Will Senate Bill 181 impact Denver’s office market?

In early March, a sweeping and comprehensive bill was introduced to Colorado. It was processed through our state’s political offices and eventually passed over the governor’s desk to be signed into law. This occurred in under 60 days, resulting in new regulations specific to the personal and environmental safety of those working in and around the oil and gas industry. The overall impact of this bill on the industry itself is not the focus of this article. Instead, we have looked at the impact it may or may not have on our office market conditions here in Denver.

Senate Bill 181 significantly changes rules and regulations of oil and gas operations in Colorado state boundaries, specifically drilling operations. However, contrary to popular belief, this bill does not directly impact all oil and gas companies that choose to office in Denver. It specifically impacts companies based upon where they focus their operations or assets; this aspect of their business plays the biggest role in if and how they are impacted.

The true changes come via the drilling permitting process and how those permits are approved. The permit process is now much more rigorous. It has increased the power of the local land-use authorities to approve or deny drilling permits. There are currently over 6,000 drilling permits subject to the new permit filter process. Oil and gas operators with assets here in Colorado, who have their drilling permits approved, are not impacted when developing those already permitted assets/wells. Companies with outstanding permits still awaiting approval are in a holding pattern, as they determine the true impact the bill will have on their approval. It now is very difficult to put a timetable on permitting, given the new process. This impairs the ability of Colorado-focused oil and gas companies to develop assets and ultimately create value through their mineral rights in Colorado.

Certainly, Senate Bill 181 puts the brakes on future growth for those companies drilling here. However, it does not mean those companies will immediately close their offices, as management and oversight of their current drilling activity will continue. However, companies based on growth in Colorado drilling activities will be directly and harshly impacted.

Given the changes, how will this impact the office market in Denver? There will be two significant impacts on downtown’s office market conditions.


 See the full article on the Colorado Real Estate Journal's June 2019 Office Quarterly.