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411 on Prop. 112 — drilling permits skyrocketing

DENVER - Colorado’s oil and gas drilling permits are skyrocketing.

In the last 12 months, the Colorado Oil and Gas Conservation Commission has either approved or received more than 11,000 permits - that's nearly as much as the last three years combined.

There's no doubt that's, in part, because of Proposition 112.

If approved, it would make all new oil and gas development in Colorado be at least 2,500 feet from homes, schools, businesses and more. Right now the setbacks – as they’re called – are 500 feet from homes and 1,000 feet from high-occupancy buildings.

The oil and gas industry says if that proposition passes, it would decimate development here.

“Prop 112 basically destroys the Colorado economy,” said SRC Energy’s Chief Operating Officer, Mike Eberhard. “Most all activities…go away.”

But the Problems Solvers have discovered they most likely wouldn't go away right away.

All those permits could provide years of already-approved drilling.

What happens after that is debatable.

The COGCC - the state regulating agency - reports 85 percent of non-federal surface land would be off-limits for drilling.

But underground, that may be a different story.

“Horizontal drilling is a huge technological advantage for drilling operations,” said SRC drilling engineer Ashley Belvin.

Now companies including SRC can drill out about two miles.

Even if 112 passes, they'd potentially be able to reach more than 40 percent of underground areas, according to a report from the Colorado School of Mines.

However, that means that companies would have to drill in all directions from a single site. Usually they drill in just one direction.

An industry report, called the Proposition 112 Playbook, said that could pose problems for oil and gas companies.

Update - the original report from the School of Mines is now getting criticized from another report from the same school, yet different experts.

According to the new report:

"Regardless of how far you can horizontally drill, the subsurface still can’t be accessed in the most important areas, since you still
have to have a surface area to drill from. Additionally, there is a technical and efficient limit as to how far horizontal wells can actually be drilled. The surface access is the key."

Meanwhile, RS Energy has released a second Proposition 112 Playbook, saying the first one was "misinterpreted when distributed publicly."

RS Energy's President and co-CEO Manuj Nikhanj told the Problem Solvers there were plenty of misinterpretations of the first playbook, in part, because it focused on a detailed analysis for five individual companies, not drilling and fracking in Colorado as a whole.

Nikhanj said the takeaways from the second playbook - which RS Energy would not give to FOX31 - are:

"The majority of the DJ (Denver-Julesburg) Basin’s current rigs and competitive resource is located within Core Wattenberg, home to 90 percent of Colorado’s current oil production. Today, we estimate about 6,500 remaining locations at Core Wattenberg – a figure that drops by 85 percent if Proposition 112 passes. After grandfathered permits are drilled, this lower inventory estimate represents less than one year of drilling.

"Our location estimates are best case and could be further reduced by the impact of setback regulations on lease configurations and flow lines, especially in Area 2 where mineral acreage is mostly accessible via discontinuous 'drilling islands.'

"If drilling activity stops, DJ Basin production would drop by 40% in one year."

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