Fact Sheet: The Reality of Increased Setbacks

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There are many stakeholders with an interest in the distance from an oil and gas facility to buildings. These include the surface owner, the mineral owner, adjacent landowners, the local government, and the oil and gas operator. Many elements play into this calculation: the property line, the mineral property boundaries, surface and lease agreements, development plans, encroachment on existing facilities, lease lines, drilling spacing orders, access, centralization of facilities, technical limitations, and location of the resource.

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Fact Sheet: The Reality of Increased Setbacks

  1. 1. The Reality of Increased SetbacksWhy One Size Doesn’t Fit AllThere are many stakeholders with an interest in the distance from an oil and gas facility to buildings. These includethe surface owner, the mineral owner, adjacent landowners, the local government, and the oil and gas operator.Many elements play into this calculation: the property line, the mineral property boundaries, surface and leaseagreements, development plans, encroachment on existing facilities, lease lines, drilling spacing orders, access,centralization of facilities, technical limitations, and location of the resource.The Colorado Oil and Gas Conservation Commission’s (COGCC) current setback rules acknowledge andaccommodate the reality of the many stakeholders, legal considerations, and technical constraints that impact thedistance of wells from buildings. The common perception that distance from a well to a building is determined by theoil and gas company is simply false.The current setback criteria and the current process for well location adequately address the perceived health andsafety risks while allowing the surface owner, mineral owner, operator and regulators the ability to determine the bestlocation of the well in order to maximize the resource and protect private property rights.Any proposal of a 1,000-foot setback ignores the complex technical, logistical, and legal challenges inherentin siting a well. This approach also disregards the numerous stakeholders with an interest in this distance,most importantly, the surface owner.From the Operator PerspectiveOperators do not want to locate wells within 1,000 feet of buildings, but surface owner, legal, regulatory, andtechnical considerations often necessitate this outcome. Oil and gas development generally must occur above or inclose proximity to the underlying mineral resources. Limiting options for surface operations impacts the amount ofrecoverable resources. When operating close to buildings is required, operators employ a variety of measuresintended to reduce nuisances such as dust, noise, and light.Any increased setback distance will:• Increase the amount of energy, costs, and resources required to access the oil and gas resource from a greater distance• Reduce flexibility for co-locating or centralizing facilities, increasing surface footprint• Increase economic burden and reduces certainty to access the targeted mineral resource o Although in some cases horizontal wells can access minerals from afar, in reality the mineral rights that would need to be acquired to fill the gap are not always accessible for the operator. o Horizontal wells are not always practical and only account for 2% of active wells in Colorado. Assuming that all resources are accessible from greater distances is not realistic.• Limit the current negotiation process with the surface owner in deciding the mutually best location of wells
  2. 2. • Restricts the use of private property rightsFrom the Agricultural and Surface Owner PerspectiveFarmers and ranchers have a significant stake in the siting of well locations. A one-size-fits-all approach ignorestheir interests and preferences.• Mandatory setbacks result in the disregard for private property - both that of the farmer and rancher on the surface and of the mineral owner below the surface – for the inadequate reason of an over abundance of caution. Farmers and ranchers have a significant stake in the siting of well locations.• The amount of local food and fiber producing land would be affected; especially agricultural lands adjacent to community developments. This in turn will affect the ultimate value of a plot of land due to lost areas of production. Crop production losses result in lower income for the farmer, hurting their economic viability in the coming years. This causes direct harm to job creation for a top economic sector in our state.• Increased setbacks discourage the co-location and centralization of facilities to limit surface disturbance. This will result in disturbing additional surface area, cause greater impacts to natural resources, and will impact property values and future land uses.• Arbitrary setbacks limit the current negotiation process between landowners and the operator on the mutually best location of wells. Agricultural irrigation activities are highly sensitive to oil & gas activities and the farmer and rancher should be able to negotiate the placement of an oil & gas well that won’t interfere with agricultural operations such as irrigation, planting, harvesting and grazing activities.• Well-siting affects locations of required agricultural infrastructure including access roads, irrigation, and sheds and other buildings• Agricultural producers and surface owners become the injured party when the surface is taken under arbitrary mandatory setbacks. This amounts to a regulatory taking.• Requiring additional setbacks from recreational areas/public use areas will result in further negative impacts to agricultural production by forcing operations to be placed in the middle of fields and pastures without any regard for the agricultural production occurring on the land.From the Royalty Owners PerspectiveMineral interests are a private property right and royalty owners’ interests are affected by any change in setbacks.• Expanded setbacks increase development costs and decrease access certainty, putting millions of dollars of royalty interests at risk.If a well is not feasible due to the burden of these costs, and the right to develop additional mineral rights in betweenthe target resource cannot be acquired, the inability to access the minerals results in waste and lost revenue anddenies the mineral owner their right to their property.From the Local Government Perspective:A 1,000 foot mandatory setback removes flexibility for the local governments to determine what is best fordevelopment needs.• It results in an unfunded mandate complicating land use decisions by pitting one group against another in front of the planning and land use decision makers with a state requirement.2
  3. 3. • It promotes sprawl and increases the cost of transportation, utilities, fire and police protection which ultimately reduces local mil levy revenue by limiting the number and location of wells.From the Developers PerspectiveDevelopers have invested in plans across the state with the expectation of regulatory certainty based on currentsetback rules. Any change in setback distances will:• Result in the significant loss of revenue due to the loss of developable land• Reroute unwanted heavy traffic through residential zones instead of off major corridors• May increase suburban sprawl as home development needs to increase their footprint3

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