Nov. 04–As Tuesday’s election looms, disputes continue to crop up as to how much impact Proposition 112’s increased drilling setbacks would have on the oil and gas industry’s ability to access underground mineral deposits in Colorado.
Proponents of the measure have long contended that the oil and gas industry deliberately overstates the negative effects of 2,500-foot setbacks for new wells — which is up to five times greater than current distances — to curry favor with voters who might be concerned about an economic hit to the state from reduced drilling activity.
Last week, Prop 112 backers pointed to two new reports — a leaked industry report and a study out of the Colorado School of Mines — as supporting their contention that a bigger setback would not spell ruin for the industry.
The problem was that the report from Canada-based RS Energy Group, a research firm that studies the oil and gas sector, that appeared to show that plenty of mineral deposits would still be available if Prop 112 passes was “misinterpreted” by several media outlets, the firm said. Meanwhile, the Mines report from professor Peter Maniloff, which said horizontal drilling would still allow operators to access nearly half of the “non-federal subsurface” under Prop 112, was immediately challenged by his colleagues.
Thus goes the often highly charged conversation around Proposition 112 and its potential impact on everything from public health to the economy to mineral owner rights. Every study presented seems to be countered by another study that arrives at a different conclusion.
“A wave of new ‘studies’ have conveniently emerged at the height of political season — they are inconsistent and at times contradictory to one another, and seem only to exist to make political points,” said Tracee Bentley, executive director of the Colorado Petroleum Council.
But Russell Mendell, campaign director at Boulder-based Earth Guardians, said the industry is being disingenuous when it asserts that 2,500-foot setbacks would act as a de facto ban on new drilling in Colorado, given the more than 50,000 producing wells in the state and the hundreds of drilling permits already in the works that wouldn’t be subject to 112.
Mendell and others are pushing for the measure due to worries that exposure to chemicals and emissions will harm the health of those who live near oil and gas operations.
“I don’t think you can take their economic claims seriously,” he said. “Proposition 112 is clearly not a ban.”
In the latest flurry of claims and counterclaims, the initial RS Energy report stated that under Proposition 112 the industry would still be able to access 43 percent of mineral acreage in the Core Wattenberg area (north Denver suburbs to Greeley to Fort Collins) and 61 percent of subterranean acreage across the larger mineral-rich Denver-Julesburg Basin in the northeast corner of the state.
But in a revised report issued Wednesday, the firm said the first report was not intended for a general audience and that media outlets that ran with the numbers didn’t understand the whole picture. Manuj Nikhanj, president and CEO of RS Energy, said Proposition 112 would actually impair 85 percent of mineral assets in the Core Wattenberg zone, which is where the vast majority of minerals are located in the DJ Basin.
The earlier percentage, he said, included deposits that other companies might already be tapping — deposits that wouldn’t be available to new drilling rigs.
“Our work confirms Proposition 112 will have extremely negative consequences for oil and gas activity in the DJ Basin,” Nikhanj said in a statement sent to The Denver Post.
Maniloff, a professor of economics and business at Colorado School of Mines, said despite the obvious constraints Proposition 112 would place on new oil and gas development, horizontal drilling provides the industry with a powerful way to reach into areas that may at the surface be part of a no-drill zone. He estimates that 42 percent of non-federal subsurface would still be accessible under 112.
“It’s not the complete ban that some have portrayed it to be,” Maniloff said. “I’m comfortable with the core finding that impacts on accessible subsurface oil and gas are smaller than the impacts on the surface, due to horizontal drilling.”
But his colleague at Mines, William Fleckenstein, said in his own report that the assertion that Proposition 112 wouldn’t be “a devastating economic blow to both the oil industry and the state’s economy” is “not true.”
“It’s like you took an eraser and wiped out those places,” said the petroleum engineering professor in reference to 112’s effect on the Core Wattenberg area along the crowded Front Range. “If you hold acreage in this area, it’s a ban.”
The Colorado Energy Office says the state produced 9.1 million barrels of crude oil in 2016, ranking it seventh in the nation for production. More than four of every five barrels of Colorado’s crude is produced in the Denver-Julesburg Basin in the northeastern part of the state, according to the energy office.
Scott Prestidge, spokesman for the Colorado Oil and Gas Association, said horizontal laterals in Colorado are typically no longer than 2 miles. If enough overlapping 2,500-foot circles are drawn around every protected area in the state, he said, lateral drilling’s reach will have limited effectiveness.
“To drill you have to have both surface access and access to the resource itself,” he said. “Proposition 112 pushes surface access locations so far away from where the resource actually exists that some operators could be 10, 20, or in some cases even more than 30 miles away from their developable mineral asset.”
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