Rising global oil prices portend increased conflict over residential drilling in Colorado
At least seven large oil and gas operators are planning to ramp up their Colorado production this year, to the tune of more than $4 billion in investments, due to a boost in the global price of oil.
Ramping up production is good news for Coloradans looking for oil and gas jobs, and for state and local revenues. But new drilling operations are expected to increasingly target residential areas, which means that for residents who are pushing to keep drilling out of their neighborhoods, it’s a sign that the fight has only begun.
In an attempt to boost sluggish oil prices, nations of OPEC — the Organization of Petroleum Exporting Countries, led by Saudi Arabia — agreed to cut total oil production by about 5 percent last November. Now Colorado production, particularly in the energy-rich Denver-Julesburg Basin in the Front Range, looks set to ramp up as global oil prices are predicted to remain at or above $50 a barrel for the foreseeable future.
“If production cuts do take place as [OPEC countries] have indicated, then it will have an advantageous effect on U.S. oil and gas prices,” explains Scott Prestidge, spokesman for the Colorado Oil and Gas Association. “However, it’s really hard to speculate whether they will maintain those cuts.” As of March, participating nations appeared to be complying with their proposed reductions but, as Prestidge points out, “That could change at any moment.” There is also concern that increased U.S. production could offset global cuts.
But so far, the boost looks promising. After beginning to plummet in June 2014, global oil prices have begun to climb, with the price of Brent crude reaching almost $55 a barrel in March. Colorado is sixth in the nation for natural gas production and seventh in oil, Prestidge says — thus, the price of oil “definitely impacts Colorado production.”
Nationwide, the total number of rigs in production has doubled since this time last year, according to data by oil and gas service company Baker Hughes. Colorado currently has 28 producing rigs, compared to 17 in March 2016. That’s still significantly fewer rigs compared to two years ago, but Prestidge notes that the industry has “made leaps and bounds” in drilling efficiency, meaning that it now takes significantly fewer rigs to produce the same amount of oil.
(Data from Baker Hughes)
Increased efficiency lies at the heart of the conflict between the oil and gas industry and Colorado homeowners, too. That conflict, which has grown heated in recent years, centers on the encroachment of oil and gas operations into residential areas.
New drilling technologies allow operators to drill up to 40 wells per well pad, a drastic change from the limit of 2-4 wells per pad years ago. In Colorado, more than 40 percent of proposed developments now include eight or more wells; in 2012, that number was less than 10 percent. In communities across the Front Range, residents are finding themselves fighting for a cause they never thought they would join.
Colorado law under the Oil and Gas Act preempts local governments from prohibiting oil and gas activity, which the state Supreme Court upheld last May when it struck down long-term fracking bans in both Longmont and Fort Collins. An attempt last fall to place two anti-fracking measures on the state ballot failed after organizers failed to round up enough signatures, a loss organizers blame on the multi-million dollar opposition campaign funded by the oil and gas industry.
In Lafayette earlier this year, scores of homeowners repeatedly packed city council meetings to push for a “climate bill of rights” that would codify the right to a healthy environment — and legalize civil disobedience if that right were threatened.
In Broomfield, interest in oil and gas activity was so high that the city council had to rent out an arena for a night in order to accommodate all the people. More than a thousand residents showed up, with a great many of them expressing a desire to have more control over oil and gas development.
Such resistance is extensive. In the Greeley neighborhood of Triple Creek, neighbors lost their fight against Extraction Oil and Gas and the state regulatory agency, the Colorado Oil and Gas Conservation Commission (COGCC), and now Dawn Stein, who is in her sixties, has found her home surrounded on three sides by high walls meant to block her view of the drilling activity. It blocks more than just the industrial equipment, she says. Stein and other Triple Creek residents have filed a lawsuit against the COGCC alleging that it did not follow adequate residential drilling rules.
The latest development in the ongoing fight between communities and industry occurred in Boulder, where the county commissioners recently passed regulations it says are the strictest in the state. The updated rules are meant to require any operator to spell out a detailed development plan and to demonstrate real effort in finding an alternative site. A large group of vocal Boulderites says this isn’t enough. During a recent county commissioners meeting, mother and teacher Kristin McLean put it bluntly: “We want you to ban fracking. No more moratoriums.” She later told The Colorado Independent, “If there is an increase in permits, we are going to respond.”
“No drills, no pipelines” is the rallying cry of many in these Front Range groups, though plenty of others are looking for more balanced solutions to keep drilling away from their homes and schools. Many activists have vowed to put their bodies on the line, and to risk arrest and jail time, to do so. Said McLean at the meeting, “If the city and state fail to protect us, we have hundreds and thousands of people who will step up and do direct action.” State law makes it unlikely that members will be able to gain significant control over drilling through legal channels.
In Lafayette, council members passed the bill of rights measure only after removing the clause about civil disobedience. Broomfield City Council has tabled the idea of a temporary drilling moratorium, hoping instead to work with the industry in an attempt to get the best deal possible.
And in Boulder, attorneys for the Colorado Oil and Gas Association are already reviewing the new regulations to determine whether to challenge them in court. At least one operator, Crestone Peak, has already begun the application process to drill up to 216 wells in Boulder County.
Environmental attorney Matt Sura says that if oil prices keep rising, Front Ranger residents can expect more and more development near their homes. “The area being targeted for oil and gas development in Colorado is primarily the Front Range — an area called the Greater Wattenberg Field,” he explains. Because most of the rural areas there have already been developed, “If global oil prices continue to rise, operators will be targeting oil and gas resources under populated areas.”
Though it’s impossible to know exactly what will happen moving forward, the numbers paint a pretty rosy picture for Colorado’s oil and gas industry. The COGCC received three times as many drilling applications in February 2017 than in February 2016.
(Chart from the COGCC)
The maps below show the total drilling permits and pending permit applications across the state.
Pending drilling permit applications in Colorado:
(Map from the COGCC)
Drilling permits in Colorado:
(Map from the COGCC)
Photo by Kelsey Ray
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