A pump jack is visible from the yard of a home in Frederick on June 24, 2020. (Andy Bosselman/Colorado Newsline)
Roughly 90% of the oil and gas resources in Colorado’s top-producing county would remain accessible through modern drilling techniques under a 2,000-foot “setback” requirement proposed last week by state regulators, a new study projects.
The results of the peer-reviewed study, conducted by three Colorado-based economists and published in a forthcoming issue of the scientific journal Energy Policy, sharply contradict a new round of claims from the fossil-fuel industry and its allies that the increased setbacks being considered by the Colorado Oil and Gas Conservation Commission would amount to a “ban” on new drilling.
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Reacting to the COGCC’s proposal on Sept. 11, Energy in Depth, an industry-funded advocacy website, called the 2,000-foot setback “essentially a ban on new oil and natural gas development across much of the state.” That echoes the rhetoric used by pro-fracking groups in their 2018 campaign against the environmentalist-backed Proposition 112, which would have established a rigid 2,500-foot setback statewide and which industry supporters repeatedly labeled a “de facto ban.”
While lengthy setbacks could make a sizable percentage of Colorado’s surface area off-limits to new drilling, the accessibility of underground oil and gas resources is determined largely by the capabilities of horizontal drilling technologies used by oil and gas operators along the Front Range — including in rural Weld County, home to nearly 90% of the state’s oil production. Already, Colorado drillers routinely extract oil and gas from across a subsurface area of multiple square miles from well pads that cover only several acres of land.
The setbacks study, conducted by economists Sean Ericson and Daniel Kaffine of the University of Colorado Boulder and Peter Maniloff of the Colorado School of Mines, evaluated the potential impacts of Proposition 112’s 2,500-foot buffer and a hypothetical 1,500-foot alternative, taking into account operators’ ability to employ horizontally-drilled oil and gas wells. Additionally, the paper’s authors provided Newsline with supplementary data analyzing a 2,000-foot setback like the one proposed by COGCC commissioners last week.
“For a 2,000-foot setback and the ability to drill two mile laterals, we calculated that 88.5% of the subsurface of Weld would be available for horizontal drilling,” Ericson wrote in an email. That figure rises even higher under an assumption that operators use three-mile laterals, dozens of which have already been drilled or approved near Front Range communities where space for large above-ground well pads is scarce.
Researchers weren’t able to gauge precisely how often operators would be able to drill lengthy horizontal wells, the feasibility of which can vary depending on subsurface geology and other factors; the study also doesn’t project the impact of the waivers and exemptions that could regularly be granted under the COGCC’s proposal, especially in areas like Weld County. In their analysis of a shorter, 1,500-foot setback, which appears in the published paper, Ericson, Kaffine and Maniloff calculated that 98.5% of Weld County’s subsurface area would remain accessible with two-mile-long horizontal wellbores.
“The only inaccessible resources would be located in Greeley and the other population centers in the southwest corner of the county,” they wrote. “(The) findings are consistent with the geometric analysis in that horizontal drilling allows access to subsurface resources as setback distances increase, up to a point.”
Concerns over health impacts
Industry groups were left “stunned” last week when a majority of the COGCC’s five-member panel, led by commission chair Jeff Robbins, backed a 2,000-foot setback requirement between new wells and occupied buildings. The proposed rule change comes amid a sweeping overhaul of COGCC regulations required by Senate Bill 19-181, the landmark oil and gas legislation passed by Democrats in the Colorado General Assembly last year.
Draft rules proposed by agency staff had proposed a series of more modest setback increases, including 1,500 feet from high-occupancy buildings and groups of 10 or more homes. But commissioners pushed for greater buffer zones after hearing weeks of testimony from Colorado residents who have suffered negative health impacts from drilling projects near their homes, as well as a briefing on a 2019 Colorado Department of Public Health and Environment study that found that drilling can pose health risks at distances of 2,000 feet.
Science, and what CDPHE said the complaints should be, line up precisely with what the complaints have been. – Jeff Robbins, chair of the Colorado Oil and Gas Conservation Commission
Science, and what CDPHE said the complaints should be, line up precisely with what the complaints have been.
– Jeff Robbins, chair of the Colorado Oil and Gas Conservation Commission
Industry groups, which had submitted testimony suggesting that drilling poses no health risks even at distances as close as 175 feet, quickly denounced the new proposal, arguing that the setbacks issue was settled by the defeat of Proposition 112 in 2018. Oil and gas interests spent more than $40 million to oppose the measure — 40 times more than what supporters raised — and voters rejected it 55% to 45%.
“Coloradans overwhelmingly voted down greater setbacks just two years ago, and the state lawmakers who passed Senate Bill 181 consistently said the law wouldn’t create the same type of dire outcomes envisioned by the activists who pushed for greater setbacks,” Dan Haley, president of the Colorado Oil and Gas Association, said in a statement. “Yet here we are, facing the same blunt and shortsighted approach of Proposition 112.”
Opponents of increased setbacks have frequently cited analyses showing that such measures would make a large majority of Colorado’s surface area unavailable for drilling. These figures, however, disregard horizontal drilling, which — combined with other modern technologies like hydraulic fracturing, commonly known as fracking — has led to a dramatic increase in oil and gas production in Colorado and nationwide since the mid-2000s.
Over the last decade, the oil-rich Denver-Julesburg Basin, which stretches across much of the northeastern quarter of the state, has been criss-crossed by hundreds of one- and two-mile-long horizontal wells, with dozens of longer laterals having been drilled near more densely populated residential areas.
In their study, Ericson, Kaffine and Maniloff analyzed publicly available data from the COGCC, the U.S. Geological Survey and the Microsoft Building Footprints project, which contains geographic information on more than 2.8 million buildings in Colorado — not all of which would necessarily trigger a setback, the paper notes.
“For example, barns and other large outbuildings would be captured in the Microsoft data, but would not count as an ‘occupied structure’ under state statutes,” researchers wrote.
The study’s geospatial analysis shows that about 13% of the median Colorado county’s subsurface area would be inaccessible to drillers under a 2,000-foot setback, assuming two-mile laterals. Under current setbacks, virtually no oil and gas resources in Colorado are out of reach of two-mile horizontal wells, while under a 3,500-foot setback — far in excess of what even the most demanding environmental groups have asked the COGCC to adopt — subsurface inaccessibility rises to about 30%.
The results of the study also show a significant gap between the effects of a 2,000-foot setback and the 2,500-foot standard still backed by some environmental groups. In Weld County, this 500-foot reduction in the buffer zone more than halves the subsurface area that would be off-limits to drilling and subject to potential revenue losses.
Searching for the ‘optimal setback distance’
Oil and gas groups have highlighted the potential economic pitfalls of increased setbacks as they mobilize to oppose the COGCC’s proposal. In a letter sent this week to Gov. Jared Polis, a coalition of more than 40 pro-industry organizations urged the governor to step in, likening the proposal to Proposition 112, which it called “an industry ban.”
“If commissioners move forward with that type of hard setback, we know the outcome,” Haley and Lynn Granger, director of the American Petroleum Institute’s Colorado chapter, wrote in a Sept. 11 op-ed. “Companies will be put out of business and thousands of hard-working Coloradans will lose their jobs.”
Few dispute that increased setbacks will result in additional costs for the industry, as some oil and gas reserves become unreachable or require longer, more expensive horizontal wells. In a statement, Joe Salazar, a former state representative and director of anti-fracking group Colorado Rising, said that a 2,000-foot buffer would help fulfill the COGCC’s new mandate to “prioritize people and our environment over oil and gas profits.”
More than a third of drilling permits submitted to COGCC regulators since 2013 have proposed well sites located within 2,000 feet of a building unit, agency staff told commissioners on Sept. 9. Especially in high-producing areas like Weld County, even small decreases in the production of valuable oil and gas resources can add up quickly.
Ericson and his co-authors project that a 2,000-foot setback would result in an initial loss of roughly $2 billion in marketed production statewide, representing about a 10% decline from Colorado producers’ record-breaking 2019 production totals. The study’s estimates were calculated based on 2019 benchmarks, and don’t reflect the 40% drop in oil prices that has hit the sector this year — or widespread uncertainty about the fossil-fuel industry’s near- and long-term future.
The impact of the COGCC’s new setbacks, however, could depend heavily on the final details of its proposal. The agency’s proposed rules are likely to differ sharply from the rigid, one-paragraph statutory change proposed by Proposition 112, which contained no language relating to possible exemptions or waivers. By contrast, Robbins and other COGCC commissioners stressed that they supported a “soft setback,” allowing requirements to be waived either through consent of affected property owners, or by the commission itself.
“We should have a provision … that is waivable,” Robbins said Sept. 9. “That’s based upon the commission making a finding that the location, even if it’s within that setback, that it’s protective of public health, safety, welfare, the environment and wildlife resources.”
The COGCC is scheduled to resume rulemaking hearings on Wednesday, beginning with a staff presentation on the new setbacks proposal. Environmental and industry groups will get the opportunity to weigh in before the commission on Sept. 21.
Over-regulation threatens jobs and tax revenue in any industry. The oil and gas industry is no different.
– Laurie Cipriano, of Protect Colorado
Under the rigid, unwaivable setbacks analyzed by Ericson, Kaffine and Maniloff in their study, industry losses begin to increase significantly beyond 1,500 feet. Exactly where on that spectrum regulators should fall depends heavily on the question of the associated health risks.
“In short, because increasing setbacks results in minimal resource loss initially … relatively modest public health benefits would likely justify setbacks that are larger than current distances of around 500 feet,” the study concludes. “However, because of the rapid increase in costs as setbacks are increased … the health benefits would have to be substantial to justify setbacks as large as the recent policy proposals of 2,500 feet in Colorado.”
“Given the uncertainties involved, it is difficult to provide a precise statement regarding an optimal setback distance that balances health and related concerns against resource losses,” the authors added.
Environmental groups and a majority of COGCC commissioners, however, argue that the decision on how to balance those concerns has already been made for them. SB-181 changed state law to direct the commission to regulate oil and gas development in order to protect health and safety, removing language that instead charged it with “fostering” the industry, as Robbins noted in expressing his support for 2,000-foot setbacks during the Sept. 9 hearing.
“The mission of the commission under 181 did indeed change … and I think that’s important,” he said. “I think this is sending a clear signal that we are creating a protective regime under 181.”
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