Energy boom times here for Weld County, region

Things are booming in Weld County.

There’s no doubt that the oil and gas industry is enjoying a strong upswing, particularly in the Niobrara formation of the Denver-Julesburg basin.

Last year, the state issued about 6,000 oil and gas drilling permits, the third-highest total on record. Weld County, which has about 16,200 active wells, about 37 percent of the state’s total, accounted for 2,132 of last year’s permits – the highest number in the state.

Big, gushing oil discoveries in the region, such as the Jake well in late 2009, are part of the reason for the upsurge in production. Also fueling the action are rising oil prices and investors and companies moving away from offshore drilling in the wake of the BP disaster in the Gulf of Mexico.

And January got off to a hot start, with 65 horizontal drilling permits issued in Weld County, more than twice the monthly number issued last summer. “That’s just off the charts,´ said Craig Harrison, whose company, Harrison Resource Corp., tracks these things.

“It’s certainly an exciting time for northeast Colorado and southeast Wyoming,´ said Tisha Schuller, president and CEO of the Colorado Oil and Gas Association, a private industry group. “The Niobrara play is getting significant attention.”

Oil and gas companies are rapidly increasing their presence in the county. Anadarko is building a new facility in Evans to accommodate its growing workforce, and Noble Energy has plans to build a new field office in west Greeley where about 300 workers would be based.

Halliburton announced in late January that it will expand its Fort Lupton operation “to meet current and forecast business activity in the Denver-Julesburg basin, particularly the Niobrara shale” formation, according to Zelma Branch, a Halliburton spokeswoman.

Branch said the “$20-million-plus,” 150,000-square-foot facility will include four buildings, which are expected to begin construction in the second quarter of 2011.

The facility, scheduled for completion in 2012, will enable Halliburton to add “300-plus new employees” to the 350 already employed in Fort Lupton.

Branch said the area shows great potential. “The Niobrara shale already has great natural gas production with the potential for oil production,” she said. “The exploratory work being done by energy companies shows promise and is the catalyst for the upswing in drilling activity to the north and east of the traditional DJ basin.”

Chinese investment

Houston-based Chesapeake Energy Corp. announced it was selling one-third interest in its 800,000 leased acres in northeast Colorado and southeast Wyoming to CNOOC Limited, China’s largest producer of offshore oil and gas and one the largest independent oil and gas exploration and production companies in the world.

CNOOC paid Chesapeake $570 million for the one-third interest and agreed to pay another $697 million to support Chesapeake’s drilling and operations costs.

John Dill, director of Chesapeake’s corporate development and government relations for the Rocky Mountain region, said the $1.3 billion investment would help his company establish 10 oil rigs by the end of 2011, 20 by the end of 2012 and 30 by the end of 2013. If all goes well, that could increase to 40 by the end of 2014, creating up to 100 jobs for each rig.

Dill said the partnership with CNOOC is indicative of what’s been happening in the industry. “Over the past two or three years, there have been a number of cooperative ventures in the energy area, and Chesapeake’s done about seven or eight of them,” he said.

Dill said Chesapeake has been leasing land in the Niobrara area “for the past two years or so” from local ranchers and farmers, who are also benefitting from lease and royalty payments.

“We’re looking forward to being a big player in the field and a good neighbor to the communities in which we operate,” he said.

Dill said he would hesitate to call the current situation in Weld County an oil and gas boom, but did acknowledge a blossoming potential.

“Whether it’s a boom or a rush, clearly the technology developed over the last few years has made these formations feasible where before they may not have been.”

The surge in drilling in the last couple years even resulted in the Colorado Oil and Gas Association announcing earlier this month that it was dropping a lawsuit challenging new rules governing the industry passed by the legislature in 2009.

COGA’s Schuller said it’s too early to say that what’s happening in the state is a bona fide boom but did allow that “the interest in it is something we haven’t seen in a long time.”

One thing that’s certain, she said, is that it is undoubtedly a boon for the state’s ailing economy.

“For every job created directly in oil and gas, three others are created in the broader market,” she said. “That’s a significant amount of economic development and job creation.”

Steve Porter covers agribusiness and natural resources for the Northern Colorado Business Report. He can be reached at 970-232-3147 or at sporter@ncbr.com.

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