Centerra oil-drilling permit process could begin within a few months

LOVELAND — Within a few months, McWhinney Real Estate Services Inc., developer of the Centerra neighborhood of east Loveland, plans to submit an application for a permit to drill oil and gas wells on Centerra land.

The company shared its plans with the public Wednesday night with a Zoom presentation led by company co-founder Troy McWhinney.

McWhinney shared a lengthy history of his company’s involvement with oil and gas and efforts to reduce the surface impacts of the industry. If permits are approved, he said that the company will drill 26 wells, all from two drill pads in areas not currently developed on the surface. 

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The meeting came as city of Loveland planners were nearly set to share details of new oil and gas regulations, which if approved by the City Council would replace existing regulations put in place in 2016 or earlier. If a permit application is filed before those rules are approved — a process that could take nine months to a year — the city would be faced with considering the application under the old rules.

And based upon discussion at Tuesday’s Loveland City Council meeting, it does not appear that council members have concerns about continuing under the old rules. When given the chance to impose a six-month moratorium that would also shorten the process of considering new regulations, the council voted 6-2 against the moratorium. Mayor Jackie Marsh and council member Andrea Samson voted in favor.

The council also voted, 6-2, against a proposal to direct the city manager to convene a panel of experts to help the council understand the issues surrounding oil and gas development. 

Brett Limbaugh, head of development services for the city, told BizWest that he anticipates McWhinney will submit an application “in a couple or three months if using the existing rules.”

It comes down to how much oversight the developer is willing to live with.

Existing rules “give the oil and gas company a choice: Follow the state minimum standards and go to the planning commission for review, or follow the state standards and the advanced (local) standards of the (city) ordinance and have staff act on the permit,” Limbaugh said.

The proposed new oil and gas regulation ordinance, which has yet to be released to the public, “treats all applications the same. They have to meet the state standards and our requirements.”

The local requirements apply to “peculiar local needs,” he said, and gave the example of reverse setbacks, which restrict where developers can build in relation to existing wells. Reverse setbacks might differ for Loveland than what exists in other communities.

McWhinney said the company is moving ahead now with plans to extract minerals that it owns under the Centerra property because it wants drilling activity complete before homes are built nearby, and it sees now that it can use horizontal drilling technology to access nearly all the minerals under Centerra from two well pads.

Those well pads, he said and showed on a map, are at the south and east edges of Centerra. The south site is about a half mile south of U.S. Highway 34 and in the vicinity of Troy McWhinney’s home, which is south of the Loveland Sports Park. The east well pad is along Larimer County Road 3, south of the Walmart Distribution Center.

“We spent years acquiring the minerals under Centerra so that we could control the surface development,” McWhinney said.

Initially, the brothers who founded the McWhinney company learned that third-party oil companies owned the mineral rights under their land. The oil companies wanted to drill 90 vertical wells, he said.

But as horizontal drilling became more popular beginning in about 2008, McWhinney said, and because the company had acquired the rights, it learned that it could consolidate the surface activity into fewer and fewer well pads. In 2021, they were able to consolidate the drilling into two well pads.

McWhinney said the company plans to submit applications for well permits to the city and to the state this year, with the intention of drilling in 2023. He said drilling would take six to nine months but could take as much as a year. Once the wells are in place, then pumping will occur from the well pads for 20 or 25 years, he said.

McWhinney, who said he had received up to 500 questions from residents asking about the process, emphasized at the start of the presentation that they would not be fracking — the process of breaking up the subsurface minerals so they can be extracted — under Boyd Lake. Boyd Lake homeowners associations were invited to the Wednesday meeting.

The drilling will require approval from the city, the Colorado Oil and Gas Conservation Commission and the Colorado Department of Public Health and Environment. It also must follow Environmental Protection Agency rules, he said.

Whether the city decides to operate under its existing rules, the prospect of fracking and drilling within the city has already generated opposition, with several people speaking to the City Council Tuesday asking the city to prohibit fracking. One individual asked that the subject be put to a public vote. Still others said oil and gas development will be necessary until renewable forms of energy catch up to the energy need.