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Colorado's green(ish) gas baron

 

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Oil and gas companies pour money into research universities

When the sun gets in Ed Warner’s eyes, he turns his chair – and his whole desk, too. Set into the floor in the middle of his home office, a giant turntable from an old mine quarry rotates the entire workspace, including a 7-foot-high  wooden cabinet wall. The ingenious setup has appeared in Architectural Digest, and it’s one of many things about Warner’s “urban villa” home in the Cherry Creek neighborhood of Denver that suggest his unusual mind and staggering wealth.

Warner first identified the abundant natural gas reserves of the Jonah and Pinedale fields in Wyoming in the late 1990s, and he and his partners opened the tight-sands formations for development by pioneering new approaches to hydraulic fracturing, or fracking. The breakthroughs boosted natural gas production in the West and the entire world, and made Warner a multimillionaire.

The former geology grunt has since dedicated himself to philanthropy, notably giving $30 million to his alma mater, Colorado State University, in 2005; its natural resources college now carries his name. He also cofounded Regenesis Management Group, a Denver-based consulting company that facilitates water transfers between farmers and cities to benefit agriculture and the environment.

Warner, in his mid-60s, is short, with cool blue eyes, and he often punctuates his stream of words with a ripple of booming chuckles. Originally from New York and the son of parents with Jewish and Italian roots, he jokes that Woody Allen movies so closely resembled his childhood, they made him break out in hives. Trips to the Adirondack Mountains sparked his love for wilderness, and inspired him to head west in 1964 to study geology at CSU. Outspoken and iconoclastic, a self-proclaimed libertarian and environmentalist, Warner didn’t hold back when he spoke with High Country News contributor Joshua Zaffos. “If people perceive you as an eccentric,” he says, “you can get away with stuff that normal people can't.” The following interview has been condensed and edited.

High Country News: Your work in Wyoming’s Jonah Field ultimately spurred a nationwide natural gas boom. How did that happen?

Ed Warner: In December ’91 or January ’92, the McMurrys (a Casper-based family company) approached me and said we want you to evaluate a big gas deal. (Warner was then an independent geologist after years of working for large energy companies.) I saw huge potential, not proven by any stretch, because three wells drilled over 10 years had been failures. We bought Jonah (federal leasing rights) for a quarter of a million dollars.  I showed my ideas to 27 (financial) companies and we got turned down 27 times. There are guys out there today who will tell you it was the worst business decision of their career.

Once we figured out Jonah, we realized Pinedale (an adjacent field) would be subject to the same engineering and geology analysis, so we started buying acreage over there. Combined (with Jonah), it’s estimated to be 50 trillion cubic feet of gas.

HCN: You and your partners are credited with helping to stimulate the widespread use of hydraulic fracturing.

Warner: Prior to Jonah, natural gas fields virtually worldwide were drilled one to four wells maximum per square mile. We revolutionized how gas is extracted from the ground -- what we call the completion technology -- over a period of three or four years (giving drillers greater access to gas formations). Now, there are 64 wells per square mile in Jonah and Pinedale. Instead of drilling vertical wells through thousands and thousands of feet of a gas play, they now drill horizontal wells through thin sheets (using fracking). We changed the world.

HCN: When did you come into your wealth?

Warner: In 1996, we brought in an industrial partner to buy us out of debt and then they put up $30 million to drill. We drilled 30 wells when gas prices were rising, and income went up twentyfold.

By the beginning of 1998, I foresaw my entire financial future. It was April, and I came home and sat (my wife) Jackie down and said, ”Honey, our lives are about to change. In the coming months and next few years, our income is going to explode. We're rich.” I never expected this to happen.

In 2000, I sold my working interests, and came into a big chunk of money, and by then I realized I wanted to work in conservation and environmental issues.

HCN: Why did you dive into philanthropy, including your endowment to Colorado State?

Warner: I owed society this gift that had been delivered to me, so I went back to the geology department at CSU (by then part of the natural resources college), which had changed my life, and said, “How can I help?” I did not walk in there and say, “I’m going to give you $30 million, I want my name on a college.”

In 2000, I decided to endow two chairs in geology. There had been three (endowed) chairs (at CSU) before my two. Today, there are 35 or 40.

By 2005, I was already thinking about how we had failed to solve problems through the environmental movement. I thought that top-down (regulatory) environmentalism did not seem to succeed. Secondly, litigation was a catastrophe -- suing people to do the right thing hurt the environment; it stopped people from doing things. A cooperative process was harder work, but in the long term brought people together to work on problems instead of making them enemies. Thus I came up with the idea to fund the Center for Collaborative Conservation (which supports local and international community-based research and conservation projects involving both scientists and land-users).

I sat down with (then CSU president) Larry Penley and said, “I’m thinking about doing this and it looks like $8 million.” And he said, “What we really would like to do is up the total gift you’ve made to $30 million, including the center.” There were several other key things: a fund for the dean to create mini-grants, and an endowment to geosciences -- with the caveat that everyone in the department had to get something.

HCN: How do you think universities are doing in preparing future scientists and resource managers?

Warner: I think universities are in serious trouble, frankly, and that includes Colorado State. I think we are still in a system that promotes a silo mentality for academics (in which researchers focus on a single topic). We need to put more emphasis on real-world solutions, which require interdisciplinary approaches, to produce creative alumni -- not just alumni with degrees.

I see some positive movement. Definitely, there are some people I'd like to box on the ears because they can't move fast enough for me. I also recognize I am outside the system even though I have an academic appointment. I introduce myself as a fake professor, which if they heard me do would embarrass the heck out of them. I don't use my titles and I try not to use force, not even economic force. But money is something that can move mountains -- because it can buy you a bigger shovel than the next guy. I just made that up.

HCN: There's an increasing amount of money being shared between the energy industry, universities, and environmental groups, but such partnerships make many people suspicious. Do we need to be cautious that we're getting good science and quality conservation?

Warner: That’s why I got into conservation work. Because for 30 years, I worked in energy and people called me the enemy, and I don’t like that. You really think that geologists working for oil companies hate the environment? Are you crazy? You think we picked up our rock hammers to destroy the earth? No. We’re the original environmentalists.

I want to be an environmentalist who brings people together, who demonstrates that goodwill will solve problems a hell of a lot better than suing the bastards.

HCN: How is Regenesis Management Group trying to pursue that goodwill?

Warner: Agriculture uses most of Colorado’s water, and they use it inefficiently. One way of transferring water for urban growth is to pay (and buy out farmers’ water rights) and dry up and ruin agriculture and rural culture. Or we can come up with a different model, like Regenesis and the SWIIM water-budgeting software. (Through pilot projects), they manage farms, not just for corn or soybeans, but also for water as an economic deliverable.

Our first project is called the Lake Canal project, and we’re going to instrument farms (to measure soil moisture, humidity and other factors) and help them irrigate in a more scientific, efficient way. The extra water is going to be transferred for instream flows, environmental water. The city of Fort Collins is helping to pay for the water. The Nature Conservancy and New Belgium Brewing are going to back this.

The consequences? Farmers make much more money, so they don’t need second jobs and kids can stay on the farms. Urban water users get all the water they need. There’s water left over for the environment. The critical thing here is that environmentalists are starting to grasp that they’re not going to get this water donated; they’re going to pay those farmers what that water is worth.

We’re also going to transfer water for fracking. A big frack play (like northern Colorado’s Niobrara shale) only has a lifespan of three to 10 years, at most. The water transfers are temporary, and it’s going to bring a lot of money into agriculture if we do it right.

HCN: Do you worry about fracking's effects on water quality and supply?

Warner: It’s absolutely not a problem. Most fracking takes place so deep in the earth's crust that you have this huge zone that protects the shallow surface water where water quality would be an issue. The one possible exception is coalbed methane, which is very shallow and where some of the gas is actually in aquifers.

HCN: OK, but flaring of gas wells, flammable tap water, and the secrecy from companies about what’s injected into the ground gets people nervous. Why shouldn’t we be concerned?

Warner: At Jonah, we couldn’t afford not to sell the gas, so we found ways of not flaring (methane). This was 10 years ago. This is not rocket science, but you can’t be fat and lazy like Exxon, or BP.

A lot of this stuff is manufactured fears. If there are chemicals that are being kept confidential, it’s because if you had a patented process that could be stolen by your competitors, would you just want to give it up? In Colorado, we’ve gotten around some of those issues because we’ve worked as a community with companies instead of against them, and we’ve gotten them to give up enough information to make (their drilling and injection practices) analyzable and to participate in testing water wells.

HCN: But, as you’ve suggested, not all these companies are going the extra mile and being good neighbors.

Warner: Don’t look at me and see somebody who loves industry. I’m as suspicious of them as anybody. Don’t look at me as someone who loves the environment over people. I’m (just) as suspicious of that. I want us to come together as a community. The difference between you and me is I’ve got a shitload of money, and I can put my money where my mouth is.