Wells sprout near Greeley homes, schools

City’s mineral wealth means oil & gas work dominates landscape

GREELEY — It’s 400 oil and gas wells and counting within Greeley’s city limits.

Oil and natural-gas companies continue to tap the rich reserves known as the Wattenberg Field, which accounts for the high number of wells drilled in Weld County, which includes Greeley.

Synergy Resources Corp., KP Kauffman Co. Inc., Noble Energy Inc. and Mineral Resources Inc. have applications being reviewed by the city’s planning department to drill more horizontal wells to extract natural gas from below the surface – and, in many instances, from underneath homes.

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While many of the nearly 20,000 wells in Weld County are on sparsely populated farm land, many of the wells constructed within Greeley are near schools, homes and apartment complexes.

Brad Mueller, director of Greeley’s Community Development Department, said there has been a steady three-year stream of applications from oil and natural-gas companies seeking land-use permits to drill wells after receiving a permit from the Colorado Oil and Gas Conservation Commission. 

“We have seen a recent increase in permits issued by the state, and that resulted in the new (setback) decisions,” Mueller said.

As of Aug. 1, oil and gas companies are required to establish a larger 500-foot buffer between new wells and homes. The decision by the commission replaces a previous 350-foot setback for urban areas and a 150-foot requirement for rural ones.

Synergy Resources Corp., based in Platteville, recently completed a drill site east of 66th Avenue and west of Fourth Street in Greeley. It is across the street from an apartment complex under construction and near Northridge High School’s football field, but it met setback requirements at the time.

Mueller said while the state must issue the drilling permit and govern how far a well should be from homes and schools, the city’s special-use review process for wells includes notifying landowners within 500 feet of the proposed drilling site and offering a forum for public comments.

According to Greeley’s municipal code, written prior to the commission’s new setback rules, a well and storage tank needed to be at least 200 feet away from a habitable building and 150 feet from streets. For higher-impact areas such as schools and homes, oil and gas tanks typically needed to be set back 500 feet.

The city can require screening and “camouflage” requirements to try to hide the wells from site, Mueller said.

While the state monitors and governs air quality and emission standards, most aspects of potential surface impacts are part of local government regulations, Mueller said. The city of Greeley regulates impacts to roads and maintenance of a drill site including the control of weeds.

Striking deals

Greeley-based Mineral Resources has applications for four wells in the works, and the city recently approved land-use permits for two others.

Like other companies, Mineral Resources has been striking deals for mineral rights with property owners inside city limits for years. A Mineral Resources spokeswoman said the company has experienced about a 90 percent success rate.

It uses a mail campaign, sending letters to property owners offering them several options: a one-time buyout of mineral rights, an oil and gas lease with royalty payments based on production, or giving them the opportunity to become partners in the well for an upfront fee of $10,000.

Homeowners are offered a signing bonus of $300 per acre. The agreement locks in the homeowners, and even if a subsequent search of records reveals the homeowners don’t own the mineral rights, they get to keep the signing bonus.

When the company identifies a potential well site, it will send the letters to homeowners in the area, sometimes prior to knowing who owns the mineral rights. The company staff researches public records to determine the mineral ownership in each of its project areas. For farm and ranch projects, the process can take weeks or perhaps months; in urban settings, the process literally can take years to complete, the company explained on its website.

Mueller said the city is not involved in these mineral-rights deals. “These are private real estate transactions,” he said.

Mineral Resources offers royalties of 14 percent of the gross produced, proportionate to the amount of land owned. Royalties are higher for someone who partners with the company, but they also must share in some of the operational costs.

Mineral Resources’ horizontal wells generally are drilled to a depth of 7,000 feet and can stretch horizontally beneath the surface up to a mile, according to Mineral Resources’ spokeswoman.

Doug Storum can be reached at 303-630-1959, 720-416-7369 or dstorum@bizwestmedia.com.