Kelly Sloan, The Business Times
Even as energy development in Colorado increases and creates more jobs and higher tax revenues in the process, the industry faces efforts to ban a crucial component of production.
The threat is significant since about 95 percent of oil and natural gas wells in Colorado undergo hydraulic fracturing.
“No fracking means no oil and gas development in the state,” said Doug Flanders, director of policy and external affairs at the Colorado Oil & Gas Association.
Speaking at an energy briefing hosted by the Grand Junction Area Chamber of Commerce, Flanders offered both a review of oil and natural gas production in the state as well as a forecast of what could lie ahead in 2014, including what’s expected to be a ballot battle over a statewide fracking ban.
Flanders remains optimistic such a measure would fail. “I don’t believe a statewide ban has the support of the people. They can try it, but they will lose.”
Flanders said oil production has climbed to a 50-year high in Colorado thanks to increased output from the Niobrara formation located in the Denver-Julesburg basin north and east of Denver.
While drilling permits have decreased 12 percent over the past year and 48 percent over the past five years, production has increased because such “space age” technology as precision directional drilling and staged hydraulic fracturing has freed oil and natural gas from tight rock formations in Colorado and across the United States.
In Colorado, Flanders said the energy industry supports 111,000 jobs and generates about $1.6 billion in public revenues annually — of which about $500 million goes to public education.
While a statewide measure that failed in the November election would have raised state income taxes to generate nearly $1 billion in additional funding for public education, the energy industry generates nearly that much without raising taxes, Flanders said.
Flanders said the 2013 session of the Colorado Legislature offered a mix of challenge and progress for the energy industry.
Several bills Flanders deemed harmful to the industry were killed, including a measure to change the purpose and makeup of the Colorado Oil and Gas Conservation Commission.
COGA supported a bill to increase fines for spills, Flanders said. “The truth is, we haven’t seen a raise in oil and gas fines for spills in 15 years.”
“Unfortunately, the sponsor of the bill would not work with us, and a 1,500 percent increase was not good enough for him,” Flanders said, adding the sponsor withdrew the legislation before it was introduced. “He could have had higher fines today if he had accepted our compromise.”
Flanders also reviewed the industry response to the massive flooding that occurred in many Front Range communities. More than 1,900 wells in affected areas were shut in. There were 13 oil release incidents — a rate of less than 1 percent — he said.
At the same time, environmental groups were releasing incorrect information about the situation, Flanders said. “While we were trying to help with flood mitigation, we had to deal with misinformation.”
Fracking bans approved in November elections in Boulder and Lafayette were largely symbolic, Flanders said, since little oil and natural gas development occurs in those communities.
The vote in Broomfield was so close it prompted a recount. “On election night we were up by 17 votes. After the recount we are down by 20,” Flanders said.
COGA has filed lawsuits against Lafayette and Fort Collins challenging the legality of fracking banks.
The group is still deciding whether to pursue litigation against Boulder, Flanders said.
Looking ahead, Flanders said the 2014 session of the Legislature likely will constitute a repeat of 2013.
But the energy industry is prepared for what’s expected to be an effort to impose a statewide ban on fracking, likely through a fall ballot initiative, he said.
In response, COGA is working to build a coalition to support oil and natural gas development, a group Flanders hopes will include the West Slope COGA, Grand Junction Area Chamber of Commerce and Club 20.
Flanders acknowledged the difficulties the energy industry faces in Western Colorado will low natural gas prices and federal land management policies.
Flanders said COGA works for the industry throughout the state. “What happens in Denver affects Grand Junction. We want to make sure that all four corners of the state are heard.”