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September 19, 2013

Colorado flooding triggers oil spills, shutdowns

DENVER — Colorado's flooding shut down hundreds of natural gas and oil wells in the state's main petroleum-producing region and triggered at least two spills, temporarily suspending a multibillion-dollar drilling frenzy and sending inspectors into the field to gauge the extent of pollution.

Besides the possible environmental impact, flood damage to roads, railroads and other infrastructure will affect the region's energy production for months to come. And analysts warn that images of flooded wellheads from the booming Wattenberg Field will increase public pressure to impose restrictions on drilling techniques such as fracking.

"There's been massive amounts of growth in the last two years, and it's certainly expected to continue," Caitlyn McCrimmon, a senior research associate for Calgary-based energy consultant ITG Investment Research, said of Colorado oil and gas drilling. "The only real impediment to growth in this area would be if this gives enough ammunition to environmentalists to rally support for fracking bans, which they had started working on before this."

Two spills were reported by Anadarko Petroleum Corp. — 323 barrels (13,500 gallons) along the St. Vrain River near Platteville, and 125 barrels (5,250 gallons) into the South Platte River near Milliken, federal and state regulators said. The St. Vrain feeds into the South Platte, which flows across Colorado's plains and into Nebraska.

In both cases, the oil apparently was swept away by floodwaters. Both releases involved condensate, a mixture of oil and water, Environmental Protection Agency spokesman Matthew Allen said.

The environmental damage still was being assessed, but officials in Weld County, where the spills took place, said the oil was among a host of contaminants caught up in floodwaters washing through communities along the Rocky Mountain foothills. County spokeswoman Jennifer Finch said the major concern there is raw sewage.

Gov. John Hickenlooper said late Thursday there is a lot of water to dilute pollutants, including oil, in the South Platte.

"When you look at the amount of water flowing through that river, it will process these pollutants very, very rapidly," he said.

Anadarko workers tried to contain the South Platte spill by putting absorbent booms in the water, but state officials said only residual oil was collected.

The company was attempting to reach other well sites rendered inaccessible by the flooding, spokesman John Christiansen said.

A 4-inch Anadarko natural gas pipeline began leaking late last week after the ground washed away around it. Christiansen said the pipeline was shut down and the leak was contained.

More reports of problems in Colorado's oil patch could emerge once flood waters recede and inspectors can access more sites, Allen said.

The Colorado Oil and Gas Conservation Commission, which regulates the industry, also found some tanks that shifted or moved off pads but said most tanks and well pads were intact.

The state's northern plains, home to the Denver-Julesburg Basin, took the brunt of the flooding after record rains pounded the foothills to the west.

Nearly 1,900 wells were initially shut down by the deluge, out of more than 51,000 statewide, but around 300 have since been brought back online. No major well spills have been reported, according to the Colorado Oil and Gas Association, an industry group. It says there was no hydraulic fracturing going on at the time of the flooding, so no fracking fluids have been released.

Some activists and environmentalists are calling for more regulation of drilling near the river as a result of the spills. COGA president Tisha Schuller said the industry would learn from problems during the disaster, but she declined to comment on the need for more regulation. Schuller said she and other industry workers have been displaced by the flooding and want to make sure the state recuperates.

"We will be here joining with our neighbors over the days, months and years ahead as we recover," she said.

The basin's largest producer, Houston-based Noble Energy, said two wells that were releasing natural gas have been shut down and a third would be shut down once it was safe to access. The company estimates it has shut down between 5 and 10 percent of its wells because of flooding, and has been monitoring them from the air and ground.

The Colorado boom has been welcomed by many — and opposed by many concerned about the possible environmental effects of fracking, a process that breaks apart deep rock to recover more gas.

If flood damage is minimal, the industry could quickly resume a frenzied pace of drilling in an area where companies were on track to sink $4 billion into new projects this year, McCrimmon said.

McCrimmon said she expected the consequences will be negligible on broader oil and gas markets. Despite its growth, the area's Wattenberg Field ranks far behind other active oil plays in the U.S.

Colorado produced 135,000 barrels of oil a day in 2012, the highest level in at least three decades but still only about 2 percent of total U.S. production.

Colorado's natural gas production topped 1.6 trillion cubic feet in 2011, according to the Energy Information Administration. That's about 6 percent of the nation's total.

Denver-based PDC Energy, Texas-based Anadarko and Canada-based Encana Corp. also shut down wells but planned to reopen some of them.

Encana said it resumed operations on more than 150 wells after shutting down almost 400 due to high water and poor access. That left 245 wells still out of service by mid-week, and inspections for environmental damage were continuing.

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