Landowners, fracers in tense face-off in wake of Colorado blast

By Meenal Vamburkar on 1/26/2018

NEW YORK (Bloomberg) -- The fracing frenzy in Colorado is spurring a tense face-off between shale drillers in the region and residents seeking a better handle on the dangers in their own backyards after a killer pipeline explosion last year.

Gov. John Hickenlooper ordered a review of oil and natural gas operations after the April blast, which destroyed a home, killed two men and injured a woman just north of Denver. Now the industry is clashing with state residents who are pushing for new rules that would mandate precise and comprehensive public mapping for underground lines.

With regulators extending the rule-making process into next month, residents say the additional disclosure would help guarantee lines are properly cared for and support quicker emergency response if an accident occurred. The industry says it’s unneeded, and could open them up to terrorist strikes.

Colorado is seeing "an affluent population collide with energy development," which isn’t necessarily the case in other parts of the country, according to Katie Bays, an analyst at Height Securities LLC in Washington. "There’s very little that everyone in Colorado agrees on."

The dispute comes as explorers are increasingly returning to the oil-rich rock of Colorado as a way to expand beyond the shale plays of Texas and New Mexico. Drilling in the Denver-Julesburg Basin northeast of Denver has doubled since mid-2016 to 25 rigs, including the recent addition of equipment searching for natural gas for the first time in two years.

Last April’s explosion in the community of Firestone was triggered by natural gas leaking from a gathering line nearby, which had been abandoned but not capped. The blast was linked to one of Anadarko Petroleum Corp.’s wells and prompted the driller to close more than 3,000 wells in Colorado as a precaution.

The Colorado Oil and Gas Conservation Commission last month released a draft of new rules it’s proposing in response to the governor’s call for a review. The results, outlined in a September report, found more than 120,000 flow-line segments running within 1,000 ft of buildings. At the same time, more than 400 of the lines failed to pass standard testing, according to the regulators.

The new regulations, if approved, would addresses management of abandoned flow lines and add new requirements for leak detection and pressure testing. They don’t include mandated public mapping, spurring protests by local landowners.

"What I’m seeing is that residents and homeowners are concerned whether the largest investment they have is safe," said Sara Loflin, executive director of the League of Oil and Gas Impacted Coloradans, which seeks to promote oil and gas reform statewide.

A decision will come after the group revisits the issue in February, the commission said in its Jan. 9 meeting.

The fracing frenzy is crossing paths with Colorado’s suburbs, as housing developments emerge in areas previously occupied by rigs and farmland. With a state law that allows entire neighborhoods to be forced into leasing the minerals beneath their properties as long as one person consents, homeowners are unable to stop development.

In contrast, many states require 51% of owners in a drilling area to consent. Against that backdrop, some residents and home builders are concerned about preventing another incident like the Firestone blast.

That sentiment extends to home builders, too. Pipeline location information is important in planning and development, the Colorado Association of Home Builders said this month. Disclosure would enable builders to include pipelines in their surveys and provide information to local governments and homeowners, the group said.

811 call

The industry sees it differently. At the January hearing, oil and natural gas companies, including representatives of Anadarko, argued that public information about locations could invite terrorists to tamper with or damage lines. They have pointed to the 811 "call before you dig" hotline, which provides information on individual lines.

"We do not want to give roadmaps to those who wish to intentionally harm our energy infrastructure," said  Dan Haley, chief executive officer of the Colorado Oil & Gas Association, in an emailed statement. "That would only place a far greater number of people at risk."

Anadarko didn’t immediately respond to request for additional comment.

Environmentalists and community representatives have said the 811 option falls short because it doesn’t ensure local governments can plan safely, and could slow response following an emergency event. "If you want to say you’re one of the safest industries, why are you fighting mapping?" Loflin asks.

Loflin says she doesn’t expect the industry to concede on mapping information, and believes a legislative solution -- not just a regulatory ruling -- will be needed to over the industry’s objections. Her group plans to work with state legislature, other resident groups and local governments top make that happen.

"At times, Colorado becomes a testing ground for what this could look like in other places," Loftin said.

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