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a drill rig owned by Enid, Okla.-based Continental Resources Inc. aims for oil from the Three Forks-Sanish formation near Watford City, N.D. Dozens of fruitful wells beneath the rich Bakken shale in North Dakota continue to fuel a hunch among oilmen and geologists that another vast crude-bearing formation may be buried in the state's vast oil patch.
a drill rig owned by Enid, Okla.-based Continental Resources Inc. aims for oil from the Three Forks-Sanish formation near Watford City, N.D. Dozens of fruitful wells beneath the rich Bakken shale in North Dakota continue to fuel a hunch among oilmen and geologists that another vast crude-bearing formation may be buried in the state's vast oil patch.

Colorado emerges as next oil frontier Add to ...

However, as in places such as the Marcellus in Pennsylvania, the predicted motherlode of energy below the ground in Colorado’s Niobrara battles raises fears of the environmental catastrophe of destroyed aquifers and poisoned drinking water. El Paso County is so new to drilling that local officials did not even know how to pronounce Niobrara (ny-o-brair-ra). County commissioners – all five of them Republican – worried about how they would pay to maintain rural roads torn up by the heavy traffic of trucks, drilling rigs and fracking equipment, and imposed a brief moratorium on drilling last fall.

Such episodes are indicative of the challenges the United States faces on the local level in its quest to wean itself from foreign oil. The El Paso moratorium was quickly eased to allow Ultra to drill three test wells.

There is palpable “fear” about water, says Mr. Davis’s boss, county assessor Mark Lowderman, who explains that there are four overlapping aquifers that oil wells would need to drill through. But money is a bigger and bigger lure, especially as some people sign seemingly lucrative deals.

“Our economy is in the dumper here, here’s an industry that’s ready to go, and we can bring in some jobs and some money,” says Mr. Lowderman in his office in Colorado Springs, the county seat. “If you look up at North Dakota it can bring a lot of money quickly.”

With oil around $100 a barrel, the conversation is evolving: “‘You know, how much money are we talking here?’”

In El Paso County, the issue will play out through the election year of 2012, where three of the five commissioners face voters, as well as Mr. Lowderman’s friend, State Rep. Marsha Looper, who comes from a ranching family, resolutely worries about water, and whose district east of Colorado Springs covers some of the newly prospective oil territory. It is parched land, a high-mountain desert, and every drop of water is gold to ranchers and people outside Colorado Springs, who depend on well water.

The eastern edge of Colorado Springs had long been seen by developers as a future suburb. Ultra sees certain wealth below ground.

“If we have what we think we have in the Niobrara, we’ll do really well in terms of making money, even at more modest oil prices,” Ultra chairman and chief executive officer Michael Watford told investors in November.

While El Paso County is an extreme frontier of oil development in the U.S., Weld County north of Denver is a traditional home for energy exploration in the state. Anadarko, a large Houston company that produces more oil and gas, by comparison, than Suncor Energy, had been active in the Wattenberg field for a decade when it cracked the Niobrara. Unlike other shale plays in Texas and Pennsylvania, Anadarko hit on the right formula quickly. Its production from the area could be doubled to 140,000 barrels a day, drilling as many as 2,700 wells, with 160 planned in 2012.

“This thing is off to a roaring start,” Chuck Meloy, senior vice-president of worldwide operations at Anadarko, told investors at a conference in early December, and invoked the success of the Bakken in North Dakota.

The Niobrara “is going to be a Bakken-ish type resource,” Mr. Melroy declares.

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Shale oil and oil shale

The vernacular of the frontier of oil exploration becomes somewhat confusing in Colorado.

“Shale oil” has been used, being the oily equivalent of the now well-known phrase “shale gas.”

The better term is “tight oil,” where the oil is trapped in tiny – tight – cracks in subsurface rock, the limestone shale of the Niobrara formation, in Colorado’s case.

In Colorado, the term “oil shale” will be remembered by some. Pursued in the early 1980s by the likes of Exxon, oil shale contains kerogen, an organic material from which oil can be produced when burned, vaguely similar to oil sands bitumen.

The effort went nowhere, though some companies’ work continues. Royal Dutch Shell has the oil shale Mahogany Research Project in Colorado.

Last November, when Anadarko Petroleum issued its prediction of as many as 1.5 billion barrels to be pulled from the tight rock of the Niobrara, it was front-page news in Colorado, whose regional economy is suffering.

In the six counties on the Front Range of the Colorado Rockies, oil leases have doubled to more than 9,000 in the 12 months ended August, 2011, compared with two years earlier. But most of that activity is in Weld County, the traditional home of energy drilling in the state.

Leases in the other five Front Range counties totalled 2,700 in the year ended in August, up from just 177 in 2008-09.

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