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Fracking and Colorado’s economy

ColoradoBiz Staff //April 1, 2014//

Fracking and Colorado’s economy

ColoradoBiz Staff //April 1, 2014//

(Sponsored Energy Section)

Tom Clark likes to tell the story of the time a delegation of top businesspeople from Turkey was visiting Denver and took a particular interest in the region’s advancements in oil and gas development.

“They had interpreters, and they certainly made a good effort with their English,” recalls Clark, the CEO of the Metro Denver Economic Development Corp. “And one says, ‘We would like to know how you get oil and gas from rocks.’ We said, well, it’s called fracturing or fracking, and we explained to them how it works. And they said, ‘What company has that technology? We would like to license it.’”

Clark remembers explaining, “‘You don’t understand, this is the way you get oil. There’s no one company that licenses it.’ They thought it was all brand-new. We had to explain that it’s gone on in this country for 60 years. It’s just gotten better in the last 25 years.”

Clark laughs in recalling the exchange, but his larger point is that fracking – or hydraulic fracturing – is misunderstood, even in a state that reaps vast economic benefits from it and where it’s practiced routinely. Clark’s career in economic development has spanned more than 30 years at the city, regional and state levels, and he is among the many Colorado business and political leaders who have pondered the adverse effects a statewide ban on fracking would have on the economy and must weigh the impact of decidedly anti-business and anti-energy ballot proposals.

Three Front Range cities – Lafayette, Boulder and Fort Collins – passed anti-fracking measures in municipal elections last November, with Lafayette going a step further than the others with an all-out ban on new oil and gas drilling. Broomfield also narrowly passed a five-year fracking ban, but the election results have been challenged in court and the outcome is awaiting resolution. There has been talk of a statewide ban making it onto the ballot in 2014.

When asked to speculate on what the impacts of a statewide ban on fracking would be, Clark harkens back to development in Colorado’s Piceance basin in the 1980s, though he says, “It was a much different, much more complex extraction process.”

Amid the downturn in Colorado’s energy industry, jobs literally went south when development stopped.

“What we knew then, because there was no supply nearby, is that all the major oil companies that had large presences here in Colorado all moved back East, or South,” Clark says. “You can expect that if there was an all-out fracking ban, a lot of the office buildings in downtown Denver, the high-paying geotech folks, the engineers, would retreat someplace else. Because they need to be close to the supply. That’s not an exact apples-to-apples comparison, but it points in the direction of what would happen.”

Times have changed since the U.S. depended on the Saudis and other OPEC nations to meet its energy needs.

“Now, because of the oil and gas plays that have occurred, 60 percent of the oil used in the U.S. is produced in the U.S. The Saudis today alone produce only 7.2 percent,” Clark says. “The second-largest contributor is Canada at 13.6 percent. You’ve got a reliable partner in Canada, you’ve got your own reservoir now. So North America is probably going to be energy-independent at the latest  by 2025 – provided that we do this properly as a country.”

Another economic reality is that Colorado has strived to become a national leader in renewable energy – chiefly solar and wind – and those sources must be paired with natural gas in any reliable power plant design. Colorado ranks among the top six states in the nation for natural-gas production.

“When we look into the future, there’s a move toward more renewables – solar and wind,” says Dan Whitten, spokesman for Washington, D.C.-based America’s Natural Gas Alliance. “Natural gas is going to be a necessary partner with those energy sources because of their intermittent nature. You need to be able to flip the switch and turn on some baseload power when the sun’s not shining or when it’s raining or when the wind’s not blowing. Natural gas is the fuel that can do that at scale.”

That’s one reason Whitten and his group have also considered the adverse effects that a statewide fracking ban in Colorado would have on the economy – and not just Colorado’s.

 “We are obviously watching what’s going on in Colorado,” says Whitten, who points out that development of natural gas through hydraulic fracturing has become routine. “Certainly a ban on natural-gas production would run counter to the interests of Colorado in terms of clean air, jobs, economic opportunity, and counter to the interests of the nation as a whole. Colorado is a huge natural-gas producer. They are a supplier to large portions of our country, and it would be counter-productive to the state and to the nation as a whole.”

The natural gas industry generated 111,000 jobs in Colorado and contributed $29.6 billion to the state’s economy in 2012, according a report by the University of Colorado Leeds School of Business’ Research Division. And the information firm IHS Global Insight projected the number of such jobs will increase by 60 percent by 2035.

“Those are projections made based on current policy and conditions on the ground now,” Whitten says. “Obviously a ban on natural-gas development would change those numbers and potentially derail the job opportunities that exist in the state. That would be one of – but not the only – sort of drawback of taking that kind of action.”

Along with the economic benefits of natural gas production, the Metro Denver Economic Development Corp.’s Clark points out the environmental improvements that natural-gas development has enabled.

“When you look at the drop in greenhouse gases across the country as a result of converting old power plants to natural gas – and a lot of them in our part of the country are partnering with wind turbines – we’re still the world’s largest economy but we’ve been on a steady downturn in greenhouse gas emissions since about 2001. We now emit 16 percent of all the GHGs in the world even though we’re the largest economy. China accounts for 25 percent (of GHG emissions), and since 2002 they have been on a precipitously vertical line upward – mostly because they have about the dirtiest, crummiest coal in the world.”

In pointing out the environmental positives of natural gas, Whitten sees an obvious irony to a statewide ban on fracking, if such as measure were to pass.

“The environmental impacts, the clean-air impacts in terms of using natural gas in power plants, reducing emissions of not just greenhouses gases but other pollutants, it would just be a real shame,” Whitten says. “Not that Colorado couldn’t have access to natural gas if they weren’t producing it, but boy, what a perverse outcome when you’re one of the biggest producers in the country right now but then you can’t even produce your own to use it in all these positive applications.”


The Case for Fracking

“If it (a statewide fracking ban) was really passed and upheld, it would certainly have severe economic impacts. It would stop almost all drilling. You can’t drill economically without fracking anymore.”

Colorado Gov. John Hickenlooper, from an interview that appeared in the Nov. 22, 2013 issue of National Journal Daily

“A statewide ban would be devastating for the state’s economy. If we were to lose the oil and gas jobs that we have, it would be just catastrophic for our economy. The idea of a statewide ban on fracking – that is such a draconian response, because there are a lot of areas, the vast majority of areas, where oil and gas development is taking place across the state that people are pretty happy with it.

“Where industry has had an opportunity to participate as corporate citizens, inevitably and without exception those communities have come to accept benefits of those activities along with the impacts, and determined that they’re comfortable with that trade-off.”

Mike King, executive director, Colorado Department of Natural Resources, in an interview that appeared in the Nov. 20, 2013 issue of National Journal Daily