Colliding forces: Has Colorado's oil and gas industry met its match?

  • Arnold Mackley stands near methane gas rig on ranch

    Christopher Tomlinson photo
  • Discharged water sits on Charles Micale's Collbran ranch

    courtesy Charles Micale
 

Note: multiple sidebar articles accompany this story, and are available online in the "Related stories" section of this online issue. Also, another feature story, "Open for business: Wyoming throws away its water to get out the gas," accompanies this feature story.

GARFIELD COUNTY, Colo. - Arnold Mackley is a patient man. For nearly 40 years, he cooperated with the oil and gas companies that drilled 11 methane gas wells on his 263-acre ranch near Rifle. He cooperated, he explains, because he's a mining consultant and believes in the development of natural resources.

So when the oil and gas companies cleared dirt roads on his property and created traffic, noise and dust, he didn't complain. When a gas company left a deep pit on his land, he cleaned it up. When a gas well exploded, and when 300-year-old trees were logged, and when his water well was contaminated with methane, he worked it out quietly with the gas companies. But things are different now, he says, and the underlying economics of his town and western Colorado have changed; natural resources no longer rule.

Mackley, changing with the times, wants to develop his ranch into an attractive bed and breakfast, but stepped-up gas drilling stands in his way.

Across the country, rights to any surface property and to the minerals underneath it can be split. When Mackley leased his mineral rights in the late 1960s, he gave up the power to determine where gas wells could be drilled on his ranch and how many of them there could be. Almost 40 years ago, gas companies were allowed to drill one well every 640 acres. On Mackley's property, that meant just one well.

In the last four decades, Colorado repeatedly liberalized that rule to allow one well every 320 acres, 160 acres, and then 40 acres. Now, one gas company, Barrett Resources, says 20-acre spacing should be permitted.

Since each well requires up to 5 acres for a road, gravel pad and pipeline, more than a quarter of Mackley's land could be eaten up with gas development. While some ranchers say they want methane wells on their property because oil and gas companies pay rent, Mackley says the $30 he gets "on a good month" isn't fair compensation.

"If we have gas wells every 20 acres, we're not going to have any quality growth," says Mackley. "Who's going to want to live among gas wells? Our property values are going to decline."

Across the state, land developers and homeowners echo his concern.

"Oil and gas wells mess up development," says Lance Astrella, a Denver-based attorney who has worked on oil- and gas-related cases for 25 years. "Since a developer has to develop around gas wells and their buffer zones, you end up with three or four acres of open space here, eight or nine acres there, and it interferes with orderly, attractive and environmentally sound development of property. Ultimately, it adds to urban sprawl."

There are 70,000 wells throughout Colorado, the majority in rural counties where real estate development is burgeoning. As towns like Durango, Parachute and Greeley fill with newcomers, more and more people end up living next to wells and their roads. Some landowners are shocked to find gas wells as new neighbors, which might explain why, for the first time in decades, politicians are talking seriously about industry reform.

An unbalanced board

At the heart of the conflict in Colorado is the state board established to regulate gas development. For years, critics have said that when requests for new wells come up, the Oil and Gas Conservation Commission needs to consider how drilling will affect surface owners (HCN, 3/15/99: Oil wells in my backyard?). Mackley says, with soft-spoken rage, that he is a prime example of how little power surface owners have in the face of oil and gas development.

Currently, state law allows six of the seven governor-appointed members of the voluntary committee to work for the oil and gas industry. According to critic Janey Hines, "No one who is drawing their paychecks from the oil and gas industry can fairly balance the interest of the industry with the needs of the public."

Like Mackley, Hines had no previous activism experience before gas drilling impinged on her life. When she moved in 1994 to Rifle, a burgeoning town on the I-70 corridor, she was struck, she says, by the white scars on surrounding hillsides - the remnants of gas and oil drilling. Gas companies are required to replant the land they deface in the process of creating a well pad, but Hines, a landscaper and a botanist, found this rarely happened. Infuriated, she formed the Grand Valley Citizens' Alliance in 1997.

Leaning against a backhoe she's using to landscape a house in a new subdivision, Hines says, "I can't believe the amount of banging our heads against a wall, when the effects of this industry are so obvious and so bad."

Laughing at herself, Hines describes her first meeting with the Oil and Gas Conservation Commission.

"I thought our argument was so good for better reclamation that we'd go into one of those meetings and they'd say, "Wow, area-wide planning, why didn't we think of that?" "

Instead, she says, the commission didn't take her or her concerns seriously.

The mandate of the governor-appointed commission was broadened in 1994, to "protect the public's health, safety and welfare and the environment," but Hines says the commission has never denied a request for tight well spacing because of potential damage to the environment or the concerns of surface owners.

In the past decade, however, just as natural gas development has boomed, so has the number of surface owners. Nearly 500,000 people have moved to Colorado in the past five years. Some of the fastest-growing areas are places like Mackley's Garfield County on the Western Slope - places previously dominated by farming and ranching, places rich in methane gas.

Newcomers put up their dukes

According to Bob Miller, an attorney who has worked with frustrated landowners in southern Colorado for the past 10 years, newcomers are less willing to accommodate the gas industry than the ranchers and farmers who once dominated these rural areas.

"I get the sense it's a conflict (for) people who move into this county and who have bought their piece of pristine Colorado," says Miller.

Some are willing to spend their money and time to take on the oil and gas industry even when it's not large tracts of ruined land at stake, but principle. Charles Micale, for example, who owns the 2,800-acre My Way Ranch in Collbran, just over the mountains from Rifle, says he's not used to being treated like a second-class citizen. In addition to his ranch, he owns several subdivisions in Colorado, and land in Wyoming. His main office and home are in Florida. He says he'd planned to turn his Garfield County property into a 300-house development, but then changed his mind, because he realized the property means a lot to his family. Last December, Micale placed a conservation easement on 2,600 acres of his ranch. So, when Strachan Exploration Co. drilled a methane well at the entrance to his ranch without consulting him, the businessman was irate.

"(Strachan) treated me like a piece of garbage," blusters Micale. "I paid millions for that land; I wasn't going to just walk away."

Since December 1999, Micale estimates he has spent one day a week working to protect his rights as a surface owner. He researched oil and gas law, documented the damage to his ranch with testimonials and photos, and wrote more than 15 times to Colorado Gov. Bill Owens, R, Greg Walcher, the director of the Department of Natural Resources, and members of the Oil and Gas Conservation Commission. He doesn't just send letters: He bombards state officials with inch-thick packets of legal essays, bound studies, photos and court-case documents.

"It is my hope that by furnishing all of this information to the commission and further interested parties, that the best interest of the surface owners and the people of Colorado will be served," said Micale in a letter to the governor last December, citing what he described as "an invasion of my property rights, to say the least."

The core of the issue, says Micale, is disregard for the law. He cites the Rule of Accommodation, a precedent established over 100 years in Colorado court cases. It says that the right to extract gas is limited by a duty to minimize adverse impacts to the landowner. Although it has been upheld in the Colorado Supreme Court as recently as 1997, mining companies ignore this case law because no state agency actively enforces it. Micale says that means his only recourse is to sue.

"I have a great deal of money and I can afford to take this to the (state) Supreme Court," says Micale, who has hired two attorneys. "It's a wonderful thing to see the Constitution at work, and in the end I will have my way. It doesn't matter how long; I'll do whatever it takes. I've never seen an industry that could withstand a Supreme Court ruling. The law is simple. They can bring all the lobbyists they want, but that judge has the last word."

Attorney Lance Astrella says Micale has a good shot at winning his case, but that doesn't mean he can evict the gas company. The dispute is only over whether Strachan Exploration Co. used 1.5 acres more of Micale's surface than it should have. Astrella says that until the Legislature amends the commission's statute to enforce the rule of accommodation, all Micale can do is make it hot for the gas company.

Politicos push the pendulum

Whether or not Micale wins his court case, this new pressure for reform is starting to make an imprint in political circles.

For the past three years, Hines and other activists across the state have pushed for a bill to prevent appointment to the commission of gas and oil company employees. For the past three years, the bill has failed. This year, the bill, carried by Russell George, R-Rifle, came close to passing. Only after the gas industry brought in nine industry lobbyists to buttonhole legislators in the House of Representatives, did the reform bill die on its third hearing, 32-33.

"The fact that we got 49.9 percent of the House to agree with us means we're getting close," says Matt Sura, a community organizer for the 1,400-member Western Colorado Congress.

As director of the Department of Natural Resources, Greg Walcher oversees the Oil and Gas Commission. He, too, is talking about reform - a surprise from the former director of Club 20, a western Colorado organization that promotes logging, tourism, and oil and gas development (HCN, 2/14/00: Mumma resigns - wildlife division shaken up).

"I think the commission is run in a very old-fashioned way and I think it needs to change," says Walcher. "I want to put the commission on notice that they cannot run away from responsibility to protect health, safety and welfare of the public. We've got to move the pendulum."

Currently, Walcher is drafting several bills that he says will change the laws that govern the commission and give surface owners more control over the drilling that takes place on their property. Due to Colorado's population boom, people are living on top of gas fields - a situation, he says, that wasn't common 10 years ago.

Walcher has told the commission that even before the laws are changed, it needs to start considering impacts to surface owners more seriously. As a result, in an unprecedented move, the board left Denver to hold hearings this summer in Durango and Glenwood Springs. According to Mackley, nearly 100 people, including landowners and gas company employees, came to the Glenwood Springs meeting.

"One man brought in two pieces of alfalfa, and the one that was grown near a well was wilting and dying," says Mackley.

Critics of the spacing request were surprised at the meeting, when Rich Griebling, director of the Colorado Oil and Gas Conservation Commission, suggested drilling at an angle into multiple underground gas pockets. Landowners and county commissioners have long asked for directional drilling because it requires only one well pad. Gas companies have said directional drilling isn't economical. The commission plans to announce its decision by the end of this month.

"The box is slowly being changed to reduce the rights of mineral estate owners and improve the rights of surface owners," says an employee of the commission who doesn't want to be identified. "The political climate is changing."

Pick your poison

The collision between the oil and gas industry and real estate development has pushed some environmental groups into unexpected alignments.

While nothing concrete has happened yet, Colorado Open Lands, a statewide land trust, recently received a phone call from Marc Smith at the Denver-based International Petroleum Association for Mountain States. Smith proposed a partnership against growth, since drilling for gas discourages subdivisions, bed and breakfasts and other land development.

"If I was a developer and was eyeing a piece of land with gas wells on 180-acre spacing, it would raise questions of whether I wanted to put another million-dollar home in that area," says Smith. "There are a number of ranch owners that would like to hold onto their land and that open space, but they see what their neighbors are getting for selling out to developers and it's hard to resist."

By working with land trusts to help farmers and ranchers place conservation easements on their land, oil and gas companies avoid messy dealings with new subdivision owners. Smith adds that working with his industry may be attractive to land trusts because the revenue from oil and gas development could be a boon to ranchers struggling to stay in the black.

Cheryl Fox of Colorado Open Lands says it's not a bad idea.

"They're an oil and gas company and they have a bad image, but they also have a lot of land," says Fox. "As a land trust, we're for open space, period. We really try to stay out of the politics of it because we want to be able to work with whoever owns and works with those lands."

Democratic State Rep. Ed Perlmutter, Golden, says alliances between gas companies and land trusts would be a step in the right direction. He's working on a bill to preserve open space by creating a partnership between farmers, oil and gas developers and Great Outdoors Colorado, a state agency that protects land with Colorado lottery dollars. Perlmutter says the agency would pay oil and gas companies and farmers a subsidy to create conservation easements with limited methane drilling.

"You have two significant economic engines: oil and gas companies and farmers that would like to keep open space. It's in the interest of farmers to keep land open for crops, and it's in the interest of the well guys to not put a well in people's back yards," says Perlmutter, a state representative from the Front Range since 1994. "People are clamoring for open space and we as government need to provide it, so that people can continue to enjoy the vistas and beauty of Colorado.

"As a general principle, people are interested."

Perlmutter believes the tension between sprawl and methane development will only increase with time. Colorado is growing by 80,000 people annually, and estimates are that in the next decade, the state will lose 1 million acres to development. Newcomers will also need methane gas to heat their homes and cook their dinners, driving the demand for more gas wells.

Even so, Mackley is wary of any easement that comes with gas wells.

"I don't think I'd go along with that," he says, with danger bells ringing in his voice. "When you end up owning a piece of land, you'd like to be able to do whatever you want to do with it. In your lifetime, your land is all you have left."

Environmentalists, caught between methane drilling and sprawl, are unsure how to proceed. "Which is worse?" asks Chuck Mallick, a lobbyist for Western Colorado Congress. "Pick your poison."

 

Rebecca Clarren is an assistant editor for High Country News.