CU study: 2,000-foot setbacks would decrease state GDP by $6.4 billion

A 2,000-foot buffer between oil and natural-gas wells and buildings would lead the state to lose 49,000 jobs between 2015 and 2040, according a new University of Colorado-Boulder study.

The study, conducted by the Business Research Division in the Leeds School of Business in partnership with the Common Sense Policy Roundtable, a nonprofit free-enterprise think tank, found that Colorado’s gross domestic product would decline by as much as $6.4 billion annually under the increased setback.

“A 2000-foot setback would significantly impact Colorado’s families,” said Earl Wright, chairman of the Board at Common Sense Policy Roundtable. “The study suggests that an average family of four could lose $3,344 of income annually.”

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The Common Sense Policy Roundtable has a six-member advisory board with three members who have worked in the oil and gas industry, according to its website. One of the board members, Lem Smith, serves as director of U.S. Government and Regulatory Affairs for Encana Oil & Gas Inc. (NYSE: ECA) (TSX: ECA), one of the major oil gas producers in Northern Colorado.

CU partnered with the think tank on a study last year that found a statewide ban on hydraulic fracturing would trim 93,000 jobs, $12 billion in lost gross domestic product and annual reduction of $985 million in tax revenue for local and state governments over 25 years.

The university also partnered with the Denver South Economic Development Partnership and the Metro Denver Economic Development Corp. on the new study, which serves as an updated economic assessment of oil and gas ballot initiatives once backed by U.S. Rep. Jared Polis, D-Colorado.

Polis agreed to drop a setback ballot initiative and another measure proposing an environmental bill of rights before the November election when Gov. John Hickenlooper formed a task force to address such issues.

A 2,000-foot setback in Colorado would represent a dramatic jump from the 500-foot buffer zone now required. In 2013, state regulators expanded setbacks to a uniform 500 feet from 350 feet in urban areas and 150 feet in rural areas.

Increased setbacks would pressure oil and gas development in Weld. Of the more than 23,000 active and permitted wells in Weld County as of this summer, 71 percent had at least one building within 2,000 feet, according to the state Oil and Gas Conservation Commission.

Hickenlooper’s 21-member task force, a diverse group oil and gas company executives and anti-fracking activists, among others, is expected to address setbacks in its policy recommendations to the Legislature.

“This information should help the governor’s task force understand the financial impact such decisions would have on the average Colorado family,” said Tom Clark, chief executive of Metro Denver Economic Development Corp.

The study assumes that increased setbacks would reduce oil and gas production by as much as 50 percent based on industry projections and statements on the matter. Under a 25 percent reduction in activity, the study found the state would lose at least 24,400 jobs and gross domestic product would be reduced by $3.2 billion annually between 2015 and 2040 under the increased setbacks.