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Colorado: An example of safe and profitable extraction of oil and gas

2014-07-18

On July 6-13, representatives of the Ministry of Environment and the Lithuanian Geological Survey visited the State of Colorado, USA, and got acquainted with the experience of Colorado in extracting shale oil and gas. The maximum attention has been given to the control mechanism used in this industry to ensure environment protection.

Oil and gas has been extracted in Colorado for 150 years already. It is one of the major oil and gas extraction sites in the US. Approximately 50 billion m3 of gas (5th place in the US) and approximately 50 million barrels of oils (9th place in the US) are extracted here annually.

The extraction of unconventional hydrocarbons commenced in Colorado a decade ago. Colorado (together with Texas and Pennsylvania) is one of the three principal states in the US where shale oil and gas is extracted. Approximately 52 thousand oil and gas wells operate in Colorado, and about 6.5 thousand of them extract shale hydrocarbons.



Shale.

About 2 thousand new wells are drilled each year, and about 500 of such wells are for the extraction of shale resources.

Colorado, which receives huge numbers of tourists in the west and develops agriculture in the plains, gives a special attention to environment protection and applies one of the strictest environmental requirements to oil and gas industry. Oil and gas volumes extracted in an environment-friendly way grow each year. Efficient environment protection and the safety of works is best illustrated by the following numbers: over 12 million tourists visit Colorado each year, and more than 1 million fishing permits and 650 thousand hunting permits are sold annually. These numbers grow each year concurrently with agricultural output.



Residents of Colorado are well-informed about all chemical substances (including the composition of the hydraulic fracturing fluid) used in the process of prospecting and extraction of oil and gas. This information is available at http://www.fracfocus.org/. Drill wells are sealed with steel pipes and are additionally cemented. Surface water and underground water samples are constantly tested. The control of drill wells is performed not only by state inspectors but by hired independent experts as well.

Even though it is required in the US to test surface water and underground water located around an oil well or a gas well at least semi-annually, for safety purposes the municipal government of Colorado decided to carry out such tests every 2 to 3 months. Colorado has also amended its legal framework, which now provides that not only a contractor but also its subcontractors can be penalised, while no period of limitation applies to environmental pollution.

Colorado has a specific service performing control of oil and gas industry. Each state controller undergoes special training lasting for 12 to 18 months (depending upon the field of control). The number of controllers has grown up twice as a result of the commencement of the extraction of shale resources and in order to ensure the safety of works.



Colorado oil and gas regulation rules were assessed by the International Energy Agency, which included the principal provisions of the Colorado rules into its Golden Rules in 2012.

Many residents of Colorado support both traditional and unconventional oil and gas extraction. First of all, it is related to the history of the industry: people are used to it, they have much information available, and they understand the demand for energy resources and their economic benefit. On the other hand, oil and gas companies provide residents with stable jobs and high income. Over 200 thousand residents are linked to oil and gas extraction in one way or another, and income from this sector are one of the highest.

According to the US laws, underground natural resources are owned by landowners. Therefore, offers from representatives of oil and gas companies regarding prospecting for natural resources are welcome in private land. Cooperation conditions are not subject to any regulation; they are the object of agreement between the parties. For instance, the owner of private land can receive an agreed lump-sum payment, or he can receive a certain percentage of the volume of extracted resources for as long as the extraction is being performed. He is also eligible to receive additional compensation when drilling and hydraulic fracturing works are being performed. Such works last for 2 to 4 months and interfere with the usual rhythm of daily life, as works are carried out all around the clock, the sites are lit at night with powerful floodlights, the intensity of traffic grows, etc. Farmers receive double compensation for each occupied are of their land where they will not be able to sow and harvest that year.



Once drilling and fracturing is complete and extraction is commenced, the area of the site is significantly reduced with only a well head remaining above the surface, which due to its appearance is called a Christmas tree. If the well is not connected with pipes, tanks for storing oil and gas are erected nearby. The maximum occupied area is several ares, and by next year the site is already surrounded with corn fields.



Colorado has also become one of the first states that has started demanding that oil and gas companies search for ways to reduce the need for water in performing drilling and fracturing works. Special water treatment facilities have been erected over few years, while companies have improved methods of their operation (for instance, they use the same water several times for drilling of several wells). As a result, approximately 60% of water used in drilling and fracturing is treated after it can no longer be reused, and 80% of the completed drill wells are recognised according to international standards as having the smallest possible impact on the environment.

Public Information Division
18 July 2014

Minister of Environment of Lithuania Kęstutis Navickas
Minister of Environment of Lithuania Kęstutis Navickas