Mountain States

Another Setback Threat To Colorado’s Oil & Natural Gas Industry

On the heels of the Colorado Oil and Gas Conservation Commission’s proposed 2,000-foot setback this year, activists in Colorado are now pushing for yet another setback around wildlife areas. A strict ruling on setbacks for wildlife areas following the broader setback decision could deal a double blow to Colorado’s energy industry and economy, according to a study from The Common Sense Institute, a free market think tank. The Denver Business Journal reported on that research:

“If the Colorado Oil and Gas Conservation Commission had enacted the rules in 2017 and strictly applied the setback distances outlined for various animals’ habitats in Colorado’s six most productive oil and gas counties, the rules would’ve prohibited well development that contributed at least $2 billion to the state’s gross domestic product last year, generated $600 million for mineral royalty owners, $130 million in state and local taxes, and the loss of the wells would’ve eliminated up to 22,040 jobs from the economy, the study found.”

The production and economic impact would be especially severe on the Western Slope:

“In the mountainous Piceance Basin region, strict application of the wildlife setback would have eliminated well development accounting for 73% of the oil and gas production value added between 2017 and 2019, the study found.

“The modeling suggests that if horizontal drilling still allowed companies to access between 10% and 30% of the oil and gas under the wildlife zones, the reduction of new wells would have eliminated the economic support for between 17,150 and 22,040 jobs, only about a quarter of them in or close to the oil and gas industry while the rest would be in retail, real estate, health care and other parts of the general economy.”

The final outcome of whether or not this setback will have some flexibility will rest on the COGCC commissioners who are poised to rule on the issue in the coming days as part of the rulemaking process governed by SB 181, the Denver Business Journal further reports:

“How large the wildlife setbacks end up being and how much flexibility oil and gas companies will have to get drilling permits in high-priority wildlife zones remains to be seen.

“The group used state wildlife habitat maps of three northwest Colorado counties home to the Piceance Basin natural gas fields, and maps of three counties, anchored by Weld County, on the Front Range that are home to the Denver-Julesburg Basin. Then the study applied the various animal species and habitat setback distances proposed by COGCC staff and assumed, as some wildlife advocates have urged, that the setbacks be considered a hard prohibition on well development in those areas.” (emphasis added)

The Grand Junction Daily Sentinel editorial board called for a flexible and accommodating regulatory structure that will both support energy development and protect wildlife:

“This new regulatory scheme isn’t unwarranted, but we hope the commission is taking care not to be overly rigid and building some leeway into the permitting system. Industry has no problem putting a wildlife mitigation plan together in areas where development can be accommodated without adverse impacts to wildlife, but it doesn’t want to have to jump through all the regulatory hoops without any indication of the ability to get a variance until the tail-end of the process.”

This wouldn’t the first time that environmental activists have worked to ban responsible oil and natural gas production in Colorado. In 2018, Colorado Rising and other groups pushed Prop 112, which would have imposed a strict 2,500-foot setback from homes, schools, and other buildings because they believed it would have eliminated the industry. That measure failed, but activists came back with a similar proposal in 2020 before withdrawing it because they couldn’t get enough signatures due to the COVID-19 pandemic.

In recent months, activists again lobbied the COGCC for a 2,500-foot setback before the commission settled on a 2,000-foot ruling that in reality will be even further back because the setback measuring point moved from the wellhead to the edge of the operating area.

A strict setback ruling on wildlife areas would only compound the production and economic impact from the COGCC’s recent 2,000-foot setback ruling. A study from researchers at the Colorado School of Mines and the University of Colorado Boulder found that setback distance would cause “substantial financial effects.” The study said:

“Both approaches demonstrate that i) the costs of setbacks up to roughly 1,500 feet are modest, provided firms can drill horizontally, and ii) costs rapidly increase as setbacks are increased from 1,500 feet to 2,500 feet, resulting in a nearly order-of-magnitude increase in resource unavailability and consequently an additional $4.3 billion in foregone annual resource revenues for Colorado.” (emphasis added)

No Comments

Post A Comment