The war in Ukraine and the subsequent steep rise in oil prices has turned the tide of public sentiment as an industry-sponsored survey finds a majority of voters in Colorado, a state which recently passed the strictest drilling setbacks in the US, now support increased domestic oil and gas drilling.
The survey, conducted by Morning Consult on behalf of the American Petroleum Institute, an industry trade group, polled hundreds of registered voters of all stripes in eight US states. It found 85% believe producing more natural gas and oil in the US could help lower energy costs for American consumers and small businesses, while 84% agreed “producing natural gas and oil here in the US helps make our country and allies more secure against actions by other countries such as Russia.”
More than 80% of Democrats and 88% of Republicans agreed with the above questions posed, which represented a retreat from the polarization so commonplace in US politics.
Among Colorado voters specifically, the survey found about 80% agreed domestic oil and gas production could help make the US more secure against actions by Russia and other countries, bolster international standing and national security and help lower energy prices. The results held regardless of the voters’ party affiliation.
“Energy isn’t a partisan issue,” said Dan Haley, CEO of the Colorado Oil and Gas Association. “It’s a people issue, and people are feeling it at the pump and in their home heating bills right now.”
The Colorado Oil & Gas Conservation Commission overhauled its rules in 2020 following passage of Senate Bill 181. New drilling permits must provide 2,000 feet from wells to occupied structures such as homes, schools and businesses. They are the longest setbacks in the US outside of states such as New York and Maryland that have placed outright bans on hydraulic fracturing. However, operators can negotiate with landowners and residents to receive consent to drill closer in certain situations.
The rules took effect January 2021. It was several months before the COGCC issued its first permits under the more stringent regulations. Operators held about 2,600 drilling permits in hand before the rules were activated, according to COGCC data.
The issuance of permits has slowed since the rules took effect. On March 10, the COGCC voted against a 33-well drilling project by Occidental Petroleum that spread across two pads in the town of Firestone, located north of Denver in the Denver-Julesburg Basin.
The COGCC found issue with the larger of the two well pads, concluding the company failed to convince most commissioners it did all it could to avoid siting the wells so close to homes.
“I don’t think the avoid concept was met,” said COGCC Chairman Jeff Robbins at the hearing.
“In a time of geopolitical instability, skyrocketing energy prices and seemingly unchecked inflation, Colorado and the United States need more natural gas and oil, not less,” said Lynn Granger, executive director of the Colorado API. “We’re not saying roll back regulations or anything like that. We need to get permits out the door.”
Oil and gas production in the DJ Basin has failed to approach pre-COVID-19 levels, according to data by S&P Global Commodity Insights. Crude production topped 600,000 b/d in late 2019. It is averaging 464,000 b/d month to date. Under the current drilling regimen, it is not projected to top 500,000 until at least the second half of 2023.
Gas production in the play averaged more than 2.5 Bcf/d during the first quarter of 2020, which was an all-time high for the play. Currently at 2.2 Bcf/d, it is projected to surpass 2.5 Bcf/d in late 2023.
Meanwhile, neighboring basins such as the Permian and Williston’s associated gas production has already met or surpassed pre-COVID levels.S&P Global estimates dislocated Russian exports will cause crude production shut-ins of 2.8 million b/d from late March through May. Thereafter, existing sanctions will remain in place under all the most likely military outcomes, but a best-case diplomatic resolution would create an easier path to redirecting cargoes and facilitating legal purchases. Conversely, worsening conditions could trigger explicit restrictions on exports to Europe, or even secondary US sanctions.Source: Platts