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Bloomberg - Energy-Rich Colorado Becomes Setting for Fracking Fight

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By Jennifer Oldham & Jim Snyder

Stan Dempsey, an oil and gas lobbyist, raced from one committee hearing to another in Colorado's statehouse this spring, defending the industry against an onslaught of bills.

While only one of 10 measures passed, the flurry of activity is one of several worrying signs to Dempsey and others in the industry that Colorado, an oil-patch state long seen as friendly to energy producers, is becoming a battleground over hydraulic fracturing, the drilling process fueling the nation's energy boom.

"The politics have shifted in the state," Dempsey, president of the Colorado Petroleum Association in Denver, said in an interview. "Energy has become a big issue."

The debate extends beyond the state capital. Two Colorado towns have banned fracturing, or fracking. Other communities are considering similar restrictions. Environmental groups -- encouraged by what they see as rising populist anger over drilling -- are now exploring a statewide ban on fracking through a 2014 referendum measure.
At stake for developers is access to resources that have made Colorado the nation's fifth-largest producer of natural gas and the ninth-biggest oil producer. One group -- the Western Energy Alliance, which represents about 400 oil and gas companies -- says it plans to increase its lobbying budget four-fold to meet the threat.

Fracking Ban

"Fundamentally, a ban on hydraulic fracturing is a ban on oil and gas development in Colorado," said Doug Flanders, a spokesman for the Colorado Oil and Gas Association, another energy group based in Denver. "And it begs the question: if not here then where?"

Communities from New Jersey to California have also sought to impose restrictions on fracking, according to data kept by Food & Water Watch, a Washington-based environmental group.

In Colorado, communities have made the most direct challenges to fracking, which injects a mixture of water, sand and chemicals underground to break apart shale rock formations so oil and gas can flow to the surface.

Voters in Longmont overwhelmingly approved a ban on fracking in November. Fort Collins had a moratorium on the process. The city council voted May 21 to lift it after Prospect Energy LLC, the only oil and gas company operating within city limits, agreed to standards that are stricter than state rules.

Boulder Ban

Boulder, home to the University of Colorado, is also considering restrictions. Last night, the directors of FrackNation, which portrays the positive attributes of drilling, and GasLand2, which takes an opposing view, screened their films for residents.

"There is a new movement out there by local municipalities and communities to seize control of the permitting process," said Tim Wigley, president of the Western Energy Alliance, whose members include Anadarko Petroleum Corp. (APC) (APC) of The Woodlands, Texas, and Devon Energy Corp. (DVN) (DVN) based in Oklahoma City.
That's worrisome, Wigley said, because it could add more delay to a state and federal process already slowing development.

Protect Our Colorado, a coalition of residents, social justice and faith groups, environmental organizations and companies such as outdoor apparel retailer Patagonia Inc., said it is considering pushing for a statewide limit on fracking through referendum on 2014.

"There's nothing that's off the table with regard to fracking and what would be on the ballot," said Sam Schabacker, Mountain West region director for Food & Water Watch.

Predicts Defeat

Dempsey, of the Colorado Petroleum Association, said he was confident that ultimately the state's voters would reject broader efforts to limit drilling.

"To pass a ballot initiative in Colorado takes a lot of work and a lot of money," he said. Oil and gas companies historically have "contributed quite a bit of money in efforts to defeat ballot measures that would harm our industry."

Colorado has a long history of oil and gas drilling. That's one reason why oil and gas producers are wary of the growing resistance to fracking in the state.

A waterway that stretched from the Gulf of Mexico to Alaska 100 million years ago left behind organic matter that time and pressure cooked into rich oil and gas deposits in Colorado. These include the Niobrara shale formation, which the U.S. Energy Information Administration estimates may contain 2 billion barrels of oil, as well as the Wattenberg Field north of Denver.

High Production

In 2012, oil production in the state reached its highest level in 55 years, according to the Colorado Oil and Gas Conservation Commission, the state agency that regulates the industry. Natural gas production increased by 27 percent from 2007 to 2011, according to agency information.

Wigley said the resistance to drilling in Colorado is being driven by new residents who aren't used to seeing energy development.

"I'm not calling them dumb, they just don't know where things come from," Wigley said in an interview. "It's a challenge to the industry, no question about it."

The population of the eight counties along the Front Range, the scenic and resource-rich eastern edge of the Rocky Mountains, grew on average 18.8 percent from 2000 to 2010.

The growth has helped turned the state from Republican red to Democratic blue. Colorado voted Republican for president six out of the seven elections between 1980 and 2004, before voting for President Barack Obama in the last two.

Homeowners' Worries

Representative Diana DeGette, a Colorado Democrat who represents the Denver area, said the shift in attitude toward drilling is less about politics and more about the encroachment on residential areas.

"People started seeing fracking very close to where they live," DeGette, who has introduced legislation to require drillers to specify chemicals used in fracking, said in an interview. "The public awareness and concern about hydraulic fracturing has grown immeasurably."

DeGette says she only wants the industry to be more transparent, and not to stop development. Oil and gas companies are among the state's top economic drivers, employing more than 48,000 workers in the state, according to the Western Energy Alliance.

Governor John Hickenlooper, a Democrat who has a master's degree in geology, joined the industry in opposing many of the measures pushed by Democrats in the General Assembly. The only one that passed sets new requirements for companies during a spill.

Lawmakers' Proposals

Democratic lawmakers had also proposed raising fines for violations, revising the charter of the state agency that regulates energy companies to emphasize public health, and bolstering groundwater testing for wells in the Wattenberg Field.

State lawmakers say they were motivated by growing concern among constituents about fracking.

In Longmont, residents went door-to-door last year raising concerns about fracking after learning of proposals to drill wells near schools, the city reservoir, a cemetery and public parks. A charter amendment banning drilling in the city passed in November with 60 percent of the vote.

"This has the true chance of getting traction because people can see this and feel this and experience this," said Michael Bellmont, a 23-year Longmont resident who sells long-term care insurance and was the spokesman for the ban's steering committee.

Impact Fees

The Boulder County Board of Commissioners voted earlier this month to assess transportation impact fees on oil and gas companies operating in the county to offset the costs of maintaining roads. The commission voted May 21 to let county-wide moratorium on fracking expire June 10.

The Boulder City Council, meanwhile, is set to consider a moratorium on fracking in city limits and city-owned open space on June 4.

"When a community bans drilling, it gives others the strength it can be done and builds momentum," said Jean Ditslear, who along with her husband, Dan, helped lead the fight to pass a ban on oil and gas drilling within Longmont's city limits.

The Colorado Oil and Gas Conservation Commission, the state agency that regulates drilling, sued the city last year over regulations the council put in place prohibiting oil and gas development in residential zones, arguing that only it had the power to regulate energy development. In a separate suit, the Colorado Oil and Gas Association, a Denver-based trade group, challenged the ban on drilling enacted by voters in November.

Legislature Failed

"At this point it's community by community, because the state Legislature failed to act and the governor is in the wrong place," Gary Wockner, the Colorado program director for Clean Water Action, a Washington-based environmental advocacy group, said.

Wigley, of the Western Energy Alliance, said polling his group has done shows wide support for domestic energy development. "But then they say we don't want fracking to be part of it," he said.

His group has increased its advocacy budget from $200,000 to $1 million to educate voters, largely in Colorado, about the drilling process, which the industry says is safe.

"Colorado is the epicenter of the debate right now," Wigley said. "It's just more of a front line topic."

State Senator Matt Jones, a Democrat, who sponsored some of the most contentious bills in the session that ended May 8, said he doesn't expect the controversy over fracking to subside soon.

"The industry is doing well and the rules we were proposing to put in place would allow them to continue doing that," Jones said. "It's a long-term issue and our constituents are going to be saying the same thing next year they are saying now and that is, 'Why is this happening this way?'"

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