In the early morning hours of June 15, 2020, Extraction Oil and Gas, Inc. filed its long-awaited bankruptcy in federal district court.
I say “long-awaited” because my organization has been litigating cases against Extraction since January 2019, and we have raised numerous concerns about the financial viability of the company in front of the Colorado Oil and Gas Conservation Commission (COGCC).
The COGCC is the state agency that is supposed to protect public health, safety, welfare, the environment and wildlife resources above the interests of oil and gas operators.
Extraction is one of those oil and gas operators that drills into neighborhoods such as Broomfield, Commerce City and other populated areas of the Denver Metro Area despite community objections. It doesn’t matter if there are kids, elderly or health-compromised individuals in the neighborhood.
Over the past several years Extraction has filed numerous permit applications for spacing, drilling and force pooling mineral owners (basically the state forces objecting mineral owners to turn their mineral rights over to oil and gas operators). Despite community objections, the COGCC tended to grant Extraction’s permits without batting an eye.
But, last year something changed. I became the Executive Director of Colorado Rising, and my organization started challenging Extraction’s permit applications in front of the COGCC.
Also, SB19-181 passed into law, which will eventually — once the urgently-needed rules are written — require oil and gas operators to provide financial assurances that they can take on a project from birth to remediation.
Because I had watched Extraction’s stocks fall over the past several years, there was major concern about whether the company was financially viable to engage in projects for which they sought permits. Sadly, the COGCC denied our right to access these vital financial documents.
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Coloradans have been forced to watch the precipitous decline in Extraction’s stock value from $23.72/share on Nov. 28, 2016, to $0.27/share as of July 22, 2020, without being able to access financial documents that would explain this massive drop in value.
We know this dramatic stock drop is not because of regulations. Instead, this is about how oil and gas companies manage themselves. Oil and gas executives are paid exorbitant salaries while their companies pile on huge debt.
As an example, right before Extraction filed for bankruptcy, it paid its executives and managers almost $7 million to stay on board while the company was saddled with $1.7 billion in long-term debt. So, pay executives millions for bankrupting a company? That might make sense to someone.
The chickens have come home to roost with this and other bankruptcies. The slow-motion financial demolition has been apparent. My clients saw it coming, and deserved more information.
Taxpayers deserve more, too. Let’s not forget that what comes with bankruptcies is the obligation to pay for cleanup. On June 10, 2020, the COGCC held a meeting where it learned that Colorado taxpayers will have to pay to manage and plug some orphaned wells from another bankrupt oil and gas company – PetroShare.
These well clean-ups cost an average of $82,500 each, but that number can reach far higher — sometimes exceeding half a million dollars per well, of which one company may drill hundreds.
Before COVID, Colorado did not have cash to clean up the environmental messes left by bankrupt oil and gas companies. After COVID, it is even more repugnant that we should be responsible to clean up after this industry.
In short, we are being fleeced. Of course, the industry will dole out its usual sob stories about “regulations” and market woes, but what’s really happening here is this industry is a cesspool of financial mismanagement. If this crisis doesn’t wake up the COGCC or lawmakers, I don’t know what will.
Joe Salazar is a former state representative and the Executive Director of Colorado Rising.
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