A BP America spokeswoman this week told the Colorado Independent the company is eyeing a resumption of coal-bed methane drilling in La Plata County this fall, although the decision has more to do with a hoped-for rebound in natural gas prices and some resolution with regard to local drilling regulations.

The company at the beginning of the year announced a six-month halt to drilling in the county, where BP directly employs 250 people and indirectly 200 contractors. There are more than 2,000 active BP wells in the county – the only part of the state where the company drills.

“It was more the economics of it actually,” BP America senior director of government and public affairs Lisa Hough said of the hiatus for the company’s $2.4 billion drilling program in the area. “We had a lot with rules and regulations coming on and the drop in the natural gas price and we actually had a real backlog of wells that were drilled but not completed.”

La Plata was the second most productive Colorado county for natural gas drilling in 2009, according to the Colorado Oil and Gas Conservation Commission, and BP is the largest operator in the county, where about 40 percent of its wells are on Southern Ute tribal land.

A patchwork and a crock

The company operates under a patchwork of regulations, including tribal rules, state (COGCC) regulations and La Plata County’s own oil and gas drilling regulations. The county is the only one in the state with its own set of drilling regs after winning several court cases, including a Colorado Supreme Court decision in 1992.

However, in recent years, the county is once again rewriting its regulations – another piece of uncertainty facing BP and other operators in the area. A company spokesman in January cited the regulatory uncertainty as one of the factors in the six-month drilling hiatus.

But conservationists and longtime observers of southwestern Colorado’s energy sector aren’t buying the regulatory argument for the drilling slowdown.

“That’s a crock, because since 1992 – 18 years – they’ve been drilling with essentially the same regulations that are currently in place,” said Josh Joswick, a former three-term La Plata county commissioner and currently the oil and gas issues organizer for the nonprofit San Juan Citizens Alliance. “This latest round of revisions was minor in terms of further regulations put on them.”

Joswick is a three-term Democratic commissioner who first took office shortly after the state supreme court decision backing limited county land-use regulation of oil and gas drilling (previously only regulated by the state). He said the county has the third lowest mill levy (property tax) in the state, which makes it an ideal place for BP or any operator to drill.

“Any regulation that there is here, nothing is going to drive them away from the goose that laid the golden egg,” Joswick said. “[BP] found the jackpot. Not only are they on top of the most productive coal-bed methane field in the United States, they are paying next to nothing compared to what they would be paying elsewhere.”

BP, natural gas and wind farms

Even as BP and the Obama administration came to terms Wednesday on a $20 billion fund to compensate economic victims of the ongoing Deepwater Horizon oil spill in the Gulf of Mexico, Hough said the company will continue to invest in natural gas and clean energy in Colorado.

“The ongoing response in the Gulf is trying for everybody,” Hough said. “We all want this leak to stop, and it’s difficult, but we’re continuing to move ahead with great investments here, and it’s going to be hard to remind the public about those, but they give us hope. This wind farm is going to be huge.”

BP last month announced a deal with Xcel Energy to build a 250-megawatt wind farm in Weld County on the state’s Front Range. Overall, BP has more than 1,200 megawatts of wind power generated by six wind farms nationwide, Hough said.

The company also built a 1.2-megawatt solar installation at the CSU-Pueblo campus, offers BP solar equipment at 10 Colorado Home Depot stores and provides residential solar installations through several Colorado solar distributors. Nationally, BP is one of the largest investors in alternative energy sources, including biofuels.

“We’re continuing to say, ‘America, we all have to watch our energy consumption and talk about what our low carbon future is,’” Hough said. “It’s difficult, trying times, for sure, but hopefully we’re all going to come out of this with a better appreciation of America’s energy appetite.”

Joswick credits BP with participating in a county study on industrial emissions in the area, which found that oil and gas drilling contributes 80 percent of the greenhouse gases locally, but now he wants to see how the company and other local operators respond.

“I would hope that anything that they say is taken with more than one grain of salt, in terms of their credibility anymore as a company and any assertions that they make,” Joswick said.

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Last week, New Mexico Oil and Gas Association President Bob Gallagher said he was fired for taking too hard of a line in support of the industry, drawing the wrath of members who say they need to be able to work with the state under tougher new regulations.

Tisha Conoly Schuller

Conoly Schuller stepped into a dustup between state Senate minority leader Josh Penry and Democratic Denver Mayor John Hickenlooper recently when she invited the gubernatorial candidate to speak at a COGA meeting that the GOP frontrunner for the governor’s office, Scott McInnis, was unable to attend.

Hickenlooper, a former petroleum geologist turned Denver restaurant mogul, has been portraying himself as more open to oil and gas industry concerns than Democratic Gov. Bill Ritter, who last spring shepherded through environmentally stricter drilling regulations that have become a rallying cry for Republicans seeking the governor’s mansion this fall.

Penry, a former congressional staffer for McInnis, bristled at the notion that Hickenlooper will more readily embrace the industry and called Conoly Schuller out for including Hickelooper.

In fact, more oversight continues to be the trend ahead of the next natural gas drilling boom. In places like Pennsylvania, where McInnis has lauded a state regulatory environment encouraging more drilling in the Marcellus Shale — which he alleges is costing Colorado high-paying industry jobs – Democratic Pennsylvania Gov. Ed Rendell recently announced the state’s Department of Environmental Protection will beef up staffing and regulations to better protect water quality.

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Did he say 'job killer'?

Choice bit:

SIROTA: But as you mention in your article, surveys say regulation is popular… Hickenlooper is just confirming the [McInnis] frame, that tougher regulations are bad for jobs…

WILLIAMS: Yeah… There’s increased support for the new regulations. The Western Slope isn’t the same as it was in the 1980s when Hickenlooper worked there as an oil industry geologist. There’s more support for regulation. Colorado is not Pennsylvania. It’s not Texas. We’re an outdoor lifestyle and tourism state. Retirees and second-home owners pour money into our economy…

Williams goes on to detail how the new regulations have actually not yet been tested and refers to the fact that the oil and gas industry is naturally cyclical, a boom and bust business.

Click here to listen. The first part of the clip includes an interview with U.S. Senate candidate Andrew Romanoff. The Daves begin their back-and-forth about 10 minutes into the discussion.

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John Hickenlooper

“[Oil and gas workers will] recognize that I’m coming from a very different place than Gov. Ritter,” Hickenlooper told reporters in Denver Friday, referring to Ritter’s two-year push for the new regs, which give more weight to maintaining air and water quality, public safety and wildlife habitat in the drilling permit process.

Hickenlooper, who announced his candidacy last week, will likely garner some support for his stance on the Western Slope, where GOP front-runner Scott McInnis– a former six-term congressman– has been hammering on the Ritter regulations as a “job killer” and painting Hickenlooper as Denver-centric.

But Hickenlooper also will discover that there’s much more support for a measured approach to drilling than he remembers from the 1980s, a time when there were far fewer people living in the arid and ecologically fragile high desert. An influx of residents– both retirees and recreation enthusiasts– seeking the healthy mountain lifestyle has led to increasing conflict with the extractive industries. And surveys show growing support for increased regulation.

“I think the biggest problem wasn’t necessarily where we ended up with the rules. It was how we got there,” Hickenlooper said Friday, according to the Durango Herald, which prompted McInnis spokesman Sean Duffy to blast the mayor for not speaking up during the highly contentious process that resulted in the passage of the new regs.

“We’ve had what in Scott’s view has been a targeting, if you will, perhaps even a demonization, of oil and gas,” Duffy told the Colorado Independent last week. “And that has resulted in part– obviously you can’t blame it all on this– but the rules being so unbalanced and really punitive have driven jobs away. Not just West Slope, but also Weld and Larimer’s got a lot of natural gas up there.”

Proponents of the regulations argue that it was the global recession and a surplus of stored gas that led to the dramatic slowdown of Colorado’s latest gas boom. They say increased pipeline capacity, a cold winter back East and slightly improved prices are already leading to a turnaround. Even some Republicans, including state Sen. Al White, say the rules may need to be tweaked but that there’s no way to know how to tweak them until some drilling plans actually go through the new process.

Even McInnis is taking a more measured approach than his opponent for the GOP nomination, Evergreen businessman Dan Maes, who last week toured the Western Slope and promised a scorched-earth policy as it relates to Ritter’s oil and gas policies. Indeed, McInnis looks circumspect by comparison.

“[McInnis’s] view would be that early in his term– granted you have [Colorado Oil and Gas Commission] members whose terms have to run– but his view would be to start the conversation on what are the best practices, what changes do we need from the status quo to reflect best practices, particularly in terms of the environment, but at the same time balance that with trying to return to a jobs focus,” Duffy said.

Maes, on the other hand, promises to gut the new rules and sack anyone who remotely empathizes with the conservationist viewpoint, which means most Coloradans.

“On Day One [in the governor's office], we walk into the COGCC board meeting and we hand pink-slips to every environmental liberal on that board and we tell them to go home,” Maes told a gathering of Republicans last week, according to the Glenwood Springs Post Independent.

Ritter not only helped push through the new COGCC regs while tirelessly championing his “New Energy Economy,” he also revamped the makeup of the state board that oversees drilling permits and rules enforcement, increasing the number of COGCC board members and requiring greater diversity than the previous makeup, which leaned heavily toward industry interests.

According to the Durango Herald, Hickenlooper tempered his statements Friday by describing himself as a “strong environmentalist [who] thinks it’s important to protect the land as well as the industry,” which sounds a lot like what Ritter was trying to do the last four years. Ritter took office after the eight years former oil and gas lobbyist Bill Owens occupied the governor’s mansion.

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“He’s really tough, and I don’t think he would have stuck his neck out as much as he did if he didn’t have the fortitude to deal with the follow-up. I don’t think he’s afraid of a fight,” Curry told the paper. Monday she told the Colorado Independent the debate over the new regulations was one of the factors behind her party switch.

Since then Curry has had mostly positive reaction to becoming an independent, according to the Glenwood Spring Post-Independent, although some Dems in the drilling hotspot of Garfield County – long a conservative enclave – lamented losing one of their own.

The move also cost Curry two key House posts when House Speaker Terrance Carroll Tuesday replace Curry as speaker pro tem chairwoman of the House Agriculture, Livestock and Natural Resources Committee.

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Penry’s office issued a press release Thursday sounding the same tired refrain from last spring, when the State Legislature passed and Ritter signed environmentally tougher oil and gas drilling regulations that put a higher premium on public health, air and water quality and wildlife habitat – all important quality-of-life issues for the majority of Coloradans, even on the more conservative Western Slope.

“Ritter also implemented oppressive rules and regulations on the energy industry in Colorado causing many oil and gas companies to scale back production in the state,” Penry said in a release Thursday. “Not only did this result in job losses on the Western Slope and Eastern Plains, but Colorado will also has to grapple with the loss of severance tax revenue that could have helped prepare the state’s strained budget.”

Josh Penry

No mention of the Great Recession and plunging natural gas prices. Nor does the former gubernatorial candidate discuss the prevailing Democratic reasoning that before the next boom is precisely the right time to get your regulatory house in order.

And according to a new survey of oil and gas executives, the next boom is right around the corner. They’re predicting more downsizing over the next several months, but after that, 84 percent say natural gas will boom because of pending climate change legislation that will reward it as cleaner burning than coal, and because of new technology making shale formations and coal-bed methane much more accessible.

Will Colorado benefit from the next big boom? Oil and gas officials, touting the abundance of the resource in the Rocky Mountains and state’s newfound pipeline capacity, say it will, even with the new regulations.

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Collins, who stepped down last week to “pursue other interest,” spent most of her two-year tenure battling the Ritter administration and Democrat-controlled legislature over the more environmentally stringent drilling regulations that went into effect April 1. COGA has filed a lawsuit challenging the new regs.

A graduate of the University of Colorado with a degree in environmental conservation, Collins came to COGA after five years as head of environmental affairs at the Colorado Livestock Association.

Some environmental activists are fearful that a new COGA president will pursue industry interests with a renewed vigor that will further endanger air and water quality, wildlife habitat and public safety on the Western Slope and in other gas-rich regions of the state.

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(Photo/Jason Kosena)

Most experts agree, the factors shaping the 2010 election on Colorado’s Western Slope — and to a lesser degree the rest of the state — boil down to a version of that old James Carville chestnut: “It’s the energy economy, stupid.”

Environmental organizations have already recognized the political shift away from green causes and toward almost any industry offering an end to the unrelenting recession. Last legislative session, conservationists helped craft most bills with jobs creation in mind.

Now many observers expect the oil and gas industry and its conservative supporters to politically counterpunch by attacking Gov. Bill Ritter’s “New Energy Economy” as a jobs-killer forced down the electorate’s throats by an out-of-touch, Democratic-controlled legislature.

“It starts with Gov. Ritter and his new energy program. Is it going to make it or not? The changes that he’s taken risks on — did he take the right risks or not?” said John Martin, a Republican commissioner in gas-rich Garfield County. “It also deals with the positions of the local folks, from the mayors to the county commissioners. It’s a very huge issue, along with the economy.”

Martin said the recession, plummeting commodity prices and over-regulation of the industry by the state are all to blame for what could be up to an 80-percent decline in natural-gas drilling in his area compared to last summer. And he cites nearly triple the number of home foreclosures in the first quarter of this year compared to last year.

Susan Alvillar, community affairs representative for Williams, said her company alone had 25 drilling rigs in operation on the Western Slope a year ago. Now they’re down to eight, and all the companies collectively only have 23 in operation this spring.

Although Williams has not yet laid off any of its 250 full-time employees, Alvillar said their contract workforce of approximately 3,000 has been cut, and as anecdotal evidence of the downturn, she said Parachute High School has lost about 70 students since last October.

“People always said, ‘Yeah, well, natural gas creates jobs,’ but I think now that the jobs are going away it’s really heightened the reality of just how many people relied on the industry to make a good living on the Western Slope,” Alvillar said.

Rifle Mayor Keith Lambert, a Democrat who has embraced the renewable energy sector as a means of offsetting the boom-bust cycle of the fossil-fuel industry, said the current downturn in no way compares to 1982, when 2,000 full-time jobs in oil shale production were lost virtually overnight. But he recognizes voters may blame the governor for the current slowdown, even though natural-gas production is suffering nationwide.

“If jobs are made in the ‘New Energy Economy’ and people realize there’s a future in all of this, then Ritter is going to be back in there in a heartbeat, and if they don’t believe that, and if they have a hard time grasping that we’re changing as a society, then he’s going to struggle,” Lambert said.

The Independent Petroleum Association of Mountain States (IPAMS) claims the natural gas and oil industry in Colorado is directly and indirectly responsible for 71,000 jobs that pay 61 percent above the state average.

By contrast, a 2007 study on green jobs produced by the American Solar Energy Society claims the renewable energy and energy efficiency sector is responsible for 91,000 jobs in Colorado, generating 70 percent more jobs than the oil and gas sector and more than 2.5 jobs per dollar of revenue than oil and gas. Overall, though, that study also pointed out that the oil and gas sector does still generate more total revenue.

But beyond a straight-up comparison of the number of jobs and amount of revenue generated by renewable energy versus oil and gas, environmentalists argue other important economic sectors need to be considered in the political debate, especially when considering the more stringent state drilling regulation implemented in April.

Matthew Garrington, field director for Denver-based Environment Colorado, said preserving and enhancing the state’s $10 billion outdoor recreation industry is just as significant for some Colorado voters.

“That’s why we need to make sure we have a healthier energy industry, because we need to protect other parts of our economy and we need to protect the environmental values of living in the West, because we can’t simply let one industry run roughshod over other important parts of Colorado,” Garrington said.

Ritter will be challenged by Republicans with long track records of supporting the oil and gas industry, especially on the state’s Western Slope. Former Congressman Scott McInnis, an energy consultant and attorney, this week quietly entered the 2010 governor’s race.

A spokesman for the Governor’s Energy Office chose a position of neutrality in the jobs debate.

“Gov. Ritter believes both the oil and gas industry, and the jobs produced through green industry ventures, are critical to Colorado and is pleased to see both sectors providing so many good jobs in the state,” said GEO media relations manager Todd Hartman.

Specifically, the Grand Valley Citizens Alliance is putting on a public social in favor of the new regs at 5 p.m. Thursday at the Glenwood Springs Community Center.

The new regs give greater protection to wildlife habitat and put more emphasis on public safety and air and water quality. They were recently adopted by the Colorado Oil and Gas Conservation Commission after nearly two years of negotiations, but now require the approval of the state Legislature.

Some lawmakers, mostly Republicans, have attacked the meticulously crafted regulations as if they came out of nowhere and without any input from the oil and gas industry. They argue that in a down economy, now is not the time to put more regulation on the struggling sector, especially with oil and gas prices plummeting along with the stock market in recent months.

But other lawmakers, mostly Democrats, say the process for drafting the rules was fair and the price of oil and gas plunged due to the collapse of global markets and not the crafting of badly needed rules to protect the environment and residents of oil-and-gas hotspots around the state.