May 28 Colorado Energy Roundup: EPA water rule, Hickenlooper pleads for Colorado mine, reduced drilling costs

May 28, 2015 by michael
Filed under: Environmental Protection Agency, Hydraulic Fracturing, Legal, Legislation, preferred energy, wind energy 

Yesterday, Governor John Hickenlooper says chances for a statewide ballot measure on fracking in 2016 are pretty low, but anti-energy fractivists aren’t so sure about Hickenlooper’s prognostication:

Gov. John Hickenlooper on Wednesday said he does not believe there is momentum to push a state ballot initiative that would crackdown on the oil and gas industry.

The Democrat spoke along with Republican U.S. Sen. Cory Gardner at a breakfast in Denver hosted by industry leaders and supporters, including Vital for Colorado.

“There will be proposals, but I don’t think there will be something that will be funded to any significant extent, and therefore I don’t expect something to get on the ballot,” Hickenlooper said.

Hickenlooper is not viewed positively by the strident activists who considered the governor’s brokered deal to get the ballot measures off the table and replaced by his blue-ribbon fracking commission as a stab in the back:

“Governor Hickenlooper’s blowing hot air to justify his continued endorsement of the fracking fiasco that is making Coloradans sick, driving down property values and threatening our air and water,” said Sam Schabacker, spokesman for Food and Water Watch, one of several groups discussing local and statewide ballot initiatives. “Outrage continues to grow over the governor’s inaction to stop fracking and more parents, business owners and community members are speaking out than ever.”

The only question is whether or not the anti-fracking forces find another funder like Rep. Jared Polis (D-CO). National groups are likely to go playing in Colorado, as the issues (setbacks, water, air quality) surrounding fracking haven’t disappeared, and were certainly not dealt with to any significant degree by the state’s recently concluded commission.

At least not in the estimation of the groups who would bring more ballot proposals to the Secretary of State by next year.

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You might think that the Environmental Protection Agency’s final “water” rules won’t have an impact on energy production, but its wide-ranging scope as defined by EPA administrator Gina McCarthy should give anyone pause:

“For the water in the rivers and lakes in our communities that flow to our drinking water to be clean, the streams and wetlands that feed them need to be clean too,” said EPA Administrator Gina McCarthy.

Under the rule, tributaries and headwaters that show physical features of flowing water — a bed, bank and high-water mark — would be subject to the Clean Water Act. So would waters that are next to rivers and lakes and their tributaries. Ditches that are constructed out of streams or function like streams and can carry pollution downstream also would be covered. But ditches that flow only when it rains wouldn’t be covered, according to the EPA.

Business groups, however, contend the rule is broader than the EPA describes. They vow to fight it in the courts and in Congress. Earlier this month,the House passed legislation that would require the EPA to withdraw the rule, which was dubbed the “Waters of the United States” rule before the EPA rebranded it.

The National Association of Manufacturers opposes the definitions provided by the EPA, saying it “all adds up to increased regulatory uncertainty, permitting costs, delays and even litigation, not to mention a giant new set of hurdles standing in the way of construction.”

Given the proximity of many energy sources to rivers, streams, and other bodies of water, the EPA’s regulations will surely add cost to energy production and quite possibly halt new electricity generating units that will not comply with the new environmental impact statements the water rule will surely require.

Of course, the EPA’s own manufacturing attempts–in this case public comments in support of proposed rules–will likely not cease any time soon.

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For the residents of northwest Colorado, Craig Station and the nearby Colowyo Coal Mine near Craig literally power the local economy, and a shutdown of the mine would cripple the local economy, perhaps permanently–so Gov. Hickenlooper has intervened:

Hickenlooper on Friday asked U.S. Interior Secretary Sally Jewell in a letter to “do everything possible” to prevent a shutdown of the Colowyo Coal Mine near Craig.

The mine currently employees about 220 people and supplies coal that powers the Craig Station, one of the state’s largest coal-fired power plants. According to Colowyo’s owner, the station is capable of producing up to 1,303 megawatts of electricity.

Hickenlooper said in the letter that the mine also contributes more than $200 million to the regional economy and generates tax and royalties of $12 million annually.

“Given the importance of this mine to the economies of the region, I ask that you do everything possible to respond to the judge’s order and remedy the situation as expeditiously as possible,” Hickenlooper wrote in the letter.

Whether or not Sec. Jewell’s agency will appeal the court ruling calling for additional environmental impact statements remains to be seen.

Meanwhile the plans to put a transmission line through Moffat County, where the Craig power plant and mine reside, continue apace. The line would send electricity from wind farms in Wyoming to California.

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Lower demand for services means some relief for driller’s in Colorado’s embattled oil and gas sector:

But the slowdown also has produced at least one upside for companies: increased availability of rigs from drilling contractors and lower costs for drilling and completing wells.

For some companies operating locally, it has helped justify drilling and completing wells at all with gas prices so low. For one company, Black Hills Exploration & Production, it resulted in a recent ramp-up from one rig to three, tying it with WPX Energy as the busiest driller in western Colorado’s Piceance Basin.

But it is not just a downturn in natural gas prices that has hurt the industry, but government red tape as well:

Bill Buniger, a Loma contractor who does energy work such as well pad construction, said he’s not willing to take a cut in pay.

“The thing about it is, when you take a cut like that, your margin of profit, that’s what you’re cutting out. All you’re doing is wearing out your machines,” he said.

The costs of things like tires and repairs don’t change, he said. Buniger, 70, has paid off most of his equipment and said he’d rather let it sit if he can’t make a profit.

Not that he’s had much of a choice. He said most of the companies he works for are small, independent oil and gas companies that simply aren’t doing any drilling, due to low oil and gas energy prices at a time of increasing state regulations.

And while commodity prices will continue to fluctuate, the state’s regulatory burden won’t be lifting any time soon.

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Vincent Carroll, writing for the Denver Post, is skeptical of Gov. Hickenlooper’s claims that avoiding a listing of the greater sage-grouse by the Fish and Wildlife Service isn’t a slam dunk:

“We are very, very close to avoiding a listing altogether,” Hickenlooper told members of the Associated Governments of Northwest Colorado two weeks ago, according to The Daily Sentinel. He said Interior Secretary Sally Jewell would like to avoid a listing, and “I believe her. I don’t think she’s posturing.”

But of course what else would she say to him? That federal officials are eager to impose draconian restrictions on a vast swath of Western land over the bipartisan objections from all 11 governors and despite little evidence from past listings that it would do much good?

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