U.S. Oil & Gas Industry Gears Up to Defeat Voter Initiatives to Limit Hydraulic Fracturing

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The Niobrara Shale formation, located in the Denver-Julesburg (D-J) Basin, about 50 miles north of Denver, may not have the crude-oil production or the potential of other U.S. shale formations, like the Eagle Ford or Bakken. But the Niobrara Shale is Ground Zero for the Oil & Gas Industry's efforts to convince the public that hydraulic fracturing is environmentally safe and an engine of economic growth.

A few producers, including Anadarko Petroleum Corporation (NYSE:APC) (Houston, Texas), Noble Energy Incorporated (NYSE:NBL) (Houston) and Encana Corporation (NYSE:ECA) (Calgary, Alberta), have made large investments in the Niobrara. And they are concerned that skeptical Coloradans will cast ballots this November that will destroy the value of those investments and sap billions of dollars of future revenue and earnings.

"Oil & gas producers have a real perception problem in Colorado," Bill Owens, Colorado's former governor, told about 100 attendees at the 4th Annual Niobrara Infrastructure Development Summit last week in Denver. "In our state, pretty much any citizen's initiative can get on the ballot. There could be up to 16 voter initiatives about hydraulic fracturing on November's ballot." Some of these initiatives are statewide, while others apply only to specific counties or cities.

"Some of these initiatives are designed to cripple the oil & gas industry, and some are designed to slow it down," continued Owens, who is a member of the board of directors of the Bill Barrett Corporation (NYSE:BBG) (Denver, Colorado). "The engineering challenges of the Niobrara have been met. The November ballot initiatives are the real challenges for our industry."

Last September, as four citizen's initiatives against hydraulic fracturing were headed for the polls, Anadarko and Noble formed Coloradans for Responsible Energy Development (CRED) (Denver, Colorado) to try to get the industry's side of the story out in the public. It wasn't successful: All four initiatives passed.

"Our industry has lost a total of five ballot initiatives in recent years," Brad Holly, Anadarko's vice president for operations, told the conference, sponsored by Information Forecast Incorporated (Infocast) (Woodland Hills, California). "We're zero for five heading into this November's election. The industry is very, very concerned."

"For too long, we've been focused on providing an essential ingredient for modern life," Holly said on March 5. "We've been very focused on the facts and the engineering, but not the perceptions."

CRED is working to change that. The organization is spending millions of dollars to hire 40 professionals to defeat the initiatives, Holly said. In recent months, the group has run a variety of TV, radio and digital ads. The ad campaign is expected to continue, if not expand, over the next six months.

The organization is mindful that spending money on advertising alone will not sway the public. So it is committed to a grassroots outreach campaign to inform the public about hydraulic fracturing's safety record, its benign impact on the environment, its contribution to Colorado's economy and its role in U.S. energy security.

As it seeks to sway the public, CRED may highlight collaboration between oil & gas producers, a national environmental organization and the Colorado state government to produce the nation's toughest regulations on detecting and reducing methane emissions across the lifecycle of oil & gas development, from drilling to production to maintenance. The regulations were proposed late last year and adopted last month. For more on that measure, see December 5, 2013, article - Oil & Gas Companies Collaborate with Environmental Group to Draft Tough New Air Quality Regulations in Colorado.

"I've run several statewide campaigns, and I must say CRED's campaign is the most comprehensive one I've ever seen," Owens told the conference on March 5. Owens was twice elected Colorado's governor. He also was elected treasurer of the Centennial State. "The advertising air war will buttress a grassroots outreach effort. There will be a social media component, too. We're going to spend millions of dollars defending $6 billion of value in the Niobrara."

Holly of Anadarko told about 100 attendees at the conference that CRED is a bipartisan effort that is using professionals who worked in the 2008 and 2012 presidential elections. "We don't just want to win an election--we want to win the public's trust. This is not a short-term thing. We need to show the public we are part of the solution."

Anadarko has held several open houses where the public could learn about hydraulic fracturing, as well as oil & gas production in general, while interacting with Anadarko employees. More open houses are planned. "In Colorado, the public is very interested in these issues," Holly said. "At one of our open houses, about 150 people attended when the temperature was 8 below zero. There is no substitute for direct outreach."

Right now, the public is evenly split on a proposal to impose a two-year moratorium on hydraulic fracturing, Holly continued. That even split reflects the public's top-of-mind thoughts about hydraulic fracturing. But when CRED's pollsters probe further, and bring up hydraulic fracturing's safety, the steps companies take to protect the environment, and its economic impact on the state of Colorado, Holly said the balance tips 67% to 33% against the proposed moratorium.

In explaining why the public supports measures to limit hydraulic fracturing, Owens said: "Roughly 20% to 30% of the public simply doesn't like or trust us. Maybe that's our fault, maybe that's their fault, but it's a fact. Then there is a certain percentage that thinks 'local control' is a good idea. And then there is a slice of the public who favor renewable energy."

"But this is a winnable challenge, and I'm cautiously optimistic," Owens said. "I'm proud of our industry's position. We're going to talk about the benefits of hydraulic fracturing and set this issue to bed for some time."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.