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