My favorite parts about the BOCC meeting yesterday were the many bias revelations by members of the planning commission, the oil & gas regulation edit committee, and the planning department [not mutually exclusive sets of people].

In contrast, all three members of the BOCC appeared to coalesce around the notion that MOU contract language should not be adversarial as a matter of policy, and that MOU subject matter should be determined between the negotiating parties at the time an MOU is memorialized.   Frankly, people I know were encouraged to see the BOCC take an objectively reasonable approach on the MOU.

But hold on, Thayer, Crisan, Dorman, Brown, Corrado, Thomasson, Fenner, and Parkinson, all but two involved with drafting the regulations, had real trouble letting go of the county enacting an official baseline MOU.

All of them seem heavily vested in the notion of a self-fulfilling prophecy.  Even though they went to great lengths to explain just how negotiable each MOU will be, for them an MOU is not so negotiable that the process to write one can begin without the county’s green policy terms already incorporated into the document.

What the county would forego by adopting a pro-forma MOU without such terms built in, according to this gang of 8, is protection of water and protection of property values.  The BOCC didn’t agree with that argument, preferring to see, instead, a non-adversarial MOU format.

Moreover, It looks like COGCC enforcement of MOU terms is an unsettled practice.  The gang of 8 are pushing to include MOU language into the well owners’ COGCC regulatory paperwork on the belief that inclusion will bring COGCC support in enforcement of the county’s MOU terms, perhaps over time elevating the effect of MOU terms to a regulatory status, or perhaps bringing help from the state on policing and discovery of MOU compliance.

But none of that is certain.  The COGCC told the county in several previous meetings that MOU compliance is the county’s responsibility to enforce in civil court.  How much help COGCC would provide to the county on enforcement of MOU terms that exceed COGCC’s statewide regulatory standards, which would basically be all of the MOU terms, appears to be a grey area at this time.

A larger question is what value operators would put on a 6 month zoning approval delay, and what increased costs they might consider accepting in an MOU to avoid spending that value.  There is no general answer to this question since no two sets of operational circumstances will be identical — further reason for there not to be an MOU template that includes a set of one-size-fits-all terms.

The MOU is part of an unsavory proposition that Elbert County is planning to present to all potential operators — “To do business here instead of somewhere else where COGCC rules control without exception, you can lose X or you can lose Y.  Choose your poison.  And here’s the bill for our fees.”

The BOCC is right to insist on removing the adversarial components of the pro-forma MOU.  Our zoning will have already told operators they are unwelcome in Elbert County.  No need to rub it in with the MOU.  It’s much better to use the MOU as an opportunity to mitigate what will have already started out to be a bad deal.

B_Imperial

Thank you, Elbert County planners, for the buggy ride.

I read the proposed Oil & Gas regulations and the proposed Memorandum of Understanding to accompany the regulations.

To discover why Elbert County needs this new body of local zoning law, I went to the Colorado Oil & Gas Conservation Commission website to compare existing state regulations with the Elbert County proposals.

I read the topical cross reference index that correlates subjects to COGCC rules.

I read the table of contents for all COGCC rules.

I skimmed through the 180 pages of COGCC rules and regulations.

I skimmed through the 26 pages of Title 34, Article 60 of the Colorado Revised Statute enabling legislation for the COGCC.

I didn’t find anything in the Elbert County proposals that wasn’t already thoroughly dealt with in a much better written, unambiguous, and effective manner at the state level.

So, I’m left with the conclusion that the Elbert County Oil & Gas regulatory effort isn’t about regulating Oil & Gas at all.  That leaves money.

A device to bring money into the county is the only reason left to explain this effort.  Someone apparently decided that under existing zoning, Elbert County didn’t have sufficient legal hooks into this budding industry to scrape off some cash for itself.

So that’s why the big government types who control the county commissions and the county planning process have spent so much effort to get this done.  Oil & Gas is just the latest funding source to grow their beloved government.   And bonus points, the industry comes with a built-in clamoring segment of the public who dependably create the spectacle of a sense of urgency to push regulations through.

And you don’t even have to pay them.  They just show up.  Every time.

To those Elbert County citizens still capable of independent thought, which unfortunately rules out most of the folks planning to attend the BOCC meeting this Wednesday, I say take the Buggy Ride.  Reach a different conclusion than I have if you can.

If Elbert County really needs more money and Oil & Gas is to be its cash cow, it would be much more honest and simple to embrace TABOR, make the tax argument to the people at large, and let the people decide the matter.

This regulatory sideshow will cause a nightmare of unintended consequences.  Not only is it an extremely poor cousin to the state’s rules, but it’s a fundamentally undemocratic exercise in fascism without voter consent.

B_Imperial

Oil wells have costs and, if all goes well, revenues.  Ownership of an oil well is divided into two classes – working interest owners and royalty interest owners.  Working interests are the people who drill and operate the well.  Royalty interests are the mineral owners who grant the working interest owners the limited rights to mine minerals from their property.

All owners share in revenues from proceeds from the well according to a percentage called a division of interest [DOI].  All revenue interest divisions add up to 100% across both working interests and royalty interests.

Working interest owners also have a separate cost division of interest that adds to 100% for cost allocations.  The working interest class of ownership pays all the costs incurred by the well from the cost of mineral rights acquisition through well construction, drilling, completion, and ongoing operations.

The working interest portion of the revenue DOI comprises the lions share of the total revenue division because the working interests take all the risks and incur all the costs.  Income from well operations must first satisfy well costs — the oil or gas well must break even — before revenue begins to be available for revenue distribution across the entire revenue DOI.

Only when earnings from the well exceed costs does money become available for distribution across the revenue DOI ownership.

Adding costs to the oil well raises the breakeven point for the well, and reduces money available for return to revenue interest owners.

Regulation that unnecessarily increases the cost of well development, acts like a hidden tax levied against all of the well owners.  It is a very selective tax, not born by the citizenship at large, and especially not born by the parties who promote it.

Elbert County is about to enter into a regulatory regime that duplicates much of the regulatory realm already covered by the Colorado Oil and Gas Conservation Commission, or COGCC.  County regulations will unnecessarily add millions of dollars of cost to oil and gas well development.  They will create pressure to add county jobs to administer all of the waivers from county regulations.  They will turn potential revenues to DOI owners into well costs.  A whole scheme of fees will divert potential revenue money into the county bureaucracy to cover new Elbert County administrative costs.

Worse still, it is not the citizenship at large who clamor for this regulatory regime.  Clamoring comes from a minute percentage of environmental activists who not only don’t represent the citizenship at large, but they have no significant percentage in the stakeholding ownership of this industry in Elbert County.

Even worse still, is that they sell a regulatory regime on the myth of improving the health, safety and welfare to Elbert County citizens, when the regulations do nothing beyond what the COGCC already successfully does to guide environmentally sound oil and gas development, and in fact will probably create new devices masking problems in to-be-discovered bureaucratic imponderables.

The only citizens whose health, safety and welfare will be improved work for Elbert County government.  This is a make-work jobs program for the Elbert County Community and Development Services Department, and the assorted consultants and counselors they will have to hire to provide industry knowledge.

These oil and gas regulations also create a deep well of Green v. Humanity subject matter to grease planning commission and BOCC meetings for the foreseeable future.

Who are the winners?  Bureaucrats, politicians, environmental activists.

Who are the losers?  Everyone else.

B_Imperial