UPDATE 1-Colorado governor unveils plan to head off fracking bans; oil shares rise

Mon Aug 4, 2014 5:57pm EDT

(Updates throughout with quotes, details, changes dateline, prev. HOUSTON)

By Keith Coffman

DENVER Aug 4 (Reuters) - Colorado Governor John Hickenlooper said on Monday he has brokered a deal between environmentalists and the energy industry that could avoid two ballot initiatives that would have curtailed oil and gas drilling.

Share prices of oil producers rose on word of the agreement, which Hickenlooper, a Democrat, said will include a task force with members from industry, environmental groups and local communities to set standards for the state's growing petroleum industry.

"This approach will put the matter in the hands of a balanced group of thoughtful community leaders, business representatives and citizens who can advise the legislature and the executive branch on the best path forward," he said.

The compromise was seen as a positive for energy companies with big operations in Colorado such as Noble Energy Inc and Anadarko Petroleum Corp, sending their share prices up more than 5 percent.

Several Colorado municipalities worried about environmental issues have sought to ban the practice of hydraulic fracturing, or fracking, which uses a mix of pressurized water, sand and chemicals to unlock hydrocarbons from rocks.

But those efforts have faced challenges, with lawyers and courts saying their legality would depend on the state's own laws for fracking.

Hickenlooper has worked for months to reach a deal to head off the competing initiatives.

That has put the governor at odds with U.S. Representative Jared Polis, a wealthy Democrat from liberal Boulder County, who was bankrolling the anti-fracking ballot measures.

Polis, who was under pressure by fellow Democrats to withdraw his support for fear it would cost the party the governorship and a U.S. Senate race this fall, joined Hickenlooper at Monday's news conference and said he was pleased with the compromise.

"For the first time, citizens will be on equal footing to the oil and gas industry, and able to negotiate directly for regulations that protect property rights, homes values, clean water, and air quality," Polis said, while acknowledging some environmental groups would be disappointed in his decision.

The deal hinges on both sides pulling their ballot initiatives, said Ryan Call, chairman of the Colorado Republican Committee, calling it "a non-agreement agreement."

"Literally, the only thing that we know for certain after today's press conference is that Gov. Hickenlooper, Jared Polis and Colorado Democrats want even more control over Colorado's already heavily regulated energy industry," Call said in a statement.

But Tisha Schuller, executive director of the Colorado Oil & Gas Association, an industry trade group, commended the governor for "putting the state's interests ahead of politics."

"These issues are complex and must include a wide range of stakeholders to find common ground with workable solutions," she said. (Reporting by Keith Coffman in Denver, and Anna Driver and Terry Wade in Houston; Editing by Daniel Wallis and Eric Beech)