• 3 minutes Nucelar Deal Is Dead? Iran Distances Itself Further From ND, Alarming Russia And France
  • 5 minutes Don Jr. Tweets name Ukraine Whistleblower, Eric Ciaramella. Worked for CIA during Obama Administration, Hold over to Trump National Security Counsel under Gen McCallister, more . . . .
  • 9 minutes Shale pioneer Chesepeak will file bankruptcy soon. FINALLY ! The consolidation begins
  • 12 minutes China's Blueprint For Global Power
  • 1 hour Pioneer's Sheffield in Doghouse. Oil upset his bragging about Shale hurt prices. Now on campaign to lower expectations, prop up price.
  • 3 hours Who writes this stuff? "Crude Prices Swing Between Gains, Losses"
  • 35 mins Tesla Launches Faster Third Generation Supercharger
  • 1 hour Climate Change Consensus Shifts in Wind, But Gas Is Still the Right Move
  • 3 hours Passerby doused with flammable liquid and set on fire by peaceful protesters
  • 5 hours EU has already lost the Trump vs. EU Trade War
  • 8 hours Atty General Barr likely subpeona so called whistleblower and "leaker" Eric Ciaramella
  • 10 hours Iran Finds New Oil Field With Over 50 Billion Barrels: Rouhani
  • 3 hours China's Renewables Boom Hits the Wall
  • 7 hours Joe Biden, his son Hunter Biden, Ukraine Oil & Gas exploration company Burisma, and 2020 U.S. election shenanigans
  • 11 hours Iran's Master Plan?
  • 7 hours Trump On Farage's Radio Show ... #eggcarton

Breaking News:

Oil Rebounds On Surprise Crude Draw

Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

It's All-Or-Nothing For Colorado Drillers

Colorado voters will decide the future of the oil and gas industry in their state on Tuesday, as they contemplate requiring greater distances between them and drilling operations.

There are more than 150 voter initiatives on the ballot in 37 states on November 6, ranging from healthcare to marijuana legalization, from voting rules to criminal justice reform. There are also a series of votes that will affect the oil and gas industry. Voters in Washington State will decide on passing the nation’s first carbon tax, while California will weigh a repeal of a gasoline tax.

But the vote in Colorado might be the most consequential for the energy industry. If passed, proposition 112 will bar drilling operations within 2,500 feet of homes, businesses and green spaces, up from the current setback distance of just 500 feet.

A 2017 explosion at a residence, while not related to drilling, helped galvanize a movement pushing for more safety. The drilling frenzy in Colorado, which began several years ago, has caused a lot of friction in the populated areas north and south of Denver.

The increased setback distances would protect local communities from the dangers of drilling, as well as from the pollution associated with operations, supporters argue. However, the industry says that the measure could nearly kill drilling in the entire state. Because of dense populations around oil and gas operations, increasing the setback distance to 2,500 feet would put roughly 85 percent of the state off limits to drilling.

Colorado has become a sought after destination for shale companies, and oil and gas production has surged over the past half-decade. Production in the DJ Basin could hit 550,000 bpd by the end of the year, according to Rystad Energy. Proposition 112 puts much of that at risk.

“If passed, Proposition 112 would eliminate – to varying degrees and depending on proximity to residential areas – many future drilling locations for operators in the DJ basin, ranging from 67-71% for HighPoint Resources and Noble Energy, to 94-97% for Anadarko and PDC Energy,” Rystad Energy said in a recent report. “Impact on DJ basin oil production won’t be visible before 2021, but output would likely enter into a multi-year phase of decline after 2020 if Proposition 112 is passed, as opposed to expectations of continuous growth through the mid-2020s if it is rejected by voters.” Production could hit 800,000 bpd by the end of 2021 if the proposition fails. Related: Why Trump Decided To Back Down On Iran

The energy consultancy said that there is evidence that drillers in the DJ Basin are accelerating their drilling and completion plans ahead of the vote.

It comes as no surprise, then, that oil and gas companies are heavily financing political ads to defeat the measure, pouring some $36 million into the state, compared to just $800,000 by environmental groups, according to the WSJ.

There is another vote on the Colorado ballot that would be just as consequential, although it is a bit more confusing. Amendment 74 would require the government to provide “just compensation” to landowners if any set of regulations negatively impacts their property value. The latest polls suggest that this measure has a good chance of passage.

Supporters of the amendment say that it will make the government more accountable since it will have to take responsibility for its regulatory actions. However, it would also have enormous ramifications for the oil and gas industry. It could be invoked in lawsuits against the state following the greater setback distances. If an oil company loses the ability to drill because the acreage falls within 2,500 feet of a residence, and the lost revenue from that property related to oil and gas revenue causes the property to lose value, then there is a legal case for compensation against the state.

Essentially, amendment 74 is the fallback plan for the industry if Proposition 112 passes, putting the state financially on the line for the increased setback distances.

“It’ll be implemented, and then boom, the lawsuits will start,” Denver-based attorney John Watson told the Wall Street Journal.

“It is such an outrageous measure,” Colorado House Majority leader, K.C. Becker told the WSJ. “It could bankrupt state and local government.”

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment
  • Randy Verret on November 05 2018 said:
    Prop 112 is a very complicated issue with a LOT of ramifications to throw at a largely uninformed electorate. Looks like the industry trade association ad campaigns & grass roots education efforts by select operators over the past couple years came up short as this initiative (finally) made the ballot. If Prop 112 passes, I'd respectfully suggest that folks just remember the names of the environmental NGO's & activists involved in it's passage once this all starts to unravel...
  • Dan on November 06 2018 said:
    And Goldman wonders why the surge in August? A little more research Goldman.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play