Hous­ton firms fight for frack­ing in Colo. By Ryan Maye Handy

They say Propo­si­tion 112 will crip­ple in­dus­try as res­i­dents voice con­cerns over well ex­plo­sions, wa­ter con­tam­i­na­tion

Houston Chronicle Sunday - - BUSINESS - ryan­mhandy@gmail.com twit­ter.com/ryan­mhandy

FORT COLLINS, Colo. — Hous­ton oil and gas com­pa­nies are at the cen­ter of a fight for their in­dus­try’s fu­ture in Colorado, where res­i­dents wary of deadly gas ex­plo­sions, en­croach­ing oil and gas de­vel­op­ment and hy­draulic frac­tur­ing are push­ing a bal­lot mea­sure ex­pected to crip­ple en­ergy com­pa­nies.

As Colorado’s top oil pro­duc­ers, Anadarko Pe­tro­leum of The Wood­lands and Noble En­ergy of Hous­ton could be forced to halt new pro­duc­tion, aban­don ex­ist­ing wells and cut jobs if the bal­lot mea­sure passes. Both have poured mil­lions of dol­lars into cam­paigns against the mea­sure; oil and gas in­ter­ests con­trib­uted at least $20 mil­lion to de­feat the mea­sure, ac­cord­ing to cam­paign fi­nance records.

The bal­lot mea­sure, known as Propo­si­tion 112, would en­force a 2,500 foot drilling set­back — up from the cur­rent 500 feet — around all oc­cu­pied build­ings and so-called vul­ner­a­ble ar­eas, such as parks. If ap­proved by vot­ers in Novem­ber, the mea­sure would ef­fec­tively block new pro­duc­tion in 94 per­cent of the state’s top oil and gas pro­duc­ing coun­ties, ac­cord­ing to the Colorado Oil and Gas Con­ser­va­tion Com­mis­sion, the state’s oil and gas reg­u­la­tor.

Econ­o­mists es­ti­mate that more than 33,000 en­ergy jobs — about 1 per­cent of Colorado’s pay­roll em­ploy­ment — and up to $1 bil­lion in tax rev­enue would be lost by 2030.

For John Cavitt, CEO of Hous­ton well-test­ing firm Covenant Test­ing Tech­nolo­gies, the ef­fects of Propo­si­tion 112 would be im­me­di­ate and dev­as­tat­ing. The com­pany is among the top em­ploy­ers in the oil and gas in­dus­try in Colorado, with 400 em­ploy­ees test­ing wells as part of 24-hour mon­i­tor­ing sys­tems to that as­sess pro­duc­tion and emis­sions, among other things.

If the bal­lot mea­sure passes, Cavitt said his com­pany would cut half of those 400 jobs within six months and elim­i­nate nearly all of them within a pe­riod of a years. Cavitt es­ti­mates that his com­pany, which em­ploys about 1,000, would lose one-third of its rev­enues — a shock that would mean lay­offs in the Hous­ton of­fice. “It’s cat­a­strophic,” he said. Anadarko and Noble both de­clined to com­ment on the po­ten­tial ef­fects of Propo­si­tion 112. But state records show that they stand to lose heav­ily if the propo­si­tion passes into law.

Noble op­er­ates more than 7,100 wells, and Anadarko, through its sub­sidiary Kerr McGee Oil and Gas, op­er­ated more than 6,700 — more than any other com­pa­nies in the state.

Big spenders

Both com­pa­nies have large op­er­a­tions in Weld County, a north­east­ern county that is home to the Den­ver-Jules­burg basin and the heart of the Colorado’s shale boom, and to­gether they have con­trib­uted about $12 mil­lion — $5.8 mil­lion each — this year to Pro­tect Colorado, the com­mit­tee cam­paign­ing to block the mea­sure, ac­cord­ing to state cam­paign fi­nance records.

The oil and gas in­dus­try has op­er­ated in Colorado for more than a cen­tury, be­gin­ning with the dis­cov­ery of oil in the south cen­tral town of Florence in the 1860s. The well was the first drilled west of the Mis­sis­sippi, but it wasn’t un­til a cen­tury later that oil and gas de­vel­op­ment be­gan to grow rapidly in Colorado. Colorado ranks seventh in oil pro­duc­tion among states and fifth in nat­u­ral gas pro­duc­tion, ac­cord­ing to the En­ergy Depart­ment.

As the state has grown, it has at­tracted res­i­dents from around the coun­try, with most set­tling in Front Range, the east­ern side of the Rocky Moun­tains and the state’s most pop­u­lous cor­ri­dor. Colorado al­ready has some of the tough­est reg­u­la­tions gov­ern­ing oil and gas pro­duc­tion, but in re­cent years Front Range com­mu­ni­ties, in­clud­ing Den­ver and its sub­urbs, have launched sev­eral ef­forts to push frack­ing as far away as pos­si­ble.

The courts and other vot­ers have struck down pre­vi­ous at­tempts to limit the in­dus­try’s spread, but Propo­si­tion 112 has ad­vanced fur­ther in the process than any other ef­fort.

Econ­o­mists ex­pect that Propo­si­tion 112 would have a rip­ple ef­fect on govern­ment bud­gets, lead­ing to spend­ing cuts for schools, law en­force­ment and fire­fight­ing in ru­ral coun­ties that rely on taxes from the oil and gas in­dus­try. Weld County, the lo­cus of the state’s drilling, stands to lose the most.

Nearly half of the county’s prop­erty tax rev­enue comes from oil and gas, said Chris Brown, the di­rec­tor of pol­icy and re­search for the Com­mon Sense Pol­icy Round­table, a Colorado think tank funded by real es­tate firms, banks and other busi­nesses.

“Fort Lupton Fire Dis­trict in Weld County got $3.6 mil­lion dol­lars from oil and gas in 2017, which is about 50 per­cent of their rev­enue,” Brown said. “It’s huge.”

Pro­po­nents of Propo­si­tion 112 say it is not meant as a drilling ban, but rather as a safety mea­sure.

Oil com­pa­nies have clashed with cit­i­zens as the shale boom has brought drilling closer to homes on the Front Range. In North­east­ern Colorado, frack­ing tow­ers loom over sub­di­vi­sions, farm fields and In­ter­state 25, the state’s main north-south high­way, stretch­ing from Fort Collins through Den­ver to Colorado Springs.

In April 2017, a cut flow­line from a gas well 170 feet from a home in the north­east­ern town of Fire­stone caused a mas­sive ex­plo­sion that killed two peo­ple and in­jured two oth­ers. Anadarko, which owned the well, set­tled a law­suit brought by the fam­ily of the vic­tims against the com­pany in May.

Threat at the doors

A sec­ond law­suit was filed in 2017 by a hand­ful of for­mer em­ploy­ees who blamed the ex­plo­sion on the com­pany’s de­ci­sion to cut safety bud­gets. The law­suit was dis­missed in June, but re­filed in Au­gust. In court record, Anadarko dis­missed the al­le­ga­tions as “a se­ries of leaps in logic that can­not with­stand scru­tiny.”

Pro­po­nents of the Propo­si­tion 112 say Coloradans have more to fear from oil and gas than ex­plo­sions. Anne Fos­ter, a spokes­woman for Colorado Ris­ing, an ad­vo­cacy group push­ing the anti-frack­ing mea­sure, said that peo­ple who live near wells re­main con­cerned about wa­ter con­tam­i­na­tion, meth­ane emis­sions and other en­vi­ron­men­tal haz­ards.

“Propo­si­tion 112 is re­ally the re­sponse of moth­ers and grand­moth­ers and teach­ers to a threat that has ar­rived on their doorstep,” Fos­ter said. “At ev­ery turn, we’ve been told that noth­ing can be done, and the in­dus­try will de­velop where it would like.”

The de­bate has riven the state po­lit­i­cally, sep­a­rat­ing con­ser­va­tive com­mu­ni­ties on the east­ern plains and on the West­ern Slope of the Rock­ies from the more lib­eral met­ro­pol­i­tan ar­eas Den­ver, Boul­der and Fort Collins.

The state’s politi­cians have been left to strad­dle the di­vide as they try to court lib­eral an­tifrack­ing com­mu­ni­ties and ap­pease ru­ral res­i­dents de­pen­dent on oil and gas. Gov. John Hick­en­looper, a Demo­crat and for­mer oil and gas en­gi­neer, fa­mously boasted dur­ing a U.S. Se­nate com­mit­tee hear­ing in 2013 that he once drank frack­ing fluid with Hal­libur­ton ex­ec­u­tives as part an ef­fort to prove that the chem­i­cal mix is not dan­ger­ous.

Jared Po­lis, a Demo­cratic con­gress­man from Boul­der who is run­ning to suc­ceed Hick­en­looper, has re­fused to back Propo­si­tion 112, even though he sup­ported a sim­i­lar, but un­suc­cess­ful, mea­sure in 2016.

Eco­nomic ar­gu­ment

Oil and gas com­pa­nies, mean­while, are left to hope that their warn­ings of dire eco­nomic con­se­quences will reach Coloradans whose only con­tact with pe­tro­leum prod­ucts is the lo­cal gas sta­tion, said Dan Ha­ley, pres­i­dent of the Colorado Oil and Gas As­so­ci­a­tion. En­ergy in­dus­try pro­jec­tions es­ti­mate that the ap­proval of the ini­tia­tive would cost the state nearly 150,000 jobs by 2030, in­clud­ing both those in the oil and gas sec­tor and oth­ers that de­pend on the eco­nomic ac­tiv­ity gen­er­ated by the in­dus­try.

“Once Coloradans un­der­stand the broad im­pacts on our econ­omy,” Ha­ley said, “they will re­ject it.”

As­so­ci­ated Press file photo

A worker ad­justs hoses at a well near Mead, Colo. Propo­si­tion 112 would en­force a 2,500-foot drilling set­back.

Paul Con­rad / Pablo Con­rad Pho­tog­ra­phy

Texas-based oil re­fin­ers have in­fused more than $18 mil­lion into a fight against Ini­tia­tive 1631 in Wash­ing­ton state.

Pro­po­nents of hy­draulic frac­tur­ing point to the eco­nomic ben­e­fits. Op­po­nents point to po­ten­tial en­vi­ron­men­tal im­pacts.

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