Colorado Attorney General’s Office

1. Colorado Attorney General’s Office Current Topics from the COGCC’s Perspective Jake Matter, Esq. Assistant Attorney General Natural Resources Section

2. Current Topics • LGD Influence Over COGCC Permitting • The State Interest In Uniform Regulation • Colorado’s HF Chemical Disclosure Rule

3. Who is an LGD? • “The office designated to receive, on behalf of the local government, copies of all documents required to be filed with the local governmental designee pursuant to these rules.” • Purely voluntary, but strongly recommended • 2004: 103 LGDs. • 2012: 146 LGDs. • 2012: 51 of 64 counties, 74 cities and 8 special districts.

4. LGD Influence Over COGCC Permitting • COGCC Rules are starting line, not finish line. • Director may attach conditions of approval to any permit as the Director deems necessary. • If operator disagrees, it must prove to full Commission condition should not be imposed. • If LGD disagrees, LGD must prove condition is necessary to further purposes of Act. • Commission decision subject to APA review.

5. Sample Conditions of Approval • Baseline water sampling • Pitless operations / closed loop systems • Prohibit drilling activity in certain seasons • Relocate wellhead and surface facilities • Use low profile tanks • Require steel secondary containment • Additional advance notice to surface owners • Fencing, reclamation & noise abatement

6. Conditions of Approval Continued… • COAs are site-specific requirements to further COGCC’s mandate to promote development in a responsible, balanced manner • COAs are not merely a conduit for local regulations that may otherwise be preempted • COAs and LGD comments are the primary opportunity for local and state collaboration to address local concerns and provide certainty to local governments

7. Other LGD Powers • Extend permit comment period from 20 to 30 days (and beyond). • Trigger CDPHE consultation on any permit. • Receive advance notice of operations with heavy equipment . • Operators are required to consult with LGDs in developing Comprehensive Drilling Plans. • File complaints (COGCC Rule 522) and pursue orders finding violations (COGCC Rule 503.b.4.).

8. Task Force Recommendations • Encourage designation of LGDs. • Promote technical training of LGDs. • Provide information regarding local rule violations and enforcement matters to relevant LGDs.

9. The State Interest In Uniform Regulation

10. Source of State and Local Tension States – Interested in uniform statewide natural resource regulation that will satisfy its citizen's need for clean, efficient, energy sources. Local Governments – Interested in a community not burdened by the environmental and aesthetic social costs of resource extractive operations; usually no local constituency for major resource development projects. Jan Laitos and Liza Getches, Multilayered, and Sequential, State and Local Barriers to Extractive Resource Development, 23 Va. Envtl. L.J. 1 (2004).

11. Statutes Bearing On The State Interest In Uniform Regulation • Local Govt. Land Use Control Enabling Act, CRS § 29-20-101 • Dept. of Natural Resources Act, CRS § 24-33-101 • Oil and Gas Conservation Act, CRS § 34-60-101 • Administrative Procedures Act, CRS § 24-4-101 • Uniform Trade Secrets Act, CRS § 7-74-101

12. Local Govt. and Land Use Control Enabling Act • Location and construction of major natural gas facilities is a matter of statewide concern. • A reliable supply of natural gas statewide is of vital importance to the health, safety, and welfare of the people of Colorado. • Where another law provides requirements for land use planning and regulation the other law “shall control”.

13. Conflicting Rules Undermine the Enabling Act By: • Prohibiting the placement of major natural gas facilities in their jurisdiction • Limit supply by enacting moratoriums

14. Department of Natural Resources Act • The state policy shall be to encourage, by every appropriate means, the full development of the state's natural resources to the benefit of all of the citizens of Colorado. CRS § 24-33-103. • COGCC is a division of the Department of Natural Resources. CRS § 24-33-104.

15. Oil And Gas Conservation Act Declares It Is The Public Interest To: • Foster the responsible development of Colorado’s oil and gas resources • Prevent waste   • Safeguard, protect, and enforce the coequal and correlative rights • CRS § 34-60-102

16. Oil and Gas Conservation Act Requires COGCC to Pass Rules: • For protection of health, safety, and welfare of any person at an oil or gas well  • To establish a timely and efficient procedure for the review of APDs   • For protection of the health, safety, and welfare of the general public in connection with oil and gas operations • CRS § 34-60-106 • Specific statutory mandates to COGCC control over general grants of authority to local government

17. Conflicting Rules Can Undermine the Oil and Gas Conservation Act By: • Disturb co-equal rights by favoring surface owners over mineral owners • Laitos: usually no local constituency for major resource development projects • Cause waste by increasing setbacks and imposing development bans in particular areas • Disturb balancing decisions vested in COGCC, e.g., banning UICs, fracturing or open pits • Causing unwarranted delay in local approvals

18. Administrative Procedures Act: • Provides means to appeal agency actions, including adjudicatory rulings and rulemakings • Insures finality of agency action • Provides safeguards to insure that competing interests are considered in rules • Requires agencies to conduct a thorough cost benefit analysis of proposed rules

19. Conflicting Rules Undermine the Public Polices Reflected in the APA By: • Imposing rules concerning a matter of statewide concern, without statewide input • Imposing rules without a required cost benefit analysis • Undermining finality of agency action by requiring reconsideration of same issue at local level • Exposing parties to multiple layers of litigation

20. Uniform Trade Secrets Act • Protects legitimate business interests • Promotes high standards of commercial ethics • Encourages invention by making innovation profitable

21. Conflicting Rules Undermine the Public Policies Reflected in the TSA By: • Compelling undefined disclosure • Eroding protections afforded by state statute • Discouraging innovation • Encouraging use of antiquated known technologies • Michael Gollin, Using Intellectual Property To Improve Environmental Protection, 4 Harv. J.L. & Tech. 193 (1991).

22. Colorado’s Hydraulic Fracturing Fluid Disclosure Rule, COGCC Rule 205A

23. Applicability. • Final rule enacted December 2011 • Applies after April 1, 2012

24. Trade Secret Protection. • Uniform Trade Secrets Act • No disclosure to State of Colorado or Fracfocus.org • Must file claim of entitlement Form 41 to protect identity or concentration of any chemical • COGCC has issued guidance on Form 41 • Challenges under Oil Gas Conservation Act

25. Earthworks v. WOGCC, (Natrona County, WY) filed March 22, 2012 • Wyoming rule requires operators to “justify” their claimed trade secrets to the WOGCC • WOGCC decides whether something is a trade secret • WOGCC approved 50 trade secret claims between 2010 and 2011 • Earthworks alleged many of the operators trade secret claims were “insufficiently justified”, yet approved by the WOGCC

26. Questions? Jake Matter 303.866.5041 Jake.matter@state.co.us