“Do good things.” I could not tell you how many times my father has told me this – I would conservatively guess he has told me those words about 2 million times in my life.

I have mentioned this for quite some time now – that we need to focus on the good works and how much companies in the energy sector give back to their communities. From fundraisers to urgently responding to incidents of neighboring operators to lend a helping hand, I try to spread the word about the many good works that companies in the energy sector do and highlight the positives that these companies bring to their communities, and the Colorado Oil and Gas Association (“COGA”) is doing the same!

COGA is issuing an industry-wide community impact report – the form for submission can be found here.

What is it?

The goal is that the complete report will reflect industry efforts and employees’ efforts from last year to “highlight industry’s social responsibility and celebrate giving back.” If you know of a good thing a company in the energy sector has done in 2017, I urge you to go online and complete the form submission.

Why is this important?

It is crucial to highlight the good works of people, across all industries. Good spreads more good – I think I once heard that this is called a ripple effect. It reminds me of throwing a rock into a pond – the good continues to ripple out. The impacts of one good act spread and spread. In a time when we focus so much energy on negative things and events, we have to shift to focus on the good.

“Do good things.”

You may remember a prior blog post I wrote back in May of 2016 about Denver’s office real estate market feeling the pinch of the downturn in the oil and gas industry – Denver Feeling the Pinch: Denver Office Market Finally Feeling the Effects of Downturn in Energy Industry. A few months later in September of 2016, I wrote a follow up piece discussing this further in the blog entitled, Denver Office Market Still Feeling the Impacts of the Downturn in Energy Industry.

Well folks, we all know how far-reaching the impacts of the oil and gas sector can be, and today we have some more good news. I read an article today that discusses how the Denver office market is getting fresh blood from some new energy companies and how it is back on the upswing!

Denver Bisnow featured an article today entitled, Denver Office Market Improves with Recovering Energy Prices that discusses how energy companies are filling the downtown Denver office space back up.

We all know that I am the forever optimist – but I write this piece to show again how the energy sector can positively impact so many different areas. From the real estate market to the service sector, the energy industry’s benefits are widespread!

Yampa River

My dad mentioned something the other day that peaked my interest – he said parts of Wyoming were getting ready for floods.

Floods?!

This got me thinking – is the West ready for the spring runoff?

Parts of the West got dumped on this winter – snow levels were very high in many places and there are high levels of snowpack. Jackson Hole Mountain Resort reports that it has received 548 inches for a season total as of today, on the upper mountain.

In fact, I read an article this morning on East Idaho News.com entitled, “Snow Causes Porch Roof Collapse in Grand Teton National Park,” that reported that area measurements in Grant Teton National Park “show the current snow water equivalent is around 150 percent of median.”

The National Weather Service reports in its 2017 Wyoming Spring Snowmelt Flood Potential Outlook – Updated March 21st that:

  • “Mountain snowpack and associated snow water equivalents (SWEs) across central through western Wyoming continued to be much above average by the middle of March; while SWEs across basins in southeastern Wyoming were generally above average.”
  • “SWEs at the peak snowmelt runoff elevations (8,500’ – 10.000’) were the highest across the Wind and the Upper Green Basins at 170 to 180 percent of median.”

Check out The National Weather Service’s Wyoming Spring Snowmelt Flood Potential Outlook map here.

The Western Governors’ Association also published a story today entitled, “Best of the West: Flooding bedevils states,” reporting flooding challenges in Idaho, Montana and Wyoming.

Similarly, according to an article this week featured in the Missoulian entitled, “Early Snowmelt Damages Bridges, Roads in Montana and Idaho,” “[t]he Salmon [Idaho] area is 130 percent of average precipitation.” The Missoulian reports that “waterlogged ground has produced landslides, mudslides, streambank erosion and damage to roads and railroad lines” in Montana and Idaho.

Steamboat Today.com reports very high flows in the Yampa River and Elk River in Colorado, although they are “well below flood stage, but the acceleration of snowmelt during a time when snowmelt is typically increasing stands out from the norm.”

The West is getting ready for the runoff and bracing for flooding…stay tuned.

Neighboring States

Wyoming and Colorado appear to be recovering from the downturn in the oil and gas industry at different paces.

  • 307 (Wyoming)

Yesterday, the Casper Star Tribune featured an article discussing the “slugglish” and “flat” Wyoming economy entitled, “Wyoming Economy has been ‘Bouncing Along the Bottom’ Since the Summer.” According to the Casper Star Tribune, “[a] Wyoming Insight report released by the state’s Economic Analysis Division in February showed a slight improvement in both energy prices and the statewide rig count, but the economy is still far from recovered.”

Wyoming’s unemployment rate is reportedly “roughly equal” to the nationwide average and “Wyoming is down nearly 8,000 jobs since 2015.” According to the Casper Star Tribune, folks are hopeful that the oil and gas sector will bounce back to help energize the state’s economy, but there is some skepticism as to how long that could take to happen.

  • 303 (Colorado)

Wyoming’s neighbor to the south, Colorado, appears to be recovering from the downturn in the energy sector a little faster than the Cowboy State. This morning, the Denver Business Journal (“DBJ”) featured an article discussing that the energy downturn is over for the state, due in part to increased activity and oil and gas company’s budgets being up, entitled, “Colorado Oil and Gas: Up from the Bust.”

The DBJ article reports that “[a]ctivity in Colorado’s oil and gas fields also is picking up,” and noting the increase in drilling rigs working in Colorado. In addition, the DBJ article reports that “[t]he 2017 budgets for some of the state’s biggest oil and gas companies also are increasing compared to last year.”

The Colorado unemployment rate is also reportedly lower than the national rate – Colorado’s unemployment rate was 3.0% in December of 2016 while the national unemployment rate was 4.7%.

The Rocky Mountain region plays a crucial role in domestic oil production and the energy sector similarly plays a critical role in the economies of Wyoming and Colorado.  One thing is certainly true, both states are in this together and I am confident that this is recovery is something Wyomingites and Coloradans are collectively rooting for.

Only time will tell how the recovery in the oil and gas industry is going to work out…stay tuned!

 

Petition signaturesEarlier this month, we discussed the ballot proposals to restrict and severely limit oil and gas operations in Colorado – Initiative No. 75 and Initiative No. 78 – in detail. The full post “Signatures in on Petitions for Ballot Proposals to Restrict Oil and Gas Operations in Colorado” can be found here.

The big announcement of the day:

The Denver Business Journal (“DBJ”) reported this morning that the proposals failed to make the ballot – the article entitled, “Colorado Secretary of State says Anti-Oil and Gas Proposals Failed to Make Ballot” can be found here.

Why didn’t the proposals make it?

The proposals needed 98,492 signatures to make it on the ballot.  According to the DBJ, the Secretary of State’s office conducted a random sample of 5% the voter signatures to confirm validity – and a large number of signatures ended up getting rejected during the random sampling.

The DBJ article further reports that typically ballot campaigns gather at least 140,000 signatures to ensure that they can clear the number of signatures hurdle, but the supporters of the initiatives to restrict oil and gas development only gathered 107,232 signatures for Initiative No. 75 and 106,626 signatures for Initiative No. 78.

The conclusion:

The DBJ reported that the Secretary of State’s office “concluded that the initiatives received less than 80 percent of the total number of signatures to be on the ballot.”

 

Colorado Sign

Here in colorful Colorado today, activist groups with the hope of having anti-energy measures placed on the ballot this fall were faced with a deadline. They were required to gather at least 98,492 valid signatures of Colorado registered voters by 3 pm today.

According to the Denver Business Journal, they squeaked in just before the 3 pm deadline – delivering the signatures to the Colorado Secretary of State’s office at 2:30 pm.

Last week and this weekend, supporters of Initiative No. 75 (amending the state’s constitution to provide more local government control over oil and gas operations) and Initiative No. 78 (mandating 2,500 foot setbacks for new oil and gas development facilities and any operation that used hydraulic fracturing) were pounding the pavement in Denver to get more signatures.  On Friday alone on my walk from the office to the gym only a few blocks away I was stopped by 3 people who unsuccessfully asked me to “sign their petition to help restrict fracking.”

I was left walking and hoping that the people who did sign understood the real consequences of signing their name to that petition…

The Reality – Do people understand the consequences of the ballot proposals?

Will this situation be similar to Brexit – when many people who voted to leave the EU did not understand the potential consequences and wanted a “do over” the next day?

To avoid that buyer’s remorse from happening here, we point you to the Energy In Depth article summarizing the three things to know about the anti-energy initiatives – the full text of the article can be found here.  It is absolutely crucial to be educated on these proposals and to understand their potential consequences; because, as noted by The Denver Post earlier this summer, there may be a hidden purpose behind Initiative No. 78 – in effect, to ban oil and gas production.

What is the most important potential consequence?

Hands down, the 2,500 foot setbacks mandated by Initiative No. 78 carry the most important potential consequences to future development.

The Colorado Oil and Gas Conservation Commission (“COGCC”) conducted a GIS-based assessment of the proposed ballot Initiative No. 78’s impact on surface lands available for new oil and gas development facilities or hydraulic fracturing operations – A full copy of the assessment can be found here.

The Key Findings of the COGCC assessment of Initiative No. 78 were:

  • 90% of surface acreage in Colorado would be unavailable for future oil and gas development or hydraulic fracturing under the proposed mandatory setback requirement
  • 85% of surface acreage in Weld County, Colorado – the state’s largest producing county, would be unavailable for new oil and gas development or hydraulic fracturing operations

The Denver Post asked a crucial question: “Did proponents know this when they wrote the initiative?  If not, they were reckless. If they did know, they were devious regarding their true intent, since their real purpose apparently was to ban oil and gas development while pretending to seek allegedly reasonable limits on its reach.”

Luckily, many reportedly consider there to be a low probability of Initiative No. 78 being approved and passed.  Still, we must appreciate the true potential consequences of these proposals.

Did they gather enough signatures to have the proposals on the ballot?

Unfortunately, it is too early to tell.

The Denver Business Journal reported this afternoon in its article, “Thousands of Signatures Delivered for Anti-Oil and Gas Ballot Proposals,” that organizers are claiming to have collected “over 100,000 signatures in support of each of the ballot petitions.”

However, it will take some time for the Colorado Secretary of State’s Office to sift through the petitions and tally up the actual number of signatures. The office reportedly has about a month, until September 7, 2016, to announce whether there are enough valid signatures on the petitions to have the proposals make the ballot.

By way of a quick update related to oil and gas operations, yesterday, the Colorado Oil and Gas Conservation Commission (“COGCC”) published additional instructions for their Form 5 (Drilling Completion Report), Form 5A (Completed Interval Report) and Form 7 (Monthly Operations).

The new instructions can be found here and several address reporting requirements for a horizontal wellbore drilled through multiple formations.  Operators may look to these additional instructions and diagrams for guidance as to what information the COGCC is looking for in its reports.

Specifically, the Form 5 Drilling Completion Report now includes the following additional form instructions: (i) Reporting “Logs Run”; (ii) Reporting Horizontal Wellbores in Multiple Formations; and (iii) Reporting Horizontal Wellbores in Multiple Formations – Diagrams.

The Form 5A Completed Interval Report and the Form 7 Monthly Report of Operations instructions now also include: (i) Reporting Horizontal Wellbores in Multiple Formations and (ii) Reporting Horizontal Wellbores in Multiple Formations – Diagrams.

The Colorado Oil and Gas Conservation Commission (“COGCC”) issued draft proposed rules in early October.  The Denver Business Journal reports today that “few have kind words for Colorado’s latest proposal on oil and gas rules” and that stakeholders who have followed the rulemaking process have used harsh words to describe the draft rules.

The public hearings are reportedly expected to draw big crowds – so big in fact that the location of the hearings has been moved to the Sheraton Denver Downtown Hotel.  The public hearings will be held on November 16-17, 2015, with the COGCC decisions expected at the commission’s December meeting on December 7-8, 2015.

So what is all the fuss about?

Gov. Hickenlooper created an oil and gas task force by Executive Order in September of 2014 comprised of representatives from local government, civic organizations, environmental interests, agriculture, and affected industries.  The task force was to focus on “how to most reasonably and effectively balance land use issues in a way that minimizes conflict while protecting communities and allowing reasonable access to private mineral rights” and its recommendations were due to the Governor no later than February 27, 2015.

The task force proposed nine recommendations in February and those recommendations were to be incorporated into proposed rule changes.

However, the controversy surrounding the draft proposed rules reportedly stems from allegations that they are “inconsistent with the letter and spirit of the task force’s recommendations.”  Some seem to say that the proposed rules go beyond the task force’s proposals, while others maintain that the proposed rules do not go far enough.

The task force recommendations can be found here: GTF Recommendation 17; GTF Recommendation 20.  The draft proposed rules can be found here.  Our office will continue to monitor the 2015 Governor’s Task Force Rulemaking and keep you apprised of the outcome.

Idled wells, also called “orphaned” or “deserted” wells, are generally wells that have not produced oil and/or gas for a period of time, typically provided in each state’s regulations.  These wells may also include those that the operator has walked away from and abandoned, either because the wells ran dry or the company has gone bankrupt.

Recently, I have been wonder who is responsible for the costs of plugging idled wells…Who gets left holding the bag?

Under many circumstances, the answer is the state.  Despite the financial assurances and bonds that state oil and gas commissions require operators to provide prior to commencing drilling operations, there are numerous occasions where the bond money falls short.

For example, in Colorado, the 700 Series of the Colorado Oil and Gas Commission (“COGCC” or “Commission”) Rules articulate the required financial assurances that an operator must provide prior to drilling or assuming operations.  When those amounts are not adequate, the COGCC may become burdened with the costs of properly plugging idled wells.  Rule 709 provides that “[w]henever an operator fails to fulfill any statutory obligation described herein, and the Commission undertakes to expend funds to remedy the situation, the Director shall make application to the Commission for an order calling or foreclosing the operator’s financial assurance.”  However, under many circumstances, there is just not enough bond money in the coffers to cover the plugging expenses.  Plugging a well typically depends on the well’s depth and can reportedly cost as much as $25,000 to $100,000 by some regulators’ estimates.  The cost can vary dramatically – of the 452 wells Wyoming reportedly plugged between 1997 and 2014, the cheapest well cost $569 to plug and the most expensive cost $527,829.

Some states, like California, have an Idle and Orphan Well Program that requires operators to put up additional monies to address the idle status of the wells.  Similarly, Wyoming regulators have recently proposed to increase bonding amounts and require idle well bonding.  The redline proposals to the Wyoming Oil and Gas Conservation Commission (“WOGCC”) Operational Rules and Drilling rules can be found here.  The proposed Idle Well Bonding Rules permit increased bonding in an amount up to $10 per foot for each idle well.

Public comment on the proposed rules in Wyoming will be taken through November 20 and the WOGCC reportedly will vote on the changes on December 8.  We will monitor the status of the proposed changes to the rules and keep you posted on who will be left holding the bag for these costs in Wyoming.

As we previously discussed in our January 22, 2015 post “Upcoming COGCC Rulemaking: Front Range Flood Lessons Learned,” the Colorado Oil and Gas Conservation Commission (“COGCC”) is considering the September 2013 Front Range Flood as a learning opportunity.

New rules were unanimously approved by the COGCC on Monday, March 2, 2015, implementing several recommendations that the COGCC staff made in the March 2014 report entitled “Lessons Learned” in the Front Range Flood of September 2013.

The new rules reportedly require:

  • All storage tanks, both new and existing, be surrounded with hardened berms made of steel instead of earthen barriers.
  • Critical equipment must be anchored according to an engineered anchoring plan.
  • Existing pits used for exploration and product waste must be removed.
  • Operators must be able to shut down the well remotely.

The new rules are effective June 1, 2015, for new wells and equipment and April 1, 2016, for retrofitting of existing equipment.

April 1, 2016 is also the deadline to create an inventory of wells and critical equipment located in floodplains and register the equipment and locations with the COGCC.  Creation of a formal plan outlining how companies will respond in a potential flood situation is also mandated.