City committee begins studying oil and gas exploration

While the county is drilling down on its final regulations for oil and gas development, Colorado Springs is just starting its exploration on the subject. The city committee studying the issue held its first meeting Thursday, and it was oil and gas drilling 101 for the group.

City attorney Chris Melcher said the committee should make a recommendation to City Council by the first meeting in May. Between now and then, the committee will look at how other municipalities have approached oil and gas development, ponder the balance of regulatory power between the city and state, and look into specific issues that may affect the city, such as impacts on road and water infrastructure.

“What council decides will have far-reaching impacts on our community, our environment and our economy,” Melcher said.

The committee will continue meeting at 8:30 a.m. every Thursday at City Hall, 107 N. Nevada Ave. The meetings are open to the public, but no public comments will be accepted until later in the process.

Much of the first meeting was devoted to a presentation from energy expert Ward Polzin, managing director for the investment bank Tudor, Pickering, Holt and Co. in Denver. Polzin told the group El Paso County is at the extreme southern end of potential oil and gas development in the Denver-Julesburg basin.

“An oil and gas guy drilling a well down here is very exploratory,” Polzin said. “They are stepping out.”

However, he said, maps of which regions of the Niobrara Shale formation have achieved what’s called “thermal maturity” for oil and gas development show a heavy concentration north of Denver, where most of the oil and gas exploration in eastern Colorado is occurring, and a tiny pocket in El Paso County.

“If you’re an oil company that takes some risks, you could look at that and say, ‘There’s an opportunity,’” Polzin said.

If there’s no oil or gas under Banning Lewis Ranch, on the city’s eastern edge, a single well might tell the tale, Polzin said, but more likely, it would take several wells and up to two years to determine what the potential resource is in El Paso County.

On the other hand, if there’s a gusher beneath Banning Lewis, that would also take several years to determine and begin ramping up production, which could continue for 20-30 years, Polzin said.

Committee members raised a number of wrinkles that may differentiate the city’s regulatory process from El Paso County’s proposed regulations — which county commissioners will consider Jan. 31 — including how Colorado Springs’ status as a home rule city might impact its authority, zoning issues over Banning Lewis Ranch, where Ultra Resources has applied to drill two wells, and what would happen if Ultra drilled from the county, where it has applied for several well permits, into the city limits.

Melcher and Denver energy and natural resources attorney Howard Boigon, a consultant for the committee, had few immediate answers, but said the committee should explore those questions.

Melcher said he had hopes, but no expectations, that the ongoing litigation between the city and Ultra Resources over the Banning Lewis annexation agreement would be resolved in the next 60-90 days, but that the committee shouldn’t consider that in its decision making. Ultra bought 18,000 acres of the ranch for $20 million in a bankruptcy auction last year.

“I would not expect that proceeding to be completed before you finish your recommendation,” Melcher said.