Up to $1 Million Per Well at Stake in Colorado Drilling Case

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The energy consultancy Wood Mackenzie reports that as the Colorado Supreme Court considers a case on whether state or local governments have the authority to regulate hydraulic fracturing, from $750,000 to $1 million per well in potential tax benefit could be lost to the state, with more than $3 million per well foregone in overall energy development spending.

Wood Mackenzie notes that although a court decision remains months away, the case is being closely watched by the oil and gas industry since the ruling will likely set a legal precedent for hydraulic fracturing regulation in other states and jurisdictions. Arguments began in early December.

Five Colorado cities—Boulder, Broomfield, Fort Collins, Lafayette, and Longmont—either banned or passed five-year moratoriums on hydraulic fracturing in 2013. The Colorado Oil and Gas Association brought suit against two cities. After a lower court threw out the bans, both parties appealed to the state Supreme Court, which will ultimately rule on whether Colorado or its cities, towns, and counties are responsible for regulating hydraulic fracturing.

To determine how Colorado’s tax revenues could be affected should local bans and moratoriums be upheld, Wood Mackenzie studied the Greater Wattenberg sub-play. Development near Longmont and Lafayette is potentially most at risk given the proximity to current energy development in the Wattenberg area, affecting producers Anadarko, Encana, PDC Energy, and Synergy Resources.

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