Governor’s new fracking pact unlikely to quell setback battle

GREELEY — The battle over how large a buffer zone should exist between new oil and gas wells, and homes and schools probably is far from over, despite a last-minute compromise announced this week designed to craft a solution the energy industry and community activists can abide by.

As part of the compromise announced Aug. 4 by Gov. John Hickenlooper, a statewide ballot initiative was withdrawn that would have mandated a 2,000-foot buffer between new wells and other development, a dramatic jump from the 500-foot buffer zone now required.

The larger setback would have eliminated much of the new oil and natural-gas development in Weld County, according to oil and gas industry representatives.

Of the more than 23,300 active and permitted wells in Weld County, for instance, 71 percent have at least one building within 2,000 feet, said Todd Hartman, spokesman for the state Department of Natural Resources, which oversees the state Oil and Gas Conservation Commission. Many wells have more than one building within 2,000 feet.

The fierce battle over buffer zones comes as companies have announced billions of dollars in investment to drill hundreds of new wells this year in Weld County, the No. 1 oil-producing county in the state. Oil production set a record of more than 64 million barrels last year, with 80 percent of the total produced in Weld.

Activists have portrayed hydraulic fracturing, or fracking, as a risky drilling technique that could endanger the health of residents who live near the industrial activity. The oil and gas industry contends that fracking is safe and that thousands of jobs and the health of Colorado’s economy are at stake.

State regulators already expanded setbacks to a uniform 500 feet from 350 feet in urban areas and 150 feet in rural areas in 2013 after community activists pushed for 1,000-foot setbacks. This week Hickenlooper said he would endorse efforts to enforce 1,000-foot setbacks when drilling is sited near schools, nursing homes and hospitals.

That may do little to reduce friction, however. As the debate raged last year, the four top oil and gas producers in the region – Encana Corp. (NYSE: ECA) (TSX: ECA), Anadarko Petroleum Corp. (NYSE: APC), Noble Energy Inc. (NYSE: NBL) and PDC Energy Inc. (Nasdaq: PDCE) – said 1,000-foot setbacks would significantly reduce their revenue as well as the tax revenue they paid to the state.

In the greater Wattenberg area, the drilling region that spans nearly 3,000 square miles north of Denver and throughout a substantial portion of Weld County, the four companies estimated 1,000-foot setbacks would have led to losses of nearly $5 billion in royalty payments and $2.1 billion in tax revenue.

More recently, the Oil and Gas Conservation Commission used computer-mapping software that combined the state agency’s data with information from Weld County, Hartman said. Officials analyzed the distance between addresses of buildings and active wells as well as other wells that the state agency had issued permits for oil companies to drill. The state agency did not look at how much acreage the 2,000-foot setbacks would have eliminated, but oil companies said the rule would have cut their territory by at least half.

Encana said the 2000-foot setbacks would have reduced its future drilling sites by “75 to 80 percent,” or almost all of its acreage west of Interstate 25, including areas around Erie and Mead, company spokesman Doug Hock said. Encana, which has 49,000 total acres in the region, planned to invest $300 million in Northern Colorado this year.

“We view this as an effective ban on oil and gas,” Hock said.  “It would be a huge disincentive to invest further capital in Colorado.”

Mara Sheldon, spokeswoman for Coloradans for Safe and Clean Energy, a group backed financially by U.S. Rep. Jared Polis, D-Colo., said that oil companies were being “misleading” in their remarks about losing acreage from setbacks. She pointed out that in rural areas, landowners could agree to allow oil companies to drill closer to buildings on their property.
“Two-thousand feet makes sense,” Sheldon said.  “You’re keeping wells away from a dense residential development, but you’re not harming farmers or ranchers who can allow for wells and who often own their mineral rights.”

Gary Graham, director of the Lands Program for Boulder-based Western Resource Advocates, the conservation group that advocated increased setbacks during last year’s state rulemaking hearings, had pushed for 1,500-foot setbacks, although he said proposed 2,000-foot setbacks would ensure safety, including from explosions or spills at well sites.

“It’s reasonable from a safety perspective, and the (Oil and Gas Conservation Commission’s) focus should be on protecting human and community public health and safety,” he said. “The rub is that when you go from 1,500 to 2,000, that’s a lot of additional geography that will potentially limit drilling.”

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

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