BP in the coming months may have to look to its lucrative natural gas fields in southwestern Colorado to recoup the massive financial hit it’s taking in the wake of the worst oil spill in American history.
A BP America spokeswoman this week told the Colorado Independent the company is eyeing a resumption of coal-bed methane drilling in La Plata County this fall, although the decision has more to do with a hoped-for rebound in natural gas prices and some resolution with regard to local drilling regulations.
The company at the beginning of the year announced a six-month halt to drilling in the county, where BP directly employs 250 people and indirectly 200 contractors. There are more than 2,000 active BP wells in the county – the only part of the state where the company drills.
“It was more the economics of it actually,” BP America senior director of government and public affairs Lisa Hough said of the hiatus for the company’s $2.4 billion drilling program in the area. “We had a lot with rules and regulations coming on and the drop in the natural gas price and we actually had a real backlog of wells that were drilled but not completed.”
La Plata was the second most productive Colorado county for natural gas drilling in 2009, according to the Colorado Oil and Gas Conservation Commission, and BP is the largest operator in the county, where about 40 percent of its wells are on Southern Ute tribal land.
A patchwork and a crock
The company operates under a patchwork of regulations, including tribal rules, state (COGCC) regulations and La Plata County’s own oil and gas drilling regulations. The county is the only one in the state with its own set of drilling regs after winning several court cases, including a Colorado Supreme Court decision in 1992.
However, in recent years, the county is once again rewriting its regulations – another piece of uncertainty facing BP and other operators in the area. A company spokesman in January cited the regulatory uncertainty as one of the factors in the six-month drilling hiatus.
But conservationists and longtime observers of southwestern Colorado’s energy sector aren’t buying the regulatory argument for the drilling slowdown.
“That’s a crock, because since 1992 – 18 years – they’ve been drilling with essentially the same regulations that are currently in place,” said Josh Joswick, a former three-term La Plata county commissioner and currently the oil and gas issues organizer for the nonprofit San Juan Citizens Alliance. “This latest round of revisions was minor in terms of further regulations put on them.”
Joswick is a three-term Democratic commissioner who first took office shortly after the state supreme court decision backing limited county land-use regulation of oil and gas drilling (previously only regulated by the state). He said the county has the third lowest mill levy (property tax) in the state, which makes it an ideal place for BP or any operator to drill.
“Any regulation that there is here, nothing is going to drive them away from the goose that laid the golden egg,” Joswick said. “[BP] found the jackpot. Not only are they on top of the most productive coal-bed methane field in the United States, they are paying next to nothing compared to what they would be paying elsewhere.”
BP, natural gas and wind farms
Even as BP and the Obama administration came to terms Wednesday on a $20 billion fund to compensate economic victims of the ongoing Deepwater Horizon oil spill in the Gulf of Mexico, Hough said the company will continue to invest in natural gas and clean energy in Colorado.
“The ongoing response in the Gulf is trying for everybody,” Hough said. “We all want this leak to stop, and it’s difficult, but we’re continuing to move ahead with great investments here, and it’s going to be hard to remind the public about those, but they give us hope. This wind farm is going to be huge.”
BP last month announced a deal with Xcel Energy to build a 250-megawatt wind farm in Weld County on the state’s Front Range. Overall, BP has more than 1,200 megawatts of wind power generated by six wind farms nationwide, Hough said.
The company also built a 1.2-megawatt solar installation at the CSU-Pueblo campus, offers BP solar equipment at 10 Colorado Home Depot stores and provides residential solar installations through several Colorado solar distributors. Nationally, BP is one of the largest investors in alternative energy sources, including biofuels.
“We’re continuing to say, ‘America, we all have to watch our energy consumption and talk about what our low carbon future is,’” Hough said. “It’s difficult, trying times, for sure, but hopefully we’re all going to come out of this with a better appreciation of America’s energy appetite.”
Joswick credits BP with participating in a county study on industrial emissions in the area, which found that oil and gas drilling contributes 80 percent of the greenhouse gases locally, but now he wants to see how the company and other local operators respond.
“I would hope that anything that they say is taken with more than one grain of salt, in terms of their credibility anymore as a company and any assertions that they make,” Joswick said.