Photo courtesy of BLM
As the election nears, the last thing on voters minds in Wyoming is what voters in Colorado will do. Yet, a ballot initiative in Colorado could have enormous regional impacts on the oil and gas industry.
Proposition 112 is a voter initiative that amends Colorado law that will increase setbacks for any new oil and gas development to five times what they are now, from 500 feet to 2,500 feet.
Polls are showing Colorado voters are split on the issue, too close to call exactly which way the vote will go. If it passes, opponents say it will effectively kill off almost all oil and gas development in Colorado.
Impacts to Wyoming
Just before oil and gas commodity prices went bust at the end of 2014, Wyoming had a rig count of nearly 60. By the middle of 2016, that was down to 7. Today, it’s back up to 30 in a much-improved market, and there is growing industry excitement over opportunities in the Powder River Basin.
Wyoming is eighth in oil and natural gas production. Colorado holds the sixth position in the nation for natural gas production, producing 1.68 trillion cubic feet of natural gas. Wyoming was in eighth place and produced 1.59 trillion cubic feet of natural gas the same year, according to U.S. Energy Information Administration figures.
When it comes to oil, the gap is much wider. Colorado produced 130.7 million barrels in 2017, and Wyoming operators produced 75.7 million barrels.
However, Texas produced nearly 17 times as much oil as Wyoming and more than four times as much natural gas production. There are a lot of opportunities for investment outside the Powder River Basin.
Considering how many Wyoming residents find work in the oil fields in Colorado, it could result in higher unemployment in the state. Likewise, with fewer opportunities for Colorado residents who work in the industry, Wyoming’s oil and gas workers could face more competition from Coloradans who no longer have jobs at home.
“I don’t think it affects Wyoming whatsoever.”- Bruce Hinchey, president of the Petroleum Association of Wyoming.
Experts are saying that, should Prop 112 pass, it’s hard to say what the impacts are, and it’s all just speculation at this point.
Mark Watson, director of the Wyoming Oil and Gas Conservation Commission, said he doesn’t expect to see much of a difference here in Wyoming.
He said there hasn’t even been much of a robust discussion on the issue among Wyoming operators. He said Anadarko, which has operations in both states, has requested some changes in the permitting approval priorities, moving some of their permit applications further up the list in their queue.
Other than that, there’s not much talk in Wyoming’s industry of what will happen if Prop 112 passes. The real impact, Watson said, is in Colorado.
“That’s one of their biggest operations down there,” Watson stated.
President of the Petroleum Association of Wyoming, Bruce Hinchey, doesn’t see much change for the Cowboy State if Colorado voters approve Prop 112.
“I don’t think it affects Wyoming whatsoever,” he said.
Theoretically, it could play out to some additional drilling here in Wyoming, and that could be good for the state, if that happens.
“We’re seeing more rigs coming into Wyoming. Any additional rigs we could see is good,” Hinchey said.
He is even skeptical of any impacts to the job market here. Fracking crews often work 14 days on/14 days off, which means it’s easy to recruit from other states. Hinchey said operators are finding it hard to get enough people sometimes, and he’s seen Wyoming ads for fracking operators in Alaska publications.
Comparison
The oil and gas market is complex and it’s hard to predict what the impacts will be of a single voter initiative in a single state, even one that effectively bans fracking. But the situation, if Prop 112 passes, is not without precedent.
Ten years ago, the Pennsylvania counties that border the state of New York had been in a long economic decline. Then, the shale boom touched the Marcellus Formation, which straddles the border between the two states. Rigs sprang up, along with the direct and indirect jobs that come with oil and gas production.
Farmers in the region who were previously struggling, suddenly had a revenue stream from their land, and manufacturers had a home-grown source of abundant natural gas. Some of the manufacturers were even operating off the grid, thanks to the supply.
New York decided to go a different route. In 2014, New York Governor Andrew Cuomo effectively banned all hydraulic fracturing activities in the state, largely over concerns of health impacts.
Energy in Depth, an industry advocate, analyzed the economies between the border counties in the two states and found striking differences since 2010.
Pennsylvania’s gross domestic product in the “mining, quarrying, oil, and gas extraction” sector grew from about $3.2 billion in 2005 to nearly $22.5 billion in 2017, a six-fold increase. New York saw that sector grow by about 74 percent in the same time period.
The manufacturing sectors between the two states likewise saw differences in growth. Between 2005 and 2017, New York’s manufacturing GDP grew by 13 percent, whereas Pennsylvania’s grew by 23 percent.
Much of the area’s agricultural economy is based on dairy production, which has been struggling due to a slump in milk prices. Pennsylvania’s dairy producers were somewhat sheltered thanks to the oil and gas industry.
Between 2007 and 2017, New York lost over 1,300 dairy farms. Meanwhile, a 2015 study on Bradford County, Pennsylvania, found that between 2007 and 2012, total number of farms increased in the county, as did their size and value.
This comparison of an area that has banned fracking with one that hasn’t comes with some severe limitations when looking at the potential impacts of Prop 112. A lot of Wyoming’s oil and gas sector operates far north of the border of Colorado in an area without a lot of the infrastructure that would make other shale plays more attractive to a producer.
Likewise, much of Wyoming’s minerals are federally owned, meaning the oil and gas industry doesn’t always impact agricultural operators, who often don’t own the minerals under their land.
The comparison does demonstrate how different two economies can become when one decides to ban fracking and one doesn’t. Whether or not a ban on fracking in Colorado enriches Wyoming isn’t certain. It will definitely hurt Colorado, and that will have at least some impacts on the Cowboy State.
Pavillion Effect
While Wyoming is generally friendlier towards its many mineral industries, the anti-fracking movement goes to great lengths to convince people hydraulic fracturing possesses severe health risks for the public. And the activism doesn’t necessarily have to be grassroots.
Seth Whitehead, spokesperson for Energy in Depth, said the power behind Prop 112 is the “keep it in the ground” movement. It’s not a group of citizens concerned about the health of their communities. It’s a movement that wants to stop all oil and gas development, Whitehead said.
Rallies featuring top anti-fracking celebrities have been held across the state to raise money and support for Prop 112.
“That is how you spell recession.” -Colorado Governor John Hickenlooper on the impacts to Colorado if Prop 112 passes.
Sandra Steingraber also visited Colorado to campaign for Prop 112. Steingraber helped put together a compendium of 400 studies about potential health impacts from fracking, and the collection was instrumental in pushing New York’s fracking ban.
While the compendium is presented as a sort of scientific consensus on fracking’s threat to the public, the research within it is almost entirely theoretical.
Anti-fracking activists regularly produce tentative research that suggests the possibility of health impacts but does not in any way prove anything conclusive.
One such study looked at potential health impacts in Pavillion, Wyoming, which became a focal point for the anti-fracking movement after some local residents had health problems they blamed on the oil and gas industry.
Throughout the media, the study was presented with scary headlines suggesting the research was conclusive in finding definite health impacts. A Wyofile story on the study, for example, ran with the headline, “Study: Water near fracked Wyo gas field disrupts hormones.”
The study was presented in a press release that claimed it “provides further evidence that people living close to oil and gas facilities are at the greatest risk of acute and chronic health issues.”
The study actually does not provide this conclusion at all. Throughout the study the authors acknowledged a number of limitations, which are only mentioned at the bottom of the press release.
The study’s co-author, Christopher Kassotis, spoke openly about the limitations of the research in the Wyofile article. However, he said he wasn’t bothered if people draw absolute conclusions about potential health impacts based on his research.
“I do not think there is necessarily anything wrong with people who are concerned, based on our studies and the growing litany of developmental toxicology and human epidemiological studies, with potential health impacts of” the hydraulic fracturing process, Kassostis said.
Steingraber’s compendium is full of such tentative, theoretical research, which is then used to advance anti-fracking legislation and voter initiatives.
Fortunately, Wyoming voter initiative process is much more stringent than that of Colorado’s process. So, it’s much less likely activists could successfully push a similar measure here in Wyoming.
Recession
Whitehead pointed out that Prop 112’s language is very vague. It’s not just setbacks from occupied structures, but also “vulnerable areas.” This is not clearly defined, and it could easily mean dry creek beds, for example.
According to most estimates, about 15 to 20 percent of Colorado’s economy would be gone immediately, if Prop 112 passes.
Gov. John Hickenlooper told CBS Denver news, “That is how you spell recession.”
If it passes, it goes into effect immediately after the governor certifies the election, unless the legislature delays its implementation.
Colorado Governor John Hickenlooper has already said he would call a special session in hopes of doing that. However, the legislature might not approve the delay. Among others, the Democratic leader in the Colorado House has expressed support for the Prop 112.
Scott Prestidge, director of communications for Colorado Oil and Gas Association, said the initiative, if it passes, will have no impact on the demand for oil and gas. Beyond energy, petroleum is used to make ink, solvents, cosmetics, nylons, shoes, medicines, and a hundred other products.
“The need for oil and gas in our lives is not going to change the morning after the election,” Prestidge said.
It’s also likely the industry would seek a legal challenge to the measure before it gives up on Colorado altogether. There is a basis by which the measure could be shot down in courts.
“You would have the seizing of private property,” Prestidge pointed out.
However, the entire conversation could be moot.
The industry has spent a lot of money educating people about the measure. While they have a financial interest in its defeat, it’s really not surprising an industry that produces goods people use every day would spend money against those who promote fear that doesn’t hold up to scientific scrutiny.
And there is quite a bit of prominent opposition to Prop 112. Almost every major newspaper has editorialized against it. Colorado cities, counties, education entities, and dozens of legislators have spoken out against it. There is also a wide variety of industry associations outside oil and gas who are opposing the measure for fear of the detrimental economic impacts that would result.
“We’re comfortable as Coloradans learn about the negative impacts of this measure, they’ll vote no on Prop 112,” Prestidge stated.
