Officials discuss Moffat County’s oil and gas activity
September 16, 2011
Active oil and natural gas rigs operating in Northwest Colorado:
• Moffat County — 1
• Garfield County — 21
• Rio Blanco County — 4
• Mesa County — 2
• Routt County — 0
• Total — 28
Source: Baker Hughes, an oilfield service company based in Houston
One of the world's most sophisticated oil rigs, as one employee described it, sits idle at the corner of Ranney and First streets in Craig.
The rig belongs to Nabors Industries, Ltd., a contract company headquartered in Hamilton, Bermuda that operates a fleet of 1,356 land and offshore drilling rigs around the world.
The rig in Craig is one of 911 land drilling and workover rigs currently stationed in the lower 48 states. Of those 911 rigs stationed in the U.S., 318 are actively drilling, according to company data from June 30.
Robert Smith, a Nabors floor hand, said he and his crew are itching to become the 319th rig to come online, but have been held up by state transportation officials for the last five weeks.
"For a county that says they want us here," Smith said, "they sure have a funny way of showing it.
"There's a lot of money to be made (by the county) if they would just let us get to work."
Nabors has been contracted by Shell Oil Company to work in Moffat County.
Carolyn Tucker, Shell communications representative for the Rockies region, said Smith's rig was scheduled to begin drilling off Colorado Highway 317 between Hamilton and Pagoda, but has been stymied by the Colorado Department of Transportation.
"The rig in town has been held up by CDOT," Tucker said. "As I understand it, there is a concern about the rig's weight and potential road damage while in transport to the site."
Tucker said Shell has been in constant contact with CDOT since the rig arrived in Craig. Negotiations with CDOT are ongoing.
Tucker said she did not have a timeline when an agreement would be reached.
The Nabors rig consists of a center steel piece with two generator houses, two pump sheds, two mud tanks, a boiler house, a fuel tank and a mast.
Drilling typically runs around the clock, and the rig requires a crew of 12 to 24 people working in shifts to operate.
Smith could not comment on the cost of the Nabors rig, but he said in his travels he saw one for sale outside of Rifle with a $4.5 million price tag.
"That rig was probably built in the 60s," Smith said. "Ours is brand new. It wouldn't surprise me if it was in the neighborhood of $10 million."
What makes the Craig rig so sophisticated is its ability to drill vertically, directionally and horizontally.
"It's not necessarily that it's new technology," Smith said. "It's the same technology we have been using for years, just better.
"It's state of the art, the best of the best. This rig will do whatever you ask it to do."
Smith said since the operating crew is stuck until an agreement can be hashed out between Shell and CDOT, he and his crew have busied themselves by customizing the rig for the site.
"We've basically been painting the rig and changing the lines," Smith said. "This particular rig came from Canada, where they don't have as many pressure issues as you encounter here."
Oil and gas in Moffat County today
Tucker said Shell's operating plan is to have two rigs online in Moffat County, and the company expects to drill seven to 12 wells before the end of the year.
Shell and Nabors currently operate the only oilrig online in the county, located atop Harper Hill at the junction of Colorado Highway 317 and Moffat County Road 37 near Hamilton.
Rig 111 has been operating for 28 days and, like its sister rig on standby in town, it can drill in a variety of directions.
Tucker said the company is using Rig 111 for "stick pipe drilling," which is done vertically using 30-foot pipe sections. There are two wells the company plans to explore from the Harper Hill pad.
"We are not producing (oil) yet," Tucker said. "We just finished drilling the first well. We are currently positioning the rig to begin drilling the second well and won't begin production until the second well is drilled."
Shell has no plans to engage in hydraulic fracturing in Moffat County at this time, Tucker said.
A second rig, Rig 20, has been constructed about two miles south of the junction of U.S. Highway 40 and Colorado Highway 13.
Rig 20 is operated by Gulfport Energy, but has not come online as of yet.
It's believed Rig 20 is a workover, or exploratory rig.
A representative from Gulfport Energy could not be reached for comment.
David Ludlam, executive director of West Slope Colorado Oil and Gas Association, can rattle off a litany of facts and figures concerning Northwest Colorado's long history and tradition of oil and gas exploration and production.
"The point here is that exploration and production have never really left the Yampa Valley," Ludlam said. "The shales of Northwestern Colorado will continue to be explored using evolving technologies until that point on the graph where commercial viability meets technologic innovation meets social license to operate.
"The latter is what WSCOGA is most committed to working towards."
Tucker was careful in her comments about whether Moffat County is approaching its next oil and natural gas boom. She echoed Ludlam's remarks that energy development in the county is nothing new.
"In terms of coal, energy development has been happening in Moffat County for over 50 years," Tucker said. "What we're doing is nothing new."
Tucker said Shell is still in its exploratory phase to learn more about the county's resources.
"Is this the next oil and gas boom? That's hard to say," she said. "We're utilizing a variety of technologies and drilling methods to see if the product is there and if we can get to it.
"We are definitely interested and we are excited to be in Moffat County. We wouldn't be here if we didn't think there was potential. Whether this is the next boom or not is still to be seen."
Moffat County Commissioner Audrey Danner said she was aware of the energy industry's impact on the economy in Craig and Moffat County the moment she and her husband moved to town in 1974.
Views from her back porch include Craig Station, Trapper Mine and the recently constructed Rig 20.
"From a personal perspective, it was obvious that natural resources power our economy," Danner said. "We accepted energy as a part of our community when we moved here.
"I would say the definition of a boom is in the eye of the beholder. We're certainly on an upward trend. We're seeing an increase in economic activity here, but for how long and at what level that is going to be sustained, I don't know."
Ludlam said one of the least commonly known benefits to having oil and natural gas activity in the area is that the industry is taxed at a much higher rate than residential or commercial properties.
"That's something that seems to get lost sometimes in conversation," Ludlam said. "But, it is very important for energy rich counties to have an understanding of that."
Ludlam said communities benefit from energy industries by receiving mineral lease dollars and direct payments from the Department of Local Affairs in severance taxes, and that revenue from sales and use taxes increase as a result of having more employees working in the area.
Every community is different, he said, but generally speaking, areas with energy activity benefit with increased revenue for education, infrastructure and services.
Sasha Nelson, northwest organizer for the Colorado Environmental Coalition in Craig, said she hopes Moffat County can avoid a boom and bust scenario.
She said oil and natural gas activity should be regulated to provide a steady revenue stream over time to minimize adverse effects to the community.
"If the resources are there at the volume they believe, they're not going anywhere," Nelson said. "Those resources are in the ground. The thing I find frustrating about the way the county perceives this discussion is that we are not missing out on anything by waiting, taking our time and getting it right. We're in the driver's seat and I am disappointed that some of our leaders aren't getting that point."
Danner said when and how the energy industry decides to conduct business is out of the county's control.
"That's market driven," she said. "We didn't go out and seek Gulfport or Shell or Trapper Mine. They come here based on economics. We're not in charge of the energy plays and when they happen.
"We do control the regulations and the permits. It's our job as county commissioners to manage those with the interest of the county in mind."
Luke Schafer, Western Slope campaign coordinator for the CEC, said he wants county officials to provide safeguards protecting the county and its residents.
"It's not that we don't expect the county to lease the minerals it has," Schafer said. "Because of lease activity and some other decisions the county has made, we have a much better budget scenario than most other counties (in the state).
"They have done a fine job in that respect, but we do want to see them provide safeguards for surface owners and the public at large."
Joe Moylan can be reached at 875-1794 or firstname.lastname@example.org.Joe Moylan can be reached at 875-1794 or email@example.com.Joe Moylan can be reached at 875-1794 or firstname.lastname@example.org.