FRACTURED: Why it took years to shut down Texas Tea
How one oil and gas company ran afoul of Colorado
regulators, and what it tells us about how the energy industry is – and
isn’t – held to account
Glick and Kelsey Ray
/ The Colorado Independent
October 23, 2016 Environment/Energy
late spring, the chief regulator of Colorado’s oil and gas industry, the
Colorado Oil and Gas Conservation Commission [COGCC], finally brought
the hammer down on Texas Tea, LLC.
small oil and gas operator, which incorporated in Colorado with more
than 30 wells around Weld and Adams counties, had been on the state’s
enforcement radar for years. The Commission had tagged Texas Tea with
repeated violations dating back to 1999, including spills, mechanical
failures, abandoned wells and, as time went on, accumulating unpaid
terse letter to the owner, Robert Parker, dated June 15, 2016, COGCC
Director Matthew Lepore summarily shut down Texas Tea and seized its
assets around the state. “Effective immediately, the Commission has
terminated Texas Tea’s Operator Number…and revoked Texas Tea’s right to
conduct oil and gas operations in Colorado,” Lepore wrote, cautioning
Parker with boilerplate language that the Commission “will not tolerate
threats or violent behavior” in response to the ruling. The COGCC went
on to claim all equipment, saleable product and miscellaneous assets
from Texas Tea’s operations.
Eighteen years passed between the first violation notice and the
shutdown order. In that time, Texas Tea racked up 54 more violations and
accrued fines of more than $320,000, which will likely go unpaid. In the
aftermath of the company’s closure, the city of Brighton and other
communities have been left with abandoned wells that local officials
fear may leak into the community’s groundwater.
Meanwhile, Texas Tea’s financial guarantee, even combined with the
potential sale of its assets, almost certainly won’t be enough to cover
the cleanup and plugging of its wells, leaving the Commission
responsible for cleaning up whatever mess the company left behind.
oil and gas industry contributes significant public revenues to the
state of Colorado each year. But the story of Texas Tea reveals what
those in the industry, environmentalists and the Commission itself have
long known: Colorado’s regulatory power over oil and gas drilling is
fractured, hamstrung by jurisdictional limits, inherently vulnerable to
conflicts of interest and shot through with loopholes that allow well
operators to skirt the true costs of cleanup. Regulation is also limited
by an understaffed inspection regime that still relies on voluntary
industry reporting and conflicting mandates. Toxic air emissions,
perhaps the most consequential impact of oil and gas activity on human
health, are neither inspected nor regulated by the COGCC, but instead
fall within the bailiwick of yet another understaffed state agency.
Commission’s compartmentalized archive containing decades of production,
inspection and violation data makes it hard to say just how many other
violators still operate in the state despite past-due fines and other
repeat offenses. Texas Tea’s story, then, becomes a parable that exposes
serious gaps in how Colorado regulates one of its biggest – and dirtiest
boom in oil and gas production in Colorado over the last decade
overwhelmed state inspectors and regulators. A rapid increase in
drilling placed industry representatives at odds with citizen groups and
communities concerned about both new and existing oil and gas
development. In response to widespread fears that companies weren’t
acting in the best interests of citizens, four Colorado cities (Ft.
Collins, Lafayette, Longmont, and Broomfield) and two counties (Boulder
and El Paso) passed local fracking bans and/or temporary time-outs from
2011 through 2013.
industry fought back with a massive public relations campaign. At a 2015
meeting of the Interstate Oil and Gas Conservation Commission, public
relations expert Mark Truax outlined how the industry had amassed a
multi-million dollar war chest, funded largely by Texas-based Anandarko
Petroleum Corporation and Noble Energy, Inc. He boasted that the
industry was using the money to influence elections at various levels of
government and to fund a pro-industry advertising blitz.
Related: Who’s behind Decline to Sign?
grassroots organizers clamored for more regulation, Gov. John
Hickenlooper convened a task force to address the concerns of both the
oil and industry and worried Coloradans. In 2014, Colorado passed
methane regulations that were hailed as groundbreaking — they were even
used as guidelines for the Environmental Protection Agency’s nationwide
methane regulations. At the time, Hickenlooper announced that the
guidelines would ensure Colorado has the “cleanest
and safest oil and gas industry in the country.”
year that followed, the COGCC approved new rules to increase its
authority over wayward oil and gas operators. Those rules permit the
Commission to hire more inspectors, assess higher fines for violators
and keep a closer eye on operators around the state. With its new,
bulked-up powers, the COGCC carried extra regulatory responsibilities
after the Colorado Supreme Court in May or this year overturned the
local fracking bans.
even with beefed up regulations, critics of the oil and gas industry –
and even some industry insiders – describe a disturbing reality: For a
company to be handed meaningful sanctions, it has to be shown to be a
repeat and flagrant violator of state law. On the rare occasions that
operators are held accountable, the Commission is frequently still left
paying for cleanup. A recent investigation by the
documented how lax oversight and inadequate regulations on multiple
fronts have led to dozens of deaths and injuries of oil field workers.
COGCC is funded by the very same industry it watchdogs, through taxes
paid by oil and gas companies. Industry lobbyists have helped write laws
that exempt oil and gas companies from certain federal environmental
protections, and a fractured system of monitoring compliance with
existing state and federal environmental laws leads to uneven
enforcement. Few opportunities exist for public participation in the
COGCC will never say no to operators,” said Doug Saxton, co-chair of the
Battlement Concerned Citizens, in a statement released after the
Commission approved a contentious plan to drill in that Garfield County
Koster, a “completions engineer” who has worked in 10 states and Canada
for a variety of companies running hydraulic fracturing and other
operations, told The Independent that Colorado “is one of the
more regulated states” in the U.S. and “has a reputation for being well
he added, while he can’t speak specifically to the Texas Tea case,
energy companies in his experience generally receive that level of
enforcement only after “a longstanding pattern of blatant disregard for
the rules or intentional negligence.”
Parker, the man behind Texas Tea, LLC, is a little like “Seldom Seen
Smith” in Edward Abbey’s “The Monkeywrench Gang.”
least six oil-and-gas related companies associated with either Robert
Parker or Michele Parker (their relationship, if any, is unknown,
although both names appear on some public document filings) have been
registered at the same address on West Colfax Avenue in Lakewood.
sunny September day, a visit to the address yielded a UPS Store in a
strip mall. Inside, the clerk said that they provide the service of a
street address and hold mail for clients, no questions asked. Mail from
the U.S. Postal Service can be delivered there, and any entity that will
not mail to a post office box can send mail to this physical address.
When asked if a visitor could find out more about a client with a
specific box number, the clerk replied, “If you have a badge you can.”
told about Texas Tea’s ephemeral corporate addresses, COGCC permit and
technical services manager Jane Stanczyk was nonplussed. “It doesn’t
matter to us,” she said. “It might matter to the Secretary of State.” “I
bet it doesn’t,” countered Lepore.
right. The Colorado Secretary of State’s office said that its role in
recording business addresses is purely ministerial, meaning it does not
verify them for any purposes.
Kathleen Staks, the Assistant Director of Energy for the state’s
Department of Natural Resources, said that the state’s hand-off approach
extends beyond the lack of verification of company addresses. “The COGCC
and the state have very little information about the financial health of
these companies,” Staks said.
could not be reached after repeated attempts to call and email every
contact he provided in multiple COGCC filings, including the lawyer who
represented him at the last COGCC hearing (but no longer does).
together the following paper trail. Texas Tea of Colorado, LLC
incorporated with the Secretary of State in 1996 under Michelle Parker’s
name, and filed a subsequent report with Robert named as manager in
1999. True Grit Oil & Gas Holdings, LLC incorporated in 1998 under
Michelle’s name, then changed registered owners to Robert in 1999. Other
companies involving one or the other Parker include RPM Indy, LLC; Kenai
Oil and Gas, LLC; BH Energy, LLC and R&R Energy Holdings, LLC. In COGCC
filings, Texas Tea of Colorado also did business as (DBA) Texas Tea,
15 years after Texas Tea was slapped with its first formal violation
from the COGCC in 1999 for failing to adequately take care of a
nonproductive well, the operator was flagged with more than four dozen
citations, for problems including leaks, spills, and failures to conduct
required mechanical integrity tests and pay increased bonds.
after Lepore took over as the head of the COGCC in 2012, he met with
Parker on multiple occasions to negotiate solutions to the outstanding
violations and unpaid fines. “He was coming back and telling us, ‘I
don’t have the money,’” Lepore said.
forthright communication boded well for Robert Parker, at least for a
while. As recently as a September 15, 2014 meeting, COGCC commissioners
granted Texas Tea a suspension of $70,000 in fines owed to the
Commission – a fraction of the fines already levied – pending full
compliance. According to transcripts from the meeting, Commissioner
Andrew Spielman noted that the case clearly described the operator’s
poor compliance history, and said he didn’t want to be part of giving a
waiver to bad operators. COGCC staff argued that the suspended $70,000
was for more recent violations, and that it should be vacated to provide
Texas Tea with an incentive to fully remediate and comply with the
Although Speilman voted against leniency in this case, he told The
Independent, “We do tend to prioritize on-the-ground cleanups rather
than imposing fines on an operator likely to go out of business —
because in the worst case Colorado would get neither.”
Indeed, the COGCC readily admits that this kind of leniency is part of
its strategy. Lepore said his agency gives operators wide latitude and
multiple opportunities to remedy violations discovered by COGCC
inspectors – including forgiving fines for noncompliance – in order to
“Frankly, we’d rather them clean up the mess and come into compliance
than give us any money,” Lepore said.
approach has not always worked, Lepore acknowledged. Texas Tea’s
violations eventually accrued total fines of $323,500, which in April
2016 the COGCC ordered Texas Tea to pay in full within 30 days. That did
not happen. The failure to pay led to the Commission’s June shutdown
order and hundreds of thousands of dollars in unpaid fines and
remediation costs — the very scenario that Spielman feared.
gaining greater regulatory authority, the COGCC appears to be taking
more and stronger action against violators than it has in the past.
Still, forceful COGCC disciplinary actions to date show that they are
still the exception, not the rule.
Commission collected less than half of the $3.3 million in fines it
assessed in 2015. As of August 2016, the COGCC had collected only 17
percent of this year’s $3.8 million in fines.
said the numbers aren’t as bleak as they look: The Commission levied a
large portion of those fines to pressure operators into compliance, with
little to no expectation of payment.
oil and gas industry is renowned for its shifting and fragmented
ecosystem of operators. Giants such as Anandarko and Noble have
thousands of wells. Independent operators typically have a few dozen to
a few hundred wells. And the smallest companies, known as “stripper
well” operators, buy only a handful of declining wells and milk the last
hydrocarbons from them. That means smaller companies are often held
responsible for cleanup when wells go dry — and they often find
themselves unable to pay.
said that as far as he knows, the COGCC has shut down only three other
companies besides Texas Tea since its establishment in 1951. The first
time, he said, was in 2012.
company was called Ranchers Exploration Partners, LLC, whose principal
operators, Lepore said, drilled wells around the state, repeatedly
violated COGCC rules, shut down their operations and then set up new
companies under different names.
didn’t really have the mechanism to pierce the corporate veil,” Lepore
said. Energy companies routinely set up new companies and subsidiaries,
then sell and resell holdings to each other like a game of corporate
whack-a-mole. It wasn’t until the third time the same men came back
trying to operate that the COGCC finally took action.
COGCC ultimately refused to issue any more permits to the individuals
involved in Ranchers Exploration, no matter what they called their
company, and issued a
order on April 27, 2012, a few months before Lepore became director.
March of this year, the COGCC shut down an operator called Benchmark
Energy, LLC. According to Lepore, Benchmark’s owner, Jerry Nash, bought
underperforming wells on the internet, sight unseen, in 2011. By early
2016 he had accumulated more than $1.2 million in fines, mostly related
to spills and contaminated soil that came to the COGCC’s attention in
2014 and 2015. Lepore admits that it has historically taken the COGCC
years to shut down insubordinate operators, but said Benchmark was a
particularly flagrant case.
“Benchmark was a little faster because they were just completely
incapable from the beginning of responding to the impacts [they
created],” he said.
gave The Independent a more nuanced version of events. He said he
bought the wells in an online auction, which included copious amounts of
information regarding the wells’ production records and details of
technical specs – “more information than you could read in a week” –
and that there was no indication of environmental problems or
violations. “I bought that thinking it was in compliance,” Nash said.
Now, he admits, “I probably didn’t do enough due diligence” prior to
Nash said, “I busted my butt for four years” working to clean up the
sites and bring them into compliance and production. He said he
consulted with COGCC inspectors and engineers to take care of old
problems he had inherited, such as 30-year-old tank batteries, as well
as new ones such as leaks that Nash said were sometimes caused by
vandals stealing equipment and shutting valves.
“making headway on the cleanup, for sure,” Nash said that he started
receiving fines and notices of violation for small things like weeds on
his property and a required sign that a cow had knocked over. Suddenly,
Nash said, “they wanted it all cleaned up in a week,” and as a small
operator, he just couldn’t move fast enough. “They totally destroyed
me,” Nash said. “Now who do you think has to clean it up? They do.”
final example of COGCC invoking its strictest enforcement option was
with a company called CM Production, LLC. Lepore said that CM took over
the wells of an operator called Lone Pine Gas, Inc. after that company’s
owner, Gilmer Mickey, died in a plane crash in 2011. Mickey’s widow,
unable to deal with the old wells and the environmental cleanup they
required, wanted to sell the company to a willing buyer. Along came John
Teff, a young oil and gas man who was so confident in his ability to
reinvigorate Lone Pine’s struggling wells that he even took on the
hundreds of thousands of dollars of outstanding environmental
remediation they needed.
According to Lepore, Teff came to the COGCC table and promised to take
care of the cleanup out of revenues from CM’s production. “Guess what
happened?” Lepore asked. “He didn’t get the field online.” The COGCC
revoked his permit. “He thought, as long as he kept producing a
tablespoon of oil every year, we’d just keep looking the other way.
That’s not how it works anymore.”
Production’s owner Teff refutes Matthew Lepore’s characterization of the
story. “If that’s what Matt told you, he’s just wrong,” Teff told The
Independent. “He can’t seem to get his story straight.” Teff said
that he evaluated the condition of the wells and felt it was
economically feasible to perform the cleanup they needed — with the help
of the COGCC. “That was my failed assumption,” said Teff. He blames some
of the environmental problems he inherited on the COGCC itself, which
suggested that Lone Pine excavate a lined pit. Mickey’s widow, he said,
tried to comply with the recommendation, but the liner ended up breaking
and threatening the water quality of nearby creeks.
operators bear the burden of this, because they try to fix these
problems, but it was polluted by the bigger operators,” Teff said. As a
smaller operator, he feels he was unreasonably targeted by the COGCC,
which he said turned out to be less helpful and more impatient than he
expected. “Matt Lepore has taken it upon himself to go after small
operators to try to break us to prove some kind of point,” he said.
“They have ultimate authority to do what they want to break you.”
this characterization, Lepore countered: “We have one set of rules that
applies to everyone who wants to do business in the state. What
motivation would I have to go after small operators, or anyone else?”
said he has no way of paying the $700,000 in fines the Commission has
cost of forgiveness
of these three examples, as with the case of Texas Tea, the COGCC was
left holding the bag for the cleanup. Prior to drilling, all three
companies put up bonds to cover the plugging of their wells. But in the
cases of Ranchers and CM Production, like with Texas Tea, the bonds were
insufficient to pay for the actual cleanup.
Bonding, in effect, works much like the security deposits landlords
require of most tenants. The typical deposit isn’t necessarily enough to
fix everything if a renter decides to trash the place, but it’s more
than enough to cover a hole in the sheetrock wall or a lost key. After a
renter moves out, they only receive their deposit back after the
landlord ensures that the renter behaved within bounds and left the
place as clean as they found it. If the tenant caused more damage than
the security deposit covers, then it’s either off to court or the
landlord eats the loss.
this analogy, state oil and gas bonding rates are similar to a landlord
asking a $100 damage deposit from a pledge from John Belushi’s
fraternity in Animal House to use as security to rent a dozen
that seems a little harsh, consider Colorado’s bonding formula. State
law requires operators that receive drilling permits to provide a
financial guarantee to state officials to guard against their desertion
of wells. Depending on well depth, bonding costs either $10,000 or
$20,000 per well. But operators quickly benefit from buying in bulk:
Operators can “blanket bond” multiple wells for much, much less. A
blanket bond of $60,000 covers well operators for up to 99 wells, and
$100,000 covers operators for more than 100 wells. Considering that
wells typically cost $10,000 to $20,000 to plug, with site remediation
on top of that, the potential shortfall becomes pretty obvious.
Tea posted a blanket bond of $60,000 for its 29 wells. It later paid an
additional bond, requested by the COGCC due to excess inactive wells, of
$10,000. But the $71,850 total bond (it appreciated slightly over the
years) still falls at least $50,000 short of the costs to plug and
abandon the four wells the COGCC has identified as needing prompt
attention, and more if remediation costs are added. The balance will
come directly from the COGCC, Lepore said.
the money it will spend cleaning up after troublesome operators like
Texas Tea, the COGCC also must keep in mind the more than 35,000 wells
in the state that have been “abandoned” after either running dry or
being plugged. The state considers plugged wells to pose no
environmental or safety risks. But even plugged wells can, and do, leak,
though it’s hard to tell how often because
is specifically looking for leaks.
But when orphan well leaks do get reported, it’s up to the state to pay
year, the state must remediate what are known as “orphan wells,” or
wells that need cleanup but no longer have a known operator of record.
Sometimes operators were forcibly removed from the state or no longer
have the means to plug and abandon them, but often these wells are
simply so old that nobody knows who is in charge anymore.
COGCC designates almost a half a million dollars every year to the
plugging and remediation of these orphan wells. In 2015, the COGCC spent
$495,000 plugging, reclaiming and otherwise cleaning up after 24 of
these projects that required attention. Of that, less than $58,000 came
from bond money provided by operators. The COGCC continues to identify
new orphan wells as they come to their attention.
Falling through the fracks
Lepore’s COGCC office on Lincoln Street south of the Statehouse, a map
pinpointing the location of Colorado’s 53,724 active wells hangs on one
wall. A photo of a Colorado mountain panorama graces another. This is
the nerve center of the state’s main regulatory agency for the oil and
gas industry, a body whose mission is “the prevention and mitigation of
adverse environmental impacts” related to Colorado’s oil and gas natural
inspectors focus on the mechanical integrity of pipes and facilities,
upkeep of grounds around wellheads and other facilities, land
reclamation and the documentation of which wells are producing, and how
said that, thanks to the increased authority and budget coming out of
the 2014 task force changes, the Commission has more than doubled its
went from basically a hearing officer and an enforcement supervisor,” he
said, to having “three enforcement officers, two additional hearing
officers on top of that, a managing officer on top of that, and we have
more assistant attorney generals,” (a position that Lepore held before
joining the COGCC).
said that the COGCC inspected 30,000 wells last year, and generally can
inspect wells at least once every 15 months. “I am very comfortable with
the number of enforcement and inspection staff that we have,” he said.
“I don’t feel like there are dark things going unseen.”
sometimes it takes a concerned citizen to register a problem. Stacy
Lambright, the mother of two children, ages 12 and 14, noticed unusual
activity of workers at a well site located a few hundred feet from a
neighborhood park near her home in Thornton. Wondering if the well had
anything to do with her kids’ nosebleeds and her husband’s asthma, she
went to investigate.
Related: The Making of a Fractivist
Lambright reported the activity to the COGCC in June 2016, and learned
that in December 2015, the well site operator had reported a significant
“historic flowline leak” from rusting pipes that had corroded completely
from the well that had first been drilled in 2004. “Historic,” in this
context, effectively means something that happened so long ago that it’s
not clear who is responsible.
had bothered to alert the neighbors.
all-too familiar set of circumstances, the site had been taken over by
at least two companies since the initial drilling: Synergy Resources
Corporation had been the operator of record when the leak was first
reported, but sold it to the K.P. Kauffmann company in April 2016. The
spill had leaked benzene, toluene and other toxic chemicals in an area
that was in the floodplain of the historic 2013 floods and adjacent to
wetlands and more than 400 single family units and parks in Lambright’s
neighborhood. COGCC reports show that the water table at the site was
just seven feet below the surface, with 36 water wells within a
Lambright said that the COGCC did respond quickly to her complaint, and
set up a remediation plan with the new owner, the K.P. Kauffman Company,
which is ongoing. Still, she wonders why it took a citizen complaint for
people living nearby to learn about the “historic” leak, and how many
other undetected, corroded pipelines and leaking sites there are
throughout the state. She also has a host of unanswered questions about
the thoroughness of the analysis of the damage done, and the
effectiveness of the cleanup in progress. “I don’t have a lot of faith
in the minor regulations put on oil and gas operators,” she said.
Lambright has a message for anybody who lives anywhere near a well or
facility: “If you see something, or smell something, or hear something,
or your gut tells you something’s wrong, file a complaint.”
good advice, said Mike Freeman, a staff attorney with the Denver office
of Earthjustice, a national environmental law advocacy organization.
Freeman said flat out that the COGCC “doesn’t have enough enforcement
resources to inspect the number of wells that are being drilled and are
operating in Colorado.”
Companies are obligated to report spills and leaks to the COGCC within
24 hours of discovery, and many companies do. But critics say there is
always a danger that the cost of fixing contamination may deter some
companies from reporting. Freeman said the lack of threat of meaningful
enforcement “reduces the deterrent value for companies to comply
voluntarily” reporting problems.
of that, COGCC does not regulate air pollution caused by the industry.
That falls to the Colorado Department of Public Health and Environment (CDPHE),
which, Freeman said, has enforcement shortcomings on par with those of
you can’t see can still hurt you
fossil fuel extraction process produces emissions of volatile organic
compounds (VOCs), including cancer-causing chemicals like benzene, as
well as compounds that contribute to
also known as smog. Increased ozone has been tied in several
peer-reviewed scientific studies
to increased incidents of asthma and respiratory illness. In a recent
by the national Clean Air Task Force, Colorado ranked third among states
with the highest number of asthma attacks. Still, state Chief Medical
Officer Larry Wolk, headof the CDPHE, is
saying that he “[doesn’t] see anything to be concerned with at this
time” with regards to fracking-related air pollution, beyond breathing
in the air directly above an active well.
air emissions are regulated by the CDPHE, whose enforcement budget, like
that of the COGCC, comes primarily from the industry itself. Oil and gas
companies have to “pay to pollute,” with a fee of about $150 per ton of
hazardous air pollutants they emit. Michael Silverstein, administrator
of the state’s Air Quality Control Commission, explained that this
amount is set by the state and that emitters pay what is required to
conduct proper inspections.
the CDPHE’s statewide oil and gas enforcement and inspection team
consists of only about a dozen people. Emissions data is largely
collected and monitored by operators’ self-reporting, and Silverstein
said his agency tries to inspect every well about “once every five
years.” Asked if he felt this was sufficient, Silverstein demurred. “We
have a legislature that says this is an appropriate amount.”
federal Environmental Protection Agency (EPA) had its own opinion about
how well Colorado has been doing on air quality enforcement. After a
joint investigation with the CDPHE, the EPA brought a significant
enforcement action against Houston-based industry giant Noble Energy
last year after Noble was found to be in widespread violation of federal
emission control requirements.
consent decree settlement
between Noble Energy and the EPA and CDPHE states that Noble had
underestimated how much its emissions would increase due to rapid growth
in Colorado, especially of VOCs from Noble’s storage tanks. According to
the U.S. Department of Justice announcement, “VOCs are a key component
in the formation of smog or ground-level ozone, a pollutant that
irritates the lungs, exacerbates diseases such as asthma and can
increase susceptibility to respiratory illnesses.” Or, as Curt Huber,
the Colorado director of the American Lung Association put it, “Ozone
does to the inside of the lungs what sandpaper does to the skin.”
investigation and enforcement actions from EPA and CDPHE resulted in a
$4.95 million civil penalty as part of the April 2015 settlement with
Noble. Of that, $3.475 million went to the federal government and $1.475
million to Colorado. In addition to the penalties, the settlement
required Noble to install an estimated $70 million in equipment and air
quality monitoring upgrades and to perform other mitigation measures.
Methane hot spot
enormous problem with this bureaucratic patchwork of inspections and
regulators is that several independent scientists have measured
substantially more toxic emissions from oil and gas activities than even
the EPA and the CDPHE have acknowledged. A
published in Nature on Oct. 6 by Stefan Schwietzke of the
Cooperative Institute for Research on the Environment (CIRES) at the
University of Colorado and the National Oceanic and Atmospheric
Administration (NOAA) found that fossil fuel development is responsible
for between 20 and 25 percent of global methane emissions, which is
between 20 to 60 percent higher than other studies had estimated.
August, Christian Frankenberg of the California Institute of Technology
and a team of scientists that included researchers from the University
of Colorado and NASA’s Jet Propulsion Laboratory
the source of a mysterious “methane hot spot” in the Four Corners area
where Colorado, Utah, New Mexico and Arizona meet. The hot spot stems
from more than 250 leaks in oil and gas operations emitting vast
quantities of methane, a greenhouse gas 28 times more effective than CO2
at trapping heat in the Earth’s atmosphere over a 100-year timespan.
to home, Gabrielle Pétron, an atmospheric chemist who works at NOAA,
in 2014 that found seven times more of the carcinogen benzene than the
EPA had estimated being emitted from oil and gas operations during a
two-day, airborne sampling on the Front Ranges. In addition, emissions
of “ozone precursor” chemicals were double EPA estimates. “These
discrepancies are substantial,” said Pétron after the study was
released. “Emission estimates or ‘inventories’ are the primary tool that
policy makers and regulators use to evaluate air quality and climate
impacts of various sources, including oil and gas sources. If they’re
off, it’s important to know.”
Perhaps most importantly, these and other scientists’ studies could only
be undertaken because curious researchers secured enough federal funding
to do the work. No state or federal regulatory agency measures or
catalogues these and other emissions with any systematic regularity.
good news is that in the cases of both the Four Corners “hot spot” and
the Noble settlement, once the biggest leaks were identified by
scientists or regulators, companies were willing and able to fix them.
Cleaning up in Brighton
Brighton is one place left cleaning up after Texas Tea.
county seat for Adams County, about 25 miles north of Denver, had
already been dealing with one of Texas Tea’s abandoned wells when the
COGCC shut the company down in June. In December 2015, the city split
the approximately $26,000 cost of plugging and abandoning one of Texas
Tea’s wells with a private company interested in expanding gravel mining
where a well was located. The company “couldn’t wait for the COGCC to
act,” said Matthew Sura, an attorney who represented Brighton in these
Tea also operated 17 other wells in and around Brighton. After being
apprised of the enforcement action against Texas Tea in June, city
officials were concerned that the abandoned wells might leak and leach
into the city’s groundwater, according to Sura. Brighton officials asked
the COGCC to step in to address the four remaining Texas Tea wells
within the city’s “Public Water System” area.
COGCC agreed to take on the four-well project, with an estimated cost of
$120,000 to plug them. Brighton officials “appreciate that the COGCC
prioritized the plugging and abandonment of these Texas Tea wells,” Sura
Robbing Peter to pay Paul
COGCC funds its cleanup programs through its “Oil and Gas Conservation
and Environmental Response Fund.” For the fiscal year 2016-17, the fund
has an operating budget of $15.5 million. About half of that comes from
the severance taxes that Colorado oil and gas operators pay, and the
other half comes from a combination of penalties, bonds and the
statewide levy on oil and gas production, which is currently set at .07
percent. A very small amount comes from a federal grant, which for
2016-17 totaled $100,000.
prices have taken a toll on the current and projected future financial
health of the COGCC. During the recent industry downturn, the price of
oil plummeted from more than $100 a barrel in April 2015 to less than
$30 a barrel in early 2016 (it’s now hovering around $50). Oil and gas
operators in Colorado responded by sharply curbing their production.
That had major implications for the COGCC’s budget.
math isn’t complicated: Fewer barrels produced means less money from the
levy on production. In response to this decline in funds, the COGCC was
granted an additional $3 million from the state severance tax fund,
which is less susceptible to volatility in prices.
severance taxes and levy money are part of the oil and gas industry’s
contribution to state, county, and municipal coffers. The COGCC doesn’t
glean money from the state general fund.
that extra $3 million means less money for the “Tier 2” projects that
also rely on levy funds, like clean energy development, soil
conservation, wildlife conservation, invasive species control and
low-income energy assistance.
levy has been set at .07 percent of an oil and gas operator’s gross
revenues since 2007, though the state is authorized to collect up to .17
percent. Asked why the COGCC didn’t just increase the levy, Lepore
laughed. “I guess I can’t answer that question.” Pressed for a more
specific answer, he said that the call wasn’t up to him. “The Joint
Budget Committee made the decision to use the severance tax fund,” he
said. “Raising the levy was always an option.”
industry’s budget woes could get even worse following an April 2016
Colorado Supreme Court decision
in favor of industry giant BP. The ruling allowed BP to deduct certain
“transportation, manufacturing and processing costs” from its severance
taxes. It includes an even more arcane provision to allow the deduction
of the “cost of capital,” or money that BP could have made if it
had invested it elsewhere.
bottom line is that the decision will result in an even bigger shortfall
in the budget that pays for the COGCC’s enforcement efforts (and many
other non-COGCC line items). Smaller severance tax revenue also reduces
the amount of money available to defray the associated costs of energy
development, such as local road maintenance and cleanup costs from
abandoned or failed wells, which often fall on local governments.
analysts have already noted that Colorado has among the
severance taxes in the country,
partly because companies can deduct the cost of their property taxes
from the severance tax calculations they typically pay to counties and
municipalities where they operate. This new Supreme Court decision will
reduce the state’s income even further, leaving even fewer resources for
the state to monitor oil and gas operations and to clean up when
companies go afoul.
Texas Tea? “They owe us a ton of money,” said Lepore. “And we’re going
to spend even more money fixing their problems.”
despite the Commission’s claims on Texas Tea’s assets, recouping any
money from the operator seems unlikely. Lepore says that trying to seize
and sell the assets is hard to do in practice — there’s no law granting
the state of Colorado priority over other potential lienholders, for
example — and the COGCC isn’t really in the business of selling scrap.
Nor, Lepore says, is it equipped to operate wells on its own.
Instead, he says, the COGCC would prefer to temporarily turn off Texas
Tea’s remaining wells, get them back into compliance, and try to find
yet another willing buyer. If history is to be believed, it will
probably be another small operator — maybe even someone from the
Full story with photos:
FRACTURED is a new series by The Colorado Independent
that looks at the science, politics and humanity of these trends and
examines their impacts on the lives of Coloradans around the state.
the past decade, Colorado has witnessed both rapid population growth and
a major expansion of oil and gas development.
result is a collision of cultures, aspirations and regulations that
increasingly put the energy industry and its supporters at odds with
residents and communities around the state. As scientists continue to
document the environmental impacts of hydrocarbon production, the
pushback against the industry from residents only increases. Colorado
has grappled with ways to balance the enormous economic value of oil and
gas production, including tax revenues and jobs, with its unwanted
impacts on residential communities and the environment. Critics ask how
effectively the energy industry is being regulated and inspected, and
whether the industry has corrupted the political process with financial
contributions and expensive PR campaigns.
same time, scientists increasingly discredit the old notion of natural
gas as a “bridge fuel” that could slow greenhouse gas emissions on our
way to a carbon-free energy future. The process of drilling, processing
and burning methane to produce electricity has its own suite of impacts,
and simply moving from coal to gas is not going to keep the planet from
Previous stories in this series include
Who’s behind ‘decline to sign,’
an examination of the public relations efforts of the oil and gas
industry to influence Colorado politics;
The making of a fractivist,
a look at of how suburban parents have been energized to fight drilling
in their neighborhoods; and
a breakdown of the myriad factors that led to the failure of two anti-fracking
initiatives to qualify for Colorado’s 2016 ballot. Coming next: Are new
rules to address “neighborhood drilling” being followed?