initiatives and State Preemption
In 2012, the City of Longmont attempted to use its zoning authority to restrict oil and gas development from residential areas within the city. The COGCC and industry-group Colorado Oil and Gas Association (COGA) sued Longmont claiming that local governments were preempted by the state from applying zoning to the oil and gas industry.
In 2012 and 2013, several citizen-initiated ballot measures were passed in home-rule municipalities that banned or put in place extended (3-5 year) moratoria on hydraulic fracturing operations. Lawsuits were filed by the COGCC and COGA opposing those ballot measures as preempted by the state.
The district court decisions in several of the banning and moratorium cases have held that bans on hydraulic fracturing are preempted by the state. They were found to be illegal because they constitute an "operational conflict" with the state regulation of oil and gas. Past appellate court cases, like the often-cited Voss v. Lundvall, have held that local governments do not have the authority to regulate the oil and gas industry if the local regulations are found to "materially impede or destroy the state interest" in oil and gas development.
The Governor's Task Force
This past year, there was an effort to place two citizen initiatives on the state-wide ballot that would have impacted drilling within municipalities. One of the initiatives would have allowed for greater local government control over oil and gas development. The other would have required a minimum 2,000 foot setback from homes. Ultimately, the initiatives were withdrawn through an agreement reached by Governor Hickenlooper and U.S. Representative Jared Polis, the primary supporter of the ballot measures. The initiatives were withdrawn in exchange for the state dropping its lawsuit against Longmont's application of zoning restrictions to oil and gas development, the state would start enforcing the existing COGCC rule that multi-well production facilities must be "as far as possible" from homes, and the Governor would set up an Oil and Gas Task Force. The purposes of the Task Force were to consider contentious oil and gas issues such as local government oil and gas permitting authority and the siting of the large multi-well production facilities. The Task Force is expected to make recommendations to the Governor by the end of February. Those recommendations that receive 2/3 majority support from the Task Force members will be supported by the Governor and passed onto the COGCC and to the Colorado Legislature for consideration.
City of Brighton Oil and Gas Efforts
The City of Brighton's Municipal Code, Chapter 17, titled as, Land Use and Development Code includes a section on oil and gas wells (currently Article 17-20-70). This section of the Code was last amended by the City Council's approval of updated regulations from the City Attorney's office in 2005 to align with the state's oil and gas regulations that were in effect at that time.
Beginning in 2012, with the increase in oil and gas development in the State, and the COGCC's substantial revisions to the state regulations mentioned above, the City Manager arranged for the City Council to receive input from various entities and individuals that presented at numerous study sessions in order to get a comprehensive and balanced perspective of the current status of oil and gas development around the State. (A list of those documents and presentations is noted under the section titled Supplementals; copies will be made available upon your request to the City Clerk's office.) A brief PowerPoint of oil and gas information, including descriptions of directional drilling and hydraulic fracturing, was available for viewing at the City's annual summer barbeque held in 2013 and comments were received from residents regarding the topic after viewing the presentation.
At the conclusion of the Study Sessions in 2012-2013, the City Council gave city staff direction to update the City's oil and gas regulations to acknowledge new regulations adopted by the COGCC, new technologies within the industry, and to address Brighton's particular public health, safety and welfare concerns, with emphasis on protecting the City's municipal water wells and system. Therefore, city staff and the City Attorney's office prepared draft regulations at the end of 2013 for consideration by the City Council. At the December 3, 2013 City Council meeting, a public hearing and first reading was held at which time representatives from the COGCC and the COGA expressed concerns regarding the draft regulations ordinance. At the December 17, 2013 City Council meeting, the City Council tabled the draft regulations in order to allow the City Attorney and city staff time to continue discussions with the COGCC and COGA and to monitor developing issues associated with oil and gas development. The City Council also provided direction that the revised regulations should address, particularly: (i) the potential impacts on the City's water supply wells and system; (ii) impacts on air quality; (iii) noise; and (iv) visual aesthetics.
At the same time that Brighton's efforts to amend and adopt revised oil and gas regulations were questioned by the COGCC and COGA, other cities, counties and towns in the State were facing similar challenges. Some cities responded by enacting extended-moratoriums on oil and gas development or bans on the process of hydraulic fracturing as described above. In other parts of the state, some local jurisdictions were allowing oil and gas development to occur through adopting and successfully implementing regulations that provided two options to Operators. The Operator could apply for a special use or conditional use permit or, alternatively, enter into a negotiated Memorandum of Understanding (MOU) wherein the Operator agreed to perform best management practices that were more stringent than the COGCC regulations.
The MOU is an enforceable contract. Because it is a contract between two willing parties, it can require stricter regulations than the COGCC without being in "operational conflict" with the State.
The City retained special legal counsel, Matthew Sura, to work with city staff to follow the lead of those jurisdictions (Broomfield, La Plata County, and Erie) and to prepare draft regulations to provide for the conditional use/MOU alternative approach.
In January of 2014, Brighton met with representatives from the COGCC and expressed its concerns regarding adequate protection of its municipal water supply. Brighton obtains over 70% of its supply from shallow groundwater wells. Brighton spent the next six months working with representatives of the COGCC and the Colorado Department of Public Health and Environment (CDPHE) to draft an Order to establish a system of requirements and Best Management Practices to protect the water supply. Throughout that time, various representatives of the oil and gas industry with direct interest in drilling in and around Brighton were included in the Order drafting process. As a result of the meetings and successful negotiations between the industry and Brighton, the COGCC passed Order 1-189 to protect the Brighton Public Water System on July 28th providing new protections for the City of Brighton's water wells and ditches. The new COGCC Order was unanimously supported by the oil and gas industry and the COGCC Commissioners.
The water protection Order accomplished the following:
1) Created an "Exception Zone" around the Brighton City water supply that does not allow oil and gas facilities within 500 feet of its water wells or 300 feet from rivers and streams.
2) Created a "Ground Water Sampling Zone" from ½ mile from the City's water supply as well as 500 feet from rivers, lakes, and streams Brighton relies on for its water supply.
3) Created a "Buffer Zone" that is within ½ mile of all water facilities where best management practices will be utilized to protect water quality.
Please refer to the attached Order No. 1-189 for further detail.
After the COGCC Order was passed, Brighton staff turned its attention to drafting the Brighton regulations. The draft Brighton oil and gas ordinance before you is largely based on the regulations adopted by the City of Broomfield in 2013. Similar to the regulatory framework of Broomfield, Erie, and Greeley and La Plata County, the proposed regulations offer oil and gas operators two options: Operators can go through a conditional use process through the City Council, or they can request that the application is approved through an MOU administrative review. Because of the preemption issues described earlier, this carrot-and-stick approach is the only way the City is able to require greater environmental, health and safety protections than the state without risking a lawsuit. Operators can choose to go through the traditional conditional use process that takes two to three months and requires a public hearing, or they can choose to enter into an MOU with the City and get through the application process in about one month without a public hearing. In exchange for an expedited administrative approval process, the Operator will agree to comply with some best management standards that go beyond the requirements of the COGCC.
Over the past six months Brighton staff have held a total of 14 meetings with the oil and gas industry. Staff have made some significant revisions based on those discussions. We believe the document before you today has been greatly improved due to this input from industry.
Brighton has also continued to meet with Director Lepore and Jake Matter from the State Attorney General's office. Their input on this proposed Code has also been a great help to the City of Brighton.
ORDINANCE OVERVIEW
The draft ordinance amends Chapter 17 of the Brighton Municipal Code (The Land Use and Development section of the Code). Sections 1 and 2 of the ordinance are primarily 'housekeeping' measures to repeal existing definitions that are later defined in the body of the new regulations and to address set back requirements for the construction of buildings next to existing oil and gas facilities. Section 3 amends the Table of Uses to specify that gas, oil and petroleum production is a conditional use in all zone districts in the City.
Section 4 creates a new Article 17-64 which sets forth the new regulations. A review of the Table of Contents of Article 17-64 provides a good summary of the scope of the proposed regulations:
Division 1 General Provisions sets forth the Purpose of the regulations, emphasizing that they are enacted pursuant to the land use authority and police powers of the City in order to protect the health, safety, morals, convenience, order, prosperity and general welfare of the current and future residents of the City. Applicability clarifies that the new regulations are applicable to oil and gas exploration, drilling and production operations proposed or located in the City, and sets forth certain exceptions for existing facilities. Definitions is an extensive list of words and phrases used throughout the regulations, with the acknowledgment that any conflicts with State definitions are resolved in favor of the State definition. Other matters addressed in Division 1 include Inspections, Statutory References, Review required, Approval required, Transfer of Conditional Use/MOU, Abandonment and plugging of Wells, and Fees.
As indicated above, Brighton, like other cities impacted by oil and gas development, purposefully drafted its regulations to provide an option for oil and gas operators, which many commentators have referenced as a 'carrot or stick' approach. An operator may submit an application for review through the City's standard land use conditional use process OR may submit an application for the Memorandum of Understanding approval process. As outlined herein, review of a conditional use application is a longer process, involving City Council review through a public hearing, and includes the imposition of certain conditions as deemed necessary and appropriate by the City Council. The MOU process is a shorter/expedited administrative review, resulting in a legally enforceable contract between the City and the operator which sets forth best management practices for a particular operator and a particular site.
Division II Conditional Use Review sets forth the process and requirements for the City's review of an application for an oil and gas facility as a 'conditional use'. This section of the regulations requires a Preliminary Site Application, a detailed document including the name of the operator; number of wells/equipment; vicinity map that locates drilling units, streets, existing oil and gas facilities, drainage courses, bodies of water, existing residential, commercial, industrial and public uses, haul routes, etc. The Conditional Use review, application requirements requires, in particular, a detailed site plan, operating plan, stormwater management plan, reclamation and revegetation plan, utilities report, plan for noise and light mitigation, traffic management plan, bond, visual mitigation plan, air emissions mitigation plan, emergency response plan, weed control plan, etc. The Conditional Use review and approval criteria are consistent with the City's standard criteria for conditional use applications. The Documents submitted prior to drilling, Conditional Use require finalized plans for the matters addressed in the Preliminary Site Application. Other matters addressed in Division II include Seismic operations, Signs, Recordation of flow lines, fencing, reclamation, geologic hazard, flood plain restrictions, and Transportation and access roads, and Notice requirements. The COGCC Order 1-189 to protect the Brighton Public Water System is referenced in the City's proposed ordinance under Water Well Protection.
Division III Administrative Approval By Memorandum of Understanding sets forth the requirements and process for the expedited administrative MOU review/approval. The City Manager is authorized to prepare a Model MOU to address such best management practices as surface owner involvement, setbacks, pits, water quality monitoring, noise mitigation, floodplains, and visual impacts and aesthetics. The Model MOU is intended to be used by all operators who submit an application for a new oil and gas location within the City for administrative review by MOU. "Attachment A" to the MOU sets forth site specific conditions and best management practices as agreed to by the City Manager and the operator in the MOU, to be included as Conditions of Approval by the COGCC on its approval of Forms 2 and 2A for the operator which may include such practices as pits, containment berms, water supply and quality, setbacks, discharge valves, burning, chemical storage, water quality and monitoring, floodplain, visual impacts and aesthetics, electric equipment, air quality mitigation, fugitive dust suppression, flammable material, flow lines and removal of debris and equipment. Once finalized, the MOU (including Attachment "A") shall be submitted to the COGCC for inclusion as Conditions of Approval for the operator's Forms 2 and 2A approved by the COGCC. The administrative review by MOU requires a Preliminary Site Application, Pre-submittal meeting, and Neighborhood meeting.
The approval of the MOU is valid for a Term of five years unless the oil and gas facility is substantially commenced prior to the expiration of that timeframe. If the MOU is terminated, the conditions remain enforceable. The applicant may appeal the City Manager's denial of the application for administrative approval by MOU to a de novo hearing before the City Council. The applicant may also proceed for consideration through the Conditional Use review process.
The draft Model MOU and draft Attachment "A" are included in the City Council agenda packet for information purposes only. The ordinance provides for the preparation, negotiation, finalization, approval, and execution of the MOU/Attachment "A" by the City Manager. The review of the proposed ordinance will not include the City Council's acceptance or rejection of the draft Model MOU/Attachment "A" as that will be the responsibility of the City Manager. However, because the City Council was specific in its direction to staff that the new regulations must address protection of the City's domestic water supply, noise, air quality, and visual aesthetics, it is important for the City Council to see that those matters will be specifically addressed in the MOU/Attachment "A" negotiated and approved by the City Manager in the future.
Division IV Variances sets forth the requirements and process by which an applicant may request a variance from any provision in Article 17-64.
Division V Miscellaneous addresses such matters as: unlawful to construct or install unapproved oil and gas facilities, Revocation of Conditional Use Permit or MOU, Civil action enforcement, Prospective Application, Coordination with Air Quality Control Commission, and Coordination with COGCC.
Sections 5, 6 and 7 of the proposed ordinance are additional 'housekeeping' measures to assure that the new regulations are consistent with other provisions in the Land Use Code.
Additional background information and further detail regarding the ordinance and MOU will be provided at the city council public hearing.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
Under the City's police powers, a local jurisdiction may implement regulations for the protection of the public's health, safety and welfare. Local jurisdictions have routinely enacted regulations within the land use context. In the context of oil and gas regulation, care needs to be given to meld those local regulations with the COGCC State regulations, and create a balance of interests between the health, safety, and welfare protections of the citizenry and reasonable oil and gas development.
PLANNING COMMISSION RECOMMENDATION
The Planning Commission reviewed a draft of the code amendment at a public hearing held on November 10, 2014 and unanimously recommended approval of the draft code amendment to the City Council.
STAFF RECOMMENDATION
Staff is recommending approval of the draft ordinance. After more than two years of research and review, receipt of information from the spectrum of entities, both governmental and private, input from citizens, and significant discussions and negotiations with representatives of the oil and gas industry, the Staff believes that this ordinance creates the necessary balance of interests between the health, safety, and welfare protections of the citizenry and responsible oil and gas development in the City of Brighton.
OPTIONS FOR COUNCIL CONSIDERATION
1. Approve the ordinance on first reading.
2. Approve the ordinance on first reading with revisions, additions or deletions.
3. Continue first reading of the ordinance to a date certain.
4. Not approve the ordinance on first reading with specific findings and direction.
ATTACHMENTS
· Ordinance (Draft for review and approval by the Council)
· MOU (Draft for informational purposes only; the form and substance of the MOU shall be determined by the City Manager)
· COGCC Water Order (Approved by the COGCC in July of 2014; provided for informational purposes only)
SUPPLEMENTALS
Note: The documents listed below are memos and PowerPoint presentations that were previously provided to the city council at various Study Session meetings held during 2012-13 Study Session meetings. You may request copies of any of these documents from the City Clerk's office.
· William Fleckenstein PhD - Colorado School of Mines Professor: "Best practices in Hydraulic fracturing"
· Sarah Landry - Colorado Oil & Gas Association: "Moving Beyond Misinformation - Education and Engagement"
· Abel Montoya - Adams County Planning & Development Director: "Oil and Gas drilling in Adams and Arapahoe County"
· Weld County Staff: "Weld County Niobrara Oil and Gas Development"
· Altus Environmental: "Oil and Gas Development Environmental Issues"
· Greeley Staff: "Oil and Gas Development Overview" (included a tour of oil and gas facilities in Greeley)
· Patricia Silverstein - Development Research Partners: "Economic and Fiscal Impacts of the Oil and Gas Industry in Adams and Weld Counties"
· Geoff Wilson - CML Attorney: "Task Force on Cooperative Strategies Regarding State and Local Regulation of Oil and Gas Development, Protocols and Recommendations"
· Tour of Synergy Oil and Gas Site off of Weld County Road 6 (no documents provided; informational tour only)
Note: The documents listed below are items that were submitted to the City Council by citizens during city council meetings in 2014 (date of meeting is noted), related to oil and gas that were provided under Items Not on the Agenda. You may request copies of any of these documents from the City Clerk's office.
· June 3, 2014: Web page article titled, "Drilling and fracking have destroyed value of our most significant investment - our homes"
· June 3, 2014: Web page article titled, "Fracking Boom Gives Banks Mortgage Headaches"
· June 3, 2014: Web page article titled, "Dimock, PA: "Ground Zero" in the Fight Over Fracking"
· June 3, 2014: "Injection Induced Earthquakes" by William L. Ellsworth
· June 3, 2014: Copy of Natural Gas Spill Report from LaSalle, Colorado
· June 3, 2014: Packet of compiled articles generally titled, "What Fracking Is" and "How Fracking Impacts the Community in regard to Declining Property Values, Economy and the Environment"
· June 17, 2014: Fracklist.org one page compilation of various information
· June 17, 2014: Article titled, "Birth Outcomes and Maternal Residential Proximity to Natural Gas Development in Rural Colorado"
· September 2, 2014: Compiled list of various articles generally titled, "Drilling and Fracking Impacts: Facts and Sources"
· September 16, 2014: Web page article titled, "People near 'fracking' wells report health woes"
· September 16, 2014: Clip of an article from The Denver Post titled, "Oil and Gas Spills"