HomeMy WebLinkAbout20130213.tiffRESOLUTION
RE: EXPRESSION OF OPPOSITION TO NEW SETBACK AND NOTIFICATION RULES,
REVISED VERSION OF JANUARY 17, 2013, CURRENTLY UNDER CONSIDERATION
BY THE COLORADO OIL AND GAS CONSERVATION COMMISSION
WHEREAS, the Board of County Commissioners of Weld County, Colorado, pursuant to
Colorado statute and the Weld County Home Rule Charter, is vested with the authority of
administering the affairs of Weld County, Colorado, and
WHEREAS, the Colorado Oil and Gas Conservation Commission ("COGCC") began its
consideration of the adoption of amendments to current rules and new rules governing
setbacks for oil and gas wells and production facilities through Cause No. 1 R, Docket No. 1211-
RM-004 ("Proposed Amendments and New Rules"), with notification of the rulemaking
proceeding and the Proposed Amendments and New Rules being published in the Colorado
Register on October 25, 2012, and the first hearing on November 14, 2012, with said hearing
being continued to December 10 and 11, 2012, then continued to January 7 - 9, 2013, and
WHEREAS, a revised draft of the Proposed Amendments and New Rules were provided
to parties to the rulemaking and posted on the COGCC website at 500 p.m. on December 31,
2012 (the "12-31-12 Revisions"); however, a revision of the 12-31-12 Revisions was not made
available to the parties and posted on the COGCC website until the day of the continued
hearing on January 7, 2013 (the "1-7-13 Revised Revisions"), allowing the parties and all
interested persons little time to review prior to testifying, and
WHEREAS, the consideration of the 1-7-13 Revised Revisions by the COGCC during its
January 7 — 9, 2013, hearings clearly violated C.R.S. § 24-4-103(4)(a), which states:
"Any proposed rule or revised proposed rule by an agency which is to be
considered at the public hearing, together with a proposed statement of basis,
specific statutory authority, purpose, and the regulatory analysis required in
subsection (4.5) of this section, shall be made available to any person at least
five days prior to said hearing," and
WHEREAS, the COGCC staff is currently rewriting portions of the 1-7-13 Revised
Revisions, with the stated goal of having them being completed on January 17, 2013, and with
COGCC consideration of such rewrite to take place on a date and time currently unnoticed but
purportedly to occur sometime during the week of January 21, 2013, and
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2013-0213
BC0044
RE: EXPRESSION OF OPPOSITION TO PROPOSED SETBACK AND NOTIFICATION
RULES, REVISED VERSION OF JANUARY 17, 2013, CURRENTLY UNDER
CONSIDERATION BY THE COLORADO OIL AND GAS CONSERVATION COMMISSION
PAGE 2
WHEREAS, the Board believes that the COGCC's writing and rewriting of the Proposed
Amendments and New Rules, publishing revisions at 5:00 p.m. the night before a Federal
holiday, then hearing the revised version of the revisions on the same day they are published,
then directing COGCC staff to rewrite them so the newest version may be heard by the
COGCC on an undisclosed date and time, has the appearance of "ex-parte backroom
negotiations," thereby violating Governor Hickenlooper's Executive Order D 2012-002, attached
hereto as Exhibit "A," which states:
"Colorado is committed to making its rulemaking process among the
most effective and transparent in the nation. State agencies and required to
comply with the State Administrative Procedure Act (C.R.S. § 24-4-101, et seq.)
in promulgating rules and involving the public, stakeholders, and the regulated
community in that process. The rules promulgated through this process are
designed to implement laws and achieve a variety of goals such as protecting
consumers, promoting responsible business practices, ensuring public safety,
and protecting public health and environment," and
WHEREAS, a stakeholder group to study the issue of setbacks was formed in February,
2012 (as required by C.R.S. § 24-4-103(2)), which group met several times through October,
2012; however, input from Weld County staff was never actively solicited, and seeking
participation by the Local Governmental Designees ("LGD's") of three of the highest producing
counties in the state (Weld, Garfield, and Yuma Counties) was apparently not a priority to the
COGCC, as shown by the lack of the names of such LCD's on the "Setback Review
Stakeholder List," which is attached hereto as Exhibit "B," and
WHEREAS, pursuant to C.R.S. § 24-4-103(4.5), by letter dated October 30, 2012, a
regulatory analysis of the Proposed Amendments and New Rules was requested by the Weld
County Attorney, which was completed by the COGCC staff and posted on the COGCC website
on November 9, 2012 ("Regulatory Analysis"), and
WHEREAS, C.R.S. § 24-4-103(4.5)(IV) requires every regulatory analysis to include "a
comparison of the probable costs and benefits of the proposed rule to the probable costs and
benefits of inaction," which the Regulatory Analysis calculated for the 350 -foot Exception Zone
Location rule, but was never updated for the 500 -foot Exception Zone Location rule that was
introduced in the 12-31-12 Revisions and in the 1-7-13 Revised Revisions, and
2013-0213
BC0044
RE: EXPRESSION OF OPPOSITION TO PROPOSED SETBACK AND NOTIFICATION
RULES, REVISED VERSION OF JANUARY 17, 2013, CURRENTLY UNDER
CONSIDERATION BY THE COLORADO OIL AND GAS CONSERVATION COMMISSION
PAGE 3
WHEREAS, the Regulatory Analysis provided no estimate of the costs of lost tax
revenue to Weld County (or other counties), or the loss of employment and income caused by
the increased setbacks, which is substantial, as detailed in the Expert Report, entitled,
"Economic Advisors, Inc., evaluation and testimony regarding Colorado Oil and Gas
Conservation Commission Statewide Setback Rulemaking (2012 to 2013) impacts to mineral
royalties, employee wages, and public finance," attached hereto as Exhibit "C," as commented
on by Donald D. Warden, Weld County Director of Budget and Management Analysis, in an
e-mail message to Commissioner Kirkmeyer, dated January 7, 2013, attached hereto as
Exhibit "D," and
WHEREAS, similar to the Regulatory Analysis, the Statement of Basis, Specific
Statutory Authority, and Purpose ("Statement"), required by C.R.S. § 24-4-103(4)(c), was
written for the 350 -foot Exception Zone Location rule, but was never updated for the 500 -foot
Exception Zone Location rule that was introduced in the 12-31-12 Revisions and in the 1-7-13
Revised Revisions, and
WHEREAS, neither the Statement, nor the Regulatory Analysis, detail scientific or
technological issues being addressed by the Proposed Amendments and New Rules; rather,
the purpose appears to be primarily political, being an attempt to satisfy certain members of the
public who have complained about new oil and gas development in counties other than Weld,
and to hurry rulemaking in an attempt to circumvent possible legislation that both the COGCC
and the oil and gas industry see as impacting them negatively, and
WHEREAS, pursuant to C.R.S. § 30-11-101(1)(k), every county has the authority:
"To coordinate, pursuant to 43 U.S.C. sec. 1712 the "National
Environmental Policy Act of 1969" 42 U.S.C. sec. 4321 et seq.,40 U.S.C. sec.
3312 16 U.S.C. sec. 530 16 U.S.C. sec. 1604 and 40 CFR parts 1500 to 1508,
with the United States secretary of the interior and the United States secretary of
agriculture to develop land management plans that address hazardous fuel
removal and other forest management practices, water development and
conservation measures, watershed protection, the protection of air quality, public
utilities protection, and private property protection on federal lands within such
county's jurisdiction," and
2013-0213
BC0044
RE: EXPRESSION OF OPPOSITION TO PROPOSED SETBACK AND NOTIFICATION
RULES, REVISED VERSION OF JANUARY 17, 2013, CURRENTLY UNDER
CONSIDERATION BY THE COLORADO OIL AND GAS CONSERVATION COMMISSION
PAGE 4
WHEREAS, similarly, the need for the COGCC to work with local governments on
various matters to better coordinate their regulatory frameworks is at the heart of COGCC Rule
201, wherein it states:
"Nothing in these rules shall establish, alter, impair, or negate the
authority of local and county governments to regulate land use related to
oil and gas operations, so long as such local regulation is not in
operational conflict with the Act or regulations promulgated thereunder."
Such coordinating relationship is the basis of the role of the LGD in the COGCC permitting
process, with a greater role for the LGD even now being contemplated by the COGCC in the
Proposed Amendments and New Rules. Finally, coordination between local governments and
state agencies is the cornerstone of Governor Hickenlooper's Executive Order D 2011-005,
attached as Exhibit "E," which states:
"Local governments should have more flexibility to design solutions to
problems without excessive interference or oversight, or unnecessary regulation,
from state government. In addition, local governments should not be expected
to implement laws and regulations without the funding necessary to do so. In
order to assist local governments in effectively complying with such
requirements, this Executive Order gives direction to state agencies on
consulting and working with local governments before imposing new regulations
or other obligations," and
WHEREAS, the Board recognizes that the setbacks contemplated in the Proposed
Amendments and New Rules are in conflict with Weld County's setbacks for buildings
(setbacks of 150 feet from oil and gas wells, 200 feet from tank batteries, and 350 feet from
such facilities in Residential Zones), thereby necessitating coordination between Weld County
and the COGCC, as Weld County's setbacks have met the health, safety and welfare needs of
the citizens of Weld County since they were instituted in 1996, and
WHEREAS, any greater setbacks required by the COGCC will make no sense if Weld
County's building setbacks remain the same; the Board has no intention of changing Weld
County's setbacks merely to mirror those setbacks set by the COGCC without any scientific or
technological basis, which, as stated above, the Proposed Amendments and New Rules lack,
and
WHEREAS, substantial testimony and exhibits have been submitted in Cause No. 1R,
Docket No. 1211-RM-004, detailing the negative impact the Proposed Amendments and New
Rules will have on local land use and planning, which is clearly within the authority of local
governments, particularly with respect to agricultural uses within Weld County, and
2013-0213
BC0044
RE: EXPRESSION OF OPPOSITION TO PROPOSED SETBACK AND NOTIFICATION
RULES, REVISED VERSION OF JANUARY 17, 2013, CURRENTLY UNDER
CONSIDERATION BY THE COLORADO OIL AND GAS CONSERVATION COMMISSION
PAGE 5
WHEREAS, with respect to the effect of the Proposed Amendments and New Rules on
urban development, the Regulatory Analysis, in the section entitled, "IV. Comparison of the
probable costs and benefits of the proposed Setback Rules to the probable costs and benefits
of inaction. B. The probable costs and benefits of inaction," states the following:
"3. Developers and residential home builders; prospective home buyers.
An increase in the setback distance reduces the number of lots that can be
developed within a subdivision. As a result, home prices must increase to cover
the increased land cost per building unit. At the same time, increased setbacks
result in suburban sprawl, as much more acreage is required to build the same
number of building units. Sprawl has many potential adverse environmental
impacts, including the need for more roads and other infrastructure, and
encouraging more vehicle miles travelled."
NOW, THEREFORE, BE IT RESOLVED by the Board of County Commissioners, that
for the reasons detailed above, the Board calls upon the COGCC to actively coordinate with
Weld County and other local governments by dismissing the setback portion of Cause No. 1 R,
Docket No. 1211-RM-004; by convening a meaningful stakeholder process that will consider the
need for a close working and coordinating relationship between local governments and the
COGCC, with the goal of fully considering the entire impacts of increased setbacks to local
governments and their citizens; and by conducting any future such rulemaking in a manner that
complies with state statutory rulemaking requirements and provides full transparency to the
process, as required by Executive Order D 2012-002.
2013-0213
BC0044
RE: EXPRESSION OF OPPOSITION TO PROPOSED SETBACK AND NOTIFICATION
RULES, REVISED VERSION OF JANUARY 17, 2013, CURRENTLY UNDER
CONSIDERATION BY THE COLORADO OIL AND GAS CONSERVATION COMMISSION
PAGE 6
The above and foregoing Resolution was, on motion duly made and seconded, adopted
by the following vote on the 16T day of January, A.D., 2013.
Weld County Clerk to the B
BY: C�-.0Z42,., < -
Deputy Clerk to the Bo
APPROVED AS TO Fe"M:
ty Attorney
Date of signature: i3
BOARD OF
WELD.COU
i
Sean Conway
Mike Freeman
0
UNTY COMMISSIONERS
Y, COLORADO
(Barbara Kirkmeyer
t k_/%-4-
2013-0213
BC0044
EXHIBIT "A"
STATE OF COLORADO
OFFICE OF THE GOVERNOR
136 State Capitol
Denver, Colorado 80203
Phone (303) 866-2471
Fax 1303) 866-2003
D 2012-002
EXECUTIVE ORDER
Regulatory Efficiency Reviews
John W. Hickenlooper
Governor
Pursuant to the authority vested in the Office of the Governor of the State of Colorado,
and in particular section 2 of Article IV of the Colorado Constitution, I, John W. Hickenlooper,
Governor of the State of Colorado, hereby issue this Executive Order to increase the efficiency
and effectiveness of state rules.
I. Background and Purpose
Colorado is committed to making its rulemaking process among the most effective and
transparent in the nation. State agencies are required to comply with the State Administrative
Procedure Act (C.R.S. § 24-4-101, et seq.) in promulgating rules and involve the public,
stakeholders, and the regulated community in that process. The rules promulgated through this
process are designed to implement laws and achieve a variety of goals such as protecting
consumers, promoting responsible business practices, ensuring public safety, and protecting
public health and the environment.
After rules are duly promulgated, state agencies should continue to review all rules to ensure that
they are effective, efficient, and essential. In that regard, state agencies have already initiated
efforts to identify, modify, or repeal unnecessarily cumbersome or obsolete rules. Nevertheless,
a periodic review and evaluation of rules should become a core component of an agency's
administrative processes. Such a process can help ensure that existing rules identify and use the
best, most innovative and least burdensome tools for achieving their goals. The directives in this
Executive Order are intended to support those processes.
At the same time, predictability and certainty regarding agency rules are important to provide
clarity on what is expected by and required of the regulated community. In order to address this
need while performing ongoing review of rules, state agencies should provide early notice and
information to the public, regulated entities, and other stakeholders about such reviews and
potential changes to rules. As importantly, this notice and outreach will provide the opportunity
for earlier consultation and input in the review and evaluation process.
II. Directives
I hereby order state agencies to achieve these actions:
A. As used in this Executive Order, the term "rule" or "rules" has the meaning as defined
in the State Administrative Procedure Act at C.R.S. §24-4-102(15).
B. Each principal department and state agency shall conduct a review of all of its rules to
assess the continuing need for, appropriateness, and cost-effectiveness of its rules to
2013-0213
Executive Order D 2012-002
January 19, 2012
Page 2 of 2
determine if they should be continued in their current form, modified or repealed.
Agencies shall consider whether each rule:
1. Is necessary and does not duplicate existing rules;
2. Is written in plain language and is easy to understand;
3. Has achieved the desired intent and whether more or less regulation is
necessary;
4. Can be amended to reduce any regulatory burdens while maintaining its
benefits; and
5. Is implemented in an efficient and effective manner, including the
requirements for the issuance of any permits or licenses.
C. Each principal department and agency shall provide public notification of its review
of rules under paragraph B of this Order and shall provide an appropriate opportunity
for the public to provide input, and shall notify other state agencies that may have
jurisdiction over the subject matter of the rules to allow for collaboration.
D. Based on this review, agencies, in consultation with relevant boards and
commissions, shall determine whether the existing rules should be continued in their
current form, be amended or repealed. If the agency determines that a rule should be
amended or repealed, the agency shall comply with the relevant and appropriate
provisions of the State Administrative Procedure Act for the amendment or repeal of
rules.
E. The Department of Regulatory Agencies is tasked with the development of
implementation guidance for this Executive Order.
F. Nothing in this Executive Order shall contravene the requirements of the State
Administrative Procedure Act or any other state statute.
III. Duration
This Executive Order will remain in force until further modification or rescission by the
Governor.
GIVEN under my hand and the
Executive Seal of the State of
Colorado, this nineteenth day of
January, 2012.
. Hickenlooper
Governor
r
EXHIBIT "B"
SETBACK REVIEW STAKEHOLDER LIST
Adell Heneghan
Andrew Casper
Andy Karsian
Angie Binder
Ashley Cocciolone
Barbara Andrews
Barbara Fernandez
Barry Myhr
Ben Doyle
Bill Roth
Bob Arrington
Brad Robinson
Brant Gimmeson
Brent Boydson
Brian Glade
Brian Lockard
Brian Macke
Brien Schumacher
Bruce Rau
Charlie Montgomery
Cindy Vue
Clayton Doke
Collin Richardson
Curtis Rueter
Dan Ditslear
Dave Devanney
Dave Peterson
David Baumgarten
David Brown
Diane Kocis
Ed Graham
Elizabeth Sith
Francois Goyer
Frank Smith
Fred Julander
Geoff Wilson
Greg Deranleau
Heidi Morgan
Howard Boigon
Jamie Jost
Jason Oates
Jay Taylor
Jeani Frickey
Jep Seman
Jerry Alberts
Jerry Jacob
Jevin Croteau
Jill Cooper
Joan Green Turner
Joe Bassman
Joe Evers
Joe Knopinski
Joe Lorenzo
Joel Malefyt
John Campbell
Josh Joswick
Joshua Kruger
Kathy Guegel
Ken Wonstolen
Kent Kuster
Kevin Kilstrom
Kim Calomino
Kim Cooke
Leslie Robinson
Liz Gallaway
Luke Mecklenburg
Mark White
Matt Baskind
Matt Harrison
Matt Lepore
Matt Sura
Michael Bellmont
Mike Chiropolos
Mike Freeman
Mike Paules
Mike Saul
Nancy Jackson
Neil Ray
Nick Colglazier
Nick Swartzendruber
Pam Kiely
Perry Pearce
Petrika Peters
Randall Ferguson
Randall Feuerstein
Randy Kloberdanz
Rick Allison
Rick Blankenship
Rick Brody
Robin Hervig
Rod Brueskc
Ryan Hollinshcad
Sandy Toland
Sandy Vossler
Sarah Landry
Sarah Sauter
Scott Campbell
Shane Davis
Shea Loper
Shelley Bassman
Sherman Fcher
Sonia Skakich-Scrima
Stan Dempsey
Stuart Ellsworth
Su Ryden
Tarwq Wafaie
Terry Fankhouser
Thom Kerr
Tisha Schuller
Todd Hartman
Troy B.
Wendy Wiedenbech
EXHIBIT "C"
ea
Economic Advisors, Inc.
evaluation and testimony
regarding
Colorado Oil and Gas Conservation Commission
Statewide Setback Rulemaking (2012 to 2013)
impacts to
mineral royalties,
employee wages, and
public finance
Expert Report
prepared for:
Beatty & Wozniak, P.C.
216 Sixteenth St., Suite 1100
Denver CO 80202
by:
Michael J. Orlando, PhD, MA, MBA, BS
Economic Advisors, Inc.
498 S. High St.
Denver CO 80209
December 18, 2012
TABLE OF CONTENTS
I. Introduction
II. Description of setback rule proposal provisions evaluated in this report
III. Framework of analysis
A. The commercial and public financial impacts of oil and gas well
drilling expenditures and producing operations
B. Channels of transmission to affected stakeholders
i. Mineral Rights Owners and Royalty Payments
ii. Employees and Wages
Hi. Public Finance (tax revenues)
C. Economic impacts stakeholders excluded from the analysis
IV. Analysis and Results
A. Assumptions
B. Implications of cash flows from a single well
C. Drill wells at risk under alternative setback radii and adjacent
landowner consent provisions
D. Economic implications of drill -wells at risk associated with various
setback provisions
i. Mineral Rights Owners and Royalty Payments
H. Employees and Wages
iii. Public Finance (tax revenues)
V. Concluding discussion
Appendices
References
Presentation Slides
Expert Witness Information - Biography and Curriculum Vitae
2
I. Introduction
Economic Advisors, Inc. ("EN' or "we" or "us") has been retained by Beatty &
Wozniak, P.C. ("Counsel") on behalf of Anadarko Petroleum, Encana Petroleum,
Noble Energy, and PDC Energy ("the Coalition") to provide opinions and/or
testimony regarding private commercial and public financial implications of setback
and surface -owner consent rulemaking provisions presently under consideration by
the Colorado Oil and Gas Conservation Commission ("the Commission").
This report is to be used in discussions with the Commission and other Setback rule -
making stakeholders. This report is not to be used for any other purpose without
the prior written consent of EA. We understand that Setback rule -making
deliberations are ongoing and, therefore, to the extent that new information and/or
additional documentation is provided that may affect our opinions subsequent to
the issuance of this report, we reserve the right to revise and/or supplement this
report.
The analysis presented in this report estimates values at risk for several
stakeholders associated with oil and gas well drilling and producing operations in
Colorado's DJ -Niobrara basin. The concluding discussion summarizes how these
results maybe used to consider economic implications of statewide implementation
of setback rule provisions under consideration.
Section Il describes the alternative setback rule proposal provisions evaluated in
this report.
Section III describes the investment and operating cash flow framework utilized to
estimate economic impacts oil and gas well drilling activity. A single -well
investment expenditure and operations cash flow model is used to illustrate how
well expenditures (direct effects) result in commercial activity through multiple
layers of the supply chain (indirect effects). The supply chain cash flow model
enables us to characterize a broad set of stakeholders with commercial interests in
well drilling and producing operations. And these commercial activities form the
basis for stakeholders in State and local public financial conditions. The analysis
does not include expenditures on goods and services that lie outside the well drill
and production supply chain (induced effects).
Section IV presents the analysis. We discuss a range of assumptions regarding
revenues, costs, and taxes associated with drilling and production activity in a
typical DJ -Niobrara basin well. We discuss the impact to mineral rights owners,
industry employees, and public finances from drilling and production activities
associated with a single well. We then estimate the cumulative impact to mineral
owners, employees, and public financial stakeholders of wells at risk under two
proposed setback rule provisions - increased setback radii, and the adjacent
landowner consent requirement. The report summarizes the potential number of
mineral owners impacted and their mineral rights value at risk, the number of
3
employed positions and employee earnings at risk, and the value of public financial
receipts (taxes) at risk.
The concluding discussion summarizes these findings in a broader context.
Specifically, we discuss the degree to which these estimates may be understated due
to induced economic effects, excluded stakeholders, and they geographically limited
scope of the analysis.
4
II. Description of setback rule proposal provisions evaluated in this report
The report summarizes maximum commercial and public finance stakeholder
impacts attributable to wells that may not be drilled due to increased setback radii,
and the adjacent landowner consent provisions currently under consideration. We
analyze the implications of these two different dimensions of various setback rule
proposals.
Increased setback radii places potential development acreage at risk because larger
setback distances increase the likelihood that a prospective well is within the
exception area of an occupied building. In addition, the adjacent landowners
consent requirement increases those risk further for locations within proposed
setback radii and within the exception distance of neighboring occupied buildings
because the likelihood of agreement in multiparty bargains is lower than that of
agreement in bilateral bargains.1
The analysis provides an estimate of the maximum direct and indirect impacts to
mineral rights owners, employees, and public finance stakeholders of well locations
at risk of not being drilled because the location is within the analyzed setback radius
of a prospective surface location owner's occupied building. The stakeholder
implications of wells at risk from these joint conditions are analyzed at setback radii
of 350 feet and 1,000 feet.
The analysis also provides an estimate of the maximum direct and indirect impacts
to mineral rights owners, employees, and public finance stakeholders of well
locations at risk of not being drilled because (1) the location is within the analyzed
setback radius of a prospective surface location owner's occupied building AND (2)
the location is also within the analyzed setback radius of a neighboring surface
owner's occupied building. The stakeholder implications of wells at risk from these
joint conditions are analyzed at setback radii of 350 feet and 1,000 feet. Due to the
increased risk associated with multi -party bargaining, we believe that wells subject
to these two conditions should be considered at higher risk of not being drilled than
those subject to only the proposed setback distance provision.
Mnookin (2008).
5
III. Framework of analysis
An oil and gas well drilling investment and producing operations cash flows
framework is utilized to estimate economic impacts to mineral rights owners,
employees, and public finance stakeholders from reduce drilling and production
activity in the DJ -Niobrara basin.
A: The commercial and public financial implications of oil and gas well drilling and
producinerations
Reported results are derived from a well drilling investment and producing
operations cash flow framework. We develop a single -well investment expenditure
and operations cash flow model. (See Presentation Slides appendix pages 4 and 5.)
This model is used to evaluate scenarios in which multiple wells are removed from
state industrial activity over a period of time.
The model incorporates direct and indirect expenditures necessary for well drilling
and producing operations. 'Direct effects' generally refer to those initial
expenditures by oil and gas development companies and the resulting activities of
their employees and primary suppliers. 'Indirect effects' refer to the follow-on
expenditures through subsequent levels of suppliers to drilling investment and
producing activity.
Well drilling phase expenditures are capital intensive. Capital goods are acquired
from primary suppliers of various tubular products and drill site services. Those
primary suppliers, in turn, acquire labor and other goods and services in order to
fabricate their goods for sale. The investment cash flows framework developed for
this analysis models seven suppliers in support of the primary supplier to well
drilling investment activity.2
Producing operations generate cash flows to a broad range of stakeholders. (see
table 1.) Taxes on production revenue flow to a variety of stakeholders at the State
and local level. Mineral royalty owners receive a fraction of revenue net of
production taxes. Operating and administrative expenditures represent worker
salaries, and goods and services purchased from suppliers. Indirect economic
effects from producing operations include those expenditures and activities by
subsequent suppliers of labor and services that support direct operating
expenditures. The model estimates seven levels of suppliers supporting direct
activity between the oil and gas producers and their immediate suppliers.3
2 The model was also estimated with only 3 supply -chain levels of support. Those results were not
materially different from the results reported below.
3 See footnote 2.
6
Table 1
Producing Operations Cash Flows
Sales revenue
- severance taxes
- ad valorem taxes
- conservation tax
Revenue Net of Production Taxes
- mineral royalties
Revenue Net of Production Tax and Royalty
- operating expenses
- SG&A
- depreciation, depletion. amortization
Earnings Before Interest and Taxes
- interest expense
Earnings Before Taxes- income tax
- income tax
Net Income
B: Channels of transmission to affected stakeholders
The supply chain cash flow model enables us to characterize a broad set of
stakeholders with commercial interests in well drilling and production operations.
And these commercial activities represent a taxable basis, resulting in flows to
stakeholders with interests in State and local public financial conditions.
i. Mineral Rights Owners and Royalty Payments - the expected loss of mineral
rights value is proportional to the setback radius and the number of surface
owners with which developers must bargain in order to secure approval for a
drilling location.
o Larger setback radii increase the likelihood that a mineral rights
owner's reserves are within the exception area of a surface owner's
occupied building.
o And within any particular setback radii provision, the adjacent
consent requirement increases the likelihood that reserves
development will be delayed or avoided due to multi -party bargaining
conflicts.
ii. Employees and Wages - the expected loss of jobs, and wage and salary income
is proportional to the setback radius and the number of surface owners with
which developers must bargain in order to secure approval for a drilling
location. To the extent that larger setback radii and multi - party bargaining
requirements place reserves at risk, the associated foregone wells will result
in a reduction in demand for employees and a loss of associated income.
7
iii. Public Finance (tax revenues) - the increased setback radii and adjacent
landowner consent requirements represent risks for public revenues from
production and income taxes. To the extent that larger setback radii and
multi -party bargaining requirements place reserves at risk, the associated
foregone wells will result in a reduction in severance taxes, ad valorem taxes,
and conservation taxes. In addition, public revenues will also be affected
through a reduction in taxable income from royalties, employee wages, and
business income.
C. Economic Impacts and stakeholders excluded from the analysis
This report provides a conservative estimate of the maximum potential value at risk
due to increased setback and consent requirement provisions. The analysis does
not include a number of additional channels of value transmission to associated
stakeholders. (See Presentation Slides appendix page 11.)
• The analysis does not consider implications of non -drilling equipment
location conflicts. For example, to the extent that rules under consideration
have implications for development facility location, which would put
associated well locations at risk, then reported results understate the
magnitude of wells at risk and hence the magnitude of the impact.
• They analysis does not consider the implications of increased costs
associated with new operational and notification expenditures that may be
required by proposed rules. For example, to the extent that these rules
increase the costs of conducting business in Colorado, investors will
reallocate some fraction of oilfield investment capital to lower -cost
development basins in order to equilibrate investment returns across
geographically diffuse portfolios of assets. Consequently, reported results
may understate the magnitude of wells at risk and hence the magnitude of
the impact.
• The analysis does not include potential implications for agricultural
productivity. For example, to the extent that lost' or 'not drilled' wells can be
relocated beyond the proposed setback distance, then that location
accommodation would reduce the oil -field cash flow disturbance reported
herein. However, that same 'relocation' accommodation may negatively
affect land values through implications for agricultural productivity.
• The analysis does not include potential implications for home development
activity. For example, to extent that 'lost' or 'not drilled' wells can be
relocated beyond the proposed setback distance, then that location
accommodation would reduce the oil -field cash flow disturbance reported
8
herein. However, that same 'relocation' accommodation may negatively
affect land values through implications for home development activity.
• The analysis does not consider induced effects - those expenditures on goods
and services that lie outside the well drill and production supply chain. For
example, additional economic activity is induced when mineral royalty
recipients, labor wage earners, and recipients of public transfers make
household consumption expenditures and other expenditures on goods and
investments unrelated to the oil and gas well drilling and development
supply chain.
• The analysis only considers impacts to the four firms who form the Coalition
studied in this report.
• The analysis does not consider impacts outside the DJ -Niobrara basin.
9
III. Analysis and Results
A: Model assumptions
(See Presentation Slides appendix p. 7.)
• Initial investment expenditures for well drilling and equipment is estimated
at $4.5 million.4 Total leasehold capital expenditures are depleted over the
life of the well. All capital investment expenditures are modeled at 10%
labor / 90% goods and services.
• The first level of suppliers of capital goods are modeled at 80% Colorado
resident / 20% non -Colorado resident; subsequent levels of suppliers are
modeled at 70% Colorado resident / 30% non -Colorado resident.
• Production is modeled as a typical DJ -Niobrara horizontal well. Annual
average daily production rates decline exponentially at a decelerating rate
through year 10. The terminal 20 years of production (years 11-30) are
modeled at the average annual rate predicted at year 20. Because the
harmonic declines are typically less severe than those estimated using the
exponential form, this method provides a conservative estimate of terminal
period production.
Time period
year
1
2
3
4
5
6
7
8
9
10
11-30
Daily production
rate (BOEPD)
228
97
65
49
40
34
29
26
24
22
8.9
Exponential decline
0.94
0.42
0.27
0.21
0.16
0.14
0.12
0.10
0.09
0.09
• Revenues are modeled at $60 per BOE. This value represents the production
volume weighted average of recent oil and gas prices typical to DJ -Niobrara
wells.
4 Based on consensus estimate from Coalition members. Independently corroborated from various
reference sources, including Niobrarashale.typepad.com, oilandgasinvestor.com, seekingalpha.com,
swanenergyinc.wordpress.com, and tudorpickering.com.
10
• Severance taxes are modeled at 5% in the first year of each well, and then
0.05% in subsequent years.
• Ad valorem taxes are modeled at an average rate of 5%.
• Conservation taxes are modeled at an average rate of 0.07%.
• Mineral royalties are modeled and an average rate of 17%, and mineral
royalty recipients are modeled as 70% Colorado resident / 30% non -
Colorado resident, based on Coalition royalty payments records.
• Total costs of production are modeled at a rate of 22% of total gross
revenues. These costs include lease operations, transportation, and
administrative expenses. Production costs are modeled at approximately
70% labor / 30% goods and services. The first level of labor and goods and
services suppliers are modeled at 80% Colorado resident / 20% non -
Colorado resident; subsequent levels of suppliers are modeled at 70%
Colorado resident / 30% non -Colorado resident.
• Employment is modeled at $72,000 per employed position.5
• Employment and corporate income taxes are modeled at 4.63 percent.6
B: Cash Flows for a Single Well
Table 2
Stakeholder Value at Risk
($thousands, UOS)
Mineral Employee Public
Royalty Positions Employee Tax
year Income *(number) Income Receipts
0 $0 17 $1,204 $59
1 763 12 897 589
2 343 5 382 147
3 230 4 256 96
4 173 3 193 71
nominal cum 2,735 n/a 4,298 1,485
PV cum (7%) 1,879 n/a 3,341 1,099
5 Wobbekind et al. 2011, p. 19, table 19.
6 see http://www.colorado.gov/.
11
Each undrilled well is associated with implications for a range of stakeholders.
Mineral royalty owners earn approximately $1.5 million in income over the first five
years of well life. (See table 2; Presentation Slides appendix page 9.) Drilling
activities in year 0 and the first four years of production support an average of
approximately eight employed positions, accounting for $2.9 million in employee
income. In addition, also over this time period, each well results in approximately
$1 million in total income taxes and production taxes.
C: Drill wells at risk under alternative setback radii and adjacent landowner consent
provisions
Table 3 tabulates the wells at risk under proposed setback radii and consent
requirements. (See Presentation Slides appendix page 14.)
Table 3
Wells at risk under proposed setback provisions
w/ AC*
350'
setback
no AC rqt
Total**
w/ AC
1,000'
setback
no AC rqt
Total**
year
0
56
49
105
273
189
462
1
66
58
124
333
228
561
2
73
66
139
369
263
631
3
73
67
140
375
266
640
4
73
67
140
375
266
640
5
52
67
119
261
266
526
6
52
67
119
261
266
526
7
52
67
119
261
266
526
8
52
67
119
261
266
526
9
52
67
119
261
266
526
Total**
601
640
1,241
3,028
2,538
5,566
Notes: * AC = adjacent consent
** totals may not sum due to rounding
Expanding the exception area radius to 350 feet places at risk a total of 1,241 wells
currently anticipated for development. Nearly half of these wells are at a
heightened risk due to their proximity to adjacent landowner occupied buildings.
Expanding the exception area radius to 1,000 feet places at risk a total of 5,566 wells
currently anticipated for development. Over half of these wells are at a heightened
risk due to their proximity to adjacent landowner occupied buildings.
12
D: Economic implications of drill -wells at risk associated with various setback
provisions
L Mineral Royalty Owners and Royalty Payments
Coalition records allow us to estimate that approximately 19,000 Colorado residents
receive mineral royalty payments from Coalition firms within the producing basin
modeled in this analysis. (See table 4 and Presentation Slides appendix page 15.)
Table 4
DJ -Niobrara Coalition Mineral Royalty Stakeholders
(maximum possible number of mineral rights owners affected)
APC Encana NBL PDCE total
CO DJ 5,344 4,278 6,917 2,500 19,039
CO x -DJ 456 n/a ** 543 284 1,283
x -CO* 22.486 1 833 3197 1193 88710
total 8,285 6,111 10,658 3,978 29,032
notes: * based on PDCE estimate of x -CO recipients / total recipients = 0.70
** not available
Given that total Colorado mineral royalty recipients receive payment primarily from
the DJ -Niobrara basin, we estimate that a majority of the 8,700 non -Colorado
resident recipients also receive royalty payments predominantly from DJ -Niobrara
basin production.
Table 5 presents the value of mineral royalty payments at risk corresponding to
wells at risk under the various setback and consent requirement provisions. (Also,
see Presentation Slides appendix page 10.)
Table 5
Dl -Niobrara Coalition - Colorado Mineral Royalty Stakeholder Value at Risk
(potential foregone payments to mineral royalty owners per indicated setback / consent condition, $millions)
350' 350' total w/in 1,000' 1,000' total w/in
year w/adjconsent no ad'consent 350' w/adjconsent no ad'consent 1 000'
1 $42 $37 $80 $209 $144 $353
2 69 61 130 348 239 587
3 91 82 173 458 322 780
4 105 95 201 536 378 914
5 117 106 223 595 420 1,015
nominal cum 1,643 1,751 3,394 8,282 6,942 15,223
PV cum (7%) 863 893 1,755 4,349 3,535 7,884
13
Under the 350 foot setback with adjacent landowner consent requirement, mineral
rights owners are at risk of not receiving a total of $310 million in anticipated
payments over the first five years of rule implementation. Under the 1,000 foot
setback requirement, the value at risk over this time period rises to $1.6 billion.
Nominal cumulative coalition mineral rights values at risk range from $1.6 billion to
$8.2 billion.
An equivalent magnitude of royalty payments is considered at lower risk because it
is not subject to the adjacent landowners consent requirement. Including this
subset of at -risk well locations, the total nominal cumulative value of mineral
royalty payments at risk ranges from $3.4 billion to $15.2 billion. The present value
of these payments depends upon the discount rate assumption.
ii. Employees and Wages
Industry employees represent another significant stakeholder group with value at
risk. Table 6 presents the wages associated with drilling and producing activities,
which correspond to the wells at risk under the setback conditions being
considered.
Table 6
DI -Niobrara Coalition - Colorado Employment Stakeholder Wage Value at Risk
(potential foregone payments to employees per indicated setback / consent condition, $millions)
350' 350' total w/in 1,000' 1,000' total w/in
year w/adiconsent no ad consent 350' w/adjconsent no adjconsent 1000'
0 $67 $59 $126 $329 $228 $557
1 129 114 243 646 444 1,091
2 168 151 318 847 593 1,440
3 193 175 367 979 691 1,669
4 209 190 399 1,066 753 1,819
nominal cum 2,581 2,752 5,333 13,013 10,907 23,920
PV cum (7%) 1,533 1,588 3,121 7,731 6,285 14,017
The estimated potential impact on employee earnings is over twice as large as that
for mineral owner payments. (See Presentation Slides appendix page 10.) Under
the adjacent landowner consent requirement condition, employee earnings at risk
over the first five years of new rule implementation range from $770 million under
the 350 foot setback to $3.9 billion under the 1,000 foot setback.
And these at -risk earnings correspond to an average of 2,100 to 11,000 jobs over
the first five years of rule implementation. (See table 7.) These values are
equivalent to 24% to 127% of Colorado job growth reported in October 2012, or
0.1% to 0.5% of total nonfarm payroll employment in Colorado.7 An approximately
7 Colorado Department of Labor and Employment, November 20, 2012.
14
equivalent number of employee positions are at the lower risk of increased setback
radius with no adjacent landowner consent requirement.
Table 7
D) -Niobrara Coalition - Colorado Employment Stakeholder Employed Positions at Risk
(number of potential foregone paid employment positions per indicated setback / consent condition)
350' 350' total w/in 1,000' 1,000' total w/in
year w/adiconsent no adiconsent 350' w/adiconsent no adiconsent 1_`00'
0 930 819 1,749 4,572 3,161 7,732
1 1,795 1,579 3,374 8,979 6,168 15,146
2 2,330 2,092 4,422 11,763 8,233 19,996
3 2,674 2,424 5,098 13,595 9,591 23,186
4 2,901 2,636 5,537 14,804 10,456 25,260
5 2,725 2,799 5,523 13,812 11,111 24,923
6 2,608 2,932 5,540 13,144 11,648 24,793
7 2,621 3,047 5,668 13,185 12,108 25,293
8 2,656 3,148 5,804 13,347 12,512 25,859
9 2,698 3,239 5,937 13,549 12,874 26,423
iii. Employees and Wages
Taxes on production revenues, mineral royalties, and employee wages are of
interest to various stakeholders in public revenues and expenditures, including
taxpayers and public services recipients. Table 8 reports the value of these sources
of public finance associated with wells at risk under the 350 foot and 1,000 foot
radii, both with and without the adjacent landowner consent requirement.
Table 8
DJ -Niobrara Coalition - Colorado Public Finance Stakeholder Revenue Value at Risk
(total potential foregone tax receipts per indicated setback / consent condition, $millions)
350' 350' total w/in 1,000' 1,000' total w/in
year w/adiconsent no adiconsent 350' w/adiconsent no ad consent 1000'
0 $3 $3 $6 $16 $16 $32
1 37 32 69 181 181 362
2 51 45 96 258 261 519
3 62 56 118 314 324 639
4 68 62 130 348 361 709
nominal cum 892 951 1,843 4,497 5,259 9,755
PV cum (7%) 504 522 1,026 2,542 2,905 5,447
Potential losses to public revenues over the first five years of new rule
implementation range from $220 million to $1.1 billion. This includes both
production taxes and taxes on wage and business income.
15
Severance taxes account for approximately 30% of this total tax impact (or 40% of
production taxes). On a discounted basis, however, severance taxes account for a
slightly higher percentage of total taxes (and production taxes) because severance
tax collections occur disproportionately earlier in well life.
Approximately 45% of total taxes (or 60% of production taxes) are paid as ad
valorem to local communities. These taxes have a particularly acute impact in the
places they are collected because they represent a significant portion of county and
local school district funding. For example, the 2011 budget for Weld County was
approximately $193 millions The 2011 Weld County Abstract of assessment
indicates that approximately 24% of ad valorem taxes are paid as county district
revenue. Thus, the $220 million at risk over 5 years under the 350 foot setback
provision represents approximately 2.4% of the Weld County 2011 budget.9 And
the 1,000 foot setback public finance stakeholder value at risk is equivalent to 12%
of Weld County's 2011 budget.
IV. Concluding discussion
This report evaluates the implications of the Commission's prospective increased
setback radii and the adjacent landowner consent provisions for mineral rights
owners, employees, and public finance stakeholders. The analysis suggests that
current rules under consideration place value at risk for each of these stakeholders.
Over the first five years of the analysis, the proposals represent a value at risk to
royalty rights owners ranging from $310 million to $1.6 billion. For employees, the
proposals represent a risk of 2,100 to 11,000 jobs, and $770 million to $3.9 billion in
income. In addition, the proposed rules represent a value at risk to public finance
stakeholders of $220 million to $1.1 billion.
By incorporating both direct and indirect effects, the analysis summarized in this
report estimates an impact that is approximately 40% larger than estimates based
upon direct effects only. (See Presentation Slides appendix p. 11.)
For purposes of evaluating the total impact of proposed rules to Colorado, the
impacts calculated in this report provide a conservative estimate.
• The analysis does not consider the implications of non -drilling equipment
location conflicts that may increase the number of wells at risk.
• The analysis does not consider costs of new operational and notification
requirements that may be under consideration in present rulemaking.
8 see http://www.co.weld.co.us/Departments/Accounting/Budget/2011Budget.html.
$220 x 0.45 x 0.24 /
9 %impact = 5years
$193= 0.024
16
• The analysis does not include potential implications for agricultural
productivity and land values for home construction.
• The analysis does not include induced effects. Considering associated
research on induced effects from energy -related commercial activity, we
predict than an estimate including induced effects would increase reported
results by a minimum of 50%. For example, Wobbekind et al. (2011)
suggests that approximately 32% of Colorado oil and gas industry
employment is induced, with the remaining 68% attributed to direct and
indirect effects.10 And Steinberg et al. (2012) suggest that 39% of jobs
associated with the initial investment phase of photovoltaic (solar) and large-
scale wind generation projects are induced; and 48% of jobs associated with
the production phase of these projects are induced.t t If these findings
provide an analog appropriate to the economic activity studied in this report,
they would imply that our results should be increased by a factor of 1.47 to
1.92 in order to account for induced effects.
• The analysis does not include potential impacts to non -coalition DJ -Niobrara
drilling and production activity. Industry production records indicate that
coalition members represent 91% of DJ -Niobrara basin production.
Consequently, if other DJ -Niobrara basin producers are impacted as
estimated in this report, then our results should be increased by a factor of
1.1 in order to incorporate effects associated with risks to those producers.
• The analysis does not include potential impacts associated with non -DJ -
Niobrara drilling and production activity in Colorado. Wobbekind et al.
(2011) indicates that the DJ -Niobrara basin accounted for at least 25% of
total oil and gas production value in 2010.12 Assuming this value provides an
estimate of the proportion of state-wide activity at risk included in our
analysis, then estimating the total potential risk to Colorado stakeholders
would require multiplying by a factor of 4 our estimate of the total DJ -
Niobrara impact. However, a lower multiple necessary to estimate the total
impact to the state of Colorado is appropriate under the assumption that DJ -
Niobrara basin development activity is likely to be disproportionately
impacted by the rule provisions considered in this study.
10 Wobbekind (2011), p. 16, table 13.
" Steinberg et al. (2012), p. 23 table A-1, p. 24 table A-2.
12 Wobbekind et al. (2011), p. 14, table 8.
17
Signature:
Michael J. Orlando
Economic Advisors, Inc.
Date: December 19, 2012
18
APPENDICIES
References
Colorado Department of Labor and Employment. (2012). Colorado Employment
Situation - October2012. < http://www.colorado.gov/cs/Satellite/CDLE-
Main/CDLE/1251615537783>, November 20, 2012, downloaded December
19, 2012.
http://www.colorado.gov/cs/Satellite/Revenue/REVX/1176842266485 =>
Colorado individual income tax rate.
http://www.colorado.govics/Satellite/RevenueIREVX/1183672492724 =>
Colorado corporate income tax rate.
http://niobrarashale.tvpepad.com/niobrara-shale/well-cost/ blog => cites Encana
investor relations communication states average Niobrara well at $5.4
million, 10/30/12, <downloaded 12/16/2012>.
http: //blogs.oila ndgas investor.com/blog/ 2011/08/ 11 /the -d -j -bas i n's-niobrara-vs-
the-bakken-and-eagle ford —how -the -plays -compare/ a DJ wells $3.5m to
$5.5m (3/2011), <downloaded 12/16/2012>.
http://s eekingalpha.co m/article/5 3 6601-how-to-play-the-niobrara-wattenberg-
field => $4-5million, 4/27/12, <downloaded 12/16/2012>.
http://swanenergyinc.wordpress.com/tag/wattenberg/ blog => typical well approx
$4.5million, 3/12/12 <downloaded 12/16/2012>.
http://www.tudorpickering.com/Webs ites/tudo rpickeri ng/1 mages/News%202011
/05.24.2011.Rockies.Niobrara--OGI.pdf => well costs $3.6 to $6million,
<downloaded 12/16/2012>.
Mnookin, Robert H. (2003). Strategic Barriers to Dispute Resolution: A Comparison
of Bilateral and Multilateral Negotiations. Harvard Negotiation Law Review,
Spring.
Steinberg, Daniel, Gian Porro, and Marshall Goldberg. (2012). "Preliminary analysis
of the jobs and economic impacts of renewable energy projects supported by
the §1603 Treasury Grant program," Technical Report, National Renewable
Energy Laboratory, April.
Weld County Abstract of Assessment, 2011. Christopher Woodruff, Weld County
Assessor.
Weld County Budget - 2011. Weld County, Colorado, Department of Finance and
Administration,
http: //www.co.weld.co.us/Departments/Accounting/Budget/2011Budget.ht
ml dowloaded 12/18/2012.
1
Wobbekind, Richard, Brian Lewandowski, Emily Christensen, Cindy DiPersio.
(2011). Assessment of Oil and Gas Industry: Economic and Fiscal Impacts in
Colorado in 2010. Business Research Division, Leeds School of Business,
University of Colorado - Boulder.
2
EXHIBIT "D"
From: Don Warden
Sent: Monday, January 07, 2013 4:58 PM
To: Barbara Kirkmeyer
Cc: Douglas Rademacher; Sean Conway; Mike Freeman; William Garcia; Monica Mika
Subject: RE: Economic Testimony
Barb,
I have gone through the Orlando report and overall it does a good job on analyzing the economic
impacts of the proposed setback rules. I would add the following comments that they did not include
that I think are relevant:
1. Page 11 second bullet that reads: "Ad valorem taxes are modeled by an average rate of 5%." For
Weld County using the 2011 fiscal year to be consistent with the report Weld County's average
overlapping mill levy is 67.009 mills, which equals an average rate of 5.86%. This means in the
model numbers all ad valorem taxes should be 17.2% higher (5% divided by 5.86% =1.172%).
The impact is where the study says Weld County losses $220 million (page 16 second paragraph)
it is really $257.8 million. So the impact is really much more than depicted in this model analysis.
2. Page 14 next to last paragraph it talks about the five year lost employee earnings of $770 million
under the 350' and $3.9 billion under the 1000' setback. Nowhere in the report does it talk
about lost sales tax revenue to local municipalities or the state from this impact. The lost
earnings of the energy industry workers in Weld County means they do not spend the money
and pay a portion of sales tax to the municipalities and state. Per page 11 sixth bullet down the
average wage cited is $72,000 per year per employee. Based upon the attached two pages from
the Institute of Taxation and Economic Policy Who Pays Taxes report dated November 2009 in
Colorado someone making $72,000 per year paid 2.1% of his earnings in sales tax. That means
that the state and local governments are losing approximately $16,170,000 over five years in
sales tax with the 350' setback and $81,900,000 over five years in sales tax with the 1,000'
setback. So, the public finance impact is even greater than cited in the report when you add in
the sales tax lost just from lost wages, not to mention royalty payments that may be spent on
item where sales tax applies. Roughly half of the lost sales tax would have gone to local
jurisdictions.
3. The analysis cited on page 16 second paragraph is correct on an approximate basis for Weld
County government. A point not made is that using the same approach for school districts in
2011 41% of the$220 million in property taxes lost goes to school districts or $90,200,000.
Depending upon the school district's mill levy under the State School Finance Act the State of
Colorado would have to make up or back fill probably 30-40% of that lost property tax or $27
million -$36 million to the local school districts.
4. The bottom line on this report is that I think the financial impact numbers used are conservative
and in reality could be much higher. Not to mention the potential loss of additional revenues
from energy companies simply going to other states to do their exploration because of a better
return on their investments due to the new setback rules.
1
Hopefully this helps you with your comments. If you have questions or need more info let me know.
Donald D. Warden
Director of Budget and Management Analysis
Finance and Administration
PO Box 758
1150 O Street
Greeley, CO 80632
tel: 970-356-4000 Extension 4218
email: dwarden@co.weld.co.us
Confidentiality Notice: This electronic transmission and any attached documents or other writings are
intended only for the person or entity to which it is addressed and may contain information that is
privileged, confidential or otherwise protected from disclosure. If you have received this communication
in error, please immediately notify sender by return e-mail and destroy the communication. Any
disclosure, copying, distribution or the taking of any action concerning the contents of this
communication or any attachments by anyone other than the named recipient is strictly prohibited.
2
EXHIBIT "E"
STATE OF COLORADO
OFFICE OF THE GOVERNOR
136 State Capitol
Denver, Colorado 80203
Phone (303) 866-2471
Fax 1303) 866-2003
John W. Hickenlooper
Governor
D 2011-005
EXECUTIVE ORDER
Establishing a Policy to Enhance the Relationship between State and Local
Government
Pursuant to the authority vested in the Office of the Governor of the State of Colorado, I,
John W. Hickenlooper, Governor of the State of Colorado, hereby issue this Executive Order
directing state agencies to take specific steps to enhance relations with local government.
1. Background and Purpose
For many years state government has imposed an ever-increasing number of legal requirements
on local governments, without regard to the costs such requirements impose on already -strained
local budgets, and without providing additional funding to enable local governments to comply.
Local governments continue to face difficulties such as funding, complexity, and delay in
securing flexibility and approvals regarding state requirements.
Local governments should have more flexibility to design solutions to problems without
excessive interference or oversight, or unnecessary regulation, from state government. In
addition, local governments should not be expected to implement laws and regulations without
the funding necessary to do so. In order to assist local governments in effectively complying
with such requirements, this Executive Order gives direction to state agencies on consulting and
working with local governments before imposing new regulations or other obligations.
II. Directive and Scope
A. To the extent authorized by law, no state agency shall promulgate any regulation
creating a mandate on local governments unless:
1. The mandate is specifically required by federal or state law;
2. The agency consults with local governments prior to promulgation of the
regulation; and
3. The state government provides the funding necessary to pay for the direct
costs incurred by local governments in complying with the mandate.
Executive Order D 2011-005
January 11, 2011
Page 2 of 3
B. Each agency, prior to the formal promulgation of regulations containing the proposed
mandate, shall provide to the Director of the Governor's Office of State Planning and
Budgeting a description of the nature and extent of the agency's consultation with
representatives of the local governments that would be affected by the proposed
mandate, the nature of their concerns, any written communications or comments
submitted to the agency by such units of local government, and the agency's reasoning
supporting the need to issue the regulation containing the mandate.
C. Each agency shall develop a process to actively solicit the meaningful and timely input
of elected officials and other representatives of local governments into the development
of regulatory proposals affecting local government. Each agency shall implement its
process as soon as practicable and post the process on its website.
D. Each agency that is permitted by law to grant temporary or permanent waivers of
statutory or regulatory requirements shall adopt rules for granting waivers if a local
government can demonstrate that the requirements conflict with other regulations or
statutes, or are unduly burdensome. Each State agency shall prepare and publish on its
website a policy describing the circumstances in which temporary or permanent
waivers will be granted, and the criteria required for obtaining a waiver.
E. Each agency shall consider any application by a local government for a waiver of
statutory or regulatory requirements in light of the goal of increasing opportunities for
local governments to exercise flexibility in seeking to comply with statutory or
regulatory requirements.
F. To the fullest extent practicable and as permitted by law, each agency shall render a
decision on an application for waiver within 90 days of receipt of such application by
the agency. If the application for waiver is not granted, the agency shall provide the
applicant local government with timely written notice of its decision and the reasons for
its decision.
G. The executive director of each agency shall be responsible for ensuring implementation
of, and compliance with, this Executive Order.
14. Executive agency means any authority of the State of Colorado that is an "agency"
pursuant to C.R.S. § 24-3-101.
Executive Order D 2011-005
January 11, 2011
Page 3 of 3
III. No Creation of Rights
This Executive Order is intended only to improve intergovernmental operations, and is not
intended to, and does not, create any right or benefit. substantive or procedural, enforceable at
law or equity by any party against the State of Colorado, its agencies, officers, employees, or any
other person. This Executive Order shall not be used as a basis for legal challenge to statutes,
regulations, or other actions or to any inaction of any state agency subject to it.
IV. Duration
This Executive Order shall remain in full force and effect until modified or rescinded by future
Executive Order of the Governor. This Executive Order supersedes Executive Order D 0007 94.
GIVEN under my hand and the
Executive Seal of the State of
Colorado, this eleventh day of
January,) 1 I.
John. Hickenlooper
Gov mor
Hello