Setbacks separating oil and natural gas operations from buildings and waterways have minimal effects on oil and gas availability at 1,500 feet. But the effects escalate as distances increase to 2,500 feet or more, according to a new study from the University of Colorado at Boulder and Colorado School of Mines.
“The steep increase in costs at certain setback distances was remarkable,” said Daniel Kaffine, an economics professor at CU and co-author of the study. “In some counties, increasing the setback just 500 feet had major consequences in terms of accessible oil and gas.”
Kaffine; Sean Ericson, an economics graduate student at CU; and Peter Maniloff, an assistant professor of economics at the Colorado School of Mines, wrote the study. The results will be published in an upcoming edition of Energy Policy.
Researchers used geographical information systems and publicly available data to measure the effects of increasing oil and gas production setback distances on oil and gas availability. They specifically looked at Colorado as a case study.
“Oil and gas setbacks are a controversial way of keeping households safe. Some environmental groups have advocated increasing setbacks to increase health and safety,” Maniloff said. “What we show in this paper is how the costs stack up as those setbacks increase.”
Colorado law currently mandates oil and gas setbacks ranging from 500 to 1,000 feet depending on the type of resources or developments nearby.
The researchers found Colorado would lose about $500 million in annual resource revenues, roughly a tenth of 1 percent of gross domestic product in the state, by requiring oil and gas setbacks of 1,500 feet.
With a setback distance of 2,500 feet, as a 2018 Colorado ballot measure proposed, costs would increase to $4.5 billion.
“Colorado’s Proposition 112 ballot initiative was the main catalyst for looking into this, particularly when we realized that existing research on setbacks was extremely limited,” Kaffine said.
Colorado Proposition 112 failed at the ballot box, but the idea of increasing setbacks isn’t dead. The Colorado Oil and Gas Conservation Commission is considering a new round of regulations after a recent reorganization, which could change setback distances or introduce new considerations, such as environmental effects on neighbors.