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Features
28 22
THE HEAT IS ON
Greeley firefighters’ learn lessons from their first big oil- and gas-related fire.
SAFE HAVEN
By Sharon Dunn
The DJ Basin is proving a safer economic choice in hard times. By Dan Larson
ON THE COVER Design by Darin Bliss
14
COOPERATIVE EFFORT
24
Relocation of Windsor’s Pace wells a shift in tide for industry, work far from over.
TECH TALK
Natural gas AC unit produces electricity. By Gary Beers
Departments 8
Field Worker Profile
10
Executive Profile
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News Briefs
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Data Center
By Allison Dyer Bluemel
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PAY TO PLAY Greeley charges impact fees on oil and gas development.
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Artillery fights oilfield fires. By Bruce Wells
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4 ENERGY PIPELINE FEBRUARY 2016
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Meet Hans Jespersen, Vestas Blades America, v.p. and general manager
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BUSINESS PUBLISHER Bart Smith EDITOR Randy Bangert GENERAL MANAGER Bryce Jacobson ACCOUNT/PROJECT MANAGER Bruce Dennis BUSINESS MANAGER Mike Campbell MANAGING EDITOR Sharon Dunn CONTRIBUTING WRITERS Gary Beers Allison Dyer Bluemel Linda Kane Dan Larson Bruce Wells
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FIELD WORKER PROFILE
Jesus Villalobos LEED FABRICATION STAFF REPORT • FOR ENERGY PIPELINE
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EXECUTIVE PROFILE
VESTAS BLADES AMERICA Vice President and General Manager
Hans Jespersen BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM hans jespersen marches through the
Windsor blade factory with authority as he dodges moving equipment, people and obstacles with the agility of a trained athlete. He is used to being a tour guide. As vice president and general manager of Vestas Blades in Windsor, he is often called upon to bring dignitaries through the blade manufacturing plant as a hallmark of the renewable energy industry. His pace fast and concern for workers on high alert, Jespersen greets someone new with seemingly every stride. He traverses this factory - a round trip that now spans a mile - at least twice a day. “Of course, I’m an engineer and I like to be on the floor and see what’s going on,” said Jespersen, a native of western Denmark who now lives in Windsor. “We really try to emphasize, get out on the floor, that’s where we create the value. “It’s important to me. I have been in manufacturing my whole adult life, so the contact with people on the floor, that is what matters most to me.” Jespersen came to Windsor in 2007 to open Vestas’ first manufacturing plant in the United States. It has since become an anchor in town and Weld County in many ways. Recent hiring at the company, as an example, has given displaced oilfield and construction workers a place to land on their feet. Jespersen’s pace as he tours the facility is fast for a reason. Production has been moving at an almost breakneck speed for the last two years as they work to fill multiple orders. He has a neverending task of finding workers and training them to build blades that weigh 7 tons each. In fact, Vestas has just come off one its best years yet - globally and locally - and certainly 10 ENERGY PIPELINE FEBRUARY 2016
the best in the last five years. In 2016, the company looks to see a similar trend. “We barely hung in there in 2015,” Jespersen said of the workload. “But we made it.” For the first time since 2010 - when it produced enough turbines to generate 8,673 megawatts of electricity - the worldwide company surpassed 8 gigawatts in wind turbine orders this last year. That’s enough to power more than 5.6 million homes and is equal to about two coal-fired power plants. In North America, the company’s order intake has never been better - and many credit the continued wind production tax credit for that success. In 2015, the company kicked out 2,868-megawatt-churning turbines where most - if not all - were produced in the company’s Colorado plants. That’s a stark comparison to 2009 - a year after the plant opened - when there wasn’t one order for wind turbines in the United States. “In many cases, we were sending blades right out from the plant (to the customer),” Jespersen said of last year’s production. “We’d like to have a little bit of a buffer inventory, but for a big part of 2015, I didn’t have that luxury.” The Windsor blade factory kicked out its first blade in February 2008 and officially opened a month later. Two years after that it opened a second blade factory and a nacelle factory in Brighton, and in that time also opened a tower factory in Pueblo. In eight production lines, the Vestas plant today builds 49- and 54-meter blades for what they call their 2-megawatt platforms, filling orders throughout North America. The company’s Brighton plant is building blades for the company’s 2- and 3-megawatt models.
“But turbines, they seem to grow bigger so you never know when we’ll be asked to build” the bigger blades, Jespersen said. Jespersen is now shepherding the company’s fourth expansion in Windsor; this latest, which extends parts of the factory to produce longer blades, will add 100,000 square feet to its footprint for a total of 650,000 square feet. That houses 1,300 workers in rotating shifts that run the plant 24/7. “In many cases, the concrete was hardly dry before we had to make an expansion and that is still the story for us in manufacturing,” Jespersen said. “More or less, we have been building here constantly.” Jespersen has manufacturing in his blood. He got his start in Denmark, then spent four years in Canada running an agriculture manufacturing plant before returning to Denmark in 1990. “Manufacturing is manufacturing. It’s a lot about the people and how to manage people,” he said. But his introduction to wind power came through his wife. Hanne, at the time, had opted to invest in a cooperative group of
QA &
with Hans Jespersen
After the tour, Energy Pipeline sat down with Jespersen to learn more:
Read his answers on page 12
private citizens who together purchased a wind turbine, through which they sold electricity to the grid. She was interested in the green; Hans, as a matter of course, was interested in how it worked and how it was maintained. Then came the chance to run a Vestas factory in 2000. “Vestas was looking for a factory manager, I applied, and I got lucky,” he said. “I knew nothing about our industry.” The trained mechanical engineer, who had spent much of his professional career in steel manufacturing, didn’t hesitate when he got the job offer. “It was a very exciting industry to be part of, and one that’s growing. That’s always much more fun than companies going the other way,” Jespersen said. Then came another chance in 2007: To open Vestas’ first manufacturing plant in the United States. “I said yes. I didn’t even tell my wife about it until after. It’s such a big opportunity and so I said yes right away,” he said. Life has been nonstop since. And his worrying about the people in his shop doesn’t stop. “I have been here so many years now, so the employment in Colorado, it actually matters to me. There are a lot of families that rely upon us that we are successful,” Jespersen said. New people are coming all the time, and that keeps Jespersen on his toes, walking through his plant, meeting the workers he feels are absolutely vital to Vestas’ success. He recognizes the sacrifices many have made in
ABOUT
Hans Jespersen AGE 64.
CURRENT JOB TITLE Vice president/General Manager.
YEARS WITH VESTAS BLADES AMERICA, INC. 15 years with Vestas (eight of them in Colorado).
recent years when turbine orders have been so high. There’s been a lot of overtime. “You should be allowed to have a life, even if you work at Vestas,” Jespersen said. With orders soaring in the last few years, and the need to quickly ramp up its workforce, Jespersen said it’s been tough finding an employee pool in a region that is not particularly saturated with a manufacturing base. “We’ve had to work for it,” he said with some mild exasperation of finding the skilled manpower needed to build highly technical blades. “We don’t have much manufacturing here, but we have hired a lot from the construction industry. People come from all
SPOUSE AND FAMILY Married to Hanne, four children (all grown).
CITY YOU LIVE IN NOW Windsor.
CITY YOU GREW UP IN
WHAT DO YOU DO IN YOUR SPARE TIME?
Skjoldborg, Denmark (on a farm in the most western part of Denmark).
There hasn’t been much spare time in 2014 2015 due to the ramp-up of the factory in Windsor, but I bicycle a lot and try to stay fit.
HIGH SCHOOL YOU ATTENDED Danish High School.
COLLEGES AND DEGREES RECEIVED Mechanical Engineer from Odense Teknikum, Denmark.
LAST GOOD BOOK YOU READ “Turn the Ship Around (How an American Submarine Captain Changed the Leadership Culture)”.
over. There are people who have never seen factories from the inside.” While 2014 and ‘15 ran at a feverish pace, 2016 probably won’t slow down that much as workers try to keep pace with orders made last year. “We constantly have to look for improvements,” Jespersen said. “And not at the expense of wearing out our staff. It’s the old term, ‘work smarter, not harder.’ “To get all these many people to be precise in what they do, it takes a lot of skill sets in building blades,” Jespersen said. “The distance between success and failure can often be not that big. ... 2016 will be about perfection, and getting up to the surface again.”
SOMETHING ABOUT YOU THAT FRIENDS AND COWORKERS DON’T KNOW Nothing - I’m pretty straight forward!
PROFESSIONAL BACKGROUND 1980 - 1981 Danish Army 1981 - 1983 Production Equipment Designer, Denmark 1983 - 1986 Production Manager, Denmark
1986 - 1990 Plant Manager, Canada 1990 - 1996 R&D Manager, Denmark 1996 - 1998 Group Product Manager (Denmark, Sweden, Finland, Germany, Canada) 1998 - 2000 Technical Manager, Denmark 2000 - 2007 Factory Manager, Vestas Denmark 2007 - Present VP / GM Vestas Blades America
QA &
continued from page 10
ENERGY PIPELINE: Is there a cultural difference between Danish and American workers? What have been your observations?
EP: Is it strange to be a renewable energy company smack dab in the middle one of the more prolific oil fields in the country?
HANS JESPERSEN: There is of course a cultural difference. Danes are more direct, more informal. You can have a guy on the floor, and he’ll come right up to you and tell you his opinion, and so on. Americans at least in this part of the U.S., they’re more ... (worried about) being too forward.
HJ: We have a lot of respect for the oil and gas industry. They do a lot of good things for the U.S. and Colorado. We all drive a car, and there are not that many that are electric. We send blades all over the U.S. and Canada; there’s only a fraction of our blades that end up in Colorado.
It’s something that is changing (here in Windsor) because we have tried to create a culture where we are open. We’re on a first-name (basis), that “sir” thing we don’t do. People can state their opinion and don’t risk any consequences from speaking up. It’s not what people say that matters, it’s what people do or not do. Here, we have a lot of local management. I’m the only Dane left. EP: What is an example of your management philosophy in action? HJ: We have a system to where people can actually come with suggestions. From time to time they show me something that could be a safety risk or something they believe that can be done better. We have what we call a suggestion box, any idea they come up with, put it in. If we implement it, we give them a small reward. They know best what is bad and good out there. We engineers, we believe we know everything but we don’t. There are many ideas that people give us. We have rewarded quite a number of ideas that have actually made life easier for them, or made operations quicker.
12 ENERGY PIPELINE FEBRUARY 2016
In many areas, natural gas and wind goes hand in hand. Of course you can’t produce much if the wind is not blowing, but that’s not good for the grid; it has to be electricity all the time. The damned thing about electricity it has to be consumed at the second it’s produced. EP: What about America do you love? HJ: Denmark is flat as a pancake, and I like the mountains. I like the winters here. Denmark is so much further north. It has very dark and rainy winters. So I definitely don’t miss the Danish winter. On the other hand, the Danish summers are beautiful, you have the sun up until 10 p.m. so that’s a nice part of the year. Really, I’m not the homesick type. Americans, maybe especially Coloradans, are very easy to get along with and friendly, if you treat them right. EP: Given how many places you’ve worked, how many and what languages do you speak?
HJ: Of course Danish is my mother tongue, but it is only spoken by 5 million people. So for Danes, it is important to speak two of the major languages. This is also because all of our teaching material and books at the technical colleges are in either English or German. So I also speak German, and of course English. EP: What would you describe as some of your personal victories/successes while in Windsor? HJ: To have the opportunity to be part of building the first Vestas manufacturing facility in the U.S., from bare field to becoming a large workplace and, in my humble opinion, a successful one. EP: The workers at Vestas in Windsor seem to really like and respect you. What is your philosophy of management to get that result? HJ: Servant leadership. We try to empower our staff at all levels to dare to make decisions without fear of retaliation if they make the wrong one. We also do our best to treat our staff on the production floor with the respect they deserve. They create the value for Vestas. Every week for almost two years the management teams have welcomed our new employees with the same message: You have to be able to work in a safe way, to build quality blades and treat your colleagues with respect. You are either building blades or you help others build blades. If you don’t do either of them, why are you here? That
counts for all of us. EP: How do you feel about America’s emerging “all of the above” energy philosophy? HJ: I really don’t think it is appropriate for me to have an opinion about the American energy policy; that’s for the politicians to decide. We try to be good at the wind turbine business, and our job in Windsor is to be efficient and do our share to lower the cost of energy for wind turbine electricity, and we still have lots of potential to reduce that cost. EP: What are your ambitions in this industry? HJ: I’m not young anymore so this is probably my last job. Let’s face it, I’m 64. I still like very much what I’m doing. First and foremost, we have created something here that’s added 1,300 jobs to a local society and I like the product we produce. I believe we’re doing something good for the world. In my home country, for instance, we’re getting over 40 percent of electricity from wind turbines now, which as far as I know is a world record. We’re not just tree-huggers anymore. It used to be in the ‘70s. Now, it’s business. But we still believe it’s good for the world, and we create jobs all over the world. In my home country, what we have achieved, you can do the same in the U.S. The U.S. has some of the best wind in the world.
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From left, Dan Johnston, Shawndra Barry, and Earl Pittman pose at a future Great Western Oil and Gas drilling site with their houses in the background in early November in Windsor. The neighbors pushed in the last several months to get the city of Windsor involved in the wells’ siting to make the location work for all involved. Photo by Eliott Foust/efoust@greeleytribune.com.
COOPERATIVE EFFORT
Relocation of Pace wells a shift in tide for industry, work far from over BY ALLISON DYER BLUEMEL • FOR ENERGY PIPELINE
- the town raced for annexation, the oil and gas The move was the culmination of months of effort from each company pushed to find the best way to get mineral access and group, and possibly a stellar example of how towns, residents and the community group members pulled all-nighters after their day oil and gas officials can, indeed, work together for alternatives on jobs to do research. siting of oil and gas wells. And, finally, It was a process which the efforts of the has been under intense organizations paid off scrutiny through the state when Great Western Oil and Gas Conservation Oil & Gas announced Commission working to in October that they implement rules from the would relocate their Governor’s oil and gas planned drilling site task force. Those rules a mile east of what were meant to find ways they called the Pace for local governments to ERIC CREED, surface land manager, Great Western Oil & Gas property, which had have a say over siting of sparked the ire of well in urban areas. nearby residents who didn’t want oil and gas in their backyards. Tensions over the proposed well sites in west Windsor Members of Windsor Neighbors for Responsible Drilling mounted in the fall of 2014 when Great Western Oil & Gas made up of residents in the surrounding developments in west announced plans to explore a parcel of land in Larimer County Windsor including Bison Ridge and High Point - rejoiced. closely located to multiple subdivisions for mineral extraction, windsor
“I think everybody did their part and I think everybody did it in good faith, and everybody is happy with the way it ended up.”
14 ENERGY PIPELINE FEBRUARY 2016
(WINDSOR NEIGHBORS FOR RESPONSIBLE DRILLING) WERE FOCUSED ON TRYING TO STRIKE A MIDDLE GROUND THAT PROTECTED THEIR HOMES AND NEIGHBORHOODS AND ALSO RESPECTED THE TOWN’S NEED FOR OIL AND GAS DEVELOPMENT AND GREAT WESTERN’S RIGHT TO DO SO
but it was not within city limits, so the city of Windsor had no say. That was also the same time the Governor’s task force had formed and began meeting. More than 70 residents complained and the town mounted a forced annexation, which would give city officials more control over the terms of development. Over the following year, the property and annexation received statewide press as the town raced to annex the property and Great Western pushed to get the project permitted through the state. Ultimately, the town was able to annex in time and negotiations between the parties began en force. “It was challenging and there were a lot of moving parts to it,” said Eric Creed, surface land manager for Great Western Oil & Gas. “I think everybody did their part and I think everybody did it in good faith, and everybody is happy with the way it ended up.” On the town’s side, staff worked to find a middle ground between the developer and the community that would both ease the anxiety of residents and promote healthy business in town limits, including the capture of revenue from wellheads. For Great Western Oil & Gas, the process was an exercise in balancing the needs of its neighbors against the needs of the company, while also working out development with another property owner, Water Valley’s Martin Lind. “Obviously, we wanted to be good neighbors and when Bison Ridge and High Point (subdivisions) mobilized, we took notice of that,” Creed said. The company also faced a hurdle in dealing with Extraction Oil & Gas, which had a pipeline through the new site that they weren’t willing to let Great Western use or buy, he said. “It was a challenging process, but I think we all understood all along that there was something to be gained for everybody,” Creed said. “There was a way to do it that was a win-win and it was just a matter of staying committed to the project and finding solutions for those problems as they arose.” Windsor Neighbors for Responsible Drilling spent the months learning the intricacies of oil and gas regulation in Colorado. They were focused on trying to strike a middle ground that protected their homes and neighborhoods and
also respected the town’s need for oil and gas development and Great Western’s right to do so. “We did not come out against the industry, we’ve never come out against the industry,” Windsor neighbors spokesman Dan Johnston said. Between the three parties was the Colorado Oil and Gas Conservation Commission, a state agency tasked with advocating for both the industry’s needs and those of the residents, though some have questioned their balance at times. However, Windsor Neighbors recognize that it was their refusal to give up that kept driving the discussion forward. “It was the citizen involvement and citizen pressure,” Johnston said. “We just kept pushing and pushing and refusing to take no for an answer.” That involvement lead to countless hours of detective work, consultation with an oil and gas attorney and research into the state guidelines, Windsor Neighbors representatives said. At one point, the organization created a video to show the problems with Pace site. Great Western contacted Windsor Neighbors and asked them not to produce another video and that they were working on finding a solution, Windsor neighbors spokesman Earl Pittman said. “The reoccurring theme is that the citizens are our own best advocate,” Windsor Neighbors spokeswoman Shawndra Barry said. “There’s no system to protect us.” But in this instance, both the company and the residents recognized the work the COGCC ultimately did that ushered in much wanted change. “I think that they are looking at oil and gas development,” Johnston said. “They’re not trying to stop it, but trying to make sure it works for everybody.” COGCC Director Matt Lepore remembers also questioning the placement of wells when the application first came to the organization. “Our first reaction was that this didn’t seem like a great location,” he said. “We wanted to understand better why the operator was making that proposal.” FEBRUARY 2016 ENERGY PIPELINE 15
When the commission met with Great Western, they came to understand that they were having surface issues with the owner of other sites, Lepore said. In a role that the agency normally doesn’t take, they urged Great Western to go back and work out the issues with Lind to find another site. “We took careful notes on what both parties had agreed to on principle and have continued to work forward on that,” he said. Thankfully, the negotiations continued to go well and ultimately resulted in the well relocation. Lepore and Pittman remember a meeting were Lepore said that - even though he had told Great Western he wouldn’t approve the wells on Pace back in December - the original plans could have gone through if Great Western appealed to the COGCC commissioners. “It was a challenge for everybody,” Creed said.
forward with sensible suggestions and possible solutions.” One of the recommendations - that Great Western could break up the proposed 28 wells on Pace into two pads on Lind’s land ended up becoming a reality. “We started to realize and evaluate what it meant for us to come from the east,” Creed said. “There was some loss in that we’re not coming from the right direction, but we were willing to do that.” The loss meant millions in additional operating costs quadrupling the cost of the pad builds - in both ongoing and initial start up to get the two pads ready for operations, he said. “It was something we were willing to do to address the community’s concerns,” Creed said. The new site, which does not abut existing development, will have residential development built around it in the future in a way that better represents urbanized oil and gas development.
MOVING FORWARD, WINDSOR NEIGHBORS WOULD LIKE TO SEE MORE COMMUNICATION WITH THE INDUSTRY, SOMETHING GREAT WESTERN ALSO BELIEVES WILL BE MORE PROMINENT IN FUTURE OPERATIONS, AND SEE MORE RESIDENTS ADVOCATING FROM THE COGCC When Great Western began the neighborhood outreach portion of development in August 2014 - notifying the neighbors of their plans to drill on the Pace property situated between residential developments - the first question on many residents’ minds was, “Why?” “The biggest question was, given all the seemingly available land to the east, why are we putting it over here on a small-ish parcel that already has development around it,” Lepore said. Over the coming months, that question would arise again and again from different sides and Great Western would work to explain why - despite its proximity to homes - the site had been so desired. The process garnered media coverage from across the state as the town raced to annex the property before the permit was approved by the state. The reasoning was that the west to east drilling orientation allowed them to access minerals across Weld County Road 13 more easily given the rock formation below. Windsor Neighbors responded by recruiting the expertise of geologists and oil and gas experts, who began helping them draw up alternative proposals for drilling. “They weren’t obstructionists, they weren’t just naysayers,” Lepore said. “They did try to understand our systems and come 16 ENERGY PIPELINE FEBRUARY 2016
“It was very complex,” Lind said. “I needed to be sensitive of the needs that we have in Water Valley.” But the extra expenses were worth it in the end to appease the community; something that Creed said the company and industry at large is learning to do more to be better neighbors. Moving forward, Windsor Neighbors would like to see more communication with the industry, something Great Western also believes will be more prominent in future operations, and see more residents advocating from the COGCC. “I think it’s really changed how the industry operates,” Creed said. And the work is far from over. While Great Western Oil and Gas has reached a surface agreement with Lind, no formal state or local permits had been filed as of Jan. 7. “I think it is important to note that there is still much to do within the realm of the Windsor regulatory process,” Windsor Town Manager Kelly Arnold said. The next step is for Great Western to submit a Conditional Use Grant application with the town, which will kick off the formal review and permitting process.
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FEBRUARY 2016 ENERGY PIPELINE 17
PAY TO PLAY Greeley charges impact fees on oil and gas development BY LINDA KANE • FOR ENERGY PIPELINE
for the first time in greeley, local
oil and gas companies are paying for their industry’s impact to the city infrastructure. The city of Greeley last year implemented development fees for oil and gas operations, applied to every well developed in city limits. Development impact fees are a way for growth to pay for growth; developers typically pay on their building permits fees to help the city pay for additional pay water and sewer, parks and recreation, transportation and public safety infrastructure to accommodate the growth the developments bring. Oil and gas was added last year for the first time since development fees began in 2000. “It’s a one-time fee and it’s when they drill they have to pay that,” said Brad Mueller, director of community development for the city of Greeley. “People will look at that number and say that it’s too low - that the impact on the roads is very big. But, that is a scientifically figured number.” The fee is $1,999 per well. Pertaining to the oil industry, that fee helps to pay for transportation, police and fire expenses. Though the fee is new, it wasn’t implemented to target the oil and gas industry, Mueller said. “All new development had new impact fees,” he said. Typically, impact fees are reviewed every five years. “We have for many, many years had impact fees and regularly review them,” Mueller said. “And last year was the end of five years, and we implemented new fees. 18 ENERGY PIPELINE FEBRUARY 2016
THE FEE IS $1,999 PER WELL. PERTAINING TO THE OIL INDUSTRY, THAT FEE HELPS TO PAY FOR TRANSPORTATION, POLICE AND FIRE EXPENSES. The whole exercise was not done for oil and gas.” Greeley Mayor Tom Norton said fees on oil and gas at a first were never considered because there wasn’t much drilling, or traffic, associated with it. With the advent of horizontal drilling coupled with hydraulic fracturing, as well as locating multiple wells on one pad, the impacts to drilling sites have become much more intense and visible - especially since they’ve been coming into more urban areas. Oil and gas pays significant amounts to the county for property tax, and likewise significant severance taxes to the state, which local communities can draw from in the form of grants. Norton said those
projects are typically to help build city infrastructure. He said he’s seen anywhere from a ski bus in Aspen to a swimming pool in Craig paid through state grants. But the city has never received compensation for the direct oil and gas impacts, Norton said. “What we’re interested in is how do we recover from the direct impacts we see that aren’t covered by other fees,” Norton said. “Those don’t come back to the local government and pay for the kinds of things we have to pay for.” Housing developers get charged impact fees, as well. “If you’re planning a subdivision of homes with 2,700 people - they are going to impact the existing road network, and the idea is new development should pay for new demand on services,” Mueller said. “You’re a developer, you get charged a fee and we the city have calculated what that impact is statistically so when you’re putting a little more impact on the roads, we’re getting money to update the roads.” Impact fees also help to pay for drainage systems, parks and trails and water, for example. Oil and gas fees include $58 per well for police development fees; $261 per well for fire and rescue; and $1,680 per well for transportation fees; there are no fees for parks and trails or other city fees. The fees are nominal compared to impact fees on a single-family residence, which combined come in at $7,725 per home in Greeley. An Impact Fee Study prepared for the
OPPOSITE PAGE Houses in the Poudre River Ranch subdivision in west Greeley sit near a oil/gas rig late last week. Currently there are 427 wells in the city limits of Greeley. In the near future there is 673 more wells that plan to be drilled. Photo by Jim Rydbom/ jrydbom@greeleytribune.com. RIGHT A fracking rig stands over the streets in north-east Greeley earlier this year. Photo by Joshua Polson/ jpolson@greeleytribune.com.
city of Greeley is a public document that was presented to the city council at the end of 2014. The city’s current impact fees for fire, police, parks and trails are unchanged from those adopted in 2003. The transportation, drainage and trail fees were revised in 2007, but were generally based on the fees adopted in 2003. The transportation, drainage and trail fees have been adjusted annually for the last three years by an “economic adjustment factor,” with the result that the current fees for those facilities are about 6 percent higher than those adopted in 2003. The water and wastewater PIFs (plant investment fees) are updated annually. “In the industrial context of oil and gas, we know oil and gas has some impact on existing road network - so that impact needs to pay its portion,” Mueller said. Though the immediate impact to roads might seem excessive, the impact fee is calculated to consider its longtime use. “It’s not unlike building a Walmart,” Mueller said. “When first built, there’s a lot of trucks that come to the site, but over the life of the site that number goes down.” Again, it’s scientifically calculated. Regarding transportation, the impact study said: The city assesses transportation impact fees on new residential and nonresidential development to help pay for the expansion of the arterial road system. The last comprehensive update of the transportation impact fees was in 2003, although the fees were increased by a total
of about 6 percent over the last three years based on the annual application of an “economic adjustment factor.” The oil and gas industry impact fees were studied, too, because well sites weren’t as active five years ago, Mueller said. “In the last five years, it’s gone from steady to a huge spike,” he said. “The whole fracking and horizontal drilling impacted that.” He estimated that five years ago, the city had about 375 wells. Now, he estimated that number to be 450. As of January, the city hadn’t collected much yet from the oil and gas industry in impact fees. “If we have collected, it’s minuscule,” Mueller said. “If I had to guess for 2016,
I’m guessing $20,000-$50,000.” Norton acknowledged that it seems agencies, governments and nonprofits all have their hands out for oil and gas collection plate. “Some days it fees that way,” Norton said. He and Mueller said they haven’t received a lot of push-back on the fees. “Most of them I have talked to say they want to pay their way. But it does feel like, and they will tell me, that every once in a while, someone else is trying to” fleece them. “We need to be careful. They are paying a lot of tax, which goes to a variety of schools, transportation,” Norton said. “The object is to have everyone pay their fair share.” FEBRUARY 2016 ENERGY PIPELINE 19
TECH TALK
NATURAL GAS AC UNIT PRODUCES ELECTRICITY BY GARY BEERS • FOR ENERGY PIPELINE
a florida-based company, BePower Tech, has
developed natural gas fueled air conditioners, BeCool System, that can dramatically reduce operating costs by producing electricity. Since natural gas is a lower-priced fuel than electricity, the value of electricity produced by the AC is higher than the cost of natural gas consumed. These AC units (10 ton) consume natural gas at rate of 43kW and produce 15kW of electricity. So, the economics breakdown in the following way: • Price of natural gas, 43 kW x 0.03/kW, $1.19/hr • Value of electricity produced, 15 kW x 0.15/kW, $2.28/hr • Savings: $1.09/hr Thus, the user saves money when running their BeCool AC in comparison with typical commercial AC systems. An example of these savings is profiled in Table 1 based on information from New York City.
HOW A “BECOOL” SYSTEM WORKS The BeCool system works in the following manner; a liquid desiccant stream flows between two proprietary system components: a dehumidifier and a regenerator. A liquid desiccant is a fluid that readily absorbs water.
DEHUMIDIFIER Hot humid air to cool enters the dehumidifier. Within the dehumidifier, this air comes in contact with the liquid desiccant. In doing so the moisture in the air is absorbed by the desiccant. This process tends to raise the temperature of the air, so the air is maintained at a constant temperature by flowing a separate air stream through the 20 ENERGY PIPELINE FEBRUARY 2016
dehumidifier. This separate air stream cools down the dehumidification process. The source of this air stream could be building exhaust air or outside air. The temperature of the dry air is dropped using an indirect evaporative cooler. In this component, water is introduced into the building exhaust air stream. This process drops the temperature of this air stream. We use this low temperature air stream to drop the temperature of the dry air stream produced in the dehumidifier. The result is cool, low humidity air that can enter a building.
REGENERATOR The regenerator is a fuel cell system that consumes natural gas and produces heat, water and electricity. The heat produced by the regenerator is used to recover the water in the liquid desiccant. This water, coupled with the water produced in the regenerator, is used to drive the indirect evaporative cooler. The electricity produced is a byproduct of the regenerator operation. While air conditioning operation is transient (start-stop), fuel cell operation is constant. The use of the liquid desiccant system enables the storage of high concentration liquid desiccant for use when air conditioning is needed. In this way, the heat and water generated by the fuel cell system is never wasted.
For over 50 years, GARY BEERS, has worked in numerous fields of environmental science as a consultant, regulator and educator. This career included senior management position with major consulting, nonprofit and public organizations. He has founded several successful firms to capture emerging resource management markets. One of his latest ventures, EnviroScienceINFO, provides content for public media.
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BY DAN LARSON • FOR ENERGY PIPELINE
THE TOP OIL AND NATURAL GAS COMPANIES OPERATING IN THE DENVER-JULESBURG BASIN HAVE EACH RESPONDED TO THE YEAR-LONG SLUMP IN OIL PRICES WITH INTENT AND INNOVATION. the optimism that is ever present in
the oil industry may have tarnished from the relentless pressure of a commodity market under siege, companies here still see the DJ Basin as the economic choice for shelter from the storm. And it is a storm that is expected to continue for months to come. “The oversupply of oil has to correct before prices can recover,” said Sarp Ozkan, a senior energy analyst at Ponderosa Advisors in Denver. “These are troubling times in terms of prices,” Ozkan said. “We don’t expect to see $50 oil before the second quarter of 2017.” Under other conditions, global events such as political disputes in the Middle East or a drop in domestic oil stocks would cause prices to rally. This time around, the response is different as oil markets continued to hammer prices the first week of the New Year. Escalating tension between Saudi Arabia and Iran and a sell-off in the Chinese stock market were seen as driving forces pushing oil prices lower through Jan. 7. The rift between the two Middle East nations could further drive down oil prices “as both countries increase production to cause the other more economic pain,” according published comments by market analyst Darin Newsom, of DTN/The Progressive Farmer. “More production by either or both means larger global supplies.” Domestic production remains north of 9 million barrels per day, a
level market analysts see as exceeding demand when global production is considered. While current production is off the peak of 9.6 million b/d reached in June 2015, oil producers were still pumping 9.2 million b/d through the end of December. In Colorado, oil production has slid off its August peak. The federal Energy Information Administration reported production in the state slipped to 334,000 b/d in October from a high of 342,000 b/d in August. Even with a decline in oil production, jobs were still available in northern Colorado. As 2015 wound down, Weld County continued to maintain one of the highest employment rates in the nation even as job growth slowed. The Colorado Department of Labor and Employment noted that November unemployment held steady at 3.6 percent compared to a national unemployment rate of 5.0 percent. Job growth in Weld County slid from a 5.2 percent gain in new jobs in early 2015 to a gain of 1.1 percent by the end of first half.
STILL THE ONE? Now that companies operating in the DJ Basin have had a full year to respond to the dictates of a slow market, how are they faring? After a half-decade of rapid growth, is the DJ still a good place to make oil? We started our review of the top operators in the DJ Basin with a look at Anadarko, producer of the most barrels in Colorado. In December, Anadarko reported an increase in overall production that was driven by its two primary fields, the Wattenberg, in the eastern DJ Basin, and the Delaware Basin in west Texas. Anadarko stated that increased production in those two fields will drive an increase of more than 15,000 barrels of oil equivalent per day, boosting the company’s overall production to between 314,000 and 319,000 boe/d, up more than 7 percent from third quarter figures. The company also noted improvements in drilling and completions allowed it to reduce capital expenses while lower operating costs
ESCALATING TENSION BETWEEN SAUDI ARABIA AND IRAN AND A SELL-OFF IN THE CHINESE STOCK MARKET WERE SEEN AS DRIVING FORCES PUSHING OIL PRICES LOWER THROUGH JAN. 7 FEBRUARY 2016 ENERGY PIPELINE 23
IN DECEMBER, ANADARKO REPORTED AN INCREASE IN OVERALL PRODUCTION cushioned the impact of lower prices. Anadarko has been drilling in the Wattenberg “for so long that the results we’re seeing are expected,” said John Christiansen, vice president of corporate communications at Anadarko. “As development continues to evolve, I wouldn’t call the results shocking, but this is certainly a field that continues to get better. We know the reservoirs and we continue to refine and improve the completion process and how much oil we ultimately recover.” The company reports it has invested $9 billion in Colorado since 2007 and currently employs 1,450 people here. “Our people and our investments have dramatically increased the amount of locally produced oil and natural gas Anadarko delivers to our customers,” noted Robin Olsen, public affairs manager for the company’s Rocky Mountain division. Ponderosa’s Ozkan noted that Anadarko holds acreage in other basins, including the Eagle Ford, Powder River and Marcellus. “Not all acreage is treated equally,” Ozkan said. “The economics Anadarko sees in Colorado are preferable to those other basins. At today’s prices, it can still produce in the Wattenberg and earn the rate of return investors are looking for.” Ponderosa estimates that Anadarko could sustain a 20 percent return on investment from its core assets in Colorado even if crude oil prices were to fall to $30 per barrel. “To reach that level of return,” Ozkan said, “they need 24 ENERGY PIPELINE FEBRUARY 2016
PONDEROSA ESTIMATES THAT ANADARKO COULD SUSTAIN A 20 PERCENT RETURN ON INVESTMENTS FROM ITS CORE ASSETS IN COLORADO EVEN IF CRUDE OIL PRICES WERE TO FALL TO $30 PER BARREL. at least $37 per barrel in the Eagle Ford and $45 in the Powder River. Their DJ Basin acreage is the best onethird of the company’s total leasehold.” Why does Anadarko see DJ Basin acreage as the crown jewels? “It is a combination of factors,” Ozkan said. Since most of the company’s local acreage is in “the heart of Wattenberg,” it is tremendously productive. Also, initial production rates on newly completed wells and subsequent
decline curves favor development here over other locations. Contributing factors are the company’s consolidated land position and outright ownership of mineral interests in the Wattenberg. In October 2013, the company solidified its position in eastern Weld County with a 100,000-acre land swap with Noble Energy. And, on much of its DJ Basin acreage, Anadarko owns the mineral rights and so, does not have
ABOVE Even amid a downturn, oil and gas exploration companies plan to stick to their Niobrara acreage in Weld County. Photo for Energy Pipeline/ Greeley Tribune RIGHT An oil worker climbs up the derrick at a rig off of 4th Street n west Greeley. This rig is using natural gas as a fuel source to power it’s drilling. Oil and gas operations across Colorado are utilizing new technology to help make operations more efficient for companies and workers.Photo by Joshua Polson/jpolson@ greeleytribune.com.
FEBRUARY 2016 ENERGY PIPELINE 25
A fracking rig stands behind a grove of trees on Friday afternoon in east Greeley. Oil and gas revenue raised taxes throughout the county, but now those revenues are now dropping. Joshua Polson/jpolson@greeleytribune.com
to pay a royalty on that production. Royalty-free production is within the former Union Pacific Railroad Land Grant acreage that Anadarko acquired from UP in 2000. “The Wattenberg continues to be one of the best U.S. onshore assets in the industry,” Olsen declared. “Al Walker, our CEO, stated in November he expects many of the efficiencies that we achieved here over the past year to continue and be further enhanced in the future.”
THE LION’S SHARE Over at Noble Energy, the second largest producer of oil in Colorado, “the lion’s share of our investment is directed to the DJ Basin,” said Ken Fisher, executive vice president and chief financial officer, in early December. “We continue to be very happy with our performance there.” Like Anadarko, Noble holds acreage in other onshore U.S. basins, but continues investing in the DJ, Ozkan said. “No other basin in the company’s 26 ENERGY PIPELINE FEBRUARY 2016
portfolio compares.” Not only is Noble’s 400,000 net acreage position north and northeast of Greeley the largest field in the company’s U.S. holdings, much of the oil produced is heavier, benchmark crude that can be sold at a premium over light crude produced elsewhere in the basin, Ozkan noted. “When it comes to who is the most economical operator of the two, I would have to say Noble,” Ozkan observed. “Noble has gotten so good at managing drilling and completions costs, that without Anadarko’s mineral ownership advantage, Noble would have the lowest break-even rate in the DJ.” Noble’s drive to be the lowest cost producer is seeing results, Ozkan said. “We estimate that Noble has a 10 percent advantage in drilling and completions costs over Anadarko.” For many companies, costs can be reduced by squeezing lower rates from oilfield service companies. How much savings a company can wring from its suppliers varies by company, Ozkan
said. “Across the U.S., service companies cut prices by 20 to 30 percent in 2015; that’s significant and part of the reason domestic producers can maintain production levels. However, we don’t expect service companies to agree to further reductions this year.” If additional cuts in drilling and completions costs, which are the biggest portion of an oil company’s capital expense, are to be realized, advances in technology must continue, Ozkan said. “Companies are drilling better wells that make more oil over a longer time. As a result, they can drill fewer wells and get the same or better results,” he said. Noble reports that in parts of the DJ Basin, it has reduced drilling and completions costs to $3 million per well, the lowest of most companies operating there.
HIGHLY EFFICIENT Synergy Resources is another DJ Basin operator that Ponderosa Advisors see as weathering the low-price
WATTENBERG CONTINUES TO “ THE BE ONE OF THE BEST U.S. ONSHORE
ASSETS IN THE INDUSTRY. AL WALKER, OUR CEO, STATED IN NOVEMBER HE EXPECTS MANY OF THE EFFICIENCIES THAT WE ACHIEVED HERE OVER THE PAST YEAR TO CONTINUE AND BE FURTHER ENHANCED IN THE FUTURE.” ROBIN OLSEN, public affairs manager, Anadarko Rocky Mountain Division
storm. “Overall, their break-evens are comparable to the two bigger companies and much of that is due to Synergy’s management and its leasehold,” Ozkan said. According to CEO Lynn Peterson, Synergy operates 75 horizontal wells and has interest 407 net producing wells. The company reports that it nearly doubled production to 9,524 b/d at the end of August 2015 from 5,020 b/d one year earlier. In a December presentation to analysts, Synergy management stated its core acreage in western Weld County includes 41,000 net acres with an extension area of 51,000 net acres straddling the Weld and Morgan county lines. In its core area, it operates 75 horizontal wells on 11 wellpads. The Synergy report notes the company is increasing the number of mid- and extended-length laterals. Extended laterals wells can be drilled and completed for $4.5 million, it says, and provide break-even returns with oil in the low $40s. An experienced management team, productive acreage and very low debt provide the impetus for Synergy’s success in the DJ, Ozkan noted. “Everything we see about Synergy says they will be successful,” Ozkan said. “Although not nearly the size of Anadarko or Noble, Synergy operates at about the same level of efficiency.”
STRENGTH IN RESERVE For PDC Energy, the third largest producer in the DJ Basin both in oil production and acreage, the Wattenberg field remains “one of the top-rate-ofreturn horizontal oil plays in the US.” Described by stock market analysis firm Seeking Alpha as “a very wellcapitalized and fast growing E&P Business,” PDC is said to be leaning on a hedge position and strong capitalization to increase production. However, the company is said to need oil in the mid$50s to reach break-even. “At today’s prices, they are not economic in the DJ,” Ozkan noted. “Their acreage here is likely the best in their portfolio but they may need to keep drilling to maintain cash flow.” Meanwhile, the company has earned the respect of regulators and the communities in which it operates. “We work in close cooperation with government regulators, communities, industry groups and others to protect public health, the environment and safety,” said Susan Fakharzadeh, community relations manager at PDC. “We are also exceptionally active in the Weld County communities in which we live, work and operate.”
BETTER OVER THERE EOG Resources is another DJ Basin operator whose efficiency has allowed
it to withstand the headwinds the industry is facing. The company claims it has the “most productive, lowest cost horizontal wells in the U.S.” and that such innovations as producing its own sand, chemicals and drilling fluids allow it to see the lowest operating costs and highest productivity of oil companies its size. “They really are among the best operators anywhere,” Ozkan noted. “It’s just that they are not developing their acreage in the DJ Basin at this time. Unlike Anadarko and Noble, they prefer to develop their acreage in the Eagle Ford, Permian and Williston basins rather than here.”
QUESTION MARK Of the other leading operators in the DJ Basin, a question mark is now attached to the acreage held by Encana in western Weld and Boulder counties. In October, Encana announced it would sell its entire 51,000 net acre position in the DJ Basin for $900 million to a business owned mostly by the Canadian Pension Plan Investment Board with a 5 percent stake owned by The Broe Group out of Denver. At the time, Encana stated it intended to direct the bulk of its investments to the Permian and Eagle Ford oil plays and a pair of gas plays in western Canada. The deal stalled in late December when the companies announced closing had been pushed back to sometime in the second quarter of this year. Encana is reported to have produced more than 880,000 barrels of oil in the two counties in July. Its acreage is considered favorably but there is concern it can be further developed in the current price environment, Ozkan noted. “It is a good bet for the longer term,” he said of Encana’s acreage. And the company has shown itself adept at developing good community relations. “It will be interesting to see if the new operator will continue in the same direction.” FEBRUARY 2016 ENERGY PIPELINE 27
28 ENERGY PIPELINE FEBRUARY 2016
BY SHARON DUNN • ENERGYPIPELINE.COM
MONTHS LATER, LESSONS
ARE LEARNED FROM
GREELEY FIREFIGHTERS ’
FIRST BIG TEST ON OIL,
GAS-RELATED FIRES
AS THE BLACK SMOKE BILLOWED And it was a hard switch to menacingly through the air on make for all involved. a cloudy spring day last April, “It’s pretty standard to let it Greeley residents flocked to burn,” said Dale Lyman, fire the scene and collectively marshal for the city of Greeley. willed firefighters’ efforts to Greeley’s fire station No. 1 squelch the flames. responded to the fire, which was Then the explosions came, about three miles northeast of then more flames. Those on Greeley, near the Greeley-Weld the outside, even firefighters County Airport. fire marshal trained to extinguish flames “An hour or two later, it looks City of Greeley quickly, watched in horror like, ‘Those guys haven’t put was the smoke continued to that fire out yet?’ But with these, plume though the air for four we’ve learned you need to have a hours before it was finally extinguished. good strategy, plan, resources, and do a risk The charred remains of semi-trucks and analysis,” Lyman said. “It’s a lot different burnt tanks the next day painted a dismal than what people normally think about fires picture of disaster, but one that could have and putting them out as quickly as possible. been much worse if there had been injuries ... It was tough on the firefighters, as well, or deaths. The lessons learned with this because they’ve trained their whole careers fire - Greeley firefighters’ first big test in to put it out and put it out fast.” combating an oil and gas-related fire - have When the call came in about 1:10 p.m. spoken volumes for city fire officials, and April 17, firefighters were out there in validated precautions the city has been minutes. A bolt of lightning had struck a taking with oil and gas facilities for years. wastewater storage tank, the heat from But the incident was a learning process which ignited the vapors inside. for all involved. But winds were strong that day, and While the general public has grown it spread the fire to some storage tanks through the years to expect fires to be that were sitting above ground. Those put out in minutes, Greeley fire training tanks were associated with skimming the in the previous years has challenged that petroleum products from the water before conventional wisdom when it comes to oil the water was injected 10,000 feet into and gas-related fires. the ground for storage.
DALE LYMAN
Smoke rises as a fire spreads at a waste water storage area on Friday, April 17, 2015 near the Greeley-Weld Airport outside of Greeley, Colo. Photo by Joshua Polson/The Greeley Tribune.
FEBRUARY 2016 ENERGY PIPELINE 29
everything full circle. We’d been going through all this preparation and planning and we got to apply it.
AFTER THAT FIRST TANK EXPLODED, THEY KNEW THERE WERE ANOTHER TWO OR THREE TANKS ON SITE THAT
WOULD DO THE SAME “Produced water does contain things that are flammable, and I know for many years, people didn’t think it was, and even I talked to guys in the oil and gas industry, who thought it’s just wastewater. But yes, wastewater burns,” Lyman said. What happened next was like watching a boiling teapot on a stove. The flames got beneath the tanks, heating the water inside. All such tanks are equipped with pressure valves to release vapors when pressures get high. In this case, the pressure valves couldn’t keep up, as the heat of the flames made the tanks boil over, so to speak. The tanks subsequently exploded into the air. “It was scary from a fire incident command perspective,” Lyman said. “We could feel that on the ground and we were 1,000 feet away. That was very scary.” As intense as it was, firefighters had to keep their wits about them. There were more tanks just like that exploding tank on site. It wasn’t safe to try to fight the fire on the ground when they arrived. They need a plan.
FIREFIGHTER TRAINING All Greeley firefighters have gone through oil and gas training from the best. “In the last three years, we have come a long way in our whole oil and gas response capabilities and knowledge base, trainingwise,” Lyman said. The entirety of Greeley’s fire command staff has attended an eight-hour oil and gas emergency response command class put on by a large company out of Houston 30 ENERGY PIPELINE FEBRUARY 2016
called Wild Well Control. “They’re one of the companies that was contracted to fight the oil well fires during the Gulf War when Saddam lit off the oil and gas wells in Kuwait,” Lyman said. In 2014, the department received a foam trailer, donated by Mineral Resources, and fire personnel attended training for fighting flammable liquid fires. “Just acquiring that piece of equipment was a huge step in getting everyone through the training,” Lyman said. “Then we had that little incident on April 17 ... which kind of brought
THE PLAN OF ATTACK On scene of the fire and subsequent tank explosions, firefighters were immediately in touch with the site operators. They quickly determined there were no injuries and all employees at the facility were accounted for. “Then we started thinking about adjacent properties and the nearest homes, so we started evacuating,” Lyman said. Typical evacuations are a half-mile. The nearest house was 459 feet. The site was fairly remote and they were dealing with a volatile situation. “One of the things we learned in training was before you initiate an attack, assemble all your resources, like foam and water,” Lyman said. “We got mutual aid from Eaton and Kersey fire departments. From the beginning we had the people from the injection well site close by to our command post. “In that initial meeting, we discussed (the strategy). Since it was fairly isolated, we made the decision to let it burn, let the tanks vent, so we didn’t have a highpressure situation.” After that first tank exploded, they knew there were another two or three tanks on site that would do the same. “We just backed everyone off,” he
Fire melts the cab of a truck as an April 17, 2015, blaze burns at a waste water storage area near the Greeley-Weld Airport. The tanks burned for four hours before firefighters felt it was safe enough to step in and fight the fire. It took firefighters 20 minutes to extinguish the blaze. Photo by Joshua Polson/The Greeley Tribune.
said. “We didn’t want to put anyone at risk. It was like a domino effect, and that was part of the plan. We knew that was going to happen, and part of the reason we backed people off. We knew we would have fire in the enclosed tanks and it creates pressure and that’s a risk to firefighters going there and getting close to it.” In the risk analysis, command staff determined there were no life safety issues, and the owner/operators said they weren’t concerned about saving equipment, so they decided to let it burn while they assembled all their resources. They called in a second alarm to bring more equipment, and the foam trailer to the site. Noble Energy officials, who have an oil and gas site nearby, brought in their foam trailer to help. The foam was the most important aspect of fighting this fire, Lyman said. The foam trailer is equipped to hold 750 gallons of foam concentrate. They mixed it with 20,000 gallons of water, which in a rural setting was difficult to come by, complicating their firefighting efforts. They had to make sure they had enough foam, because as Lyman said, “it’s an allor-nothing prospect.” Foam is applied to horizontal fires, or pools on fire on the ground. On site, the liquid from the tanks that had exploded remained in the contained area, surrounded by a berm. But the pools of liquid were on fire. Firefighters must apply foam on that pool and completely cover it. “It creates a barrier, a seal over the top of that liquid. It floats on top of the liquid and seals the vapors coming off the liquid,” Lyman said. “In a flammable liquid fire, the vapors are what’s burning. Foam takes away the fuel and cools it a bit.” Simply applying some foam on the fire, without covering it completely renders the entire process useless, Lyman said. “If you start an attack with foam and you don’t have enough, whatever you applied is wasted because the fire will over take the foam blanket and it’s like you did nothing at all,” Lyman said. While the foam only works to seal the burning pools, there still was threedimensional objects on fire, Lyman said, such as tank valves and other equipment. Firefighters had brought in a dry-chemical truck housed at the Greeley-Weld County Airport nearby. Those chemicals act like a fire extinguisher when sprayed onto flames.
Once firefighters began that attack, the fire was out in 20 minutes, Lyman said. Firefighters stayed there through the night, applying foam as needed, and they finally left the next morning at 4 a.m. when they were sure there were no more ignition points.
LOOKING BACK It was a tense day to say the least. Greeley firefighters hadn’t really seen an oil and gas explosion and fire to this extent. There was a small fire a few years back near the Poudre Learning center when vapors were caught on fire at an oil tank, but that was quickly extinguished and caused little damage. But training won out in the end. What really excited Lyman was the process. In looking back, he said he felt encouraged by the city of Greeley’s precautions when siting oil and gas facilities in more urban areas in Greeley. The city of Greeley had 200-foot setbacks in place at the location of the fire. For this injection site, there was a row of trees in that 200-foot setback. Firefighters worried those trees would ignite with the heat and embers. An outbuilding 300 feet away and a home 459 feet away. None of them were
BY THE NUMBERS TIME OF CALL 1:10 p.m. LOCATION NGL Water Solutions, 22727 Weld County Road 64 IGNITION SOURCE Lightning strike NO. OF TANKS BURNED 11 NO. OF HOURS FIRE BURNED 4 AMOUNT OF FOAM CONCENTRATE 1,000 gallons TIME IT TOOK TO EXTINGUISH BLAZE 20 minutes DAMAGE ESTIMATE $1.5 million
damaged. The exploding tanks were located no more than 50 feet from their initial resting spots. “I learned a lot about our setbacks actually, that our setbacks were validated,” Lyman said. “Up until this point, all the setback numbers we had worked with here in the city... they were all based on engineering studies that either owner/ operators had commissioned and we actually commissioned to validate some of them, but they were all theoretical. “We have a number of areas we looked at, radiant heat, potential explosions, natural gas leads and plumes, they’re all based on engineering theory and fire protection studies,” Lyman said. “This fire was like a living laboratory.” “It was kind of reassuring for me,” he said of the existing city setbacks. “It makes me feel pretty comfortable.”
CONTINUING EDUCATION It’s not as if this is it. Firefighters didn’t shake hands at the end of the day, pat each other on the back and decided they now knew everything about fighting such an industrial fire. This stuff doesn’t happen every day. They need to keep abreast and keep training. “This fire gave us enough lessons, but there area always things that can get thrown in to change the whole strategy and tactics, unique things you might not have considered,” Lyman said. “There’s unique weather, locations, so in general, it was good. I think it prepared us, but there’s always new things and new twists that come into play that would definitely challenge us. “I don’t want to say, ‘We did this, we’re good for anything and everything.’ No, absolutely not.” That’s where the city’s new public safety training facility will come in. The facility - at 4th Street and 35th Avenue adjacent to an existing multiwell pad - will open mid-spring, and Noble Energy has already committed to donating equipment for props to help firefighters learn how certain field equipment works in fire situations. “It’s just a place to practice. It’s like the Denver Broncos training facility where they run through plays,” Lyman said. “That’s where we’re going to go and run through our plays and use our equipment to become more efficient.” FEBRUARY 2016 ENERGY PIPELINE 31
News Briefs API, business coalition file lawsuit against EPA’s new ozone standards WASHINGTON - The American Petroleum Institute and a coalition of business groups filed a lawsuit in December against EPA’s tightening of ozone NAAQS standards. “Our nation’s air has been getting cleaner without costly new regulations, but the administration ignored science by changing the ozone standards before states could fully implement existing standards,” said API Vice President and General Counsel Stacy Linden, in a news release. “We’re asking the court to step in and block this unnecessary regulation that could be one of the costliest to consumers in history.” Ground level ozone in the U.S. declined by 18 percent between 2000 and 2013, according to EPA data. “Tightening the standards will not improve air quality any faster, but these regulations could hurt jobs and the economy by imposing unachievable emission reduction requirements on virtually every part of the nation,” Linden said. “Even pristine areas with no industrial activity such as national parks will be out of attainment. Operating under such stringent requirements could stifle new investment and impair our nation’s economic future.” New restrictions on business and investment could impact job growth in 958 counties across the U.S. - nearly one-third of all counties or county equivalents - under EPA’s new standard of 70 parts per billion, according to an API analysis of EPA data. That’s up from just 217 counties at the previous ozone standards. API is a national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy. API’s more than 650 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms. They provide most of the nation’s energy and are backed by a growing grassroots movement of more than 30 million Americans. - Staff Reports
UK Parliament backs fracking below national parks LONDON (AP) - The British Parliament has approved proposals that would allow fracking for shale gas below national parks, world heritage sites and other designated areas of natural beauty. The measure, which is opposed by environmental groups, was endorsed in December by 298 votes to 261 and paves the way to more extensive fracking three-fourths of a mile below parks. The fracking process involves pumping huge volumes of water, sand and chemicals underground to split open rocks to allow oil and gas to flow. The opposition Labour Party said after the vote that there should be a moratorium until better safeguards are in place. “We should have a moratorium on fracking in Britain until we can be sure it is safe and won’t present intolerable risks to the environment,” said Lisa Nandy, Labour’s spokeswoman on energy and climate issues. She said the government is ignoring the public’s “legitimate concerns” about the technology. Earlier in 2015, British lawmakers rejected a proposal to suspend fracking but indicated they would not permit fracking in national parks. Rose Dickinson of Friends of the Earth said the government is reneging on its commitment to have strong fracking safety regulations in place. She said fracking “is completely incompatible with tackling climate change and the agreement reached in Paris.” The government says fracking is safe if the right standards are in place. - Associated Press
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Sunrun’s new office expands the company’s geographic footprint nationwide to support consumer demand for home solar into 2016. In Colorado, Sunrun has saved local homeowners more than $4.3 million on their electric bills since 2007. The company will also help advance Colorado’s cleantech industry by offering employment opportunities in operations, project planning and design engineering, the release stated.
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“Colorado is thrilled to be home to Sunrun’s new corporate office. Colorado’s forward-thinking energy policies and talented workforce will support the company’s creation of new jobs and savings for homeowners while diversifying the state’s energy economy,” Hickenlooper said in a news release. “Sunrun has proven its business and advantages for homeowners. We look forward to supporting Sunrun’s future growth.” “Renewable energy and finding innovative ways to power our homes is one of the next great economic opportunities, and we’re proud that Sunrun has chosen Denver for their next-stage growth and success,” said Denver Mayor Michael Hancock in the release. “With Sunrun joining a roster of leading industry firms here in the city, we can build on our momentum as a leading center for progress in this important and growing sector.” To apply for open Sunrun positions in Denver and learn more about what it is like to work at Sunrun, visit Sunrun’s Careers page. - Staff Reports
PROUD
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of the Greeley Community
Halliburton Company and Baker Hughes Incorporated have agreed to close their merger by April 30. The U.S. Department of Justice did not agree with the merger.
Conserving the Environment
Halliburton and Baker Hughes officials believe that the proposed merger is good for the industry and customers, according to a news release. The merger is expected to create a strong company and achieve substantial efficiencies enabling it to compete aggressively to provide efficient, innovative and low-cost services. Completion of the transaction would allow customers to operate more cost-effectively, which is increasingly important due to the current state of the energy industry and oil and gas prices, the release stated.
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Over the last year, Halliburton and Baker Hughes have spoken extensively with the DOJ regarding Halliburton’s acquisition of Baker Hughes. The parties have produced millions of pages of documents, providing numerous written submissions in response to specific questions, and participated in multiple meetings with the DOJ, the release stated.
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Halliburton proposed to the DOJ a divestiture package that would facilitate the entry of new competition in markets in which products and services are being divested, the release stated. Both companies strongly believe that the divestiture package, which recently was enhanced to address the DOJ’s specific competitive concerns, adequately addressed concerns raised by competition authorities, including the DOJ, the release stated. There is no guarantee that an agreement with the DOJ or other competition authorities will be reached, the release stated. Halliburton and Baker Hughes agreed to extend the time period for closing the transaction to no later than April 30, as permitted under the merger agreement, though the parties would proceed with closing prior to such date if all relevant competition approvals have been obtained, the release stated. Te boards of directors of both Halliburton and Baker Hughes unanimously approved the merger agreement and the stockholders of each company overwhelmingly approved the transaction. Halliburton and Baker Hughes also continue to work on any remaining issues with the European Commission and all other competition enforcement authorities that have expressed an interest in the proposed transaction. The European Commission in January announced it would continue to investigate the merger, taking 90 days to review the pending transaction. The pending acquisition has received regulatory clearances in Canada, Colombia, Ecuador, Kazakhstan, South Africa, and Turkey. - Staff Reports
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MAKING HOLE A look back at the origins of oil and gas BY BRUCE WELLS • AMERICAN OIL & GAS HISTORICAL SOCIETY
Artillery fights oilfield fires early petroleum technologies included Civil
War era cannons for fighting fires, especially in the Great Plains, where lightning strikes often ignited derricks and oil tanks. Artillery blasted solid shot into the base of the burning tank, allowing oil to drain into a pit until the fire died. “Oil Fires, like battles, are fought by artillery,” explained a December 1884 article from the Massachusetts Institute of Technology. Appearing in the student publication Tech, “A Thunder Storm in the Oil Country” described the opening scene. “The lightning had evidently struck a derrick and had followed the connections into the tank, igniting the gas, which always is rising from the fresh oil. Immediately following this blinding flash, the black smoke began to roll out,” reported this first-person account. “Eager to see the fire, we turned our horses down the valley and left them at the nearest barn.” “Without stopping to watch the burning tankhouse and derrick, we followed the oil to see where it would go,” noted the author, who does not give the conflagration’s location. “Here, on a large smooth farm were six iron storage tanks, about 80 feet in diameter and 25 feet
high, each holding 30,000 barrels of oil,” the report continued, adding that burning oil “spread with fearful rapidity over the level surface” before reaching one of the oil tanks. “Suddenly, with loud explosion, the heavy plank and iron cover of the tank was thrown into the air, and thick smoke rolled out,” proclaimed the MIT writer. News of the fire had been telegraphed to the operator’s central office while other tanks, surrounded by fire, “in turn boiled and foamed, and the heat, even at a distance, was so intense that the workmen could not approach near enough to dig ditches between the remaining tanks and the fire.” Mentioning the arrival of “the long looked for cannon,” the 1884 article observed that “since the great destruction is caused by the oil becoming overheated, foaming and being projected to a distance, it is usually desirable to let it out of the tank to burn on the ground in thin layers; so small cannon, throwing a three-inch solid shot are kept at various stations throughout the region for this purpose.” The newly arrived cannon was targeted at points below the supposed level of the oil. “The marksmanship at first was not very good, and as many
BRUCE WELLS, is the founder of American Oil and Gas Historical Society, a 501c3 nonprofit organization dedicated to preserving the history of oil and gas. He is a former energy reporter and editor who lives in Washington, D.C.
ABOVE LEFT Especially in the Midwest, lightning strikes ignited derricks and oilfield storage tanks. Photo courtesy Kansas Oil Museum, El Dorado.
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TOP | An oil patch artillery exhibit is at the Oklahoma Oil Museum in Seminole educates visitors about the early fire fighting technology.
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BOTTOM | A smooth-bore cannon in Corsicana, Texas, once stood ready at the Magnolia Petroleum Company’s tank farm.
shots glanced off the iron plates as penetrated, but after a while nearly every report was followed by an outburst,” the observer reported. “The oil in three tanks was slowly drawn down by this means and did not again foam over the top, and the supply to the river being thus cut off the fire then soon died away.” In the end, “it was not till the sixth day from that on which we saw the first tank ignited that the columns of flame and smoke disappeared. During this time 180,000 barrels of crude oil had been consumed, besides the six tanks, costing $10,000 each, destroyed,” concluded the Tech article. Today, visitors to a park in Corsicana, Texas, a town that struck oil in 1894 while drilling a water well, can see an oilfield cannon donated by Mobil Oil Company in 1969. Other cannons are exhibited at many oil-patch museums and parks, including the Kansas Oil Museum in El Dorado, the Oklahoma Oil Museum in Seminole, Discovery One Park in Bartlesville, and the Wood County Historical Center and Museum in Bowling Green, Ohio. The American Oil & Gas Historical Society depends on donations, which are 100 percent tax deductible. Go to www.aoghs.org.
“Making Hole” is a term for drilling coined long before oil or natural gas were anything more than flammable curiosities. Read more petroleum history at the American Oil & Gas Historical Society’s website, www.aoghs.org.
DATA CENTER
The oil and gas industry is a large part of Colorado’s economy. Below, find statistics on energy pricing, drilling production, well permits, spills and rigs.
2015 DRILLING PERMITS COUNTY
RIG COUNT BY STATE
NO. (% OF STATE TOTAL)
Weld..........................................................................................1,841 (61.5%) Garfield......................................................................532 (18%) Mesa...................................................126 (4.2%)
State Dec. 18 Nov. Avg. Colorado 22 25 Louisiana 59 59 Oklahoma 83 86 North Dakota 49 58 Texas 308 324 California 7 9 Alaska 9 12 Ohio 14 15 Pennsylvania 25 28 Wyoming 16 20 Source: Baker Hughes Rig Count.
Oct. Avg. 33 70 83 63 340 12 13 20 28 24
Sept. Avg. 30 69 90 63 349 14 12 20 29 25
2015 GAS PRODUCTION
Rio Blanco..........................................107 State....................................................2,987 Source: Colorado Oil and Gas Conservation Commission as of Jan. 4
2015 OIL
PRODUCTION COUNTY *YTD
US RIG COUNT
The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999. Area Jan. 8 Dec. Avg Nov. Avg. Oct. Avg. U.S. 681 714 760 809 Canada 125 160 178 184 Source: Baker Hughes Rig Count, Jan 8.
COUNTY *YTD PRODUCTION (% OF STATE) Weld........................................412,939,306 (30.7%) La Plata ..................................268,262,813 (19.9%) Las Animas ................................ 65,750,367 (4.9%) Rio Blanco .................................. 46,969,481 (3.5%) Mesa ........................................... 24,692,673 (1.8%) State...................................................1,342,770,782
PRODUCTION (% OF STATE)
Weld 83,530,084 (88.3%) Rio Blanco 3,683,307 (3.9%) Arapahoe 1,448,355 (1.5%) Garfield 1,445,230 (1.5%) Lincoln 1,063,811 (1.1%) Cheyenne 989,527 (1%) State 94,548,660
Source: Colorado Oil and Gas Conservation Commission as of Jan. 8.
Source: Colorado Oil and Gas Conservation Commission as of Jan 8.
COLORADO ACTIVE WELL COUNT
Weld ..........................................................................22,650 Garfield .....................................................................11,034 Yuma ...........................................................................3,881 LaPlata........................................................................3,323
Las Animas .................................................................2,962 Rio Blanco ...................................................................2,898 36 others .....................................................................6,881 State .........................................................................53,629
FEBRUARY 2016 ENERGY PIPELINE Source: Colorado Oil and Gas Conservation Commission as of Jan. 4.
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