On Oil Operators’ Exploration and Production (E&P)
This activity has, historically, been permitted with little regard for either public health and safety, or protection of the environment. The Colorado Oil and Gas Conservation Commission (COGCC) has seen its role largely as a promoter of the industry. Recently, this position of the COGCC was challenged in the Martinez case (1) and upheld by the Appellate Court. In short, the Appellate directed the COGCC to follow the clear language of the Legislative Act that both created the agency and subjected its E&P regulation to protections of public health, safety, and welfare, including the environment and wildlife resources.
COGCC director, Matt Lepore, has completely ignored the Appellate’s directive and has continued to issue drilling permits under the Commission’s historical misinterpretation of state law. Municipal, county, and local jurisdictions have remained obligated by state law in their issuance of permits and use grants. Apparently these lesser jurisdictions, all acting similarly, have taken direction (from some umbrella organization?) to the effect that they cannot exceed the authority of the COGCC, therefore must join it in disobeying state law per their own regulations. Such spineless deference (obedience to an unlawfully acting superior) opens these lesser jurisdictions to the possibility of expensive law suits, almost certainly culminating in adverse rulings such as Mandamus (instructions to follow one’s statutory obligations). Temporary moratoria have not been precluded by the laws of Colorado.
Therefore, permits to drill may be denied by lesser jurisdictions on health and safety grounds, for example, without fear of legitimate legal repercussions for superseding the powers of the COGCC, being here delinquent at law. Indeed, such denial would be warranted in the health, safety, and environmental interests of constituents.
On Oil Development’s Economic Tradeoffs
Lack of financial fitness should preclude an Operator from doing business in the state. Crudely put, ‘profit or die’ is the fundamental competitive truth of ‘free market capitalism’ upon which Colorado oil economics claims to function, both politically and commercially. If an Operator is not economically viable, all other financial considerations relative to its E&P operation become irrelevant. For example, no economic trade-off issues (lost royalties, local business benefit, etc.) can be comprehensively, thus rationally, argued.
The public has no guarantees of recompense in case Operations go environmentally bad (residential explosions from leaky equipment, climate effects of abandoned/orphaned wells, mass health consequences from oil-related benzene poisonings, etc.) which can easily cost multi-millions (2). Whilst the COGCC requires Operator bonding against such disasters in the thousands of dollars, actually incurred costs will typically reach into the millions, thus will not likely be paid by already financially strapped Operators.
On E&P Economics
It is easy to show by standard graphical analysis, and without any special technical knowledge of the oil industry, that drilling for product cannot be done economically in the Wattenberg (core production area of oil’s D J Basin) at current or expected oil prices (3). The amount, A, of a well’s oil production is excellently modeled by hyperbolic depletion,
A = a ln x
where a is the depletion parameter (chart-determined) and x is the elapsed time of production. Only two additional quantities, the cost per unit length of the average well, c/l, and the average price of oil, p, are needed to assess the Wattenberg’s profitability. From the raw drill/frack cost c/l, as reported to the SEC by Extraction O&G, the overall value of c/l = $1500/ft was derived as in reference (3). The average (uninflated or real) market price for WTI oil has been p = $50/bbl for decades (albeit with some dramatic spikes and dips) (4). Wattenberg wells deplete on average between month 2 and month 20 according to reports filed with the COGCC by the Operators, themselves. Thus ln (20/2) = 2.3. At ‘breakeven’, a well’s income, i = pA, equals the cost, c, of bringing it into production. Thus, after dividing by well length, l,
c/l = i/l = [p (a ln x)]/l
Substituting numerical values and solving for the value of a/l at breakeven yields,
a/l = 13 bbl/ft
Since the Greeley area has the highest a/l values in the Wattenberg, should its wells prove unprofitable on average, the D J Basin’s overall production will be unprofitable. Graphical analysis of Greeley wells’ production yields an average a/l = 9.63 bbl/ft, far below the necessary breakeven value of a/l = 13 bbl/ft. Indeed, only one Greeley well proved profitable with an a/l value of 15 bbl/ft. Thus the DJ Basin proves, on average, unprofitable to drill at expected oil prices–its financial operations are simply unfit.
From the Operator’s production reports (to the COGCC), average well values were chart-derived, then entered into the breakeven equation above to yield
p = $99/bbl
This is the price that oil must reach for the Wattenberg‘s average well to breakeven on cost. For natural gas, separation, handling, and transport to the sales hub will typically combine to cost more than is recoverable by sale.
This work’s production model, A = a ln (x), has two parameters: the constant ‘a’ characteristic of location and technique and the logarithm of the production time, x. If ‘a’ is technologically increased (more sand, more stages, and so on), the time, x, of good production correspondingly decreases keeping overall output about the same, as though there is only so much oil that fracturing can release. COGCC production reports verify that the so-called new, efficient wells since 2015 produce more initially, but also deplete more rapidly.
On Health, Safety and Environment
According to the July 2017 issue of the journal “Energy Research and Social Sciences”, there were at least 116 fires and explosions at oil and gas operations in Colorado during the 10-year period 2006-2015, or about 1 per month. Bruce Finley of the Denver Post reported on Jan 12, 2018 that “Oil and gas industry spills increased by 17 percent around Colorado last year” (2017)—nearly a dozen mishaps per week. In six cases, hydrocarbons flowed directly into waterways and in 22 incidents, domestic water wells were apparently contaminated. More than 506,000 gallons of toxic, radioactive, returned fluids from producing wells were spilled.
Infants born within 1 kilometer (about ½ mile) of fracked oil wells are 25% more likely to have lower birth weights than infants born more than 3 kilometers away (5). Low birth weight is a symptom of benzene exposure, a known air pollutant associated with fracking (6). For a general review of the neurodevelopmental effects of fracking, see Ellen Webb’s 2017 study (7). It cites 209 peer-reviewed references.
Iron minerals normally found in frack waste are a frequent host for another element: arsenic, a known human carcinogen. When soil bacteria breathe in that iron, arsenic at toxic levels is released and becomes water-soluble. This allows unsafe levels of arsenic to percolate into groundwater (8).
With accurate measuring protocols and holding periods, ordinary landfill-targeted frack-waste cannot meet the TENORM standards needed to protect public health. Indeed, radiation levels are being under estimated by factors of 100 to 1000 (for scale). It is clearly inappropriately legal to land-dump E&P waste. Thus, TENORM land-dumping should be stopped until COGCC/CDPHE rules comply with current knowledge. In the meantime, Operators must find approved disposal sites in order to continue operation (9).
The New York Compendium’s latest findings (10), from scientific, medical, and journalistic investigations, combine to demonstrate that: “Fracking poses significant threats to air, water, health, public safety, climate stability, seismic stability, community cohesion, and long-term economic vitality.” From a review of 685 recent, peer-reviewed publications on fracking, 84% indicated health hazards, risks or adverse outcomes; 69% reported water contamination, and 87% found air pollution (11). The Compendium concluded that regulations (such as those of the COGCC) are simply not capable of preventing harm. Accordingly, a state-wide ban of fracking was recommended as a reasonable course of action.
Evidence of the negative health, safety and environmental effects of fracking are rapidly accumulating. Concerns over fracking, revitalized in response to a number of recent, large explosions, fires and toxic releases (Firestone, Mead, and Windsor), are currently a vital issue for Coloradoans. For those directly affected, the COGCC and CDPHE (Colorado Department of Public Health and Environment) have failed, overall, to effect any acceptable degree of regulation and justice. Some anecdotal complaints follow: The COGCC is an oil captive agency, run by a former oil lawyer and an industry-prejudiced board of directors. It is intolerant of criticism, interpreting such as out-of-bounds personal attacks. Its public information website is so chronically out-of-date that it is nearly worthless for making spot decisions. Although benzene tops the list of toxic emissions as a primary health concern, no reliable COGCC data exists for assessing its routine exposures/concentrations. The agency deploys scientifically discredited testing protocols, does not follow normal rules of evidence in its contested case hearings, and relies on the CDPHE’s scientifically unpublishable studies for its health and safety guidance.
The legislative Act that created the COGCC mandated that the development of oil and gas be regulated subject to the protection of public health, safety, and welfare, including protection of the environment and wildlife resources. However, Philip Doe has observed (12): The agency has interpreted its mission to protect only half the time while promoting the other half, noting this was akin to encouraging student’s health in the mornings, yet ‘pushing drugs’ on school grounds in the afternoons. Doe’s observations are particularly cogent given that most of the dangers and costs of oil development do not occur for renewable energies, which, in any case, are already cheaper (12).
The State and The State’s Duty lay obscured by Oil’s might. The Supremes said, “Let there be Martinez”, and all was Right.
— A. Hope
- Martinez vs COGCC, 2017 COA 37.
- Damages from Firestone’s house explosion cost at least $1 million. The parent company of the Aliso Canyon’s gas/benzene leak in California estimates its cost at over $700 million. The costs of climate change from oil and gas is likely in the high billions (constituting 60% of all fossil). The COGCC claims it costs, on average, at least $45,000 to fix one leaky, orphaned well among the nearly 1000 outstanding.
- Letter to COGCC on behalf of ‘Be the Change’, Re: Comprehensive Drilling Plan Docket No. 170500189.