Potential oil & gas setback initiative could cost Colorado up to 100,000 jobs and billions in GDP

A proposed 2,500-foot setback for new oil and gas wells in Colorado could result in the loss of up to 54,000 jobs over the first five years and up to 104,000 jobs over 15 years, according to a new study released today.

The initiative could also lower Colorado’s gross domestic product by an average of $7.1 billion in the first five years and $14.5 billion between 2017 and 2031.

The study is based on data collected from the Colorado Oil and Gas Conservation Commission, part of the state’s Department of Natural Resources.

The mandatory 2,500-foot buffer proposed under initiative 78 would apply to all new oil and gas development, including hydraulic fracturing from both “occupied structures” and “areas of special concern,” such as water sources and waterways, public parks, and open spaces throughout Colorado.

In addition, the proposal would put 95 percent of land in the top-five oil-and-gas-producing counties in Colorado off limits for new drilling and fracturing projects (LaPlata – 99.6 percent, Rio Blanco – 99.2 percent, Garfield – 98.9 percent, Las Animas – 96.3 percent, and Weld – 85 percent).

“This study illustrates the dire effects of a full attack on an industry that has been historically vital to our state’s economy,” said Tom Clark, CEO of the Metro Denver Economic Development Corp. “Companies simply would not be able to operate here. This initiative, were it to pass, would usher in the probable demise of the oil and gas industry in Colorado.” 

Commissioned by a partnership between the Common Sense Policy Roundtable, the Denver South Economic Development Partnership and the Metro Denver EDC, the Business Research Division at the University of Colorado’s Leeds School of Business completed the assessment study in June 2016.

The BRD – which conducts economic impact studies covering a range of topics and industries, from health care and education to natural foods and craft brewing – used the REMI Tax-PI dynamic economic modeling system developed by Regional Economic Models Inc. for the analysis, which is based on quantifiable industry metrics including production and prices, employment, wages, and taxes. The REMI model used in the analysis is the TAX PI model for the state of Colorado, with 2013 data as the most recent historical year within the model. The BRD has used REMI during the past two years to analyze the ripple effects to the economy of various, proposed public policy initiatives in Colorado. 

“In addition to the heavy loss of jobs and GDP, this setback initiative would lead to a $10.9 billion decline in personal income over 15 years,” explained Earl Wright, chairman of the CSPR. “An unintended consequence to the passage of this initiative would not only damage the potential of Colorado’s economy, but also could significantly reduce funding for education and infrastructure.”

The study also noted that falling commodity prices, that began in mid-2014, have affected the industry—most notably, decreasing oil and gas activity. Researchers further evaluated the economic impact of the 2,500-foot setback proposal using updated depletion rates for oil and gas wells, data rig counts, price forecasts from Moody’s Analytics and the Energy Information Administration, as well as the assumption of a 90.2 percent reduction in future drilling.

“Energy is the ‘oxygen’ that fuels Colorado’s economy. For Colorado to potentially not utilize its significant energy resources—which not all states are blessed with—would be a missed economic opportunity of significant magnitude,” said Mike Fitzgerald, president and CEO of Denver South EDP.

The full study, Colorado Oil and Gas Industry: Economic Assessment of 2,500-Foot Oil and Gas Setback Proposal, can be viewed and downloaded online.