Proposition 112 requires that any new oil and natural gas development be located at least 2,500 feet from occupied structures and other areas designated as vulnerable. This type of requirement is commonly known as a setback. Entering a previously plugged or abandoned oil or natural gas well is held to this same setback requirement. The measure also allows the state or a local government to require a setback distance greater than 2,500 feet. If two or more local governments with overlapping boundaries establish different setbacks, Proposition 112 requires that the greater distance be used. The measure does not apply to federal land, which includes national forests and parks and comprises about 36 percent of the land in Colorado. Under the measure, oil and natural gas development includes the exploration for, and the drilling, production, and processing of oil or natural gas. Oil and natural gas development also includes hydraulic fracturing, flowlines between oil and natural gas facilities, and the treatment of associated waste. Occupied structures include buildings where people live or work. Proposition 112 designates certain areas as vulnerable, including certain recreation areas and water sources, such as public and community drinking water sources, canals, reservoirs, lakes, rivers and streams (whether continuously flowing or not), and any other area designated by the state or a local government as vulnerable.

State regulation of oil and natural gas. The Colorado Oil and Gas Conservation Commission (COGCC) in the Colorado Department of Natural Resources establishes and enforces regulations on oil and natural gas operations in the state. The COGCC is charged with fostering the responsible development, production, and use of oil and natural gas resources in a manner that protects public health, safety, welfare, and the environment. The COGCC consults with the Colorado Department of Public Health and Environment (CDPHE) to consider the health and safety of the public when regulating oil and natural gas operations. The CDPHE regulates air pollution, the discharge of water to surface water bodies, and the disposal of hazardous waste related to industrial activities, including oil and natural gas operations.

Existing setback requirements. Current COGCC regulations, approved in 2013, prohibit oil and natural gas wells and production facilities from being located closer than:

500 feet from a home or other occupied building; and

1,000 feet from high-occupancy buildings such as schools, health care institutions, correctional facilities, and child care centers, as well as neighborhoods with at least 22 buildings.

The surrounding area encompassed by the current 500-foot setback includes about 18 acres, and the 1,000-foot setback area includes about 72 acres. Proposition 112 increases the setback to a minimum of 2,500 feet, or about 450 surrounding acres. The current setback requirement may be waived in certain instances by the COGCC and a building owner. Proposition 112 does not include a waiver provision

Oil and natural gas resources in Colorado. Geologic formations containing oil and natural gas are found in many areas of Colorado, with some formations underlying multiple local communities. Recent development of these resources has been concentrated in Weld, Garfield, La Plata, Rio Blanco, and Las Animas Counties, as well as portions of surrounding counties. Most of the state's oil production occurs in the Denver-Julesburg Basin, primarily in Weld County and other nearby counties. A COGCC map of current oil and natural gas activity can be found online at: this link.

Oil and natural gas resources are owned or leased by many different private companies, governments, financial institutions, nonprofits, and private individuals. Oil production in Colorado doubled between 2013 and 2017. Natural gas production in Colorado has been stable over the past ten years. In 2016, Colorado ranked seventh among the states in domestic oil production and fifth in natural gas production. In 2017, there were about 54,000 producing wells in Colorado, a 48 percent increase since 2007.

Oil and natural gas extraction technologies. Changes in industry technologies, such as hydraulic fracturing, or "fracking," and horizontal drilling, have led to substantial oil and natural gas production increases in Colorado and nationally, as well as an increase in the number of wells and related facilities. Hydraulic fracturing is used for most new wells and involves pumping a mixture of mostly water and sand, and small amounts of chemicals and other additives, into underground rock layers where oil or natural gas is located. The pressure of the water creates small fractures in the rock. The sand keeps the fractures open, allowing the oil or natural gas to escape and flow up the well. Hydraulic fracturing enables access to oil and natural gas formations that were previously inaccessible. Horizontal drilling enables oil and natural gas operators to drill multiple wells from a single location to improve their efficiency and minimize surface disturbances. With current technologies, oil and natural gas wells have the greatest production in their first year of operation and decrease in production each successive year until the wells are depleted.

State and local revenue from oil and natural gas. Companies that extract mineral resources, including oil and natural gas, coal, and metallic minerals, pay severance taxes to the state. Oil and natural gas tax collections fluctuate annually. From budget years 2012-13 to 2016-17, state severance tax collections from oil and natural gas producers ranged from $4.0 million to $264.7 million per year. Under current law, Colorado severance tax revenue is split between state programs and local governments. The state also collects some revenue from royalty and lease payments. Oil and natural gas producers also pay income taxes, sales taxes, and local property taxes. In 2017, Colorado oil and natural gas producers paid an estimated $496.7 million in property taxes to impacted local governments, school districts, and special districts.