The demise of the oil and gas industry in Colorado — predicted after the passage of legislation and regulations focused on protecting public health, safety and the environment — does not appear to be imminent.
Plans for nearly 1,900 new oil and gas wells are before the Colorado Oil and Gas Conservation Commission in 2022 — some already approved and others in various states of review.
This comes as a relief to the industry and to the chagrin of environmental groups who call it “business as usual” even as Colorado tries to chart a new path to cut ozone and greenhouse gas emissions.
“We are hopefully getting to a spot where things are workable,” said Dan Haley, CEO of the Colorado Oil and Gas Association, one of the state’s industry trade groups. “Oil and gas companies are learning what’s expected of them.”
In 2019, Senate Bill 181 changed the oil and gas commission’s mission from promoting oil and gas development to protecting public health, safety and welfare, as well as the environment and wildlife. The law triggered a two-year overhaul of the state’s oil and gas regulations.
It was the hope of community and environmental groups that the new law and rules would bend the curve in oil and gas development in Colorado, limiting the drilling and hydrofracking, or fracking, of new wells and curbing emissions — including greenhouse gasses.
Companies are now also required to look for alternative locations if they are proposing sites close to homes and schools, and to consider the cumulative impacts of multiple oil and gas operations.
“The COGCC is not following their mandate to protect public health, safety, welfare and the environment with their approval of permits,” Kate Christensen, oil and gas campaign director for the environmental group 350 Colorado, said in an email.
“It seems like the COGCC is working hard to set off the carbon bomb that is fracking in the American West,” Christensen said.
There is, however, a big difference between pre- and post-Senate Bill 181 permitting, according to Jeff Robbins, the commission’s chairman.
“The new rules and the permits that are being sought under the new rules are in line with SB19-181,” Robbins said in an interview. “They are in line with the mandate to regulate in a way that is protective.”
Oil and gas companies are taking into account the rules on the front end, Robbins said. “What we are seeing in terms of the applications of the operators is a significant change; they are starting out as being more protective.”
The oil and gas commission rewrote its rules from top to bottom during the past two years, with the new regulations going into full force this year.
The first few months were “an ugly duckling period,” said Brian Cain, chief sustainability officer at Civitas Inc., one of the top operators in the state.
“Everybody had to learn. We had to learn, the commission staff had to learn,” Cain said. “Then about three months ago the state really hit its stride.”
“We definitely have to do more work, we definitely put a lot more time in alternative location analysis,” Cain said.
Still, he said, “we have a construct we can work in.”
Operators continue to drill as they close abandoned wells
The regulations are like a set of Russian nesting dolls that fit into one another. There are comprehensive area plans — or CAPs — that cover thousands of acres, oil and gas development plans covering multiple wells on one to a few dozen acres, and finally individual drilling permits for each well.
There are three pending comprehensive area plans. Kerr-McGee’s Bronco CAP covers 24,000 acres in rural Weld County with 219 wells to be drilled on 11 sites north of Roggen. PDC Energy’s Guanella CAP, also in Weld County, projects up to 466 wells at 25 locations on 32,640 acres southwest of Greeley.
Crestone Peak Resources, which is part of Civitas, filed the third plan, the Box Elder CAP, covering 37,520 acres straddling Adams and Arapahoe counties and Aurora.
The plan envisions 20 drilling sites with 151 new horizontal shale wells.
The Box Elder plan is in a more populated area and there would be 18 residential buildings inside the state’s mandatory 2,000-foot setback for drilling activity including four in a disproportionately impacted community, according to a company filing. Disproportionately impacted communities include low-income or minority residents.
“Crestone specifically planned the proposed oil and gas locations to, first, avoid residential building units, and if such units could not be avoided, to minimize and mitigate any potential impacts to those residents through best management practices and mitigation measures,” David Stewart, Crestone’s vice president for environment, health and safety, said in written commission testimony.
A company can seek a waiver to drill within 2,000 feet of a home, and the commission has granted several, but in its most high-profile case, the commission rejected Kerr-McGee’s Longs Peak plan to drill 26 wells within the buffer in Firestone, affecting 62 homes.
“Industry has obviously taken the 2,000-foot suggestion to heart and learned from the Longs Peak [plan] because most of their new drilling permits are rural,” Christensen said. “They’re also sending notices to people within 2,000 feet to offer them $5,000 ‘relocation’ money that they can keep if they don’t relocate, but they can’t protest.”
The comprehensive area plans are no guarantee of drilling permits, but they set the stage for the approval of oil and gas development plans, which do identify specific drill sites.
The commission has approved 17 development plans targeting 231 wells. Ten of the plans were in Weld County, three were in the Western Slope oil fields of Garfield and Rio Blanco counties, and one each in Adams, Arapahoe, Washington and Las Animas counties.
There are another 20 development plans with 375 wells pending. Twelve of the plans are for drilling in Weld County, with two each in Garfield and Las Animas counties, and the rest evenly divided among Adams, Arapahoe, Washington and La Plata counties.
Through the first week of June, the commission had approved 417 drilling permits for new wells — each approval is good for three years. In 2021, 894 permits were approved and in 2018, during the height of the state’s drilling boom, 5,116 were awarded.
The industry points out that with almost every new well dozens of old and potentially leaking wells are plugged. Between 2015 and 2020, 8,104 wells were drilled in Colorado and 9,902 were plugged, according to industry statistics.
Occidental Petroleum, the state’s biggest oil and gas producer, spent more than $100 million between 2017 and 2020 to plug and abandon 2,224 wells, while drilling 937, according to a filing with the COGCC.
Civitas announced in January it would even plug 42 wells near its operations identified by the state as abandoned and orphaned oil wells, at an estimated cost of $4 million.
“We’ve already met the first phase of the state’s greenhouse gas goals,” Rich Coolidge, a COGA spokesman, said in an email. “We believe through more technology and innovations, we will meet the next phases as well.”
Still, the biggest concern for environmental and community groups is the cumulative impact of thousands more wells in Colorado.
Senate Bill 181 directs the oil and gas commission to consult with the Colorado Department of Public Health and Environment to “evaluate and address” impacts of oil and gas development.
“COGCC is still lagging far behind in implementing the cumulative impacts portion of 181,” said Mike Foote, an environmental lawyer and former state legislator who was one of the sponsors of the oil and gas bill.
“It is a new concept they don’t have a lot to draw upon, so they are struggling,” Foote said.
Who holds the “hot potato”?
The commission issued its first cumulative impacts evaluation in January. It did not have detailed emissions data, working off modeling and operator estimates, for three broad areas: the Eastern Plains, the Denver-Julesburg Basin and the Western Slope.
“We are now getting feedback on the report,” Robbins said. “It is a work in progress that will continue to get better.”
The evaluation, however, defers to the CDPHE’s Air Pollution Control Division, which regulates oil and gas operations, to deal with summer ozone pollution and greenhouse gases.
Oil and gas operations are a major source of the chemical emissions that contribute to ozone pollution and the state’s greenhouse gas releases.
The Polis administration has issued a Greenhouse Gas Reduction Roadmap aimed at cutting greenhouse gases 50% over 2005 levels by 2030, with the biggest cuts coming from power plants and oil and gas operations.
In December, the Air Quality Control Commission, advised by the pollution control division, issued new regulations aimed at cutting oil and gas industry greenhouse emissions by 60% by 2030.
Those rules, however, say nothing about the overall number of wells to be permitted. The division does not have approval power over oil and gas permits, although it can be consulted by the COGCC.
The oil and gas commission, in turn, has no power to control the chemicals that create ozone or greenhouse gas emissions.
“The COGCC and the AQCC keep tossing that back and forth like a hot potato,” Foote said. “How is Colorado going to meet its greenhouse gas emission reductions while it keeps approving thousands of new wells? It is inherently contradictory and nobody seems to want to deal with that issue.”