Industry: Study disregards many drilling benefits

David Ludlam



An activist group’s study finding a net negative economic impact to Delta County from a proposed drilling project is rife with errors of omission when it comes to the public revenues oil and gas development generates, according to an industry organization’s critique.

David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, delivered the 11-page response to Delta County commissioners Monday, as they also heard a presentation from Paonia-based Citizens for a Healthy Community on its cost-benefit analysis of Gunnison Energy’s proposed 35-well drilling project in the upper North Fork Valley.

That analysis notes that Delta County would receive property and severance tax revenue from just three of the wells, with the rest to be drilled in Gunnison County. But it says the project would hurt residential property values and local visitation by hunters, anglers, agritourists and others, resulting in an estimated $24.3 million net loss to the county over 30 years.

Ludlam counters in his response to Delta commissioners, “They are presenting to you an inaccurate and ill-conceived report that ignores economic contributions to Delta County from natural gas production on federal lands. The report omits much of the economic benefits afforded to your community through energy production.”

As an example, he wrote, “Royalty money from natural gas production on federal lands pays for important agriculture water projects for farmers and ranchers in Delta County.”

The Gunnison Energy project involves mostly federal lands and minerals. Forty-nine percent of the royalties from gas production on federal lands is returned to the state, and 10 percent of the state share goes to the Colorado Water Conservation Board, Ludlam wrote. That board funds water projects, and Ludlam said natural gas royalties from federal lands have funded at least 34 projects in Delta County, he said.

“In this way, natural gas produced from federal lands is responsible for the reliable delivery of irrigation and municipal water to some of the very people who oppose natural gas production occurring anywhere near them,” Ludlam wrote.

Citizens for a Healthy Community’s membership includes some people who are involved in the burgeoning organic farm movement in the Paonia area and feel oil and gas development poses a threat to it.

Among other benefits Ludlam says the group’s report ignores are:

■ The 48.3 percent of Colorado’s share of federal gas royalties that goes into the State Public School Fund, which helps pay for state school equalization funding that included $24 million for Delta County schools last year;

■ Direct distribution funds that Delta County schools receive from federal mineral royalties and state severance taxes, and direct distributions to local governments in the county;

■ More than $14 million in energy impact assistance grants since 2008 in Delta County, generated from the state’s share of federal royalties;

■ The portion of natural gas severance royalties that goes into Colorado’s Low-Income Energy Assistance Program, which as of Nov. 1 of last year benefited 1,110 residents in Delta County;

■ Severance royalties that support the Colorado Department of Natural Resources, flowing back to the county through programs such as wildfire-risk reduction and aquatic nuisance species mitigation, including for watercraft inspections at Paonia Reservoir;

■ Personal property tax revenues for special districts from oil and gas equipment;

■ Federal royalty revenues that go to the U.S. Treasury and benefit Delta County residents through pass-through programs or through the services provided by federal agencies.

Ludlam wrote, “When assessing economic and socio-economic contributions from energy production, the (a)ctivists simply cherry-picked data to serve as a straw man for ideological aims. We believe a better approach is to take a more holistic and comprehensive look at the myriad social benefits from natural gas production on federal lands.”

Natasha Leger, interim director of the citizens group, said Tuesday, “We are a small, resource-constrained nonprofit, and any omissions are not by intent but they’re based on the resources that we have.”

She said her group’s report should have indicated that it wasn’t addressing federal mineral lease royalties, and she apologized for its failure to do so. But she said it also didn’t address things such as the environmental and public health costs of spills, accidents, and air and water pollution from oil and gas development.

“We probably should have stated that as well,” she said.

She said Ludlam’s critique in some cases talks about the contributions the industry makes in general terms, without breaking things down at a Delta County level for purposes of cost-benefit analysis.

She said her group’s hope is to have Delta County commission its own independent study to look at some of the areas her group didn’t address, such as the impacts of oil and gas development on property values of commercial property and vacant lands.

“With these (drilling) projects, from our perspective we are being asked to accept environmental and health risks and the justification is the economic benefits that come from these proposals,” Leger said.

She said an open and transparent study is needed to determine just what those benefits are, and so the community can understand what the impacts are.

In his analysis, Ludlam takes issue with the idea of oil and gas development negatively impacting the North Fork Valley. He wrote that drilling already has occurred there “with little conflict to date,” with Gunnison Energy and SG Interests drilling a combined 64 wells in the upper valley.

“The (a)ctivists’ study points out the success of residents in and around Paonia in developing and growing the local agriculture and arts economy over the past 20 years; all the while oil and gas development has occurred to the north,” Ludlam wrote.

Ludlam said Monday that Delta County doesn’t have to choose between oil and gas and other industries. All can exist side by side, whereas the activists’ report tries to push county commissioners “into a position to have to make an unnecessary false choice,” he said.

Said Leger, “We are unapologetically concerned about the development being proposed from an environmental and public health perspective.”

Likewise, she said, Citizens for a Healthy Community is unapologetic in its call for a cost-benefit analysis by the county.

Delta Commissioner Mark Roeber on Tuesday didn’t rule out the possibility of the county commissioning such a study. But he said the county’s assessor and oil and gas liaison do a lot of that kind of work already, and the results are available to the public. And the county also has to consider its cash-strapped budget situation, he said.

“It’s kind of hard to say we’re going to spend money on a study that may not get us any results,” he said.

He said he thinks there are some questionable numbers in the citizen group’s report about oil and gas impacts on things such as tourism.

“There’s no real good data on what kind of visitation we have now, what kind of spending is going on now, so it’s kind of hard to just take national averages and extrapolate that way,” he said.

He doesn’t think the county needs to choose between oil and gas development and other forms of economic activity in the county.

“The resource is there. I think we can figure out how to (develop) it and keep everybody happy. It shouldn’t have to be a totally either/or (decision),” Roeber said.

He said he thinks the county always has stressed that there’s room for everything when it comes to public land uses, including things such as oil and gas drilling, coal mining and livestock grazing.

“It takes true collaboration to work it all out. We’re committed to that,” he said.


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