Per­mits show gas and oil pro­duc­tion is vy­ing for space with grow­ing com­mu­ni­ties.

The Denver Post - - FRONT PAGE - By Aldo Svaldi

The clash be­tween grow­ing com­mu­ni­ties and oil and gas pro­duc­tion in north­east­ern Colorado, height­ened by a deadly home ex­plo­sion last spring, will only in­ten­sify in com­ing years, a Den­ver Post anal­y­sis of drilling per­mits sug­gests.

The Post an­a­lyzed pend­ing and ap­proved drilling per­mits in and around the sprawl­ing Wat­ten­berg Field in Weld, Larimer, Boul­der, Adams and Broom­field coun­ties, and found that per­mits are be­ing taken out in and near towns and other pop­u­lated ar­eas twice as of­ten as in more re­mote ru­ral ar­eas.

Eight of the 10 fastest-grow­ing towns and cities in the state and the two fastest-grow­ing coun­ties, Broom­field and Weld, are in the di­rect path of drilling. Larimer, Adams and Ara­pa­hoe — among the state’s fastest­grow­ing coun­ties — have per­mits pend­ing and drilling rigs at work.

“We are try­ing to get to a place where ev­ery­body can co­ex­ist. That is the pur­pose and the goal,” said Deb­bie Chummy, town man­ager of Kee­nes­burg. The town has 67 per­mits ap­proved or pend­ing in the sur­round­ing area and is protest­ing one driller’s per­mit over con­cerns about in­creased noise, dust and truck traf­fic.

The Wat­ten­berg, the pri­mary field in the larger Den­ver-jules­berg Basin, rep­re­sents a cross­roads of ge­ol­ogy and geog­ra­phy and of drilling ac­tiv­ity and hous­ing devel­op­ment — a cross­roads un­like any other in the coun­try, ex­perts say. Al­though drilling in or near ur­ban ar­eas is not un­prece­dented — it has hap­pened in Los An­ge­les and Dal­las, for ex­am­ple — Weld and neigh­bor­ing coun­ties are unique in terms of the cur­rent level of both oil and gas ac­tiv­ity and rates of pop­u­la­tion growth and hous­ing devel­op­ment.

As a re­sult, Colorado has seen ris­ing con­cerns over safety and health and de­bate over how close drilling op­er­a­tions may be placed to homes and schools. Lo­cal gov­ern­ments have bat­tled against the state for the right to reg­u­late or ban drilling out­right in their com­mu­ni­ties. The con­flicts have flowed into ev­ery level

of pol­i­tics, in­clud­ing the state­house and the con­test for gov­er­nor.

Per­mit­ting data show that the forces of drilling and devel­op­ment are likely to bump against each other even more in the fu­ture.

The Post’s anal­y­sis cov­ered per­mits across 100 town­ships, each mea­sur­ing 36 square miles. Of those town­ships, 55 were ru­ral with few in­hab­i­tants and 45 con­tained in­cor­po­rated ar­eas. The num­ber of per­mits in ru­ral re­gions, how­ever, was about half that found in the more pop­u­lated ar­eas.

The Colorado Oil and Gas Con­ser­va­tion Com­mis­sion had ap­proved or re­ceived around 3,400 drilling per­mits in those town­ships as of mid-july. Not all of those per­mits will end up as wells, and oil prices will de­ter­mine what gets com­pleted. But per­mits show where pro­duc­ers want to go, and much of their ac­tiv­ity is cen­tered in Colorado’s prime growth cor­ri­dor.

Of the 20 Wat­ten­berg town­ships with half or more of their sec­tions in­cor­po­rated or de­vel­oped, pro­duc­ers have re­cently re­quested nearly 1,000 drilling per­mits. Some of the most in­tense drilling in pop­u­lated ar­eas in­cludes the Weld County side of Wind­sor, with 213 per­mits; ar­eas east of Brighton, with 147; and the town­ship around Da­cono, with 116.

Com­mu­ni­ties and un­in­cor­po­rated ar­eas in the path of drilling have added 103,578 peo­ple since 2010, which rep­re­sents a growth rate of 15.8 per­cent, ac­cord­ing to counts pro­vided by the Colorado De­mog­ra­phy Of­fice. By con­trast, the 291 cities, towns and un­in­cor­po­rated ar­eas more re­moved from the Wat­ten­berg Field are grow­ing at un­der half the pace — 7.4 per­cent since 2010.

Di­rect­ing traf­fic

Lo­cal gov­ern­ments, faced with a re­sump­tion in ac­tiv­ity af­ter a twoyear lull, are fo­cused on mit­i­gat­ing im­pacts and in­flu­enc­ing the lo­ca­tion of drilling pads. Erie trustees last month ap­proved an or­di­nance that would al­low res­i­dents to file complaints about odors, in­clud­ing those re­lated to frack­ing..

A panel of Broom­field res­i­dents, ad­vis­ing City Coun­cil, is propos­ing a 1,320-foot buf­fer zone be­tween wells and homes, parks, schools and wa­ter sources, much more than the 500-foot buf­fer the state set in 2013. And Thorn­ton’s City Coun­cil is look­ing at an up­date to its oil and gas rules that would limit light­ing around drilling rigs, hold pro­duc­ers to tighter time­lines and ap­ply other re­stric­tions.

Weld County adopted an oil and gas lo­ca­tion assess­ment process last fall that pro­vides closer scru­tiny on drilling lo­ca­tions within 1,000 feet of a build­ing. But the county also re­quires a state­ment be at­tached to doc­u­ments when­ever land is split up, say for a hous­ing devel­op­ment.

“These re­sources are pro­tected prop­erty rights and min­eral own­ers should be af­forded the op­por­tu­nity to ex­tract the min­eral re­source,” the state­ment in­forms land buy­ers.

Weld County plan­ners are try­ing to fun­nel ur­ban growth into three devel­op­ment zones: the In­ter­state 25 cor­ri­dor; the area north of Colorado 7 be­tween Da­cono and Fort Lup­ton; and the area around Keens­burg. All three, how­ever, are tar­geted for drilling ac­tiv­ity.

“Due to the prox­im­ity and own­er­ship con­sid­er­a­tions, cen­tral­ized plan­ning on a large scale does not work well for oil and gas sur­face lo­ca­tions and oil and gas devel­op­ment is al­lowed in all zoned dis­tricts,” said Troy Swain, the county’s oil and gas li­ai­son.

Kee­nes­burg has a good work­ing re­la­tion­ship with No­ble En­ergy, the state’s sec­ond-largest oil and gas pro­ducer, said Chummy, the town man­ager. No­ble is build­ing pipe­lines to re­duce truck traf­fic in the area and com­mu­ni­cat­ing about its plans. But Kee­nes­burg protested per­mits re­quested by an­other less-com­mu­nica­tive Dal­las-based pro­ducer, Ver­dad Oil & Gas, on grounds the com­pany’s plan will have ad­verse im­pacts.

Closer to metro Den­ver, the E470 high­way, long con­sid­ered a di­vid­ing line that pro­duc­ers wouldn’t cross, looks in­creas­ingly breach­able. There is a rig ac­tive as far south as Ara­pa­hoe County near Aurora, and one just out­side Colorado 7 to the north.

Wil­liam Fleck­en­stein, an ad­junct pro­fes­sor of pe­tro­leum en­gi­neer­ing at the Colorado School of Mines in Golden, said more work needs to go into mem­o­ran- dums of un­der­stand­ing, or MOUS, or the doc­u­ments that lo­cal gov­ern­ments, pro­duc­ers and state reg­u­la­tors craft to guide drilling and op­er­a­tions in spe­cific ar­eas.

“MOUS are re­ally crit­i­cal to be able to en­sure ev­ery­one’s needs are be­ing met,” he said. “It is im­por­tant for the state and feds to fund re­search on how to put them to­gether in a way that makes the most sense.”

Af­ter the Fire­stone blast in April that killed two men in a home and was sparked by an im­prop­erly main­tained Anadarko Pe­tro­leum well, Fleck­en­stein said more maps of oil and gas lines, along with other util­ity right of ways, are needed, and that the pub­lic should have easy ac­cess to those maps.

Drilling and den­sity

Large-scale oil and gas pro­duc­tion is some­times as­so­ci­ated with sprawl­ing and sparsely pop­u­lated ar­eas such as the Per­mian Basin in west Texas and New Mex­ico and the Bakken For­ma­tion in North Dakota and Mon­tana.

But the na­tion also has sev­eral ur­ban oil fields, three of the most notable run­ning be­neath Los An­ge­les, Dal­las-fort Worth and Pitts­burgh.

In Los An­ge­les, dense devel­op­ment on top of a pro­lific basin killed off new drilling. Ex­ist­ing wells have gone into hid­ing, tak­ing on build­ing fa­cades or re­lo­cat­ing to is­lands off the coast.

Dal­las presents a dif­fer­ent sce­nario, one where weak com­mod­ity prices caused for­merly ro­bust drilling ac­tiv­ity to screech to a halt. Pitts­burgh is an ex­am­ple of a metropoli­tan area that threw up a wall and said no drilling al­lowed.

About 17 mil­lion peo­ple live in the Los An­ge­les basin, in­clud­ing 1.7 mil­lion within a mile of an ac­tive oil or gas well, ac­cord­ing to 2015 es­ti­mates from the Cal­i­for­nia Coun­cil on Science and Tech­nol­ogy.

“Los An­ge­les has the most pro­lific basin in the world for hy­dro­car­bons per sur­face area,” said Fleck­en­stein, who spent the early part of his pe­tro­leum ca­reer in Cal­i­for­nia.

If pop­u­la­tion den­sity, ex­pen­sive land val­ues and heavy reg­u­la­tion weren’t is­sues. pro­duc­ers could take a sec­ond crack at the basin with mod­ern tech­niques and ex­tract more oil. But a re­vival isn’t going to hap­pen.

“They are coast­ing and man­ag­ing de­cline,” said Imre Ku­gler, as­so­ciate di­rec­tor with IHS Markit in Hous­ton.

The Bar­nett Shale, a large nat­u­ral gas field that un­der­lies a dozen coun­ties in north Texas, in­clud­ing the Dal­las-fort Worth metro area, went from nearly 200 ac­tive drilling rigs in 2008 to zero in 2016. The rig count now stands at seven, with only one ac­tive within metro bound­aries, ac­cord­ing to Baker Hughes.

Lower-cost gas com­ing out of Penn­syl­va­nia and Ohio made the field non­com­pet­i­tive. But the Wat­ten­berg con­tains the right mix of oil and gas and drilling costs low enough to keep ac­tiv­ity going even if oil re­mains be­low $50 a bar­rel, an­a­lysts fore­cast.

“I see a fair amount of up­side. The eco­nom­ics are there, pro­duc­tion is pick­ing up, and pro­duc­ers are boast­ing about their po­si­tions,” said Tay­lor Cavey, an en­ergy an­a­lyst with S&P Global Platts in Den­ver.

Al­though pro­duc­ers have ac­tively drilled the Wat­ten­berg since 1970, an­a­lysts said hor­i­zon­tal drilling has given the field a new lease on life that could last for years.

“If you take the whole Wat­ten­berg field, at the cur­rent drilling pace, there is a solid 15 years left,” es­ti­mates Ku­gler.

That as­sumes oil prices in the $50- to $55-a-bar­rel range. A sep­a­rate es­ti­mate from BTU An­a­lyt­ics es­ti­mates seven years of hor­i­zon­tal drilling at prices be­low $50 a bar­rel. Es­ti­mates get cloudier and time frames shorter if oil dips be­low $40 a bar­rel.

Skep­tics in the en­vi­ron­men­tal and in­vest­ment com­mu­nity ar­gue cur­rent shale drilling isn’t sus­tain­able, given the steep de­clines in out­put wells face af­ter the first year and the need to con­stantly keep drilling.

Ku­gler’s re­search shows that a lower price en­vi­ron­ment ac­tu­ally fa­vors hold­ings closer to Fort Collins, Long­mont, Brighton and the fast-grow­ing com­mu­ni­ties along the I-25 cor­ri­dor, and makes a higher share of hold­ings in ru­ral cen­tral and eastern Weld County un­eco­nomic.

Western Penn­syl­va­nia of­fers a third model of how a ma­jor metro area dealt with drilling. In Novem­ber 2010, Pitts­burgh City Coun­cil banned drilling within city lim­its.

“Pitts­burgh has been off lim­its from Day One, the whole metro area. No­body has tried to drill there, and it is a pain deal­ing with Penn­syl­va­nia,” Ku­gler said.

Colorado com­mu­ni­ties have tried to ban drilling within their bound­aries, but un­suc­cess­fully. Gree­ley at­tempted the first ban in the late 1980s, only to lose on a le­gal chal­lenge be­fore the Colorado Supreme Court. Long­mont and Fort Collins had their ef­forts to re­strict drilling struck down by the state’s top court last year. Boul­der County’s ban faces a sim­i­lar fate.

Where the rigs are

An­other way to un­der­stand drilling ac­tiv­ity is to look at where com­pa­nies are de­ploy­ing oil and gas rigs. Baker Hughes counted 37 rigs ac­tive in the state at the start of Au­gust, up from a low of 15 in May 2016.

Two dozen of those rigs were ac­tive in Weld County, in­clud­ing one west of Mead, one west of Wind­sor, three in­side or near Gree­ley, one near Evans, four around Kersey, two out­side of Erie, five south of Fort Lup­ton, and one west of Lochbuie.

A rig is op­er­at­ing in Adams County, just north of Colorado 7 near the Todd Creek Golf Club, and one is in Ara­pa­hoe County to the north of Ridge View Academy. Two are op­er­at­ing in Larimer County be­tween Love­land and John­stown.

An ad­van­tage the Wat­ten­berg Field has ver­sus com­peti­tors is its lower drilling costs, around $3.5 mil­lion per well ver­sus more than $6 mil­lion for wells in the Per­mian, the coun­try’s most ac­tive oil and gas play right now, Cavey said.

Ser­vices are read­ily avail­able and work­ers don’t have to com­mute long dis­tances or aban­don their fam­i­lies. Chummy said oil and gas work­ers are buy­ing homes in Kee­nes­burg, which has helped the town re­vive and start grow­ing again.

In that re­gard, oil and gas ac­tiv­ity is con­tribut­ing to the re­gion’s pop­u­la­tion growth, while also com­pet­ing with it for land and re­sources.

He­len H. Richard­son, The Den­ver Post

Gas and oil devel­op­ment, ex­plo­ration and frack­ing op­er­a­tions are col­lid­ing more and more with sub­di­vi­sion and hous­ing de­vel­op­ments such as this one in Da­cono as the pop­u­la­tion of the Front Range continues to grow.

Sources: Colorado State De­mog­ra­phy Of­fice, Colorado Oil and Gas Con­ser­va­tion Com­mis­sion Kayla Robert­son, The Den­ver Post

He­len H. Richard­son, The Den­ver Post

A large drilling op­er­a­tion near the Den­ver and Front Range land­fills is pic­tured close to hous­ing sub­di­vi­sions in Erie in June.

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