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2 ENERGY PIPELINE MARCH 2016
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MARCH 2016 ENERGY PIPELINE 3
Features
24 FRACK CITY
Greeley, Colo., is not so easy to get oil, gas through.
20
By Linda Kane & Sharon Dunn
BALANCE OF POWER
Colorado Oil and Gas Conservation Commission adopts rules for locating wells in urban areas.
ON THE COVER
By Sharon Dunn
Design by Darin Bliss
12
BARGAIN HUNTERS Downturn positions large oil and gas companies to acquire smaller companies below cost.
24
Brine processing is green alternative to deep well injection.
By Allison Dyer Bluemel
14
MONITORING SUCCESS
Water Watch pilot project finds first evidence of well tainting in 2 years. By Sharon Dunn
16
TECH TALK
By Gary Beers
26
MAKING HOLE
Oil boom brings first Hilton Hotel.
Departments 8
Support Company Profile
10
Field Worker Profile
28
News Briefs
31
Data Center
By Bruce Wells
ROUGH RIDE
Anadarko reports continued losses in 4th quarter. By Sharon Dunn
4 ENERGY PIPELINE MARCH 2016
Cutters Wireline Services, Inc.
Meet Chris Greer, Titan Energy Services, LLC
MARCH 2016 ENERGY PIPELINE 5
ENERGY is your
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 Bruce Wells
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ENERGY PIPELINE MAGAZINE 501 8th Ave. P.O. Box 1690 Greeley, CO 80632 For all editorial, advertising, subscription and circulation inquiries, call (970) 352-0211. Send editorial-related comments and story ideas to: editor@energypipeline.com For advertising inquiries, contact: bjacobson@energypipeline.com
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SUPPORT COMPANY PROFILE
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HOW LONG HAS YOUR BUSINESS BEEN OPERATION IN WELD COUNTY? 5 years.
WHY SHOULD CUSTOMERS DO BUSINESS WITH YOUR COMPANY?
CORPORATE HEADQUARTERS
We provide good, quality, safe service. “We’re committed to the area over here regardless of the price of resources,” District Manager Josh NolanCQ.
655 Gyrfalcon Court, Windsor 970.834.2495 Vernal, Utah 435.789.5556
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NUMBER OF EMPLOYEES 35
WEBSITE www.cutterswireline.com
SERVICES OFFERED Cutters provides cased-hole wireline services to companies throughout the Denver-Julesburg Basin in Colorado and southern Wyoming, including Anadarko Petroleum, Encana Corp. and Whiting Petroleum Corp., along with most other major basins in the U.S.
8 ENERGY PIPELINE MARCH 2016
As long as there is business here, we hope for a very long time. The company first started in Vernal, Utah, in 1988 and expanded in 2007 with the purchase of Lone Wolf Wireline and Mesa Wireline. They also acquired Wireline Specialties
in 2008, expanding operations into New Mexico’s San Juan Basin. The company expanded to the DJ Basin in 2011 to get in on the oil and gas side of the industry. In 2012, the group grew to include the Capitan Corporation in Midland, Texas.
IS YOUR COMPANY IN A GROWTH MODE? In this basin yes, but we’re scaling back in other areas. “We’re a small, independent company that focuses on the quality of our work and great employee base,” Nolan
said. “(We’ll expand) to whatever the market can handle.”
WHAT KIND OF SKILLS, EXPERIENCE OR EDUCATION DO YOU LOOK FOR IN EMPLOYEES? High School education. We’d like employees who are safety oriented and minded, mechanical people who don’t mind working in the outdoors.
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FIELD WORKER PROFILE
Chris Greer TITAN ENERGY SERVICES, LLC STAFF REPORT • FOR ENERGY PIPELINE
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WHERE DO YOU LIVE? Loveland CO
HOW LONG HAVE YOU BEEN WORKING IN NORTHEASTERN COLORADO? 6 years
HOW DID YOU GET INTO THE INDUSTRY? A very good friend gave me an opportunity.
WHAT IS YOUR JOB TITLE AND DUTIES? I am the operations manager at Titan Energy.
WHAT IS THE MOST INTERESTING THING ABOUT YOUR JOB? The constant evolution of the industry. At Titan we are always looking into new solutions to help our customers reach efficiency, safety, and environmental goals. Many of our products
have been created and engineered by our own staff to better assist our customers and help them meet their needs.
WHAT IS THE BEST PART OF YOUR JOB? The best part of my job is knowing that Titan Energy is here to make a difference. We care about Colorado and we provide a service to keep Colorado beautiful. We custom build our containment systems so they can keep land owners land spill free.
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WHAT DO YOU DO IN YOUR SPARE TIME? VOLUNTEERISM, SCHOOL, SPORTS? I enjoy golf and fishing in my spare time. I always look forward to the summer to go camping with my family and enjoying the outdoors.
WHAT ARE YOUR FUTURE AMBITIONS IN THE INDUSTRY? My ambitions for myself/Titan Energy is to
HOW DO YOU FEEL ABOUT THE CURRENT ENVIRONMENTAL DEBATE GOING ON WITH “FRACKING” IN COLORADO? I believe that whenever there are concerns you are going to have debate. It is our responsibility as industry leaders to listen to the public and to keep providing solutions for their concerns.
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MARCH 2016 ENERGY PIPELINE 11
BARGAIN HUNTERS
Downturn positions large oil and gas companies to acquire smaller companies below cost BY ALLISON DYER BLUEMEL • FOR ENERGY PIPELINE for many oil and gas companies, the last
year has been filled with woes as the market continues to face dips in the price of crude oil. However, for larger capital companies, such as Anadarko Petroleum Corp. – the largest operator in the DJ Basin – and Great Western Oil & Gas, the dip in prices may allow them to purchase new assets from smaller companies. While the DJ hasn’t experienced the fire sales – the rapid boom of mergers and acquisitions – that have been rumored as a possibility for North American operators since October 2015, the region is beginning to see the effects of long and low crude oil prices in the sale of non-core assets of companies small and large. “There’s no fire selling yet,” said Great Western Oil & Gas CEO Rich Frommer. “That won’t come until the bankruptcies come and they haven’t hit in northeastern Colorado.” Great Western Oil & Gas – whose affiliate company Denver-based Broe Group is pursuing purchase of $900 million of Encana assets since last fall – continues to consider any opportunities that can add to its presence in the region, he said. While the industry has been feeling the low prices for some time now – shown by layoffs and cuts in production – but the Chapter 11 bankruptcy filing of Denverbased Escalera Resources Co. in November 2015 signaled more serious cuts in the region due to high debt. The filing doesn’t yet concern Frommer, who said Escalera’s filing shows some of the hardships are beginning to be felt by smaller companies on the basin’s fringes. 12 ENERGY PIPELINE MARCH 2016
“The smaller guys who have borrowed a lot of money run into very difficult times,” he said. “As commodity prices drop, they couldn’t compete because their cost of production (was so high). The fire sales will start out on the perimeter of and then gradually work in as the economics get worse.” Frommer likened the current oil and gas climate in North America to the historical family farm plight. As commodity – crop – prices dropped lower and lower, it became less economically feasible for small family farms to produce. The smaller their profit became, the more small farms began to sell at below-value prices to larger corporations. “We’re seeing that same thing happening in the oil and gas business right now,” Frommer said. “We will continue to look at building our position as long as the opportunities are available.” However, the act of acquisition does not reflect that large companies aren’t feeling the downturn. Instead, many have cut production costs and focused on core assets, seen by Encana’s attempt at sale of the $900 million in “non essential” assets. “Northern Colorado is driven by mostly big operators,” Frommer said. “Now you’re going to see them run fewer rigs. The larger (operators) might sell of their fringier pieces, sticking with the more cored up positions.” Anadarko demonstrated its ability to cut production costs by 40 percent in 2015, setting them up to weather the market’s uncertainty in the coming quarters,
executives reported during their 2015 fourth quarter report Feb. 2. They’re also planning to continue to sell off non-essential assets in the near-term to keep production levels consistent. Few companies have begun selling actual acreage or other assets on the production side, however, said Sarp Ozkan, senior energy analyst for Denver-based Ponderosa Advisors, LCC. “It’s very difficult to get fairly priced, good acreage,” he said, adding that for the larger companies things are bad enough to take a loss on the land sale. “It’s very difficult to do a deal in the DJ Basin particularly when a lot of the acreage that the big guys have doesn’t really make sense to sell for $55 or $60 a barrel.” Overall, Ozkan said the “big guys in the basin are doing just fine,” though that he projects production will be on the downward trajectory. “In terms of core assets of the other guys… guys like Bonanza Creek and Bill Barret Corp., they’re in trouble,” he said. “Their debt is very high and their returns are low. They haven’t been as good as the others in the basin in terms of operating. They just don’t have anything making money at the moment.” Still, it will be a while before the big guys would be tempted to buy out struggling smaller companies, but “nothing is out of the question for a price,” Ozkan said. “The bottom line here is, to survive, you have to be a low cost producer,” Frommer said. “This is going to be a very difficult time for everyone in our business.”
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Dr. Ken Carlson, associate professor of Civil and Environmental Engineering, and the lead in Colorado Water Watch, samples water wells nearby a Noble Energy production facility near Ault, with students Asma Hanif, center, and Ji-Hee Son. Colorado Water Watch began in February 2014 in a partnership between Colorado State University and Noble Energy to detect changes in groundwater. Photo by John Eisele/Colorado State University.
MONITORING SUCCESS
Water Watch pilot project finds first evidence of well tainting in 2 years BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM
in two years of round-the-clock
inspection, water analysts in recent months isolated one case of water contamination in a monitoring well in a heavily drilled area northeast of Greeley. Analysts with Colorado Water Watch, a water-monitoring partnership between the Center for Energy Water Sustainability at Colorado State University and Noble Energy, in November found evidence of thermogenic gas — which originates from oil and gas exploration — in a water monitoring well in an area that has been heavily drilled for years. The gas found would not be considered “toxic” to groundwater, which in this area could feed water wells and irrigate crops, but rather more of an explosion risk in certain situations, said Ken Carlson, director of the program. “The sky is not falling,” Carlson said when contacted about the anomaly, which is noted on the Colorado Water Watch website. “There isn’t a hazard here, we don’t think, because it is irrigation water.” 14 ENERGY PIPELINE MARCH 2016
Investigation by the Colorado Oil and Gas Conservation Commission so far has not pinpointed a source of the contamination. The area is surrounded by several Noble wells, some which were drilled for several years ago.
THE SAMPLING FOUND GAS ONLY AND NOT CARCINOGENS ASSOCIATED WITH OIL AND GAS LIQUIDS Colorado Water Watch, billed as an independent watchdog of water in areas of oil and gas drilling, started its first water testing in February 2014 in a pilot project with Noble Energy. The plan was to drill 10 water-
monitoring wells within a half-mile of Noble wells and monitor water levels 24/7. Throughout the Wattenberg Field in recent years, there have been a few other instances of gas leaking from wells, usually older, legacy wells, which were built with lesser casing standards than recent wells. “One thing most of us believe is that the risk is not these new horizontal and hydraulically fracked wells that are being put in (today) …” Carlson said. “The risk is more the 20- to 40-year-old wells done at a time when we didn’t have nearly the knowledge and didn’t have nearly the barriers built in in the casing. … It’s all speculation” until a source is pinpointed. In November, however, Carlson’s team had drilled the last of its test wells in the pilot project on a farm southeast of Lucerne. They expected similar results to other tests in the previous two years from monitoring wells. “It was sort of a shock, really,” said Carlson, noting the gas was found in the water during the well testing for baseline levels, which is
used for comparison to future samples. “We were expecting, particularly with the initial one, (to be fine). We’ve had hits, so to speak, or events or anomalies (on other wells), but they haven’t been oil and gas-related. They’ve been agriculture-related. This is the only time we’ve actually seen oil and gas-related contamination.” The sampling found gas only and not carcinogens associated with oil and gas liquids, such as benzene. Analysts found a methane concentration of 50 milligrams per liter; 20-25 grams per liter is typically considered a threshold for the potential to cause explosions. As an example, if such a concentration of water was pumped into a shower, from which steam was emanating, if you lit a match, it could potentially explode, Carlson explained. He added, however, water from this well is not being used domestically. Carlson quickly notified COGCC authorities, which began an investigation, which involved testing area water wells, as well as integrity testing of surrounding oil and gas wells. The agency reported, “if any oil and gas wells are found to lack integrity
or are otherwise identified as a source of the dissolved gases found (in wells) COGCC will require the wells to be plugged or repaired to prevent further impacts.” Noble Energy spokesman Brian Miller would not comment on the situation, but issued the following statement: “Noble Energy is a partner in Colorado Water Watch, along with CSU, COGCC and others. COGCC requested Noble Energy to identify and evaluate wells within a three-quarter mile radius from the CWW monitoring well. Noble Energy is working cooperatively with COGCC to undertake the evaluation and identify any potential source.” The COGCC investigation is ongoing, said director Matt Lepore in a statement: “It’s important to note that investigations concerning groundwater are technically complex, involve many steps and sources of information, and take time to complete. The agency is undertaking thorough reviews of surrounding water well information to determine whether more sampling is warranted and to determine any potential impact to domestic water wells.”
He said investigators will keep a keen eye on anything that may indicate a lack of wellbore integrity in surrounding wells. Testing can actually match substances found in wells, much like a fingerprint. Carlson said the program was set up for exactly this reason — to find anomalies and alert authorities to get the problems fixed. “I think people might find solace in that COGCC is on top of it, and Noble is on top of it, and we have a university-based system looking for this type of contamination,” Carlson said. Jon Goldin-Dubois, president of Western Resource Advocates, which works to create solutions to conservation issues, said he thinks this instance is a good opportunity to learn more about this type of contamination and what it means. “This is opportunity to increase our knowledge,” Goldin-Dubois said. “I definitely feel we should have an expanded network of water monitoring sites that allow us to understand (such events). I think the more we know the better, and the more residents and communities know the better.”
MARCH 2016 ENERGY PIPELINE 15
ROUGH RIDE Anadarko reports continued losses in 4th quarter BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM weld county’s largest oil and gas producer is considering
Production increases have still occurred, Walker explained, as crews more drastic cost reduction measures in its local drilling operations have continued to find innovative ways to drill a well and make it as this year after continued losses throughout 2015. cost-efficient as possible. The company was able to reduce spending Simply, Anadarko Petroleum Corp., which posted a $1.25 billion by almost 40 percent, Walker noted. loss for the final months of 2015, plans to wait out 2016. Crude prices, Company finance executives will now have to dip into their which plummeted 60 percent last year, have shown no early intention innovation tool bags to come up with ways to withstand continued low of inching much more above $30 a barrel so far this year. prices in an environment in which the U.S. is producing an average As a result, Anadarko this year will reduce its new capital spending 9.4 million barrels of oil per day, helping pump out about 2 million in drilling areas by half, reduce its capital to maintain its current more than global demand. Iran coming back into the market could production to two-thirds of last year’s budget, and it plans to sell more add another 500,000 barrels of oil per day. than $1 billion in assets. Cutting costs continues to Company officials have be the answer as Anadarko’s not yet weighed in on the and other companies’ losses potential of layoffs. mount. Anadarko registered “Our short-cycle U.S. a $1.25 billion loss in the onshore investments fourth quarter, after losing will be impacted the $2.2 billion in the third most,” reported company quarter. The company in the chairman, president third quarter intentionally and CEO Al Walker in a delayed production on fourth-quarter earnings about 200 wells across call with analysts on Feb. 2, the United States, mostly discussing some preliminary in the Wattenberg Field. plans for this year. “Frankly, That number is up to 230. AL WALKER, company chairman, president and CEO, Anadarko even with two of the best Essentially, the company assets in North America, drilled the initial portions of we don’t find the returns the wells, but stopped short in this environment compelling. Therefore, we are choosing to fund of “completion,” or their efforts to hydraulically fracture and produce a reduced program in the Wattenberg … as we seek to preserve the oil and gas from those wells. Those wells will be ready for completion shorter cycle opportunities for a better day.” when necessary, and can represent a quick turnaround and require Company officials expected to discuss actual figures on planned less capital spending when company officials do decide to bring them cuts and asset sales on March 1, which did not meet Energy Pipeline’s online. officials say. publication deadline. The company still plans to cut overall new capital spending by Anadarko is Weld County’s largest oil and gas producer, pumping 50 percent (70 percent less than 2014) to $2.8 billion and will cut 229,000 barrels of oil equivalent per day out of its Weld County wells in existing maintenance budgets to $1.8 billion and continue to defer the fourth quarter. That number was up 17 percent from 2015 at the completing wells. same time. The company has focused its North American program on Weld’s second-largest energy production company, Noble Energy, the Wattenberg Field in Weld and on the Delaware Basin in Texas. also recently announced it would cut its 2016 capital program in half But production already is starting to slow as In Anadarko’s last three to roughly $1.5 billion. months of 2015. Wattenberg crude alone fell to 95,000 barrels, down “At some point when growth matters again, by lowering that 2,000 per day from the first three months of the year, but up from the maintenance cap-ex to two-thirds of what it was prior year, that’s same time in 2014, which reported 85,000 barrels of crude per day. pretty impressive in terms of being able to create that value
“We have an extremely good line of sight today for monetizations in excess of $1 billion that we hope to announce between here and March 1.”
16 ENERGY PIPELINE MARCH 2016
preservation,” Walker said. “We’re expecting oil will not be at $30 for the rest of our lives.” Walker stopped short of ruling out layoffs as a cost-reduction measure, however. Anadarko has maintained and held onto its current employee base without any announced layoffs through 2015, when other companies, such as Noble Energy, trimmed their ranks a couple times over. “We believe this is a protracted commodity environment for this and coming years,” Walker told analysts Tuesday when asked about staffing changes. “We and every other company in the industry will take opportunities to look at the environment and sync up capital plans with our workforce, and we’re not going to be any different than anyone else … in response to market dislocation.” The planned sale of $1 billion in assets, Walker said, should tide the company over. The company last year closed on $2 billion in asset sales, helping it absorb the $2.2 billion loss in the third quarter. “We have an extremely good line of sight today for monetizations in excess of $1 billion that we hope to announce between here and March 1,” Walker said. “We think that would and should address a lot of concerns and questions about how we intend to fund our activities in 2016. … It’s definitely going to be a tough year, and the opportunities we have are quite significant. … We’re doing everything we possibly can.”
ANADARKO’S 4TH QUARTER IN THE WATTENBERG Began production on its 1,000th horizontal well. Enhanced its wellbore design, which along with other efficiencies, allowed the company to reduce its Wattenberg drilling costs per foot by 50 percent and completion costs per well by approximately 32 percent in 2015 from 2014. Anadarko operated an average of five rigs and drilled 75 wells (96 typewell equivalents) during the 4th quarter and exited 2015 with five rigs. The company completed 68 wells, a 34 well increase over the third quarter.
Wattenberg field net sales volumes increased by approximately 9,000 BOE/d or 4 percent compared with the third quarter of 2015 to an average of approximately 229,000 BOE/d. Oil sales volumes increased 12 percent year over year. The Centralized Oil Stabilization Facility is expected to occur in the first quarter of 2016. This facility should increase oil recoveries, enhance efficiencies of tank batteries, lower operating expenses and reduce impacts on the environment.
- Source: Anadarko Petroleum Corp., fourth quarter operations report.
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17
TECH TALK
BRINE PROCESSING IS GREEN ALTERNATIVE TO DEEP WELL INJECTION BY GARY BEERS • FOR ENERGY PIPELINE
DEEP WELL INJECTION IS WASTING RESOURCES The widespread practice of disposing produced and flowback waters (brines) in injection wells involves wasting resources that can be used in oilfields and adjoining areas. In the Marcellus and Utica Shale region (West Virginia), an innovative, processing facility produces useful products (Table 1) from brines that would normally go to deep well injection.
EXPERIENCES USING EXTRACTED PRODUCTS
LOCAL OIL COMPANIES • Every well uses calcium chloride for use when pulling plugs from fracked well-bore stages to control pressure and keep the gas in pace and for use in frack fluid. This liquid is expensive and the brine processing facility provides the liquid, at a discount or free, to customers. • The use of distilled water provides an alternative to obtaining water from local communities for use in fracking fluids. Distilled water reduces biocide, scale inhibitors, and friction reducers at the wellhead. Further, oil companies save transportation costs if they can pick-up water from the same location where they offloaded produced and flow back waters.
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.
The treatment of produced and flowback waters for reuse in fracking fluids is a widespread LOCAL COMMUNITY practice in oil fields. This practice is in place at • The West Virginia Department of the brine processing facility, and trucks off-load Environmental Quality allows for the use of raw produced and flowback waters and load “natural gas well brines for roadway pretreated brine for subsequent use in the fracking process. Obviously, this is an efficient use of water and TABLE 1. INFLOWS AND OUTFLOWS minimizes the cost of transportation Inflow of Produced Brine Outflow of Useful Products to pick up fracking fluids at a and Flow Back Processing separate location. The oil operators Waters* Facility Product Amount Uses make full use of this practice Treated 3,000 to Use in available at the brine processing Brine 5,000 bbls frack fluid Pretreatment facility. processes Recovered <10 bbls Sold to refineries The unique and innovative Oil service provided by the brine Calcium Chloride Road application 750 bbls processing facility is the local supply (liquid) Reuse in drilling fluid Evaporation bbls/day of salt products and distilled water. crystallization Sodium Chloride Road application 120 tons Examples of the benefits to the local and other (rock salt) Chemical manufacturing processes oil companies and community are Permitted discharge Distilled 1,000 bbls summarized below. Reused in drilling/fracturing Water
5,000
*Typical salt levels (mg/l) are: total dissolved solids (274,000), sodium (85,000), calcium (30,000) and magnesium (3,500). 18 ENERGY PIPELINE MARCH 2016
wetting (brine mixed with rock salt/abrasive mixes prior to roadway application), anti-icing (brine applied directly to rod surfaces prior to precipitation), and de-icing (brine applied to roadway surfaces during and after the precipitation event). The brine processing facility produces a very safe and clean sodium rock salt that can be used for road application under the department guidelines. In fact, chemical tests show that this rock salt is purer than the commercially mined salt typically used on roads. Further, local counties are pleased that this rock salt costs about $45/ton which is significantly cheaper than the commercial mined salt ($60 -$100/ton). Further, the liquid calcium chloride is valuable for conditioning unpaved road surfaces as a dust suppressant. • Fresh water is not in short supply in the vicinity of the brine processing facility; thus, the distilled water is discharged under a permit to surface waters. However, this water is provided free of charge to local fire departments.
BRINE PROCESSING FACILITY An aerial photograph of the first brine processing facility (Fairmont Brine Processing) is provided in Figure 1. A second facility is under consideration for a location in the Midwest. The facility’s pretreatment process (facility in lower right of photograph) serves to remove metals and hydrocarbons through chemical precipitation, mechanical means, and filtration through granulated activated carbon media. The resultant treated brine water is stored in a large impoundment (150,000 bbls) for trucking to uses in the oilfield or for piping to subsequent treatment to recover resources. The innovative component of the processing facility is the patented process that recovers calcium and sodium chloride salts with the co-production of distilled
water (facility in lower left of photograph). Treated brine is withdrawn from the impoundment and boiled in the next process to separate the sodium chloride crystals. The slurry goes to a centrifuge, where the salt is drawn and transported, as a dry material, to a storage shed. The distilled water is routed to a separate impoundment (36,000 bbls).
THIS IS A GREEN OPTION WORTH EXPLORING The one-of-a-kind brine processing facility is demonstrating that there is a green option to the continued injection of produced and flowback waters into deep wells. While there are some constraints (i.e., minimum size is 5,000 bbls/day, incoming waters should be high in total dissolved solids or salts), an actual operation in West Virginia demonstrates the technical feasibility with business profitability. Hopefully, operators in oilfields in the Western states — where produced and flowback water disposal practices reply upon deep-well injection — will consider the availability of this “green” option which solves the current problem of having a sustainable beneficial use of the residual salts in produced and flow back waters.
FIGURE 1
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BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM
LEFT TO RIGHT: Barbara Kirkmeyer, with Weld County Attorney Bruce Barker, discusses Weld County’s position on proposed changes to the COGCC’s final rulemaking hearing in January in Denver. The COGCC adopted the new rules, but many involved on both sides of the issue weren’t satisfied with the results; Shawndra Berry, center, of Windsor, testifies before the Colorado Oil and Gas Conservation Commission about the importance of oil and gas companies working with area residents and nearby local governments in the final rule-making hearing on Jan. 25 in Denver. The COGCC finalized rules requiring more communications with local governments, which were recommended by the state Oil and Gas Task Force.
DENVER - To the chagrin of residents who wanted to eradicate oil and gas drilling from residential areas in Colorado, the state commission governing oil and gas on Jan. 25 adopted regulations to enhance a local government’s role in the location of oil and gas wells. The Colorado Oil and Gas Conservation Commission decided on the size of an oil and gas facility that would trigger a consultation with a local government, and it approved a set of rules to determine when operators had to consult with local governments on siting of a large-scale oil and gas facility in urban areas. The rules were part of the directive by the Governor’s Oil and Gas Task Force which wanted to craft rules to enhance local government involvement in large-scale oil and gas facilities in urban areas. The new rules are tied to recommendations (Nos. 17 and 20) of the Governor’s Oil and Task Force. On February 24, 2015 a twothirds majority of the Task Force approved nine recommendations. Two of those required action by other agencies and two required action of the General Assembly. Five others required action by the COGCC, but
only two of those five required a rulemaking process by the Commission. “I appreciate the hard work of the COGCC staff and commission to develop rules that implement the intent of the Task Force recommendations,” said Bernie Buescher, a task force member who supported the recommendations that led to the new rules, in a news release. “The consultation and information sharing provisions reflect the desires of the Task Force to create more collaboration and communication between local governments and operators on large facilities near communities.” What the group didn’t do was draw a hard line — prohibiting all drilling from residential areas, which many resident and environmental groups had urged in the last few months. Specifically Sara Barwinski, a member of
the task force who recently moved to Estes Park from Greeley because of her proximity to oil and gas, told members Monday they were doing a disservice to Colorado. “You delude yourselves if you think passing this rule solves any of the problems that Colorado is facing in oil and gas development in communities,” Barwinski told the group in its final hearing Monday. “It exacerbates the problem because impacted citizens will clearly realize they cannot trust the COGCC to meaningfully regulate the industry.” Likewise, the Colorado Oil and Gas Association, wasn’t pleased. “COGA has consistently engaged local governments to help create operating agreements that respect the rule of law and meet the needs of local communities,” said COGA president Dan Haley. “And we will continue to do the difficult and important work of finding reasonable and workable solutions with our friends and neighbors throughout the state so we can responsibly develop our natural resources. “Despite industry’s significant and meaningful involvement, and submission of reasonable solutions to recognized problems with the draft rules, certain portions of the COGCC Rule remain problematic, unsupported by reasonable or technical basis, and unclear as to the intent and purpose. ... However, despite our disappointment that these rules exceed the Governor’s Task Force recommendations, MARCH 2016 ENERGY PIPELINE 21
we are committed to working with our operators, our communities, and the state to successfully and effectively implement these rules.” The COGCC has spent the past several months implementing two specific rules to implement changes suggested by the task force last year. The task force was formed as a compromise for groups to back off proposed ballot issues that would increase setbacks between wells and residences. The rules define a large-scale facility that would trigger a government consultation, and how operators go about coming to agreements for siting. Kirby Winn, who represented several Western Slope governments and serves as the local government liaison for oil and gas, lauded the efforts. “You’re as close as you’re going to get with these draft rules,” Winn said. “We believe the rules now do so in manner that assures consultation process. “There’s no such thing as perfect, but you did a pretty good job.” Local governments also would be allowed to opt out if they have their own process or existing memorandums with operators. Weld County will do just that, said Barbara Kirkmeyer, Weld County commissioner. “We are creating our own process, and they will get notice anyway from our process,” Kirkmeyer told the group. “We will be giving notice through our use-by-special-review process and proximate local governments will get a referral notice.” Matt Lepore, director of the COGCC, told the commission early on they would hear from a variety of concerns that the proposed rules do not meet the four corners of what the task force suggested, but he emphasized the decision-making fell on their shoulders. “It has indeed been a challenging rulemaking,” Lepore stated. “The task force tasked this commission with creating a process to enhance collaboration between local governments and the commission. It’s easier said than done. It turns out to be not all that easy to regulate relationships, especially when operators are different and local governments are different. “Local governments all have their own way of doing things and that makes it difficult to create rules to fit everyone in and allow them flexibility to go their on way. The rules before you strike that balance very well.” A growing problem will be that oil and gas production will increase throughout the state, and they will be closer to residential areas, said Dave Neslin, former director of the COGCC 22 ENERGY PIPELINE MARCH 2016
who was representing the industry response to the commission Monday. As the population grows, it encroaches on oil and gas holdings. “First, significant development will occur in and near urban areas in the future,” Neslin said. “You’ve heard from operators how they previously focused on remote areas, but much of that has been developed. There are at least two operators in Colorado who have told you their acreage in and near municipal areas now account for more than 30 percent of their holdings … and there will be substantial urban ground anticipated in next 25 years.” Barwinski and others representing residents and environmental groups throughout Colorado on Monday chided the commission for catering to the “sociopathic” oil and gas industry’s desires with the proposed rules. Barwinski warned if the group doesn’t change the rules to reflect the wants of residents and taking their safety into account, they would be kicking the can down the road. They would become a part of the political theater and invite citizen protest and ballot initiatives. Those against oil and gas drilling near people contend the industrial process involved with drilling is harmful to residents’ health, though there are state regulations that govern allowable emissions and protect waterways. “The public deserves to know this rule is window dressing,” Barwinski said. “It won’t protect them when oil and gas comes knocking at their doors. If you don’t revise this rule, task force and COGCC will both have failed the people of Colorado.” Still, others came the other end with a sense of satisfaction. “Going into this rulemaking, there were many expectations about its purpose, but the discussions among local and state governments, industry, and citizens have increased understanding on all sides of how local and state authority can be exercised in a complementary fashion to protect the public from oil and gas-related impacts,” said Barbara Green, an attorney specializing in local government issues and a participant in the rulemaking, in the release. Brad Mueller, community development director for the city of Greeley told the commission that the rules aid in the land-use planning process for local governments. “To the degree these rules promulgate increased coordination, that’s positive,” Mueller said. “If that can be focused on and kept intact it would foster coordination, cooperation and community. To the degree there is opportunity to defer to the local governments’ and local land use decision process, we feel that’s good.”
NEW RULES THE COLORADO OIL AND GAS CONSERVATION COMMISSION ON JAN. 25 FINALIZED NEW RULES TO ENHANCE COLLABORATION AND COMMUNICATION WITH LOCAL GOVERNMENTS WHEN A LARGE-SCALE OIL AND GAS FACILITY IS LOCATED IN AN URBAN AREA, SUCH AS NEAR A RESIDENTIAL NEIGHBORHOOD. THERE WERE DOZENS OF MINOR CHANGES, BUT HERE IS THE GIST:
The commission decided the definition of a large scale oil and gas facility in an urban area as a pad with eight wells, both vertical and lateral, and 4,000 barrels of oil storage on site, or essentially eight 500-barrel tanks. That size would trigger the consultation with a local government. COGA remains concerned that the rule should allow an operator an dincentive to use pipeline transportation and/or takeaway capacity – which was not included into the rule. Citizen groups had sought to define that area as 45,000 feet of total drilling — half of what was originally proposed — and 2,000 barrels of oil storage at a site. The commission took out the drilling length to avoid confusion.
The rules would require opera- 1,000 feet, but such notifica-
MITCHELL INSURANCE AGENCY
tors to notify local governments tions were not intended to be a
LOCAL OFFICE IN GREELEY
fication of homeowners within
within 1,000 feet of the large part of this rule. development for the consultation. The rules would not allow
The rules also would require op-
the government to restrict the
erators to provide proof of their
development. COGCC approval search for alternative sites, and of a permit would be predicat- reasons why those sites were not ed on an operators’ agreement considered. with a local government. If there were no agreement, the issue would go before the com- Operators will have to notify mission for a hearing.
surface owners of their intentions, and invite comment. Existing surface use agree-
• Oil & Gas Servicing • Blow Testers • Pumpers • Pipe Dealers / Contractors • Roustabout • Flow Testers • Oil Related Construction Businesses • Trucking
Nearby local governments, out- ments however, would be an side of the municipality in which exception to the rule to notify a project is proposed, would not
the landowner. COGA lamented
be given standing in the deci- this part of the rule because it
We insure most oil & gas related businesses Mike Mitchell
sion-making, though they would said it didn’t include language
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be notified if they were within that all existing surface use that 1,000 feet.
agreements that contemplate a
970-352-6418
specific location within an urban mitigation area be grandPre-application notice to proxi- fathered in. mate local governments for large UMA facilities: The commis- COGCC staff had originally apsion adopted new language for
proved a drilling time limit, and
a 45-day pre-application notice one citizen group expanded on to proximate local governments that, seeking a limit of 90 days while the pre-application notice for all drilling and completion to the local government with
operations at a well site, with a
land use authority remained at
five-year grace period between
30 days. COGA voiced concern drilling. Drilling times were tak-
Picture it differently.
about the unintended conse- en out of the final rules, so that quences of putting the proxi- proposal wasn’t entertained. mate local government needs before the local government of jurisdiction.
Operators must register their five-year drilling plans with mu-
Citizen groups had sought to nicipalities beginning May 1. send notifications to local governments within a mile of proposed developments. The groups The commission stopped short also had request to notify resi- of requiring operators to detail dents within 1,500 feet of any plans for drilling within municproposed large urban drilling
ipal growth areas, which some
area. The state mandates noti- groups had suggested.
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G R E E L E Y
C O L O R A D O
FRACKCITY not so easy to get oil,gas through BY LINDA KANE & SHARON DUNN • FOR ENERGY PIPELINE
TO HEAR DRILLING OPPONENTS ACROSS THE FRONT RANGE, MANY WOULD THINK GREELEY LAYS OUT THE RED CARPET FOR OIL AND GAS DEVELOPMENT. How could it not with 450 wells in city limits? It’s all about the money trading hands, opponents say. They call it Frack City. But locating a well in Greeley city limits — contrary to word on the street — is anything but easy. While all companies must work with the state permitting process, they also must gain city approval, which in many cases can be much more strict than the state.
24 ENERGY PIPELINE MARCH 2016
“There’s no rubber stamp at all in any way shape or form,” said Craig Rasmuson, COO of Synergy Resources, which is one of a handful of companies that deal with the city regularly with drilling plans. “If I know I’m going to do something in Greeley, I’m banking on at least a year of process and detail and dollars spent. It’s not something I can get done in three to five months.”
HOW IT BEGAN Oil and gas producers have been extracting resources within city limits for nearly 50 years, and Greeley was among the first municipalities to adapt to seeing well sites pop up closer to neighborhoods and schools. City leaders had to learn the hard way that oil and gas companies had a constitutional right to access their minerals, just as homeowners have a constitutional right to live in their homes. Both are property rights. In the late ‘80s, the city of Greeley banned oil and gas operations in city limits. Local businessman Elmer Lundvall sued to reverse that ban. The case, Voss v. Lundvall Bros. Inc,. ended up reaching the Colorado Supreme Court, where a decision was reached June 8, 1992. Justice Joseph Quinn delivered the opinion of the Court for the case, which affirmed the judgment of the Court of Appeals that ruled in Lundvall’s favor and reaffirmed his right to drill within city limits. “Because the development of oil and gas resources is a matter of statewide concern, the Oil and Gas Conservation Act preempts a home-rule city from regulating any aspect of oil and gas development or operations within the city,” Quinn said in his ruling. Greeley ended up spending $388,000 in settlements to oil and gas companies as a result of the case. This case set a precedent in Colorado regarding whether the state or city has jurisdiction over oil and gas drilling and the protection of private property rights. The city was told, as a city, officials cannot ban oil and gas — that we must allow it in all zone districts. “But in that same case, there’s language that allows for local land use regulations that harmonize with state regulations,” explained Brad Mueller, director of community development for the city of Greeley and the local government designee for the Colorado Oil and Gas Conservation Commission. At the time, the city adopted new regulations to accommodate oil and gas within city limits and ensure mineral owners could get to their property. The city applied land use regulations to the highest degree possible. “That became the basis for the regulation that we exercise today,” Mueller said. “In planner terms, or land use terms, oil and gas is processed locally by use by special review.”
That means it’s not a use by right, and city officials can impose restrictions on development to mitigate impacts. In addition to going through state regulations, an oil and gas company needs to submit a permit application to Greeley’s planning commission, which is made up of a body of residents. It goes under review for four months and through a public hearing process. The commission then votes to approve or deny it. If denied, there is an appeal process. “Parallel to all of this, they have to get a state permit independent of city jurisdiction and that’s where COGCC comes in,” Mueller said. The city of Greeley can, and in some cases already does, make siting an oil and gas well much more strict than state regulations, with tighter setbacks and mitigation requirements. “I think we’re more restrictive, and so does the COGCC, than they are on the surface issues, and they allow us to be that,” Norton said. Though sometimes city requirements can be daunting, and sometimes maybe border on overboard, Rasmuson said, he understands the city is working to satisfy concerned residents. He also knows the city does what it can to work with oil and gas companies to exercise their rights. “Their planners are educated, and certainly the council members and the mayor are educated on what they can legally do and how to best protect constituents,” Rasmuson said. “They realize that with technology, that durations can be shorter, rigs are quieter, and we can pipe water versus truck (it out) and in some instances we can pipe oil off locations. So we can limit the impact with development of drilling and completions, and minimize impact on the back side. They hold our feet to the fire and want us to go through that with the accountability of treating it like in our own backyard, which for us, it is, most of us live there.”
Houses in the St. Michael’s development sit next to a oil and gas production facility in west Greeley near 71st Avenue and Highway 34. The oil and gas industry has made immense strides through the years to lessen their footprint, and operate more environmentally friendly -- contrary to the rape and pillage idea many have of the industry. Photo by Jim Rydbom / jrydbom@greeleytribune.com.
MARCH 2016 ENERGY PIPELINE 25
“THEY UNDERSTAND IT, AND STAFF, ALL THE WAY UP TO THE MAYOR, ARE VERY VERSED IN WHAT IS SAFE AND HOW IT IS DEVELOPED SAFELY AND HOW IT CAN BE DONE RESPONSIBILY AND THEY ALSO KNOW THEIR LEGAL RIGHTS ON WHAT THEY CAN AND CAN’T DO.” CRAIG RASMUSON, COO, Synergy Resources
Unique to Greeley is its location. Whether it sets precedent for other communities is hard to say. “The simple basic fact is Greeley is geographically located at the center of the sweet spot of the Colorado oil resource. We didn’t pick that. It just happens to be that way,” Mueller said. “So we’ve been in the position to figure out how to give people access to their property — their mineral property — while also considering land impact. A city up against the foothills doesn’t have the same geography Greeley does.” Being located in an energy-rich and natural resource-rich area links many residents to the industry and therefore they understand the link to the local economy, Mueller said. “I would say there has always been a certain curve of support, but there’s also been concern about neighbor impact,” Mueller said. Since it sits in that natural resource hot-spot, it’s not unlikely other communities look to Greeley for comparison when it comes to permitting. “There are several municipalities that have land use processes and special permits for oil and gas within their boundaries that reflect the priorities and desires of the constituents and elected officials. As Greeley has been at this for a while, there are probably some good lessons learned and examples that might be of interest to other local governments,” said Todd Hartman, communications director at the Colorado Department of Natural Resources. Whether there’s a general consensus within the industry on how hard or easy it is to permit in Greeley is hard to determine. “The COGCC and Greeley do have an MOU (memorandum of understanding) in place and we consider this a good working relationship,” Hartman said. Five Colorado towns along the Front Range in recent years have worked to ban or limit fracking in their city limits, but their efforts have and will be challenged in court — just like Greeley’s 26 ENERGY PIPELINE MARCH 2016
was years ago. And resident groups opposing oil and gas development near their neighborhoods have popped up in Adams County and Windsor, where drilling has become an issue. “While oil and gas is of statewide concern with some of the most rigorous state regulations in the nation, every community is unique, with differing concerns and constituencies,” said Doug Flanders, director of policy and external affairs for the Colorado Oil & Gas Association. “That is why industry is always willing and open to work with every community where it operates to best ensure the communities concerns are addressed.” It comes down to that experience, said Greeley Mayor Tom Norton. “It is frustrating, and it bothers me people think we’re a pushover,” Norton said. “People think it’s a pushover because they haven’t looked at our regulations. If they looked at them, they’d see what (companies) see. We put it down in black and white and tell them ahead of time what the requirements are. That makes it so oil and gas companies agree that’s the right way to do it, because they know what’s expected.” Greeley officials have taken the time to educate and have years of experience, working with oil and gas. “Greeley gets that kind of label, if you will, simply because they’ve been dealing with it longer,” Rasmuson said. “For me, they’re so much more versed than most towns because they’ve dealt with it longer. … They get it. They understand it, and staff, all the way up to the mayor, are very versed in what is safe and how it is developed safely and how it can be done responsibly and they also know their legal rights on what they can and can’t do.”
CONTINUED COMPLICATIONS What’s complicated matters is growth. Oil and gas companies have existing wells in several areas, in and around the outer limits of Greeley, but as development moves further, stretching city limits, residential subdivisions begin to encroach on existing oil and gas development or leaseholds. Sometimes, companies didn’t come knocking for years. “The footprint and size of cities continues to increase,” Rasmuson said. “Greeley’s out to Promontory now. That was not Greeley 15-20 years ago. Fort Collins was not up to the Budweiser plant, and Longmont was not all the way out to Interstate 25. Now Greeley is flirting with parts of Eaton, Windsor and Kersey, so everywhere we go as an industry we have a different municipality to deal with because of the and grab for annexation.” About five years ago, multi-well sites began to develop. With horizontal drilling taking off, well sites have the potential to be-
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come more intense. Adding more wells to a pad has been seen as a way to reduce companies’ footprints In some cases, companies have returned to oil sites to refrac, or drill more from multiwell pads. “Associated with that increased potential has been increased interest,” Mueller said. “With folks engaged in a site, emotions run high typically. We’ve tried very hard to uphold what the law has told us while at the same time recognizing and advocating for the mitigation of any neighbor impacts,” Mueller said. “Greeley has recognized that and made it tougher,” Rasmuson said. “And as an industry, it probably needed to happen, because there is a lot more impact, but it’s short-lived impact.” Likewise, Greeley’s population since the late ‘80s has swelled, and many new residents are unaware of that previous struggle, or the work put in to craft rules that strike the balance that satisfies property rights. As residents have become increasingly involved in drilling sites, they demand rules and regulations, often not knowing regulation exists — more to find a balance of the uses, rather than outright bans as many would desire. They seek protections against every possible outcome of industrial processes that could affect their lives. City leaders try to meet those concerns with strong regulations in concert with state air and water regulations, Norton said. “The fact that we do that and know how to do it, and don’t get emotional about it, is disturbing to people,” Norton said. “You could ‘what if’ something to death. There’s something that happened 10 years ago, and someone didn’t know something about nuclear and ‘x’ happened. You can’t regulate the unknown. “You can work with (everyone) and develop what that is, and that’s where I think we need to work with the industry and say, let’s do groundwater studies or air quality studies, and oil and gas industry does do that.” A huge struggle for cities, including Greeley, is the call for additional setbacks, which could limit the natural expansion of the city. Several ballot issues could be coming to the November election seeking setbacks so large, they could in effect ban drilling anywhere in Greeley city limits. It creates a double-edged sword for cities. “One, do you set oil and gas further back from homes and mitigate the impact to homes around it?” Mueller said. And how do you work around city growth? “In terms of new buildings coming along after a well is built, if you’ve got a half mile setback, growth has to leapfrog. “Imagine having to go a mile away before the town can continue. Obviously you’d have a disconnected city. Our challenge as land use planners is how do you continue the natural progression of the town?” Residents don’t typically think in those terms, Mueller said. “That’s the frustrating part of this state debate — there’s no more space to go to. It seems to be a point that gets lost over and over again in the debate. Both in the statewide debate and it’s just not on anybody’s radar because oil companies are not particularly concerned about city expansion and citizens are not necessarily interested in the big picture,” Mueller said.
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MARCH 2016 ENERGY PIPELINE 27
News Briefs Industry continues to enhance best practices of natural gas storage facilities
Karl Rove to speak at DUG Rockies Conference
WASHINGTON - The Pipeline and Hazardous Materials Safety Administration in February released a natural gas storage safety advisory modeled after industry’s best practices.
Political strategist Karl Rove will address attendees of the networking luncheon for Hart Energy’s DUG Rockies conference, March 10 in Denver at the Colorado Convention Center.
“Safety is our industry’s core value and we are committed to zero incidents,” said American Petroleum Institute Midstream Group Director Robin Rorick in a news release. “PHMSA’s new safety advisory is in part guided by the best principles industry already has in place for natural gas storage facilities.
The DUG Rockies conference and exhibition is set for March 9-11. Influential oil and gas industry leaders are the main attraction. More than two dozen executives will be confirmed to speak.
“We continue to lead when it comes to safety by constantly upping our safety standards to ensure that we protect the public and the environment. In fact, we collaborated with PHMSA to create new standards just last year,” said Rorick referring to API’s Recommended Practices 1171 and 1170. The standards address the proper storage of natural gas underground. Recommended Practice 1171 focuses on safe practices for designing, storing and operating natural gas in depleted oil and gas reservoirs. Recommended Practice 1170 specifically outlines how to safely design, store, and operate natural gas in salt caverns. The two standards discuss proper construction methods, materials, and maintenance practices for ensuring safe operations. “The RPs are the result of the best minds in industry working with regulators to ensure Americans continue to safely get the reliable fuels they need to run their daily lives. The American people expect government and industry to work together towards common goals. It is these types of actions, not regulatory overreach, that serve the best interest of safety and economic growth,” said Rorick. API represents 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 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
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• Greg Hill, President and COO, Hess Corp. • Jim Volker, Chairman, President and CEO, Whiting Petroleum Corp. • Taylor Reid, President and COO, Oasis Petroleum Inc. • Clay Gaspar, Senior Vice President and COO, WPX Energy Inc. • Heath Mireles, Manager - Resource Development, Continental Resources Inc. • Ward Polzin, CEO, Centennial Resource Development. • Jack Vaughn, Chairman and CEO, Peak Exploration & Production. • Chris Wright, CEO, Liberty Resources. • Grant Butkus, U.S. Head of A&D Advisory, Macquarie Capital. • HC Freitag, Vice President, Integrated Technology, Baker Hughes. • Sam Margolin, Director - Equity Research, Energy Cowen & Co. • Ben Burke, PhD, Senior Geologist, Fifth Creek Energy. Prices are $295 for an exhibit hall pass or $795 for a full conference and exhibition pass. Late registration is $295 and $895 from March 9-11. To view the full conference agenda and to register, go to dugrockies.com. - 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
Oil boom brings first Hilton Hotel the first hilton hotel ccame in 1920 when
Conrad Hilton, intending to buy a Texas bank, witnessed the booming Ranger oilfield. He bought a motel in nearby Cisco instead. In October 1917, the McClesky No. 1 well had revealed an oil-bearing sand at about 3,400 feet and launched the world-famous Ranger oilfield boom. Thanks to the “Roaring Ranger” field, eight refineries were soon under construction. The Ranger field and other North Texas discoveries gained international fame by eliminating critical oil shortages during World War I. Its oil allowed the Allies to “float to victory on a wave of oil,” according to Britain’s Foreign Secretary Lord Curzon. Investment capital and aspiring millionaires soon overwhelmed the little town of Ranger as well as nearby Cisco, where the Texas Central Railroad crossed the Texas & Pacific. New oilfields brought newspaper accounts of fortunes being made. But only one tale has endured of a fortune made because oil was easier to find than a good place to sleep. Conrad Hilton learned the banking business from the ground up in his hometown of San Antonio, N.M. As a young man with less than $3,000 in capital, he founded a successful bank there. He believed he had found his life’s work. World War I interrupted Hilton’s plans, prompting him to sell his bank and serve his country. Returning from France after the 1918 Armistice, Hilton set out for Albuquerque determined to start again in the banking business. But times had changed and banking opportunities had dried up. Hilton couldn’t get back into the business. Then a friend suggested Texas, where the Ranger oilfield was making millionaires. Hilton boarded the train bound for Wichita Falls. However, just as he had found in Albuquerque, there was no room for a newcomer in the banking community of Wichita Falls. The same was true farther south in Breckenridge. 30 ENERGY PIPELINE MARCH 2016
Disappointed but determined, Hilton continued down the Texas Central Railroad to the Cisco railway station, just east of Ranger. He was 31 years old and determined to build a banking empire. With $5,011 in his pockets, Hilton walked to the first bank he saw in Cisco and found to his delight that it was for sale for $75,000. Accustomed to finding financial backers and undeterred by the $69,989 shortfall, he wired the absentee owner in Kansas City to close the deal. The seller sent back a telegram tersely raising the price to $80,000. In his autobiography, “Be My Guest,” Hilton recalled telling the startled telegraph operator, “He can keep his bank!” He then strode out of the station and across the street to a two-story, red brick building boosting itself as the Mobley Hotel. Henry Mobley, the hotel’s owner, was making the most he could off of the Ranger oil boom. His lobby was constantly packed with tired roughnecks impatiently awaiting for a room. Mobley rented the hotel’s 40 beds in eight-hour blocks corresponding to shifts. Hilton joined the crowd in line, suddenly alert to an unanticipated opportunity. He approached Mobley, who had become convinced the real money was in oil, not in the boarding house business. Before long, they closed a $40,000 deal and Hilton had his first hotel. He would never return to banking. Today, the restored Mobley Hotel, which Hilton once referred to as “a cross between a flophouse and a gold mine,” serves as a museum and community center. Hilton later regarded his Cisco purchase as his “first love...a great lady.”
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.
Conrad Hilton visited Cisco, Texas, intending to buy a bank. When the deal fell through, he noticed a small motel with a long line of roughnecks waiting for a room.
DATA CENTER
The oil and gas industry is a large part of Coloradoâ&#x20AC;&#x2122;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)
Garfield................................................................................................53 (42%) Weld................................................................................................50 (40%) La Plata.......9 (7.1%)
State Feb. 5 Jan. Avg. Colorado 22 22 Louisiana 46 59 Oklahoma 80 83 North Dakota 42 49 Texas 262 308 California 7 7 Alaska 13 9 Ohio 13 14 Pennsylvania 19 25 Wyoming 13 16 Source: Baker Hughes Rig Count.
Dec. Avg 25 59 86 58 324 9 12 15 28 20
Nov. Avg. 33 70 83 63 340 12 13 20 28 24
2015 GAS PRODUCTION
Adams...8 (6.3%) Elbert...3 (2.4%) State................126 Source: Colorado Oil and Gas Conservation Commission as of Feb. 1
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 Feb 5. Jan. Avg. Dec. Avg Nov. Avg. U.S. 571 681 714 760 Canada 242 125 160 178 Source: Baker Hughes Rig Count, Feb. 5.
COUNTY *YTD PRODUCTION (% OF STATE) Garfield.................................503,396,668 (33.07%) Weld......................................494,481,784 (32.45%) La Plata ..................................291,072,671 (19.1%) Las Animas ................................ 71,609,249 (4.7%) Rio Blanco ................................51,306,723 (3.35%) Mesa ........................................... 29,093,548 (1.9%) State...................................................1,522,184,370
Weld Rio Blanco Garfield Arapahoe Cheyenne Lincoln State
PRODUCTION (% OF STATE)
98,294,790 (89%) 4,036,860 (3.65%) 1,604,589 (1.45%) 1,547,726 (1.4%) 1,174,030 (1.06%) 1,148,037 (1.04%) 110,474,668
Source: Colorado Oil and Gas Conservation Commission as of Feb. 3.
Source: Colorado Oil and Gas Conservation Commission as of Feb. 3.
COLORADO ACTIVE WELL COUNT
Weld ..........................................................................22,668 Garfield .....................................................................11,054 Yuma ...........................................................................3,881 LaPlata........................................................................3,327
Las Animas .................................................................2,963 Rio Blanco ...................................................................2,907 36 others .....................................................................6,874 State .........................................................................53,674 MARCH 2016 ENERGY PIPELINE 31
Source: Colorado Oil and Gas Conservation Commission as of Feb. 1.
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