The Green Century Equity Fund has filed a resolution with the Williams Companies – the 10th largest natural gas producer in the country and the biggest producer on Colorado’s Western Slope – asking the company to report on the environmental impacts of its hydraulic fracturing, or “fracking,” operations.

A Williams spokeswoman did not immediately return an email seeking comment, but in the past the company has maintained the process is very safe and does not need to be regulated by the U.S. Environmental Protection Agency under the Safe Drinking Water Act, as currently proposed by Colorado U.S. Rep. Diana DeGette.

“We are not asking Williams or any other company to stop hydraulic fracturing, but we do want to make sure that this drilling is done in a way that both minimizes its impact on drinking water and surrounding communities while also protecting the company’s bottom line,” Larisa Ruoff, Director of Shareholder Advocacy for Green Century Capital Management, said in a release.

“We are concerned that our investments may be undermined by company decision-making and policies that could fall behind public and regulatory expectations for environmental protection, and we believe increased transparency is critical.”

A majority of oil and gas companies have fought DeGette’s FRAC (Fracturing Responsibility and Awareness of Chemicals) Act because they say chemicals used in the process are proprietary and kept secret for competitive reasons.

“Hydraulic fracturing is really misunderstood and it’s really been misrepresented,” Susan Alvillar, a community affairs representative for Williams, told the Colorado Independent in a previous interview. “It’s such a necessary part of our business, but unless you’ve got processed water in a truck that spills into a drinking water source or a stream, hydraulic fracturing 8,000 feet underneath the ground is not going to commingle those fluids and gas with drinking water.”

Still, the recently introduced Kerry-Lieberman Senate climate change bill calls for full disclosure of fracking chemicals, even if it falls short of closing the so-called “Haliburton Loophole” exempting the process from Safe Drinking Water regulation during the Bush administration.

A growing number of oil and gas companies are starting to say it’s a battle no longer worth fighting, including Exxon Mobil, which is poised to become the largest gas company in the country with its purchase of XTO Energy.

Exxon, already a major player in Colorado’s gas-rich Piceance Basin, is reportedly ramping up hiring in Rio Blanco County in the far northwestern part of the state. At its annual meeting May 26 in Dallas, shareholders are being asked by a group called As You Sow – an advocacy organization representing holders of 16,646 shares valued at $1.1 million – to vote on a resolution similar to the one put to Williams’ shareholders.

Recently, more than 30 percent of shareholders at Cabot Oil & Gas Corp. and EOG Resources approved similar resolutions, according to advocates – a good result given the history of environmental resolutions put to oil and gas company shareholders in the past.

Rio Blanco County impact fees are unique in the nation and viewed by some observers as an effective means of recouping county infrastructure costs associated with energy production without relying on state funds from severance taxes. The concept of similar fees being imposed in nearby Garfield County became a political issue in the 2008 commissioners’ race.

But, according to the Grand Junction Daily Sentinel, the Colorado Supreme Court upheld an appeals court decision finding that construction use taxes approved by the state legislature should not apply to equipment associated with natural gas drilling. ExxonMobil had filed suit against the county in its efforts to collect nearly $750,000 in use taxes for 2003 and 2004.

According to the county attorney, the Colorado Supreme Court did not clarify whether such use taxes can be applied to broader industrial undertakings, not just residential or commercial development.

“I think it’s only a matter of time before somewhere, somebody ends up in more litigation because it’s just not clear — an area that needs to be clarified,” county attorney Kent Borchard told the paper.

Western Slope energy advocates say ExxonMobil, which declined comment for the Daily Sentinel story, has been the hot topic in the high country after moving to acquire natural gas giant XTO Energy. One observer called ExxonMobil “the T-Rex of the energy industry,” with the ability to radically reshape the face of natural gas production in the state.

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ConocoPhillips bought when gas prices were soaring and production was booming, according to the Wall Street Journal. Now those prices have plummeted due to decreased demand associated with the global recession.

But natural gas is increasingly the darling of the hydrocarbon set because it burns 50-percent cleaner than coal and is viewed as a bridge fuel to renewable energy that will gain favor if Congress passes climate-change legislation.

Natural gas production has typically been dominated by smaller, independent operators, but ExxonMobil is no stranger to the natural gas industry in Colorado. The company is very active in Rio Blanco County in the northwest part of the state, and it also owns significant water rights in the Colorado River Basin.

ExxonMobil also chipped in $1 million to help defeat Amendment 58 in 2008, which would have removed a state property tax exemption granted the oil and gas industry in the 1970s and then created a pool of money benefiting higher education, renewable energy and wildlife habitat.

Industry analysts say ExxonMobil is also betting on new technology and hydraulic fracturing techniques that have made hard-to-access natural gas reserves much more accessible domestically and around the world. However, there is growing environmental pressure on federal and state officials to regulate those techniques and better protect groundwater supplies in the United States.

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That decline in enrollment matches a 13-percent decline in De Beque School District 49-JT, where administrators hope for more students by October when the district must submit its numbers to the state. Each student is reportedly worth about $11,000 in state funding in De Beque.

Garfield County schools were experiencing about a 10-percent-a-year increase in enrollment during the most recent natural-gas boom, according to the Sentinel. Other school districts in oil and gas country aren’t being hit quite so hard by the recent downturn.

Enrollment for Meeker School District Re-1 in Rio Blanco County is actually up about 20 students, while Garfield Re-2 School District, which serves the communities from Rifle to New Castle, is only down about 40 students out of a total of 5,000.

Some administrators quoted in the story directly pointed to the recent drilling downturn associated with global recession and drop in commodity prices, but they added they were already seeing signs of a turnaround and that it’s all part of the ebb and flow of the cyclical oil and gas industry.

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Colorado Oil and Gas Conservation Commission staff, according to the story, expects to approve about 5,000 drilling permits this year –- way off the record 8,027 approved in 2008 and much closer to the 4,364 permits approved in 2005. But a March record 1,475 applications were filed this year to get in under the old regs.

Garfield County this year was neck and neck with Weld County on the Front Range, but recently pulled away with 37 percent (1,247) of the overall 3,360 permits approved statewide as of Aug. 6. Weld accounted for 27 percent (904); Mesa County was third at 9 percent (315); La Plata County was fourth at 7 percent (241); and Rio Blanco was fifth at 6 percent (212).

Garfield County may get an even bigger bump if plans by Bill Barrett Corp. to drill up to 136 new wells from 10 pads on federal leases southeast of Silt are approved for the fall. According to the Sentinel, the Bureau of Land Management Tuesday announced it’s seeking public comment on drilling plans for the 2,700-acre Gibson Gulch area.

Send comments by Sept. 18 to the Glenwood Springs Field Office of the BLM at 2300 River Frontage Road, Silt, CO, 81652, or e-mail gsfomail@co.blm.gov.

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Rugged and remote: In Rio Blanco County, county commissioners were the first in the state to enact impact fees for drilling operations, mainly to offset the cost of infrastructure improvements. (Photo courtesy Rio Blanco County)

In the nearly 25 years Rio Blanco County Commissioner Ken Parsons has been living west of Rangely in rugged and remote northwestern Colorado, he has experienced three significant downturns in natural gas drilling. During the first two he was working for Texas-based Halliburton.

Now he’s known in the county of some 6,600 residents as the chairman of the all-Republican board of commissioners that in 2008 passed a first-of-its-kind impact fee on gas wells to fund road improvements and other county infrastructure.

Oil and gas companies fought the fees at every turn, in part leery of the precedent it might set not only for other gas-rich counties in Colorado, but also around the nation. The possibility of impact fees quickly became a campaign issue in neighboring Garfield County during the 2008 county commissioner election.

But for Parsons the fees, which are levied against all development — including residential and commercial construction — and based on a formula of truck traffic (axel loads) needed to complete a project — are a fair way of making industry pay for its upfront impacts. Parsons does admit he’s taken some grief from fellow politicians in energy-producing counties and from some officials in the oil and gas industry.

“Obviously, nobody that’s impacted by these impact fees likes them, and if I was in their shoes I’d probably feel much the same way, but on the other hand when we began this — and Garfield County keeps speaking with pride of all the things they’ve done with industry down there — we found that whenever we approached industry here it was very spotty,” Parsons said, referring to talks about alternatives to the fees.

“Some companies were very generous and very straightforward and helped us maintain roads. Others simply turned the other way. I can tell you that the more generous the company the more willing they are to be OK with the impact fees because everybody is really paying a share that is in proportion to the impacts they’re generating.”

Rio Blanco’s low property taxes — sixth lowest among the state’s 64 counties, according to the Department of Local Affairs — and various industry tax breaks, including the ad valorem property tax credit industry currently enjoys under the Colorado’s severance tax structure, made it mandatory the county find some way to pay for deteriorating roads.

“Otherwise you’d have 7,000 people trying to pay the tab for some of the biggest multi-national energy companies in the world to supply the roads, and they’re literally beating our roads to death,” said county planner Jeff Madison, who administers the impact fees and cites studies showing nearly $300 million in needed road improvements by 2022.

There was considerable debate on the Western Slope last year about Amendment 58, which would have removed the property tax credit and increased severance taxes for higher education and environmental programs. Some local politicians supported restructuring severance taxes paid by the oil and gas industry, but not the way proposed by Gov. Ritter because not enough money came back to impacted communities.

Amendment 58 ultimately failed, with impact fees emerging as one way for counties to exercise more local control over a typically state-regulated industry. Commonly used to offset public infrastructure costs for commercial and residential development, Rio Blanco’s per-well fee of just under $18,000 brought in $2.44 million in 2008 and another $1.55 million as of the end of May this year.

Madison said 98 percent of the money being collected is coming from the gas industry, which hasn’t dropped off too severely despite the recession. During peak drilling last year he said there were 14 rigs operating, and that number is now down to just nine — eight of them operated by ExxonMobil.

Questions of local control over drilling operations have cropped upped recently in Garfield County with regard to plans by Antero Resources to drill in Battlement Mesa and several companies’ plans to drill closer to the Rulison nuclear blast test site. But those are regulatory concerns whereas impact fees are seen as a tool to mitigate infrastructure costs.

“I do get criticisms from fellow commissioners, particularly in Garfield and Mesa counties from time to time, both of which have impacts fees on people that are doing traditional development, be it residential or commercial, malls, warehouses,” Parsons said, “and it strikes me as rather odd that you would leave some of the industrial development out and not others. To me it seems that’s a fairness and equitability issue.”

Parsons said the main criticism from industry is that impact fees pile on top of property taxes and other fees, but he said Rio Blanco’s mill levy of 9.050 means it has the lowest property taxes of the state’s major energy-producing counties — Garfield (13.655), Mesa (14.890), Moffat (24.050) and Weld (16.804).

“That’s a different story. You can make an argument there that they’re getting close to too much,” Parsons said. “If we were taxing them at 14 or 15 mills rather than 9 mills, this is something that I would have really looked at long and hard to see how we’re spending our money internally first.”

(Photo: 7263255, Flickr)

In the late 1960s and early ’70s, four nuclear devices were exploded underground on Colorado’s Western Slope in an effort to free up commercially marketable amounts of natural gas from dense sandstone formations.

The explosion of one 43-kiloton nuclear device near Rulison in Garfield County in 1969 continues to make headlines 40 years later — with the safety of modern-day drilling in the area one of the likely topics of a July 14-15 meeting in Glenwood Springs — while the simultaneous test shot of three 33-kiloton devices in Rio Blanco County in 1973 remains virtually unknown.

One Garfield County commissioner is calling for the Department of Energy to admit its mistake — gas generated in the blasts was too radioactive for commercial use — and ban drilling in the Rulison area and compensate nearby property owners for lost mineral rights.

“I say, let’s just shut the whole thing down,” John Martin recently told a gathering in Glenwood Springs, according to the Post-Independent newspaper. The DOE currently bans drilling on the 40 acres immediately surrounding the blast site, while the Colorado Oil and Gas Conservation Commission prohibits drilling within a half-mile radius.

The DOE just released a draft plan calling for drilling by private companies right up to the half-mile limit, then inside that limit until drilling produces radioactive material or reaches the 40-acre blast site, whichever comes first.

Martin, generally a strong supporter of the natural gas industry, said it’s too unsafe to use privately employed workers to test the area. His strong stance contrasts with his position last spring that much-improved nuclear energy technology should be explored as a means of powering the oil-shale industry on the Western Slope.

“Look at the Rulison blast and all the excitement it’s caused there and that was in 1969, when it’s actually safe and has been monitored since 1969, but you just mention it and Three Mile Island comes to their vision, as well as Chernobyl,” Martin told the Colorado Independent in April. “What are we talking about? Old technology.”

The Rio Blanco blasts were the third and final phase of the Plowshare Project, which sought to find peaceful industrial uses for nuclear weaponry. The first test was Project Gasbuggy in New Mexico, followed by Rulison.

Perhaps the biggest difference between Rulison and Rio Blanco is that Rulison is only eight miles southeast of the town of Parachute and 12 miles southwest of Rifle, with heavy natural gas drilling and more conventional fracturing — using water, sand and chemicals instead of nukes — occurring throughout the area. Since the blast, Interstate 70 has pushed through the area and brought with it big-time residential and commercial development.

In the last U.S. Census, Garfield County had a population of nearly 44,000 and Rio Blanco County only had about 6,300 residents. The Rio Blanco blast site itself is very remote, described by the DOE as 52 miles north-northeast of Grand Junction.

“Because the nearest private residence is many miles away up here in Rio Blanco County, there really is no one living close to [the blast site],” Rio Blanco County Commissioner Ken Parsons told the Colorado Independent. “It’s out in the middle of nowhere. If you don’t know which well it is and where it’s at, you’d just drive right past it on our County Road 69 and never even know the difference.”

But Parsons said he understands why some people would be worried as development encroaches on the old blast sites.

“[Rulison] was really remote back in the early ’70s. But as people start moving closer I think there are greater concerns,” he said. “I’m not terribly concerned about it myself [in Rio Blanco County].”

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(Crashworks, Flickr)

Even as domestic drilling for natural gas has dropped off dramatically due to the recession, more and more states and local governments are looking to up taxes on the industry in order to bolster desperately depleted budgets.

According to an article in Monday’s Wall Street Journal, California and Pennsylvania are the latest states weighing a so-called “severance tax” on gas that’s extracted from the ground. The WSJ story mentions Colorado’s severance tax — one of the lowest of the western gas-producing states — and Amendment 58, a failed attempt last fall to increase the tax by removing a property tax exemption:

The oil industry has already beaten back some proposed tax increases. An effort to raise Montana’s severance tax died in the state legislature this year, and in November voters in Colorado voted down an oil-tax increase after a high-profile ‘vote no’ campaign funded by the industry.

Energy interests argue that higher taxes would lead companies to shift their drilling elsewhere, leading to lost jobs and lower tax revenue. And they say reduced drilling could lead to greater dependence on imported oil and higher energy prices.

In fact, industry forces in Colorado compiled a more than $10-million war chest to defeat Amendment 58, but some studies have shown severance taxes don’t have that much of an impact on where companies drill. The WSJ quoted Headwaters Economics, which last year provided similar information to the Colorado Independent in the wake of Amendment 58’s defeat:

Advocates for increased taxes argue that taxes play a smaller role in companies’ drilling decisions than factors such as how much oil is present or how difficult it is to produce. A study released last fall by Headwaters Economics, a Montana-based nonprofit, found that Montana and Wyoming, despite widely differing effective tax rates, haven’t seen much difference in drilling activity.

It doesn’t seem to be affecting where companies drill,’ Mark Haggerty, one of the study’s authors, told the WSJ.

That applies to local government fees, as well. Haggerty recently told the Colorado Independent he was not aware of any other counties in the nation, other than Colorado’s Rio Blanco, charging impact fees on a per-well basis.

The threat of such fees — Rio Blanco has charged just under $18,000 per well for just under a year — shaped last year’s bitter Garfield County election, where industry forces spent heavily to defeat two Democrats interested in imposing similar fees.

But according to Jeff Madison, Rio Blanco County’s director of planning and impact fee administrator, the industry hasn’t exactly been chased off by the new county fee, which is levied against all forms of development, including residential and commercial buildings, but pulls in about 98 percent of its revenues from the oil and gas industry.

Rio Blanco’s impact fee garnered $2.44 million in 2008 after going into effect in mid-July, and as of May had pulled in another $1.55 million in 2009 — most of which will be spent on county roads and facilities.

Madison said that last year at the peak of the recent gas boom there were about 14 rigs in operation in the county, and that number is only down to nine, seven of which belong to ExxonMobil. Also, Madison said three companies, including ExxonMobil, have built major gas-treatment plants that are just now coming online.

“Our big one is ExxonMobil right now and they haven’t cut back one bit, and the other thing that has stabilized us a lot is that … we’ve had close to $2 billion in infrastructure put in in the last two to three years, which is just now being completed, some of which hit the impact fee for this year and so that’s kind of mitigated it too.

“The companies have decided they like to build gas plants up there in the middle of Rio Blanco County, so that’s helped a lot. Of all of the counties along the line, from Mesa, Garfield, Rio Blanco, Moffat and on into Wyoming, we have the lowest property taxes.”

That lower property tax rate was one of the reasons the Rio Blanco county commissioners decided to implement an impact fee, but some critics say that even the high property taxes in other counties don’t cover the impacts of the industry because of the exemption in the severance tax.

“Our tax structure here in Colorado has been so minimal for so long that there just isn’t enough money to sustain the kinds of costs occurring,” petroleum accountant Mary Ellen Denomy told the AP last year.

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Rio Blanco County, Colo. (Illustration/Google Maps)

“Three extremely conservative Rio Blanco County commissioners unanimously passed very substantial impact fees, and as a result they have the money to fix the roads, they have the money to hire deputy county sheriffs, they have the money to do these things that we don’t,” said Rifle attorney and former Garfield County judge Steve Carver, who lost to Republican high school administrator Mike Samson last year.

The three-member board of county commissioners in Rio Blanco, to the north of gas-rich Garfield County, is comprised of Republicans who saw the need for additional fees to pay for the increasing pressure put on roads, bridges, law enforcement and other county services and facilities by the booming natural-gas industry.

“The handwriting was on the wall: How do we deal with the impacts of something like this?” Ken Parsons, chairman of the Rio Blanco Board of County Commissioners, told the Associated Press in May 2008.

Democrat Stephen Bershenyi, a Rifle blacksmith and artist who unsuccessfully ran against Republican John Martin last year, said the oil and gas industry spared no expense — or dirty tactic — in turning back the Democrats because they feared the same type of impact fee in Garfield County.

“One of the things that scared them the most was what happened in Rio Blanco County,” Bershenyi said. “The county commission, which is a Republican board, decided to charge the energy industry impact fees for each well permit issued. By August of last year [Rio Blanco] County had already brought in more than $6 million in impact fees from the energy industry from wells that they were drilling.”

Rio Blanco charges just under $18,000 per well, with the vast majority of that money going toward road construction and maintenance. An impact fee support study conducted in 2007 estimated the county would have collected $22.7 million had the fee been in place during the heart of the boom (from 2000 to 2006).

Over the next 15 years, when Rio Blanco expects to see another 16,500 wells drilled — with some studies suggesting the next natural gas boom will shift there from Garfield — the county expects to generate $292 million. Still, that won’t cover its estimated $343 million infrastructure tab if its population triples, as predicted.

“[Implementing impact fees] was one of the things that I was advocating that Garfield County do immediately, because we should have done it from the very beginning,” Bershenyi said.

Parsons and Rio Blanco County Administrator Pat Hooker didn’t return calls requesting comment on the impact fees Tuesday, but the groundbreaking step — the first such fee imposed in Colorado — definitely raised eyebrows not only in the rest of the state but throughout the gas-producing Rocky Mountain West. According to the AP’s May 2008 report:

Bob Gallagher, head of the New Mexico Oil and Gas Association, a trade group, said there are no similar fees in his state. “But if our Birkenstock-wearing friends in Colorado have a chance to pass it in Colorado, there’s a chance it will come across the border,” Gallagher said. “It’s a little bizarre that people want to continue to bite the hand that feeds them.”

Bershenyi, without divulging his choice of footwear, said the 4,000 active wells in Garfield County could have provided about $60 million for sorely needed infrastructure if a more conservative $15,000-per-well impact fee — Garfield’s wells aren’t quite as deep as Rio Blanco’s — had been charged.

“When you throw the economic downturn in, [Garfield] County is strapped, and they thought they had a rainy day fund that was really going to put them in good shape, and what they found out was it was woefully short of the goals they needed to carry forward with the services that are being requested of them,” said Bershenyi, who in April was elected to the Glenwood Springs City Council.

Martin, the longtime Republican commissioner, told the Colorado Independent in April that Garfield County had set aside $80 million to weather the recession and slowdown in drilling stemming from plunging commodity prices.

“Hopefully we’ve done enough to survive the downturn because that downturn is going to last for many years,” Martin said at the time.

“What it is is there’s $80 million coming into the county, but $80 million has been spent,” Carter said when asked about the county’s reserves. “He doesn’t have a rainy day fund. That’s totally bogus.”

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