Energy Pipeline August 2017 by The Greeley Publishing Company

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For advertising inquiries, contact: bdennis@energypipeline.com August 2017, Volume 4, Issue 8. Published by Greeley Publishing Co., publisher of The Greeley Tribune, Windsor Now, the Fence Post, and Tri-State Livestock News.

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Features

OIL & GAS INSPECTIONS

OIL FIELD THEFT

Greeley firefighter pioneers oil, gas inspection program. By Sharon Dunn

Two men jailed for thefts of equipment from multiple oil and gas sites. By Sharon Dunn

DELAWARE SHIFT

In Every Issue

Colorado’s producers putting more money into Delaware basin. By Dan Larson

Making Hole

Tech Talk

SCHOOLYARD FIGHT

Residents sue over Bella Romero drilling site in east Greeley. By Sharon Dunn

OPINION

Severance tax initiative shows environmental ‘street fight’ tactics in action. By Simon Lomax

ON THE COVER Design by Joshua Aho

4 ENERGY PIPELINE AUGUST 2017

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Could a nanosatellite monitor greenhouse emissions from oil, gas facilities in the DJ? By Gary Beers

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DELAWARE SHIFT Delaware Basin in Texas sees growing presence BY DAN LARSON • FOR ENERGY PIPELINE

shines through. Research from DrillingInfo shows break-evens, the minimum an operator needs to sell a barrel for to cover expenses and return 15 percent to investors, give the Delaware a sizeable advantage over the DJ. A low-cost barrel of oil from the Bone Spring formation in the Delaware shows a breakeven price of $26.29. A comparable, low-cost barrel from a Wattenberg formation will breakeven at $37.39, according to the DrillingInfo report. Basins like the Niobrara will remain active as established companies like Anadarko, Noble and PDC develop core

Map credit: U.S. Energy Information Administration

If companies learned anything from the oil price downturn, it is that efficiency without access to a viable, long-term resource is not how to survive into the next decade. That long-term resource could be an acreage position in the Delaware Basin. The Delaware Basin is now the most active oil and natural gas field in the country, said Bernadette Johnson, an energy analyst in the Littleton office of DrillingInfo, a Texas-based provider of data analytics and consulting services. “The Delaware resource is vast,” she said. “When you consider there are up to 15 potential target formations stacked in a zone up to 2,000 feet thick, or more, that’s considerable. Compare that to target 6 ENERGY PIPELINE AUGUST 2017

formations of 250 feet or less in the Bakken and between 250 and 500 ft. in some parts of the Niobrara.” The Delaware also stretches over several counties in southwest Texas and southeast New Mexico. The combination of stacked formations and mile-after-mile of surface area make the Delaware a most attractive investment, she added. “A typical square mile section with 80acre spacing can hold eight wells,” Johnson observed. “If you can drill into just four stacked formations, you can produce the equivalent of 32 wells. The potential return on investment just escalates from there.” As companies relentlessly pursue drilling and completion efficiencies, the attraction of a resource like the Delaware

“In about 10 years things will start to slow down. That is not an issue in the Delaware. Nowhere else can you find so much surface over so many potential stacked formations.” BERNADETTE JOHNSON, DRILLINGINFO ENERGY ANALYST

areas and others drill-up leases in areas already held by production. “Activity in the DJ will continue for at least the next decade,” Johnson noted. “In about 10 years things will start to slow down as companies begin to run out of places to drill. That is not an issue in the Delaware. Nowhere else can you find so much surface over so many potential stacked formations.” As part of the greater Permian Basin, the Delaware is a known topic. “When you look at the history of unconventional development, companies used horizontal drilling and hydraulic fracturing to unlock the gas formations first,” Johnson noted. “After the Barnett, Woodford, Fayetteville, Haynesville gas plays, the activity shifted over to crude, starting with the Bakken, Eagle Ford, Niobrara and finally, the Permian.”

For more than a decade, Lock-Tite Anchor has leased it’s Portable Surface Anchors (P.S.A.’s) to oil and gas companies across the United States. Developed as a safe and legal alternative to earth anchors, the P.S.A.’s are an integrated element of assuring overall rig safety and stability while adhering to OSHA regulations and rig manufacturer’s recommendations. Fast and easy to move, these anchors are four sided with six progressive, retractable teeth, so they can be set at any angle to the rig. Although each anchor is a truck-load (48,500 lbs.), they have been very cost effective in areas of heavy development, refineries, completion projects, multi-well pads, heavily congested oil fields, pipeline right-of-way’s, well circulation and other changing underground conditions. P.S.A.’s are giving rigs the freedom to set anchors where they are needed to be for the job they are doing. They are also allowing well operators the ability to have less clutter from permanent anchors and less risk of damaging underground utilities and location liners. Many times, these anchors have been used in addition to earth anchors when one or more anchors just won’t fit the pattern the rig needs for the job they are on, or when an earth anchor fails and is waiting for replacement on a job that can’t wait. P.S.A’.s are also available for other load rated applications such as coil tubing units, snubbing units, B.O.P. stabilization, and emergency decent devices.

“The companies have taken the lessons learned over the past few years and applied them to the Midland and Delaware. After years of vertical and directional drilling, they know what the rock looks like. Now they have the key to unlock the door.”

SHIFTING CAPITAL Examples abound of increased activity and companies hitching their wagons to the Delaware. By the end of the first half of 2017, some of the most active companies in the Delaware are also heavily invested in the Niobrara (see chart). According to the Baker Hughes rig count for the first week in July, the rig count for the greater Permian Basin, of which the Delaware is a segment, was 369 rigs, up from 158 one year ago. For the same period, there were 27 rigs running across the DJ Basin, up from 15

anchors where they are needed to be for the job they are doing. They are also allowing well operators the ability to have less clutter from permanent anchors and less risk of damaging underground utilities and location liners. Many times, these anchors have been used in addition to earth anchors when one or more anchors just won’t fit the pattern the rig needs for the job they are on, or when an For more than a decade, Lock-Tite Anchor has leased it’s Portable Surface Anchors (P.S.A.’s) to oil and gas companies across the Unitedanchor States. Developed as a safe and legal to earth anchors, the P.S.A.’s are an integrated on element assuring earth fails and isalternative waiting for replacement aofjob overall rig safety and stability while adhering to OSHA regulations and rig manufacturer’s recommendations. Fast and easy to move, these anchors are four sided with six progressive, retractable teeth, so they can be set at any angle to that wait. the rig.can’t Although each anchor is a truck-load (48,500 lbs.), they have been very cost effective in areas of heavy development, refineries, completion projects, multi-well pads, heavily congested oil fields, pipeline right-of-way’s, well circulation and other changing underground P.S.A.’s are giving rigs the freedom to set load anchors where they areapplications needed to be for the job P.S.A’.s areconditions. also available for other rated they are doing. They are also allowing well operators the ability to have less clutter from permanent anchors and less risk of damaging underground utilities and location liners. such coil tubing units, snubbing B.O.P. Manyas times, these anchors have been used in addition to earth anchors units, when one or more anchors just won’t fit the pattern the rig needs for the job they are on, or when an earth anchor fails and is waiting for replacement on a job that can’t wait. P.S.A’ . s are also available for other load rated applications such as coil tubing units, snubbing stabilization, and emergency decent devices. units, B.O.P. stabilization, and emergency decent devices.

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last year, and 52 rigs in the Williston (Bakken) Basin, up from 28 last year. A few companies stand out as examples of sharply increased interest in the Delaware.

CAPITAL SPOTLIGHTS In its most recent investor pitch, Denver-based PDC Energy noted that it will spend $465 million of its $750 million 2017 capital budget running four rigs and completing about 140 new wells in the Wattenberg. The company said it expects that investment to grow its Colorado production by 30 percent. One year ago, PDC’s investor guidance did not even mention investments in other than its core operations in the Wattenberg and Utica shale in Ohio. Then in August 2016, the company bought 57,000 net acres in the Delaware from a pair of private equity holders for $1.5 billion. It later added 4,500 acres in a “bolt-on” acquisition for $118 million. In June, PDC announced it will spend about $290 million running four rigs to develop its Delaware assets. Of that, PDC will invest $35 million in midstream gathering and compression and another $30 million on leasing and seismic surveying. Carrizo Oil & Gas announced in late-June that it expanded its presence in the Delaware by acquiring 16,000 net acres for $648 million. The company already held 26,100 acres in the Delaware, 103,300 acres in the Eagle Ford in east central Texas and 31,200 in the Niobrara. The Delaware acquisition gives Carrizo “the potential for decades of drilling locations across multiple stacked pay horizons.” Of the company’s $620 million capital outlay this year, $390 million will go to the Eagle Ford, $15 million less than was planned before the acquisition. Carrizo’s Delaware investment will increase to $150 million with $25 million earmarked to Carrizo’s other development programs, including the Niobrara. Carrizo notes that new well completion techniques in the Niobrara are expected to see a 20 -30 percent improvement in production while it is reviewing potential Codell formation pay zones that could add another layer of Niobrara production. Anadarko notes that both the DJ and Delaware basins are focus areas for this year’s capital budget. It reports 15 rigs running in the Delaware and six in the DJ. With plans to spend about $820 million on new wells in the Delaware, Anadarko says it will also allocate an additional $560 million in expanding its midstream asset base “to enable future growth.” Noble, the second largest producer in the DJ, also positions itself as the second largest operator in the southern Delaware. Following the first quarter acquisition of Clayton Williams Energy that added 71,000 net acres to its Delaware position, the company shifted some midstream assets to its affiliate, Noble Midstream Partners, and raised cash by selling its operations in the Marcellus for $1.12 billion. The company claims its expertise with long-lateral wells, its access to midstream infrastructure and the higher value liquids produced in its Delaware operation give Noble an advantage over other operators. The sheer size of the Delaware assures that it will attract large chunks of capital from oil companies for years to come. From an investor’s point of view, the outlook for the Delaware is the difference between return multiples and break-evens. 8 ENERGY PIPELINE AUGUST 2017

The billions invested in the Delaware will see many years of strong production but at the cost of the investments traditionally needed to sustain production in older oil fields.

DECLINING AGE Another, less considered outcome of the price downturn has been the dramatic decrease in investment, and resulting drop in production, from mature fields. As companies, and nations, go head-to-head to gain a greater share of the global petroleum market, shale is seeing the bulk of investment capital. Older fields, especially those with little horizontal drilling potential, are harvested with just enough spent on operations to pump another barrel. According to the Norwegian consulting firm, Rystad Energy, output from older fields around the world declined 5.7 percent last

THE SHEER SIZE OF THE DELAWARE ASSURES THAT IT WILL ATTRACT LARGE CHUNKS OF CAPITAL FROM OIL COMPANIES FOR YEARS TO COME. FROM AN INVESTOR’S POINT OF VIEW, THE OUTLOOK FOR THE DELAWARE IS THE DIFFERENCE BETWEEN RETURN MULTIPLES AND BREAK-EVENS. year, the sharpest fall-off since 1992. This year looks to be even worse, with production projected to decline by about six percent if oil prices stay constant. A lack of investment in mature oil fields is cause for concern, analysts say, because older fields produce about one barrel in every three that comes onto the world market. Most of the declining production is seen in China, where production from older fields dropped by nearly 10 percent last year, three times the decline rate of 2015. In the U.S., mature field production fell 8.3 percent in 2016 following a decline of 11 percent in 2015, Rystad noted. The upshot of this decline, if it continues, is removal of about 1.8 million barrels/day from the global market. That amount is significant in that it is the same volume OPEC agreed to voluntarily keep off the market to support prices last year. The pair of questions that surround the decline in mature field production are, first, how long before the effect of fewer barrels on the market is seen in strengthening prices; second, as investments are withdrawn from the traditional techniques for squeezing more barrels from an aging field, will those fields wither to become stripper well territory?

OIL FIELD THEFT Two men jailed for thefts of equipment from multiple oil and gas sites BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM

An oil field water supply company employee and another man are facing

charges of theft of roughly $20,000 in oil field batteries and solar panels in June from various oil and gas sites around the oil fields of Weld County. According to a news release, the Weld County Sheriff’s Office Strike Team had been investigating multiple cases involving stolen equipment from oil and gas sites in unincorporated Weld, Mead and New Raymer. Investigators learned that suspects made off with batteries, solar panels and controllers in the previous few weeks from Crestone Energy, Noble Energy Anadarko Petroleum and Whiting Oil & And Gas Corp. They arrested William Patrick Scott, 38, of Keenesburg and Corey Burnsed, 31, of Brighton. Investigators were alerted to the thefts from oil field company representatives, who had learned equipment was being sold on the internet that looked much like that stolen from their production sites, according to an arrest affidavit. Detectives set up a buy of some batteries that were listed for sale. A detective agreed to buy 12 batteries for $360, according to the arrest affidavit. They agreed to meet at a convenience store in Keenesburg. Scott showed with only one battery, and said the buyer would have to come back the next day. Meanwhile, a GPS tracker had been put on his vehicle. A representative from an oil and gas company identified the battery by brand and capacity as that which

Weld Sheriff Strike Team investigators recovered these batteries stolen from multiple well sites across Weld County. Two men were arrested in the thefts. Photos by Tribune/Weld County Sheriff’s office

his company used. The detective was set to buy the additional 11 batteries the next day, allowing Scott time to get the batteries from storage. Scott, at the time, said he had gotten the batteries at auction. The next day, Scott didn’t show, but deputies tracked his vehicle’s movements through GPS, the affidavit stated. Scott sent a man he identified as his brother, Corey Burnsed, to bring the batteries to the buyer, and he

sold them for the $360. Deputies connected Scott’s vehicle to a host of theft locations, and they issued search warrants of Scott’s and Burnsed’s properties. At Scott’s they recovered 63 batteries, and some black tar heroin. At Burnsed’s home, deputies found numerous batteries. The affidavit states, he admitted to deputies that he was addicted to methamphetamines and was helping Scott sell the batteries to feed his habit. AUGUST 2017 ENERGY PIPELINE 9

to the amount of money they have and didn’t consider them a victim,” the affidavit stated.

DEPUTIES STATED THAT IN ALL, THE BATTERIES, SOLAR PANELS AND LOSS OF PRODUCTION AT THE SITES AMOUNTED TO $22,154. Corey Burnsed

Deputies stated that in all, the batteries, solar panels and loss of production at the sites amounted to $22,154. “Corey stated he targeted oil sites due

Scott was arrested on suspicion of theft and tampering with oil and gas equipment, as well as possession of a schedule II substance. Scott also faces petty offense charges for possession of drugs and drug paraphernalia from a case earlier this year. Burnsed, who got out of jail on personal

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SCHOOLYARD FIGHT Residents sue over Bella Romero drilling site in east Greeley BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM

A group of residents in east Greeley, along with some heavy-hitting national lobbying organizations, filed a lawsuit in April against the Colorado Oil and Gas Conservation Commission, claiming unfair treatment in allowing drilling near a low-income, primarily Latino school. The groups claim the COGCC erred in approving drilling permits for the Vetting 15-H Well Pad and Vetting Facility in east Greeley, a project that was approved by the Weld County commissioners last summer, as the site is just outside Greeley city limits. The COGCC answered the complaint

“They’re OK with a drilling rig within 500 feet from residences, for example, where my grandchildren live, but where my grandchildren go to school it must be 1,000 feet.” WELD COUNTY COMMISSIONER BARBARA KIRKMEYER, ON A FAILED PROPOSAL TO KEEP DRILLING 1,000 FEET FROM SCHOOL PROPERTY

June 28, essentially denying its claims. The case will come up for review Aug. 4 in Denver District Court. Weld County Commissioner Barbara Kirkmeyer testified against efforts to impose increased setbacks near schools this past spring in the legislature. The bill failed. She calls moves to impose increased setbacks “purely political.” “They’re OK with a drilling rig within 500 feet from residences, for example, where my grandchildren live, but where my grandchildren go to school it must be 1,000 feet,” Kirkmeyer said of those fighting for the setbacks. “It’s not common sense.” State drilling setbacks, which were updated in recent years, require such projects to be 1,000 feet from multiple occupancy structures and 500 feet from residences. Residents for the last two years

have not accepted those new setbacks as safe, citing health reports about the dangers of oil and gas drilling. Oil and gas industry leaders cite studies refuting the health concerns, and the COGCC has repeatedly stated Colorado has the strictest oil and gas rules across the country to protect the public. Groups sought upward of 2,500-foot setbacks on the ballot last fall, but they failed to get the required signatures to get it on the ballot. The Vetting pad, which is owned by Denver-based Extraction Oil and Gas, was met with concerns from area neighbors and parents of schoolchildren last summer, when the commissioners discussed the 24-well pad project, which is about 1,350 feet south of Bella Romero Academy middle school, a grade 4-8 campus. The commissioners unanimously approved the

This is the road just east of Bella Romero Academy, that leads to a site more than 1,000 feet from the playground to the south of the school. Neighbors have filed a lawsuit to prevent Extraction Oil and Gas from drilling in the empty field. Photos by Sharon Dunn/sdunn@energypipeline.com. AUGUST 2017 ENERGY PIPELINE 11

project. Kirkmeyer said Bella Romero was built after oil and gas was present in the area. “They were actually shutting down a well that was closer to Bella Romero, and moving the location even farther away from the school,” Kirkmeyer said of Extraction. The Vetting site is 1,343 feet away from the actual school, with about 1,200 feet between the well pad and the playground, Extraction Oil and Gas officials say. The complainants in their

ACTIVISTS GATHER IN JUNE TO PRAY FOR BELLA ROMERO bout two dozen environmental advocates gathered in June at a A playground in east Greeley. The message: Oil and gas activity has no place near a school. The school is Bella Romero Academy of Applied Technology, 1400 20th St. Extraction Oil and Gas has planned a 24-well fracking operation about 1,300 feet from the school in an empty field. “We’re just there to protect the earth, protect the water, protect the children and the people of Greeley,” said Paddy McClelland, of Denver-based Wall of Women. People came from Denver, Fort Collins, Windsor and Loveland. Another, Joann Spotted Bear, made the trek from South Dakota. Spotted Bear, who protested the Dakota Access Pipeline and who has spoken before the United Nations in New York, led a ceremony blessing the Bella Romero playground. People held hands in a circle. They burned sage and used water in a ritual, too. Their children played on the playground behind them. Megan Meyer, an environmental studies student at the University of Northern Colorado, has two children of her own. Although her kids don’t attend Bella Romero, Meyer said she thought it was important to be there. “We want the parents at Bella Romero to know they have support,” Meyer said. “A lot of them are upset about it but feel like they can’t do anything to stop it.” Weld County commissioners approved the Extraction Oil and Gas project in late June 2016, frustrating roughly 100 residents who attended the hearing that day. Residents and advocates opposed the drilling operation before and opposed it in various public settings, including GreeleyEvans School District 6 meetings, since. Jennifer Soule-Hill, pastor at the Family of Christ Presbyterian Church, 2410 35th Ave. in Greeley, said she wants to start a regular schedule of prayers at the school. Extraction officials have denied the operation would be a safety concern, and the company spent months planning to meet state and local requirements. There are also additional safeguards, including electric drilling rigs and technology to reduce methane emissions planned for the operation. — Tyler Silvy 12 ENERGY PIPELINE AUGUST 2017

lawsuit claim the playground is 500 feet away from the pad site. “The ‘schoolyard’ facility described in the lawsuit appears to actually be a storm-water detention pond located approximately 500 feet south of the school, complete with a detention pump, which is used to store rainwater runoff,” said Brian Cain, spokesman for Extraction Oil and Gas. In a news release, Therese Gilbert of Weld Air and Water, one of the groups suing the COGCC, stated, “The state of Colorado is failing to protect our children. We are subjecting children to conditions that are dangerous at their point in physical development, and then expecting them to actively play in those conditions.” The lawsuit also claims the COGCC failed to do its duty by requiring Extraction to examine alternative sites, a new requirement in large facilities as set forth by a new rule the COGCC implemented in the past two years to enforce Gov. John

The playground at Bella Romero Academy is just south of the main building, followed by a soccer field, and a swampy area. Extraction Oil and Gas’ planned drilling site is further south of the swamp.

Hickenlooper’s oil and gas task force’s recommendations to improve community input into the oil and gas siting process. The lawsuit claims other school areas where Latino population is much lower than the white population get better treatment. Extraction proposed a drilling site in southwest Greeley about 1,500 away from Frontier Academy and 1,000 feet from the playground in 2014. The company pulled out of that request, seeking other drilling options that allowed them better access to infrastructure. The company moved previously planned drilling projects to what is called the Triple Creek site, just west of 71st Avenue in an empty field in Greeley surrounded by residences, all at least 1,000 feet away. Brian Cain, spokesman for Extraction, said the Vetting location on U.S. 34 was “part of a series of alternative locations that were identified by Extraction to replace several older-vintage permitted locations, including the Gilbert, Sheep Draw and south Greeley sites. Vetting was one of several locations sited in the area to replace those pads because it enabled more efficient use of pipelines for both gas and oil, as well as access to electricity for an electric-powered rig and electric production facilities, which the

other pads did not. Extraction makes use of pipelines wherever possible to reduce impacts of development by reducing truck traffic.” The lawsuit also claims the site is located in a low-income area, where “the commission and operators generally experience the least amount of pushback when siting major oil and gas development in predominantly minority communities, since these communities do not have the same resources as more affluent communities.” Neighbors fear their quality of life will suffer due to drilling, which they say will be noisy. “As someone who lives in the neighborhood near where this drilling would happen, we are concerned for our quality of life,” said Shirley Smithson of Wall of Women, another group behind the lawsuit, in a news release. “Fracking operations involve huge noisy drills and vibration at all hours plus heavy traffic that has no place in any community.” But Extraction officials have proposed a variety of safeguards, from electric drilling rigs, which eliminate the big diesel engines create, and technology to reduce methane emissions by 99 percent. Cain said Extraction went through months of meeting state and local requirements on this project, and also is working with Greeley-Evans School District 6 “to locate and assist in creating additional athletic facilities for the benefit of the students and

community.” Matt Lepore, director of the COGCC, declined to comment on the lawsuit.

Lakota Rosebud, originally from Seattle, holds hands with people from Greeley before a prayer ceremony at Bella Romero Academy, 1400 E. 20th St. in Greeley. Rosebud went to Standing Rock to stand against the construction of an oil pipeline. She and others prayed for the children of Bella Romero, where a 24-well oil and gas operation is planned nearby. Photo by Kelly Ragan/kragan@greeleytribune.com

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OPINION

Severance tax initiative shows environmental ‘street fight’ tactics in action BY SIMON LOMAX • FOR ENERGY PIPELINE

National environmental activist groups have spent years trying to wipe

out oil and natural gas development in Colorado. Sometimes, they openly demand a ban. More often, they propose unworkable laws and regulations that would bring energy development to a grinding halt. Keeping up with the different demands and proposals is tough, but the goal is always the same. Just ask Josh Joswick, a Colorado organizer with the national antioil and gas group Earthworks. “This is a street fight,” Joswick told a conference of environmental activists in 2010. “This is a back-alley fight. And you’ve got to fight it any way you can [with] any tool you can use. Whether it’s bans on drilling, whether it’s local regulations, whether it’s severance taxes … you have to make it as difficult as possible to develop [oil and gas].” Seven years later, the anti-drilling playbook hasn’t changed much at all. Take the severance tax measure proposed for the statewide ballot this year, for example. It would dramatically hike severance tax rates anywhere from 100 percent to 250 percent. While severe, the measure doesn’t look like a ban at first glance. But the measure’s sponsor is Andrew J. O’Connor, an anti-fracking activist from Boulder County. He’s not interested in stricter regulations on energy development, or in tax revenues from 14 ENERGY PIPELINE AUGUST 2017

continued oil and gas production. Quite simply, O’Connor wants to eliminate Colorado’s oil and gas sector. “[D]on’t we have a moral responsibility to blow up wells and eliminate fracking and workers?” O’Connor wrote in a recent opinion piece. When a reporter called O’Connor to explain his comments, he doubled down. “I wouldn’t have a problem with a sniper shooting one of the workers,” O’Connor told ColoradoPolitics.com. O’Connor has even seized on a tragic house explosion in Firestone to justify his violent rhetoric. He’s not alone: Earthworks, Sierra Club, 350.org and other anti-oil and gas groups are also using the tragedy to push their agenda, even though their calls to ban new drilling are completely unsupported by the findings of investigators. O’Connor has also tried selling his extreme brand of environmental politics to elected officials. “Fracking is murder,” the activist wrote in an e-mail exchange, uncovered by Western Wire, with Broomfield City Councilman Kevin Kreeger. “Fracking workers are mercenaries. Fracking is commercial terrorism. Is anything I wrote not true?” “I appreciate the clarification!” replied Kreeger, who expressed interest in proposing a local version of the severance tax increase for Broomfield. O’Connor’s severance tax initiative – which still has a chance of making the

ballot this year – is just one example of the “fight it any way you can” strategy. National activist groups seeking a total ban on oil and gas development have pushed other measures in Colorado, including bigger nodrill zones near buildings and other “areas of special concern,” such as creeks, parks and open space. But state regulators and the leaders of Colorado’s business community have called out these measures for what they really are: Thinly veiled energy bans. Gov. John Hickenlooper even warned such measures would “drive oil and gas out of Colorado.” But that’s the whole point, of course. The talking points may change, but the anti-oil and gas activists don’t. Whether it’s drilling bans, local regulations or severance taxes, they’re fighting the same street fight year after year, trying to land a knockout blow against the state’s energy sector. They haven’t succeeded yet, but the activists are just waiting for state, local and business leaders to let their guard down. With tens of thousands of jobs and tens of billions of dollars of economic activity at stake, let’s hope that never happens. Simon Lomax is a research fellow with Vital for Colorado, a coalition of state business leaders focused on energy policy. From 2004 to 2012, he was a news reporter covering energy and environmental policy in Washington, D.C. Find him on Twitter at @ simonrlomax

Longtime Greeley firefighter Greg Becker inspects an oil and gas well site in north Greeley in preparations for nearby fireworks displays for the Fourth of July. Becker is Greeley’s first dedicated oil and gas well inspector in a program the city pioneered to be another set of eyes for increasingly busy state inspectors. Photos by Sharon Dunn/ sdunn@energypipeline.com.

OIL & GAS INSPECTIONS Greeley firefighter pioneers oil, gas inspection program BY SHARON DUNN • SDUNN@ENERGYPIPELINE.COM

Just before Greeley’s Fourth of July celebration, Greg Becker turned his cityissued suburban down a dirt road toward an oil and gas well in north Greeley. It was shut in to prevent even a hint of trouble with the impending fireworks, which would be launched 500 feet away. He stopped at the entrance to turn on his gas monitor — a hefty, hand-held machine that detects the tiniest of gases, one that would alert him to the presence of sometimes deadly poisons, or those that would hint of a leak in the area.

Becker, a Greeley firefighter for nearly 20 years, was there to ensure the well was inoperable and do a general once-over. Part of his daily routine finds him traversing may well sites and tank batteries in and around Greeley, looking for clues of poor maintenance or issues that crop up — problems that if found early enough could help prevent catastrophes like the April home explosion in Firestone. As he wandered through the site, his gas detector silent, making sure valves were shut and the site wasn’t operational, checking

pipes and caps here and there. Becker really can only enforce Greeley fire code issues such as overgrown weeds or improper signage; but he can refer safety issues he finds to the COGCC and the site operators. He was trained right along with state inspectors to look for signs of impending trouble. He knows what they look for, and operates as another set of eyes in the field. “This is a picture in time,” Becker explained of the inspection process. “Tomorrow something else could go on there. If we’re not getting back in a couple of years, a lot can AUGUST 2017 ENERGY PIPELINE 15

happen, so the extra sets of eyes is safer for the community.”

PIONEER TIME It was 2014 and the oil and gas industry was booming in Greeley and all of Weld County. Greeley officials were starting to get more applications for drilling in city limits, and residents were starting to voice concerns about the industrial scenes in their backyards, as drilling popped up in new subdivisions borne out of old drilling areas. “Part of this is how fast the community is growing,” Becker said of the concern. “Before, a lot of existing wells were out in the county, and the city has grown around them. I am concerned with that.” City officials developed a new inspection program that is now at the forefront of the state.

Greeley firefighter Greg Becker walks the perimeter of an oil and gas well in north Greeley in July. Becker’s job is to inspect all of 475-plus wells in Greeley. While he can only enforce the city’s fire code that regulates signage and weeds, for example, he also has been trained with state oil and gas inspectors to look for signs of problems onsite.

“As a fire department, that’s one of the reasons why we started the inspection program, to try to reduce the risk to oil and gas and urban interfaces.”

Greeley firefighter Greg Becker checks off an item on his oil and gas checklist while he inspects a north Greeley oil and gas well in north Greeley.

“We were starting to get lot of questions and inquiries to what we were doing and our capabilities in the response and prevention areas,” said Dale Lyman, Greeley’s fire chief. “We all just thought this was the right thing to do.” 16 ENERGY PIPELINE AUGUST 2017

Greeley’s oil and gas inspection program, Lyman said, provides that additional layer of oversight. While it may or may not have prevented the issue that resulted in a home explosion in Firestone on April 17, the philosophy is any additional inspection makes it that much safer.

DALE LYMAN, GREELEY FIRE CHIEF

“As a fire department, that’s one of the reasons why we started the inspection program, to try to reduce the risk to oil and gas and urban interfaces,” Lyman said. The program guarantees onsite well inspections of every one of Greeley’s 475 oil and gas wells every other year — that’s about half the time those same wells were inspected before. Since the program began, every one of those wells has been inspected; prior to that, each

well in Greeley would have been inspected every four to five years. Through the Greeley Fire Department, the city was inspecting wells regularly before Becker was named the city’s oil and gas well inspector. It just wasn’t hitting as much, and frankly, the training needed to navigate oil and gas situations was a learning curve for Greeley’s firefighters, who were charged with the additional inspections along with their regular duties. Becker was a working firefighter with the city and volunteered for the new duty. Becker grew up around oil and gas near Kersey. “It was a challenge to start it because we had no model to build off of,” Lyman said. “We kind of built it from the ground up.” Becker pioneered the program. He set up well-inspection checklists, GIS mapping, developed relationships with state inspectors and oil and gas operators. He took some of Aims Community College’s oil and gas classes to understand equipment and processes. He spent three days training with state inspectors to learn everything he needed to look for pending signs of trouble.

who immediately shut in the well. “They had actually LDAR’d the site a few weeks prior to my inspection and it checked out perfectly,” Becker said. It turned out that the pressure relief valves on top of the tanks collectively malfunctioned and began emitting gas. Had the weather been just right, and there was an ignition source, it could have been a catastrophe.

Greeley firefighter Greg Becker discusses his job of inspecting oil and gas well sites in and around Greeley. The city created its own inspection program a little more than two years ago.

“It was combination of training and putting together a database to track inspections,” Lyman said. “And a lot of it was kind of getting the oil and gas operators familiar with what exactly we were doing. It was baby steps. Greg developed an actual inspection form, and worked with GIS people. It was literally building the program.” Becker is charged with inspecting 200 wells per year, a number that will continue to increase as the city gains more wells. If you count the fire department’s coverage area, that would add another 2,000 oil and gas wells into the picture. “Our fire response jurisdiction is bigger than city limits,” Becker said. “Now, inspecting 2,000 wells is not feasible.” In the field, he is outfitted like any oil and gas employee, wearing flame resistant clothing and a gas monitor to alert him to any dangerous gases on site. He most often finds minor violations of the local fire codes, but occasionally, he has helped avert disaster. On one site of 10 wells at Aims Community College a while back, Becker’s gas alarm started screaming the moment he pulled up in his rig. He backed up to a more acceptable level, and called the operator,

Greeley firefighter Greg Becker uses a hand-held gas detector to monitor for leaks at an oil and gas well in north Greeley. The detector is his first line of defense on a site, and he turns it on well before coming to each location.

“They were able to correct it. It wasn’t a big deal, but something I noticed during a (routine) inspection,” Becker said. “It’s a great example how the state, operators and we worked together to keep the community safe.” AUGUST 2017 ENERGY PIPELINE 17

Many operators at first were skeptical. It took a while, but Becker has been able to form working partnerships in which everyone benefits. “Since I’ve been in this positions, the steps the state and operators

camera, with which he would be able to see emission sources to better identify leaks and maintenance problems. “After the Frederick-Firestone (explosion) and with proper training and incorporating that into our inspections, there is the potential to identify that leak, especially sites that are so close to the community,” Becker said. “If I could pick that up, there’s a huge potential of protecting the community.” The program also would benefit from another inspector, but that too may be a tall order in limited city budgets. At present, Becker’s duties are not 100 percent dedicated to the program, as he also must do area commercial inspections. Part of pioneering his program is a GIS mapping component, through which he identifies the well sites he inspects.

THE FIRESTONE EXPLOSION KILLED TWO PEOPLE, AND SEVERELY INJURED ANOTHER. IT HAS SCARED RESIDENTS WHO LIVE NEXT DOOR TO THE WELL. BECKER THINKS MORE REGULAR INSPECTIONS COULD HAVE MADE A DIFFERENCE FOR THE NEIGHBORHOOD.

Greeley firefighter Greg Becker has been with Greeley Fire Department for more than 19 years. He grew up in Kersey near oil and gas development, and he volunteered for the newly created position three years ago.

have taken to make it safer for the general public is phenomenal,” Becker said.

LEGITIMACY Becker continues to work to improve the Greeley program but that will cost some money. Becker hopes to convince the Greeley City Council to fund an infrared 18 ENERGY PIPELINE AUGUST 2017

“All of our inspections are public record,” Becker said. The city offers through its website a public database that shows all wells within city limits that have been inspected at the state level. Becker would like to add a link to his inspections as well. “If someone lives near a well, they can see when the last inspection was done by the state, the fire department, what was found there,” Becker said. The Firestone explosion killed two people, and severely injured another. It has scared residents who live next door to the well, which had been there a couple of decades and changed hands numerous times. Becker thinks more regular inspections could have made a difference for the neighborhood. He doesn’t want that happening in Greeley. But he also must understand his role. He needs to strike a balance between community safety and helping businesses operate. “I walk a fine line to where I have to be able to work with both the meet the common good,” Becker said. “That’s where we’re constantly learning more and more. If Frederick-Firestone never happened, this could have been going on for a couple of years. “ And he’s just hitting his stride. “I’m very passionate, I love what I’m doing,” Becker said. “It’s kinda nice knowing at the end of the day I potentially could have made a difference. If I can just prevent one of these incidents from happening, then I did a good job.”

MAKING HOLE “Diamond Glenn” McCarthy BY BRUCE WELLS • FOR ENERGY PIPELINE

As Texas stereotypes moved from millionaire cattle ranchers to oil barons in the late 1940s, people started calling “Diamond Glenn” McCarthy the “King of the Wildcatters.” Some people said a $21 million hotel McCarthy opened in 1949 put Houston on the map. McCarthy’s oil patch fame began in 1935 with a discovery well 50 miles east of Houston. On July 21, he and partner R.A. Mason completed in the No. 1 White well with initial production of almost 600 barrels of oil a day. The well extended the already productive Anahuac field 3 miles to the north. By 1945, McCarthy had discovered 11 new oilfields and extended After discovering almost a dozen Texas oilfields, Texas wildcatter others. In Brazoria Glenn McCarthy appeared on County a year TIME in 1950. Photos for Energy later, he drilled Pipeline/American Oil and Gas Historical Society

the highest-pressure gas well to date. Described as a “bombastic, plucky Irishman best known for building the famous Shamrock Hotel,” McCarthy was featured on the February 13, 1950, cover of TIME. Born on Christmas Day in 1907 in Beaumont, Texas, Glenn H. McCarthy worked as a water boy at age 8 in the oilfields surrounding Spindletop Hill, where father Will McCarthy earned about 50 cents a day. The family

moved to Houston in 1917. McCarthy, who excelled at football in high school, won a scholarship to Tulane and later transferred to Texas A&M. In his early 20s, he dropped out of college and entered the retail oil business. He soon owned two Houston service stations. While pumping gas one day in 1930, the daughter of a successful oilman pulled into his station driving a Cadillac convertible. He would marry its driver, Faustine Lee, daughter of Thomas Lee, a partner in Yount-Lee Oil Company. Determined to find success in oilfields without help from his father-in-law, McCarthy drilled wells for others. At age 24 he drilled a dry hole in Hardin County; more followed until two years later when he found oil at the Anahuac field in 1935. McCarthy continued drilling over the next decade and by the end of 1949 had more than 400 producing wells. As his reputation as a hardcharging, hard-drinking wildcatter grew, his estimated worth reached $200 million (about $2 billion today). By then he had earned the nickname “Diamond Glenn.” McCarthy produced a 1949 movie, “The Green Promise,” starring fellow Irishman Walter Brennan and a new star, Natalie Wood. His circle of friends included Errol Flynn, John Wayne, Maureen O’Hara,

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.

McCarthy arranged for a 16-car train to bring his Hollywood friends to the St. Patrick’s Day 1949 opening of the Shamrock Hotel. AUGUST 2017 ENERGY PIPELINE 19

Dorothy Lamour, Howard Hughes Jr., and Eddie Rickenbacker of Eastern Airlines. In addition to his movie-production company and McCarthy Oil and Gas, he owned KXYZ radio, 14 newspapers, a magazine, two banks, and the Shell Building in downtown Houston. He built his 1,100-room hotel on the edge of town. Constructed between 1946 and 1949, the 18-story Shamrock Hotel was the largest in the United States. After spending $21 million to build it, McCarthy spent another $1 million on a party for the St. Patrick’s day opening. The gala – where McCarthy also introduced his own label of “Wildcatter” bourbon – was dubbed Houston’s biggest party. “The hotel had a shamrock motif, 63 shades of green colors in the interiors, the reception desk pen wrote in green ink,” noted one observer. The Steinway piano in the lobby was green. More than 5,000 attended the opening, and the oilman arranged for a Santa Fe Super Chief 16-car train to bring his Hollywood friends.

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Although McCarthy once said he built his hotel to last 100 years, by 1955 he found himself financially overextended and sold the Shamrock to Hilton Hotels. He lived

McCarthy pictured in 1986. His $21 million hotel’s swimming pool was big enough for water ski demonstrations. Photo courtesy Houston Chronicle.

two-story house near La Porte. He died on Dec. 26, 1988, and was buried in Glenwood Cemetery next to his wife, Faustine. The Texas oil millionaire’s legend lives on, according to one biographer, “because on one March night in 1949, the Shamrock introduced Houston as a dynamic city of the future to the rest of the nation.” Learn more petroleum history at the American Oil & Gas Historical Society website, www.aoghs.org. “Making Hole” is a term for drilling coined long before oil or natural gas were anything more than flammable curiosities. 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.

long enough to see his hotel torn down and turned into a parking lot in 1987. McCarthy lived a quiet life in a modest

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TECH TALK

Could a nanosatellite monitor greenhouse emissions from oil, gas facilities in the DJ? BY GARY BEERS • FOR ENERGY PIPELINE

CANADA’S OIL SANDS INNOVATION ALLIANCE (COSIA) NEEDS MORE PRECISE AND FREQUENT DATA ON GREENHOUSE GASES Alberta was the first jurisdiction in North America with mandatory greenhouse gas emission reduction targets for large emitters across all economic sectors (Oil Sands and EHG Emissions Fact Sheet, Public Works and Government Services Canada, 2013). Under the Copenhagen Accord, activities that develop and transport natural resources in this region committed to reduce greenhouse gas emissions by 17 percent below 2005 levels by 2020. Many oil sand operators realized they needed more precise measurements of total emissions — more frequently and more safely — than current methods to effectively take steps to reduce emissions on an areawide basis before 2020 (LOOKNorth, GHS Satellite Solutions). This view was shared by other emitters – power generation, mining and waste management companies. To meet this need, GHGSat (Montreal, Quebec) designed the world’s first satellite for measuring greenhouse gases, such as methane and carbon dioxide, and air quality emissions, such as sulfur dioxide and nitrogen oxides. With the support of COSIA, LOOKNorth, various academic institutions, and environmental agencies, GHGSat built and tested the satellite before implementing an 18-month demonstration program.

JUNE 21, 2016 - FIRST SATELLITE LAUNCHED TO MEASURE EMISSIONS FROM INDIVIDUAL INDUSTRIAL FACILITIES

An Indian Polar launch vehicle placed the nanosatellite, about the size of a microwave oven, in orbit at an altitude of approximately 310 miles (CLAIRE’s Launch, GHGSat). This 33-pound instrument orbits the earth every 90 minutes; however, any single point on the earth’s surface can be measured every two weeks.

An Indian Polar launch vehicle placed the nanosatellite (about the size of a microwave oven, Figure 1) in orbit at an altitude of approximately 310 miles (CLAIRE’s Launch, GHGSat). This 33-pound instrument orbits the earth every 90 minutes; however, any single point on the earth’s surface can be measured every two weeks. The satellite, nicknamed CLAIRE, measures the gas fingerprints of carbon monoxide and methane using imaging spectrometers and other sensors. In a few seconds, over 200,000 atmospheric measurement around an industrial facility can be made from CLAIRE. The sensors can measure emission gases in areas of 5 square miles at a resolution of up to 160 feet. CLAIRE is expected to operate for five years before burn-up in the atmosphere.

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.

JUNE 21, 2017 – RELEASE OF SAMPLE IMAGERY FROM FIRST YEAR OF OPERATION AUGUST 2017 ENERGY PIPELINE 21

A nanosatellite, nicknamed CLAIRE, measures the gas fingerprints of carbon monoxide and methane using imaging spectrometers and other sensors. These images show the Rocky Mountain region.

During the first year in orbit, imagery from CLAIRE was restricted to qualified users. During the initial demonstration period, CLAIRE was directed to measure emissions from hundreds of facilities and activities, for example: • oil and gas facilities • hydroelectric facility under construction (Africa)

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• release of bottom water from large reservoir which released methane from decomposition • landfill (Japan) • power station (Russia) • cement plant (Africa) • animal feedlot • coal mine (Australia) Examples of the mapped emissions for six facilities are provided in Figure 2. Public releases of CLAIRE’s imagery has occurred at several events and many images are available on GHGSat’s website (www.ghgsat. com). GHGSat is reviewing CLARIE’s output with several facility operators. However, detailed evaluations of the emission maps and applications to improve management of greenhouse gas emissions at a specific facility have not been widely released. At the 2017 Global Petroleum Show (Calgary, Canada), GHGSat was the winner of the Environmental Excellence award which recognized any efforts, initiatives or technological development that have minimized or eliminated environmental footprint of the oil and gas industry. The success of CLAIRE has prompted GHGSat to build two additional tiny satellites which incorporate the lessons learned from the initial demonstration year, improve performance and provide additional capacity.

KICKSTARTER CAMPAIGN: $100,000 FOR DEMONSTRATION TARGETING YOUR INDUSTRIAL SITE GHGSat launched a kickstarter campaign to fund CLAIRE’s design, development and testing. Remaining funds for specific demonstrations of CLAIRE’s abilities were limited to a few projects. Efforts have been underway to obtain funds for additional demonstrations. The proposal is that $100,000 will pay for a demonstration using a single site or facility. The demonstration will involve taking carbon dioxide and methane measurements over a year for a total of 13 to 26 measurements (A Tiny Canadian Satellite Is Going to Watch the World’s Climate Offenders”, Motherboard, M Braga, November 2015). It would be interesting to have a demonstration project for one of the oilfields in the Rocky Mountain region, given the imagery from facilities in the Bakken and Barnett shale regions (Figure 2).

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DATA CENTER

The oil and gas industry is a large part of Colorado’s economy. Below, find statistics on drilling production, well permits and rig counts.

2017 DRILLING PERMITS

RIG COUNT BY STATE

COUNTY

NO. (% OF STATE TOTAL)

Weld 1,043

(67%)

Garfield 164 State July 7 Colorado 36 Louisiana 69 Oklahoma 136 New Mexico 59 North Dakota 52 Texas 463 California 11 Alaska 8 Ohio 27 Pennsylvania 34 Wyoming 25

June Avg. 36 65 130 59 49 461 10 6 27 34 25

May Avg. 31 63 121 56 44 453 9 7 23 34 24

April Avg. 29 59 125 56 43 425 8 6 22 34 19

Source: Baker Hughes Rig Count, Feb. 3. Source: Baker Hughes Rig Count, July 7.

2017 GAS PRODUCTION

(10.5%)

Mesa 110 Adams 81 La Plata 54

(7%) (5.2%) (3.5%)

2017 OIL

Rio Blanco 31 (1.98%)

State 1,565

PRODUCTION COUNTY *YTD

Source: Colorado Oil and Gas Conservation Commission as of June 1, 2017.

US RIG COUNT The U.S. rig count peaked at 4,530 in 1981 and previously bottomed at 488 in 1999. Area July 7 June Avg. May Avg. April Avg. U.S. 952 931 893 853 Canada 175 150 85 109 Source: Baker Hughes Rig Count, July 7

County *YTD‘16 .......................................Production Weld...........................................36,502,077 (27.6%) Garfield......................................27,494,631 (20.8%) La Plata .....................................16,108,283 (12.2%) Rio Blanco ..................................... 6,174,787 (4.7%) Las Animas ................................... 4,282,511 (3.2%) Mesa .............................................. 2,389,822 (1.8%) State.......................................................132,309,357

‘16 PRODUCTION

Weld 31,529,400 (89%) Rio Blanco 1,062,024(2.99%) Garfield 560,624 (1.6%) Cheyenne 302,404 (0.85%) Lincoln 301,544 (0.85%) Arapahoe 284,843 (0.80%) Larimer 275,634 (0.77%) Adams 211,774 (0.59%) State 35,416,329 Source: Colorado Oil and Gas Conservation Commission as of July 10.

Source: Colorado Oil and Gas Conservation Commission as of July 10.

COLORADO ACTIVE WELL COUNT

Weld ..........................................................................23,493 Garfield .....................................................................11,308 Yuma ...........................................................................3,875 LaPlata........................................................................3,323 Las Animas .................................................................2,935 Source: Colorado Oil and Gas Conservation Commission as of July 10.

Rio Blanco ...................................................................2,891 Adams ............................................................................957 Boulder...........................................................................310 Larimer...........................................................................278 State .........................................................................54,640 AUGUST 2017 ENERGY PIPELINE 23

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