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Petroleum's Two Faces on Colorado Health Protections

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View Ted Zukoski's blog posts
23 July 2008, 5:55 PM

They tell Colorado that proposed regulations will cripple the local economy, but investors are told that profits will still boom.

Doom? Or boom? Is it the best of times? Or the worst? The oil and gas industry is saying it's both. But they're very careful about who receives which message. And the truth is a lot closer to one message than the other.

To the people of Colorado, the industry is spending huge sums on glossy mailers and radio ads, claiming they will have to slash operations if modest protections for human health, drinking water, and wildlife are adopted by the Colorado Oil and Gas Conservation Commission (COGCC). In short, adopt these rules, industry says, and the economic sky will fall.

Denver Earthjustice Attorney Mike Freeman has been slogging through days of hearings at COGCC, and has determined the source of industry's numbers: out of thin air. On the first day of testimony, Mike reports, Earthjustice's expert, Randy Udall, helped the Commission identify two key flaws in Big Oil's arguments:

First, industry just assumes - with no analysis or support - that the proposed rules would cause drilling activity to drop by up to 30 per cent in Colorado.  Its socio-economic predictions of resulting job losses, mortgage foreclosures and closed businesses rest on this quicksand.

In other words, the industry simply made up its doomsday scenarios about the supposed hit Colorado's economy would take if the state protects Coloradans' health, drinking water, and wildlife.  Their PR departments are channeling Chicken Little and the Boy Who Cried Wolf.

The second problem with industry's gloomy message to the public in Colorado is that it runs counter to the smiley face the industry is giving to investors about the future of drilling and production in Colorado.  As Mike reports:

Industry's dire predictions in the rulemaking stand in sharp contrast to their reports to investors and stock analysts, which boast of record profits in Colorado and describe plans for substantial expansions here.  Industry's numbers show that even accounting for the cotsts associated with complying with the proposed rules, oil and gas companies will continue to earn historically high profits.

In other words, to their shareholders, the Oilies are saying the future looks bright.

One example of this double-talk comes from The Williams Companies.  Williams warned the Commission that the proposed health and environment protections would have far-reaching economic impact, including job losses on Colorado's Western Slope.  Sounds scary.  But to its investors, Williams reported a record half-billion dollars in profits in the first three months of 2008 and predicted even greater profits in 2009.  And the company, whose reserves and production are mostly located in Colorado, reported a "very favorable long term organic growth outlook" overall for exploration and production.  This, at the same time it was battling the Commission's rules.

Luckily, the COGCC appeared to understand the truth in industry's contradictory statements.  Mike's favorite exchange at the Commission hearing along these lines went something like this.

Question [from a commissioner]:  "So, let me get this right.  These wells are really, really, really profitable now.  But with the new rules, they'll only be really, really profitable?"

Answer [from an analyst testifying for industry]:  "I'm not going to touch that one."

And no wonder he wouldn't touch it.  It would prove just how much smoke the industry that paid him was blowing.

To urge the Colorado Oil and Gas Conservation Commission to adopt their proposed rules to protect public health, drinking water, and wildlife, click here and scroll to the bottom of the page.  Western Colorado Congress has some good background info on how folks can support the rules.

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