Colorado Voters Defeated Proposition 112, Slam Gas Output 45%, Oil 54%

UPDATE: November 7, 2018 — Colorado voters on Nov. 6 defeated Proposition 112, which would have increased oil and gas well setbacks from homes and businesses. The proposition would have required most new oil and gas wells be at least 2,500 ft from homes and other occupied buildings statewide except for federal land in Colorado

(November 2, 2018) — If passed, Colorado’s Proposition 112 ballot initiative might not completely destroy the oil and gas industry in the state since producers could employ longer laterals to reach molecules while still complying with new setback rules, according to a new study by the Colorado School of Mines and as reported by S&P Global Platts. But approval could eliminate access to 58% of the state’s subsurface minerals, and gas and oil production could fall at least 45% in five years. Polling indicates initiative support leading 52% to 48%. Proposition 112, which appears on the Nov. 6 ballot, would increase new oil and gas drilling setbacks from 500 feet to 2500 feet from occupied structures, parks, and waterways. It would eliminate 85% of all non-federal surface land from use for drilling, according to separate analysis by the Colorado Oil and Gas Conservation Commission. But Peter Maniloff, a professor at the Colorado School of Mines, determined more than 15% of subsurface minerals could be reached through modern drilling techniques.

“With the recent advent of horizontal drilling, some subsurface resources beneath the

2500-foot buffer may be reachable from within the 15% available surface area,” he said.

“I calculated what area of the subsurface is within one mile of a surface location, which would remain accessible under Prop 112. That is, how much of the subsurface would be available, assuming that firms could drill horizontally for one mile from an accessible

surface location. I find that 42% of the non-federal subsurface would be accessible, or nearly three times the available surface area.”

However, he noted that restricting oil and gas operations to such a small portion of surface space would “impose substantial operational difficulties.” This includes limiting the placement of wellbores in order to achieve the highest production rates, as well as the difficulty of adding new surface infrastructure, such as roads. Also, Maniloff’s analysis did not consider the varying quality of rock. Most of the core areas of the Denver-Julesburg

Basin are located in densely populated areas along Colorado’s Front Range, which would

become basically inaccessible under Proposition 112.

Research by S&P Global Platts finds the proposition would curtail natural gas production by 45% and oil output by 54% within five years. It would render 78% of Weld County’s surface land off-limits to new oil and gas development. The county currently accounts for more than 95% of all Denver-Julesburg Basin production. Since Colorado’s approved drilling permits are valid for two years, the analysis assumes drilling will continue for the next two years and the impact would start to show in 2021 as 78% of the surface land would be off-limits owing to the new 2500-foot setback restriction.

The number of new wells drilled in the Denver-Julesburg would be reduced by 78% starting in 2021, and oil production would decrease by 54% to 275,000 bbld by the end of 2023. Applying the same analysis to natural gas, if the number of new wells drilled is reduced by 78%, the impact on production would be a decrease of 45% to 1.9 Bcfd by the end of 2023. Drilling permits in Colorado have been steadily increasing since the beginning of the year as multiple Denver-Julesburg Basin producers have said they are preparing for the worst and accumulating as many permits as possible in advance of the election.

(Source: The Weekly Propane Newsletter, November 5, 2018. Photo Courtesy:

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