Drilling ‘lessons learned’ but little changed so far

State says it hopes to have plan in place by year end

GREELEY – A year after floodwaters uprooted oil tanks and spilled tens of thousands of gallons of crude oil in northern Colorado, state officials have yet to implement key recommendations on improving their response to oil and gas flood disasters.

Flooding last September led to spills of more than 48,000 gallons of crude oil and suspended production on nearly 2,700 oil and gas wells, according to the state Oil and Gas Conservation Commission. Another 43,000 gallons of contaminated or “produced” water spilled. Produced water, which rises to the surface with oil and gas production, contains small amounts of dissolved hydrocarbons.

Although the spills raised concerns throughout the South Platte River Basin, state officials downplayed the hazards associated with the oil and produced water spills, saying that far greater amounts of sewage and household chemicals were washed through urban areas.

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As the spills occurred, the state oil commission found itself unprepared, with no contacts with emergency response authorities, no disaster checklists or manuals and no emergency training, according to a 44-page report “Lessons Learned in the Front Range Flood,” issued this spring.

Dave Kulmann, deputy director of field operations for the agency, said it has reached out to counterparts and hopes to implement the report’s recommendations by the end of the year.

That includes developing an emergency-response manual so the agency can be better prepared for future disasters. The agency also plans to do emergency training exercises with oil companies as well as an internal exercise to test its inbound and outbound communications systems.

“We’re going to get those set up throughout the year,” he said. “I don’t know exactly when they’re going to have them, but we are going to be reaching out.”

One reason oil fields were hit hard by the flooding is that many facilities are located in flood plains near rivers and streams, areas where there traditionally is little other development. After the floods, activists called on the state to require oil and gas facilities to locate farther from these fragile waterways.

But Kulmann said the oil commission has not addressed that issue yet. “I don’t think I can answer a yes or no on that now,” he said, “but it’s something that may come up.”

Environmentalists such as Gary Wockner, director of Save the Poudre in Fort Collins, have called for the state agency to initiate a rulemaking on setbacks from rivers and streams.

“The state made no substantive change to its policies about drilling and fracking near waterways whatsoever,” he said. “The threat is exactly the same, and the kind of catastrophe that happened last year could happen again in the future.”

Companies often locate their oil wells near streams and rivers on land that cannot otherwise be used for agriculture, according to the “Lessons Learned” report.

“A second reason to locate oil and gas equipment near a stream is a regulatory one,” reads the report. “Sometimes building setback requirements leave an operator with little practical choice other than to site their operations in undeveloped floodplains and away from occupied structures.”

Oil producers such as Houston-based Noble Energy Inc. (NYSE: NBL), meanwhile, say they have worked to gird for the next disaster. 

Noble Energy took “numerous steps” to prevent and lessen the impact of future severe weather events after the flood, said Dan Kelly, vice president for regional strategy and planning, in an email. During flooding, the company suspended production on 760 wells, leading to an average daily production loss of 2,000 barrels of oil equivalent during the third quarter of last year.

“We then worked closely with state regulators and other D.J. Basin producers to define what are now established as best management practices for all producers and communities to implement,” said Kelly, referring to the Denver-Julesburg Basin, a region that includes Northern Colorado.

Noble Energy teams are now trained to monitor potential storm surges and, using sophisticated automation systems, instantaneously shut-in wells before flood waters reach the facilities.

“Where necessary,” he said, “we’ve installed a comprehensive system of sturdy anchoring systems, metal production storage tanks and steel barriers both at the wellhead and upstream to deflect flood waters away from where they might do damage.”

Encana Corp. (NYSE: ECA) (TSX: ECA), a Calgary, Alberta-based producer that suspended production on about 400 of its wells in northern Colorado, suffered $300,000 in damage to its operations. Encana found that improvements it had made to wells before the flood – such as steel fencing, cement anchors and impervious liners around tanks, and automated “stop” systems – helped it weather the storm.

“We were fortunate in that we came through the flood fairly well,” company spokesman Doug Hock said. Since then, “There were really no changes in emergency plans, but I think we learned a few things coming out of it.”

Steve Lynn can be reached at 970-232-3147, 303-630-1968 or slynn@bizwestmedia.com. Follow him on Twitter at @SteveLynnBW.