What’s Happening With SB 181?

Dated: 05/31/2019

Views: 183

There’s been a lot of controversy around Senate Bill 181 here in Colorado.

If you aren’t very clear on the implications of the bill, it essentially focuses on the permitting process for oil and gas development, laying out who has the authority to approve those permits. We’ve had a lot of people speaking out on this issue, especially those in communities that are heavily reliant on that industry.

So what impact will this bill have on real estate?

As it happened during the Great Recession, some are concerned that real estate values will be completely decimated. During that time, jobs dried up, so people were forced to move out of the area.

It’s a unique situation, to be sure, and we’ll have to let it run its course in court before we’ll know what will happen for sure. To be clear, there shouldn’t be any immediate impact.

Once things are worked out in the court systems, there are two things to watch for:

  1. Additional development on horizontal land. Mineral rights on horizontal land might become cheaper, enticing people to do additional development on those spaces since land values will increase. However, mineral rights will decrease, so landowners won’t keep those properties vacant for as long.

  2. The effect on home values. If there is a memorandum on the actual process of drilling—thereby making the process of getting a permit more difficult—and industry heads pull back on putting in those oil wells or isolate different areas in which to put them, there could be an exodus of jobs. This is a concern for many people since that could also greatly impact real estate values. As I said, Colorado is a unique area because many people move here for the quality of life, but if there aren’t any jobs tied to that industry, then those parties will have to go find work in another space.

One thing that could come from this whole situation is real estate opportunity: Vacant land held for oil development could become available for purchase. However, this could pose some risk to investors if property values go south.

If you’re not in an area of Colorado that relies heavily on the jobs provided by the oil and gas industries, then you might not see much of an effect at all. There were certain markets during the recession that only dropped by 1% because they weren’t reliant on occupations that were themselves affected by the recession. However, I would expect some disruption if the big players in the industry pulled back on some of the workload in Colorado.

All in all, this is an issue to keep an eye on as it unfolds. If the bill is signed into law at the end of the legislative session, it’ll be interesting to see what occurs with some of the communities here in the state.

If you have any questions, comments, or thoughts about this hot-button issue, don’t hesitate to reach out to me. I’d be happy to speak with you.

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Luke Angerhofer

Luke Angerhofer is the founder of and active real estate agent at Prestigio Real Estate and the President of Grail Capital. He is a former appraiser and active investor which has allowed him to garner....

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