Released May 23, 2017 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The business environment for Oil & Gas drilling in Colorado became more uncertain after a natural gas explosion destroyed a home last month, killing two people and injuring two others. Drillers in the state already are facing new safety-inspection mandates, and another political campaign against drilling and hydraulic fracturing is almost certain to be launched.
On April 17, natural gas seeping from an abandoned flow line ignited under a home in the town of Firestone, about 30 miles north of Denver. The flow line was connected to a vertical well drilled in 1993 by Gerrity Oil and Gas Corporation. That well was acquired in 1997 by Patina Oil and Gas Corporation, then sold in 2005 to Noble Energy Corporation (NYSE:NBL) (Oklahoma City, Oklahoma), and finally acquired in 2014 by Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas).
That well had been out of production in 2016, and Anadarko restarted it January 28, 2017. The well was located about 178 feet from the home, which was built after the well was drilled. It is not clear when the flow line was abandoned. The home and the well were in compliance with Colorado's set-back requirements.
On May 15, the first lawsuit was filed in the explosion, naming Anadarko, Noble, land developer ST-Firestone LLC and home builders Hearth at Oak Meadows LLC and CC Communities LLC. The suit, filed in Weld County, is expected to be the first of many filed in connection with the explosion. It claimed there could be numerous other unmarked, unmapped flow lines below that residential subdivision and that neighbors cannot be certain their homes will not also explode.
In the wake of that accident, the Colorado Oil & Gas Conservation Commission (COGCC) (Denver, Colorado), on May 2 issued a two-phase "Notice to Operators." In the first phase, ending May 30, all operators are required to "inspect systematically their inventory of existing flow lines and verify that any existing flow line not in active use, regardless of when it was installed or taken out of service, is abandoned pursuant to (established rules), including being cut off below grade at the lesser of three feet below ground surface or at the depth of the flow line, and sealed as described in this NTO.
In the second phase, which will end June 30, 2017, all operators are required to document the locations of all existing, active flow lines that are within 1,000 feet of a building, and ensure and document that these lines have integrity.
Colorado has about 54,000 active wells and about 36,000 inactive wells. The state does not have a comprehensive map of all pipelines and flow lines, which has caused some homeowners to become alarmed about the potential for other gas-related accidents.
In a statement after the explosion, Anadarko's Chief Executive Officer Al Walker said: "This terrible tragedy has left all of us with heavy hearts, and the families and their loved ones are in our thoughts and prayers. Words cannot express how saddened we are that this occurred in a community where many of our employees, their families, and friends live and work. We share the community's gratitude for the courageous response of neighbors and nearby construction crews who quickly came to the aid of the family, as well as the first responders and others who made sure surrounding homes were kept safe."
Saying it was acting with "an abundance of caution," Anadarko immediately stopped production from all 3,000 vertical wells it operates in Colorado, removing about 13,000 barrels of oil equivalent per day (BOE/d) from the market. The company said the wells would remain shut in until its field personnel "can conduct additional inspections and testing of the associated equipment, such as facilities and underground lines associated with each wellhead. Particular focus is being placed on areas where housing and commercial developments are occurring in close proximity to existing infrastructure."
Anadarko added that the wells will not be restarted until "each has undergone and passed these additional inspections," a process the company estimated would take two to four weeks.
Last week, Anadarko said it was permanently disconnecting one-inch diameter return lines from all vertical wells in Colorado--the same type of pipe that carried odorless gas that fueled the Firestone house explosion.
In a first-quarter earnings call May 3, the day after the COGCC issued its two-phase notice to operators, Anadarko's Walker said the company "will cooperate with the ongoing investigations," but he was unable to answer analysts' questions about what it could cost to comply with the COGCC's two-step mandate to operators and any potential remediation costs.
The Firestone explosion, and the subsequent notice to operators issued by the COGCC, shaved billions of dollars in stock value off the leading Oil & Gas operators in Colorado. Anadarko's stock price fell about $10 per share, or about 16%, in the two weeks after the explosion, erasing about $5.2 billion in market capitalization. Noble Energy lost about $2.1 billion of stock value. A third Colorado operator, PDC Energy (NASDAQ:PDCE) (Denver, Colorado), saw its stock value fall about $540 million over that same two-week period.
"Yes, we're concerned -- how could we not be concerned" about how the business environment in Colorado could be affected by the Firestone accident, asked one industry source interviewed by Industrial Info. Another industry source, who also requested anonymity, said, with some understatement, the explosion in Firestone "certainly isn't helpful. That will keep drilling and safety in the public eye, especially when residential areas are near drilling operations. We expect (anti-fracking) bills to be reintroduced in the 2018 state legislative session." Several other industry sources could not be reached for comment.
A source with Coloradans for Responsible Energy Development (CRED) (Denver, Colorado), an industry-funded information source, told Industrial Info the group is proceeding on a "business as usual" basis, meaning it does not plan to increase its advertising or outreach efforts.
The explosion happened near the end of the Colorado legislative session, and the tight end-of-session calendar prevented that body from voting on bills concerning Oil & Gas issues. The Democratic Party holds a majority in the Colorado House of Representatives, but Republicans hold a majority in the state Senate, so getting a bill passed on any controversial topic has proven to be difficult. The governor, John Hickenlooper, is a Democrat and a petroleum geologist by training. He has tried to steer a middle course on Oil & Gas development, which has angered some in the environmental community.
Although Colorado is not the only state where hydraulic fracturing is taking place, it is one of the few places where drilling is taking place close to residential subdivisions. Although drilling has been going on in Colorado for decades, until about 10 years ago drilling along the state's so-called Front Rage took place mostly in rural, less-populated areas. But those areas have experienced strong growth over the last decade at the same time that hydraulic fracturing became more widespread. For that reason, some areas have experienced sharp conflicts between environmental groups and homeowners, on the one hand, and the Oil & Gas industry on the other. In many cases, elected officials are caught in the middle.
Oil production from Colorado's Denver-Julesburg Basin has tripled over the last decade, promoting environmental organizations to launch multiple efforts to place ballot initiatives before voters that would sharply limit, or effectively prohibit, Oil & Gas development. For more on that, see August 4, 2014, article - Oil & Gas Industry Sees Brisk Business in Colorado after Withdrawal of Voter Initiatives, May 22, 2015, article - Initiatives to Limit Fracking Appear Headed to Colorado's 2016 Ballot, and August 11, 2015, article - Billions of Dollars at Risk if Oil & Gas Industry Can't Do a Better Job Telling its Story.
Click on the image at right to view oil production from Colorado's Niobrara formation.
The 2016 voter initiatives never made it to the ballot, but the two measures backed by environmental organizations that year garnered more than 75,000 signatures each. Each measure fell short by about 20,000 signatures. For more on that, see September 2, 2016, article - Oil & Gas Industry Urged to Continue Personal Outreach After Measures to Restrict Drilling in Colorado Fail to Make the Ballot.
Aside from ballot initiatives, several Colorado municipalities have tried to pass measures limiting, delaying or prohibiting Oil & Gas development or hydraulic fracturing. Those measures have lost in court, but in the wake of the Firestone explosion, elected officials at the local and state levels have reiterated their commitment to tighter policing of the industry to ensure the safety of residents and the protection of their air, land and water. For more on the municipal legal challenges to Oil & Gas drilling in Colorado, see May 6, 2016, article - Colorado Supreme Court Sides with Industry in Overturning Local Drilling Bans and Moratoria.
Garrett Garner-Wells, state director of Environment Colorado (Denver, Colorado), told Industrial Info it was in the middle of its annual summer outreach effort across the state, and could not say right now what the group might do in response to the Firestone accident. "Obviously, the tragedy in Firestone is at the top of people's minds. I'm a dad and it's heartbreaking," he said.
This summer, canvassers for Environment Colorado aim to conduct "tens of thousands" of face-to-face surveys of citizens across the state about their environmental priorities, Garner-Wells continued. He said, "we'll wait for the data to come in before adopting strategies and tactics" regarding Oil & Gas drilling in the Centennial State. But, he added, "we are committed to getting off dirty fuels and moving to a 100% renewable energy future."
While not prejudging the group's potential tactics and emphases, Garner-Wells said the group will share its findings with elected officials. Environment Colorado lobbies the Colorado legislature, and he said, "I imagine there will be increased activity (on Oil & Gas drilling) there."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
On April 17, natural gas seeping from an abandoned flow line ignited under a home in the town of Firestone, about 30 miles north of Denver. The flow line was connected to a vertical well drilled in 1993 by Gerrity Oil and Gas Corporation. That well was acquired in 1997 by Patina Oil and Gas Corporation, then sold in 2005 to Noble Energy Corporation (NYSE:NBL) (Oklahoma City, Oklahoma), and finally acquired in 2014 by Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas).
That well had been out of production in 2016, and Anadarko restarted it January 28, 2017. The well was located about 178 feet from the home, which was built after the well was drilled. It is not clear when the flow line was abandoned. The home and the well were in compliance with Colorado's set-back requirements.
On May 15, the first lawsuit was filed in the explosion, naming Anadarko, Noble, land developer ST-Firestone LLC and home builders Hearth at Oak Meadows LLC and CC Communities LLC. The suit, filed in Weld County, is expected to be the first of many filed in connection with the explosion. It claimed there could be numerous other unmarked, unmapped flow lines below that residential subdivision and that neighbors cannot be certain their homes will not also explode.
In the wake of that accident, the Colorado Oil & Gas Conservation Commission (COGCC) (Denver, Colorado), on May 2 issued a two-phase "Notice to Operators." In the first phase, ending May 30, all operators are required to "inspect systematically their inventory of existing flow lines and verify that any existing flow line not in active use, regardless of when it was installed or taken out of service, is abandoned pursuant to (established rules), including being cut off below grade at the lesser of three feet below ground surface or at the depth of the flow line, and sealed as described in this NTO.
In the second phase, which will end June 30, 2017, all operators are required to document the locations of all existing, active flow lines that are within 1,000 feet of a building, and ensure and document that these lines have integrity.
Colorado has about 54,000 active wells and about 36,000 inactive wells. The state does not have a comprehensive map of all pipelines and flow lines, which has caused some homeowners to become alarmed about the potential for other gas-related accidents.
In a statement after the explosion, Anadarko's Chief Executive Officer Al Walker said: "This terrible tragedy has left all of us with heavy hearts, and the families and their loved ones are in our thoughts and prayers. Words cannot express how saddened we are that this occurred in a community where many of our employees, their families, and friends live and work. We share the community's gratitude for the courageous response of neighbors and nearby construction crews who quickly came to the aid of the family, as well as the first responders and others who made sure surrounding homes were kept safe."
Saying it was acting with "an abundance of caution," Anadarko immediately stopped production from all 3,000 vertical wells it operates in Colorado, removing about 13,000 barrels of oil equivalent per day (BOE/d) from the market. The company said the wells would remain shut in until its field personnel "can conduct additional inspections and testing of the associated equipment, such as facilities and underground lines associated with each wellhead. Particular focus is being placed on areas where housing and commercial developments are occurring in close proximity to existing infrastructure."
Anadarko added that the wells will not be restarted until "each has undergone and passed these additional inspections," a process the company estimated would take two to four weeks.
Last week, Anadarko said it was permanently disconnecting one-inch diameter return lines from all vertical wells in Colorado--the same type of pipe that carried odorless gas that fueled the Firestone house explosion.
In a first-quarter earnings call May 3, the day after the COGCC issued its two-phase notice to operators, Anadarko's Walker said the company "will cooperate with the ongoing investigations," but he was unable to answer analysts' questions about what it could cost to comply with the COGCC's two-step mandate to operators and any potential remediation costs.
The Firestone explosion, and the subsequent notice to operators issued by the COGCC, shaved billions of dollars in stock value off the leading Oil & Gas operators in Colorado. Anadarko's stock price fell about $10 per share, or about 16%, in the two weeks after the explosion, erasing about $5.2 billion in market capitalization. Noble Energy lost about $2.1 billion of stock value. A third Colorado operator, PDC Energy (NASDAQ:PDCE) (Denver, Colorado), saw its stock value fall about $540 million over that same two-week period.
"Yes, we're concerned -- how could we not be concerned" about how the business environment in Colorado could be affected by the Firestone accident, asked one industry source interviewed by Industrial Info. Another industry source, who also requested anonymity, said, with some understatement, the explosion in Firestone "certainly isn't helpful. That will keep drilling and safety in the public eye, especially when residential areas are near drilling operations. We expect (anti-fracking) bills to be reintroduced in the 2018 state legislative session." Several other industry sources could not be reached for comment.
A source with Coloradans for Responsible Energy Development (CRED) (Denver, Colorado), an industry-funded information source, told Industrial Info the group is proceeding on a "business as usual" basis, meaning it does not plan to increase its advertising or outreach efforts.
The explosion happened near the end of the Colorado legislative session, and the tight end-of-session calendar prevented that body from voting on bills concerning Oil & Gas issues. The Democratic Party holds a majority in the Colorado House of Representatives, but Republicans hold a majority in the state Senate, so getting a bill passed on any controversial topic has proven to be difficult. The governor, John Hickenlooper, is a Democrat and a petroleum geologist by training. He has tried to steer a middle course on Oil & Gas development, which has angered some in the environmental community.
Although Colorado is not the only state where hydraulic fracturing is taking place, it is one of the few places where drilling is taking place close to residential subdivisions. Although drilling has been going on in Colorado for decades, until about 10 years ago drilling along the state's so-called Front Rage took place mostly in rural, less-populated areas. But those areas have experienced strong growth over the last decade at the same time that hydraulic fracturing became more widespread. For that reason, some areas have experienced sharp conflicts between environmental groups and homeowners, on the one hand, and the Oil & Gas industry on the other. In many cases, elected officials are caught in the middle.
Oil production from Colorado's Denver-Julesburg Basin has tripled over the last decade, promoting environmental organizations to launch multiple efforts to place ballot initiatives before voters that would sharply limit, or effectively prohibit, Oil & Gas development. For more on that, see August 4, 2014, article - Oil & Gas Industry Sees Brisk Business in Colorado after Withdrawal of Voter Initiatives, May 22, 2015, article - Initiatives to Limit Fracking Appear Headed to Colorado's 2016 Ballot, and August 11, 2015, article - Billions of Dollars at Risk if Oil & Gas Industry Can't Do a Better Job Telling its Story.
The 2016 voter initiatives never made it to the ballot, but the two measures backed by environmental organizations that year garnered more than 75,000 signatures each. Each measure fell short by about 20,000 signatures. For more on that, see September 2, 2016, article - Oil & Gas Industry Urged to Continue Personal Outreach After Measures to Restrict Drilling in Colorado Fail to Make the Ballot.
Aside from ballot initiatives, several Colorado municipalities have tried to pass measures limiting, delaying or prohibiting Oil & Gas development or hydraulic fracturing. Those measures have lost in court, but in the wake of the Firestone explosion, elected officials at the local and state levels have reiterated their commitment to tighter policing of the industry to ensure the safety of residents and the protection of their air, land and water. For more on the municipal legal challenges to Oil & Gas drilling in Colorado, see May 6, 2016, article - Colorado Supreme Court Sides with Industry in Overturning Local Drilling Bans and Moratoria.
Garrett Garner-Wells, state director of Environment Colorado (Denver, Colorado), told Industrial Info it was in the middle of its annual summer outreach effort across the state, and could not say right now what the group might do in response to the Firestone accident. "Obviously, the tragedy in Firestone is at the top of people's minds. I'm a dad and it's heartbreaking," he said.
This summer, canvassers for Environment Colorado aim to conduct "tens of thousands" of face-to-face surveys of citizens across the state about their environmental priorities, Garner-Wells continued. He said, "we'll wait for the data to come in before adopting strategies and tactics" regarding Oil & Gas drilling in the Centennial State. But, he added, "we are committed to getting off dirty fuels and moving to a 100% renewable energy future."
While not prejudging the group's potential tactics and emphases, Garner-Wells said the group will share its findings with elected officials. Environment Colorado lobbies the Colorado legislature, and he said, "I imagine there will be increased activity (on Oil & Gas drilling) there."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
