Colorado Drillers Rise on Governor's Deal to Avert Fracking Vote

Monday, 04 Aug 2014 04:19 PM

 

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Oil producers led by Noble Energy Inc. and Anadarko Petroleum Corp. rose after Colorado’s governor struck a deal to avert a November vote that would have offered local communities more control over fracking.

Rep. Jared Polis, a supporter of two proposed ballot initiatives to limit drilling, and Gov. John Hickenlooper agreed to create a task force to study the impact of oil and natural gas activity on local communities, the two men said at a news conference in Denver on Monday. The deal was expected to end efforts to add the initiatives on the day they were scheduled to be turned in with enough signatures to qualify for the vote, the governor said.

“Responsible oil and gas development in Colorado is critical to our economy, our environment, our health and our future,” said Hickenlooper. The Democrat, who told a Senate committee last year that he drank fracking fluid to prove its safety, has been a strong proponent of drilling in the state. Colorado crude output grew faster than in any other state in 2013.

From Texas to North Dakota, companies are clashing with landowners and environmentalists over the local effects of expanded drilling in the U.S. as production has soared because of hydraulic fracturing, which uses sand, water and chemicals to free fossil fuels from shale rock. The Colorado vote was seen as a bellwether for “local control” concerns and other potential ballot initiatives, including one in Denton, Texas, expected to reach voters in November.

Proposed Regulations

Noble gained 5.8 percent to $70.60 at 3:39 p.m. in New York, after earlier having its biggest intraday rise in more than five years. Anadarko increased 5.3 percent to $111.23.

The initiatives would have amended Colorado’s constitution to require wells to be set back 2,000 feet (600 meters) from structures and provided communities with more control over where drilling takes place. If passed, they would have “severely” affected hydraulic fracturing in Weld County, the core of new drilling activity, according to a July 29 report from Sanford C. Bernstein & Co.

Polis, a Colorado Democrat who had pledged to financially support the ballot initiatives, said today he supported the creation of the task force.

“Today’s announcement is a victory for the people of Colorado and the movement to enact sensible fracking regulations,” Polis said. “I know for many today’s announcement will not go far enough, but I believe it’s just the beginning of next chapter.”

Favoring Industry?

Environmental groups said they were disappointed the ballot measures wouldn’t get a vote.

“Colorado’s oil and gas oversight favors the oil and gas industry’s interests before the public interest,” Bruce Baizel, director of Earthworks’ Oil & Gas Accountability Project, said in a statement. “Impacted communities must have a real seat at the table, and must be allowed to determine that in some cases no fracking may be the right choice.”

The 18-member task force will be made up of representatives from industry, local government and conservation groups and is expected to make recommendations to the state legislature on proposals to mitigate the impact of drilling. The commission will be led by Randy Cleveland, president of Exxon Mobil Corp.’s XTO Energy unit and La Plata County Commissioner Gwen Lachelt.

Drilling Rights

Hickenlooper, who is running for re-election, has worked with energy companies, lawmakers and business groups since May to broker a compromise and appease activists pushing for restrictions on fracking. He said July 16 that he didn’t have enough votes to pass a bill in a special session of the legislature allowing more community control over energy development.

Drilling in the Denver-Julesburg basin has helped make Colorado the nation’s sixth-largest gas producer and ninth-biggest oil producer. Hickenlooper has been leading a campaign to persuade Coloradans that mineral-rights owners must continue to have the ability to collect royalties from energy companies.

The announcement is positive for companies with significant operations in the Rocky Mountains, including Anadarko, Noble, Whiting Petroleum Corp., Bill Barrett Corp., PDC Energy Inc. and Carrizo Oil & Gas Inc., David Tameron, an analyst with Wells Fargo & Co., said in a note to investors.

The debate over fracking has escalated in Colorado as drilling moved closer to suburbs, raising concerns about water and air contamination.

Community Bans

Five communities in the state have voted to ban or put a moratorium on such activity. Judge Dolores Mallard last month granted a request by the Colorado Oil & Gas Association to overturn a voter-approved ban in Longmont on the use of fracking.

Mallard rejected the city’s argument that the ban is legitimate because the fracking amounts to a purely local matter. She ruled the city can’t override the Colorado Oil and Gas Conservation Commission, the state’s regulatory agency. She also overturned a ban on the storage and disposal of fracking waste within city limits.

Hickenlooper said he would ask the state commission to end its challenge to the Longmont ordinance, an effort Polis described as an act of “good faith.”

© Copyright 2014 Bloomberg News. All rights reserved.

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