DENVER, Dec. 9, 2019 /PRNewswire-PRWeb/ -- Colorado is the 7th largest oil-producing state in the United States. Weld County has been the primary driving force behind this growth, with 89% of the state's oil and 33% of its gas production. This has largely been fueled by the advent of horizontal drilling and hydraulic fracturing techniques, which allow more oil and gas to be extracted than conventional drilling.
This increased oil and gas activity has not come without controversy; however, there have been several proposals in recent years to attempt to impose stricter regulations on oil and gas development in Weld County. Proposition 112, the initiative that would have increased oil and gas drilling setbacks from homes, business, waterways and other sensitive areas failed to pass in 2018 by a margin of 57% "against" and 43% "for". In Weld County, the margin of defeat was even greater, with 75% of people voting "against" and 25% "for." This seemingly meant oil and gas production would march on as it had in recent years. However, in April 2019, the newly-elected governor executed Senate Bill 181 ("SB181") which has been referred to as "the most comprehensive oil and natural gas legislation Colorado has seen in decades."
SB181 has two primary components that impact Weld County mineral rights owners: it increases authority of local governments to regulate the industry and restates the mission of the Colorado Oil and Gas Commission ("COGCC"). Previously, the power to approve drilling permits was at the sole discretion of the COGCC based on state-wide rules and regulations. With the passing of SB181, local municipalities now can create their own rules and regulations that must be met in order for permits to be approved. A second important result of the bill is the change to the COGCC's mission statement. Previously, the COGCC's mission was to "foster the development and production of the natural resources of oil and gas in the state of Colorado in a manner that protects public health, safety, welfare, the environment and wildlife resources," it now reads that their mission is to "regulate the development and production of the natural resources of oil and gas in the state of Colorado..."
What does this mean for Weld County mineral rights value? While oil and gas production continues in Weld County, the passing and implications of SB181 creates a cloud of uncertainty around future oil and gas development in the state. In recent years the amount of drilling activity in Weld County has fallen over 50% from a peak of 54 rigs down to 23 today.
Oil companies may continue to seek more oil and gas friendly states to shift their focus, deciding its not worth the risk of not getting permits approved, and withdraw from Weld County over time. This would put Weld County mineral rights owners in a tough position as mineral rights only have value if the resources in the ground can be extracted. To counteract this risk, some Weld County mineral rights owners may decide to sell their minerals.
SOURCE TPG Energy
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