On Valentine’s Day, the Colorado Attorney General’s Office filed a lawsuit in a Boulder District Court against the moratorium. The suit asks the court to order an end to the moratorium.
Boulder County Commissioners issued a statement in response saying, in part, that in some areas of Colorado, “drilling proposals of 20 to 40 wells per site are being proposed near residential neighborhoods, schools, parks, and recreational areas up and down the Front Range, and we believe it is our responsibility to ensure that we have the strongest possible protections in place for the residents of Boulder County and the world-class environment we have worked hard to protect and preserve.”
The county’s position is that the current moratorium is temporary and legal and was needed in order to complete updates to regulations addressing oil and gas development in unincorporated Boulder County. According to the county staff the proposed regulations “will allow for a thorough and comprehensive review of any oil and gas development proposal, along with the application of conditions on the development that will reduce the impacts on neighboring landowners and preserve the county land and environment.”
County officials hope to complete that process and be ready to enforce the updated regulations by May 1, the date the current moratorium expires.
On Tuesday, March 14, Boulder County Commissioners held a public hearing on the proposed updates to the county’s oil & gas regulations.
Read all about the raucous meeting here: Boulder County protesters want fracking ban as commissioners discuss regulations
On the day of the meeting Phil Doe, environmental director for Be the Change, submitted a letter to the Boulder County Commissioners. In it he laid out an evaluation of Extraction’s financial picture as well as an analysis of the economic feasibility of drilling in the Niobrara.
The full text of his letter is included below.
March 14, 2017
We came before you several months ago to inform you of the study done by our friend, Dr. Wendell Bradley, professor in Physics, retired, from Gustavus Adolphus. He clearly demonstrated, using the industry’s own production data, that for drillers in the Niobrara to approach the break-even point the price of oil would have to be around $78 a barrel. You have that study, and your new regulations indicate you have taken Dr. Bradley’s study and our suggestions seriously. We applaud your efforts.
Still we ask you to judge the effectiveness of your regs against the following real life information. If the evaluation procedures outlined in the regulations would lead, with some certainty, to the denial of a drilling permit based in the information presented below, they are adequate. If they would not, they are not adequate, in our opinion.
This is the background and specific information we would ask you to evaluate in determining the adequacy of your regs, both at 12-200, dealing with what constitutes a public nuisance, and 12-400 the Special Review process for frackers.
The industry continues to pipe about how they’ve reduced production costs and that now money can be made with oil at $65 a barrel. Some even say the $50 threshold is inspiration enough to crank up the pollution spewing drilling rigs.
The facts support the opposite conclusion. Extraction Energy has lost hundreds of millions of dollar in the last several years while oil has hovered near $50 a barrel. In 2015, according to their SEC filings, they lost roughly $60 million. In 2016, they lost over $450 million dollars. Think of it, nearly one half billion dollars in losses. This year they are losing even more as their stock continues to drop in trading—it’s gone from $24 to $14 a share in the last few months.. Moreover, Extraction is not unique. They are the rule. The largest oil companies in the world are all hemorrhaging money in quantities Croesus would envy.
And lest you think we exaggerate concerning Extraction’s commercial prospects, the SEC filings show that Extraction had only one drilling rig operating in 2016. That rig was in Windsor we believe. It stopped because of a large drilling spill and drilling activity has not returned. In fact, the SEC records show that Extraction has opened only one producing well in the past two years. Strikingly, the production reported to the SEC is about double what is reported on the COGCC website. We will leave it to you to determine what this reporting discrepancy might mean. (One possible explanation is that Extraction salted its reporting with the SEC to enhance its stock value.) They probably have drilled more wells, but they have not gone to production on any of them. If they had, we assert, and as they certainly realize, they would simply have lost more money than they already are. The price of oil is determining.
So, the question is, given the information provided above, which is also information required in your regs at 12-400, would this information be disqualifying for Extraction? If not, it exposes the need to strengthen the economic criteria. We recommend adding the following criteria as essential to understanding the overall economic viability of a proposed permit to drill.
Require the prospective operator to demonstrate that a net profit from production is possible after deducting the cost of capital (debt load and borrowing); leasing and royalty payments: costs of bringing product to market, whether by pipeline or truck and rail; and the annual maintenance costs.
In other words, a business plan should be required of every fracker with a drilling plan. Without such detailed economic information, given the present and prospective economics of fracking, the county is flying blind, and might be guilty of something akin to giving Bernie Madoff the county’s investment portfolio to manage.
In order to protect the people and the natural environment of Boulder County, detailed procedures must be devised, with a strong dose of economics, so that Extraction or any other driller clearly establishes they are a legitimate business enterprise, one that will not evaporate in the night leaving the taxpayers of Boulder County with mammoth environmental damage and attendant cleanup costs.
Additional comments and suggestions:
We think the county should not allow self insurance as an option for drillers, see language at 12-400 B.4.c. Self insurance for coal mine operators in Wyoming has put that state at substantial economic risk and is being discontinued we believe.
The regs at 12-600 K.6 establish that pipelines shall not be located closer than 150 feet from residential, commercial, or industrial buildings. If we understand the information that Josh Joshwick and Earth Guardians provided on pipeline actual explosion burn radii, greater setback should be established as a buffer from the burn or explosion radius. We would suggest consulting with insurance company fire safety standards or federal standards on which insurance policies are based for guidelines.
Finally, there is the question of the inspection of pipelines and who is responsible. Apparently there is a small agency within the Dept. of Transportation that is responsible for inspecting pipelines, including gathering lines. The staff of 5 inspectors is responsible for insuring the integrity and safety of about 5000 milies of pipeline each. This is a bad joke. The county must establish its own staff and criteria, the costs for which should be assigned to oil operators in the county.
Phillip Doe, Environmental Director
Be the Change
*Phil Doe is environmental director for Be The Change, and has been fighting for Colorado’s water for most of his adult life. He served as Bureau Chief and Environmental Compliance Officer for the Bureau of Reclamation in the Department of Interior and was featured as a whistleblower on 60 Minutes. A former professor of English literature, he has published op-ed features in Rocky Mountain News, Denver Post, Colorado Central Magazine, and Counterpunch. His past grassroots efforts opposed the Animas-La Plata water project in southwest Colorado. He is a registered citizen lobbyist at the State Capitol and testifies at the federal and state legislative level on natural resource issues. He serves on the board of the grassroots group, Be the Change, and directs their environmental issues program, with a current focus on horizontal hydrofracking.