The city of Longmont has negotiated changes in its agreement with oil and gas company TOP Operating Inc. in an effort to avoid getting embroiled in another lawsuit related to “fracking,” or hydraulic fracturing.
And at the same time it is defending itself against two existing lawsuits — one aimed at the city’s voter-approved fracking ban, the other at its city council-approved oil and gas regulations — Longmont officials are preparing to issue a drilling permit to TOP in an effort to strengthen one of its legal cases.
TOP’s efforts to drill around Union Reservoir in 2011 helped spark the ongoing outcry over fracking in Boulder County, and when its Rider No. 1 well near Trail Ridge Middle School was found to have been contaminating groundwater with higher-than-allowed levels of benzene for several years, it only added fuel to the fire.
In summer 2012, when city council approved new oil and gas regulations that included, among other things, restrictions on drilling in residential areas and recommended 750-foot setbacks, it also signed an agreement with TOP in which the company agreed to discontinue using the Rider property and to not sue the city based on its new regulations. (But TOP has since joined the other lawsuit, challenging Longmont’s fracking ban.)
The contract called for the city to buy the 33-acre Rider property from the company at a cost of $498,000, pay $25,000 for TOP to plug the contaminating well, and give the company $850,000 in future oil/gas royalties to help offset costs associated with using other well locations to replace the Rider one, including a drill site about a quarter-mile east, on the Lower Adrian property, adjacent to Union Reservoir. (The city also purchased the Lindberg property near Union as part of the agreement.)
Now, city officials say the environmental remediation of the Rider contamination is nearing completion. (An Oct. 28 staff memo to the Longmont City Council says that benzene levels have been below the state’s thresholds for the past four quarters, with xylene at levels deemed safe for three quarters. TOP is asking the Colorado Oil and Gas Conservation Commission to close the remediation case.)
But officials aren’t holding their breath for the well to be plugged. The well will continue to be operated thanks to amendments to the TOP contract approved by city council on Oct. 28. Due to the fracking ban, TOP is unable to use hydraulic fracturing to develop its replacement well at the Adrian property, and according to the contract with the city, it’s not required to plug the Rider well until it can use that new well. So the city adjusted its agreement with the company this week to give TOP a “time-out” on its mineral leases, stopping the five-year ticking clock that TOP has to begin drilling, until after the fate of the fracking ban is decided in court. In return, TOP has agreed to not sue the city based on a “takings” claim, in other words, based on the fact that the ban is depriving it of access to its property, the mineral resources.
If the fracking ban is upheld in court, TOP can pursue that lawsuit, and if the ban is struck down, it can move forward with its development of the replacement well at Adrian and the plugging of the Rider well.
It raises the question of why the city, after agreeing to shell out nearly $1.4 million to have the Rider well closed down and replaced with wells farther away from the elementary school and nearby housing development, would agree to extend the amount of time that well is allowed to continue its possibly hazardous operation, under the contract amendments approved this week.
Dale Rademacher, the city’s director of public works and natural resources, told BW that because the remediation is nearly complete, the well doesn’t represent the same health threat that it used to.
“An operating well is always subject to some sort of a release or additional spill in the future,” he acknowledges. “I think there’s always going to be a level of concern until it’s finally closed and abandoned, but it’s not at the same level as it was, when it was not only an operating well, but one that had levels of contamination around it.”
But Rademacher says the closure of the well was not the only reason the city acquired the Rider property as open space. For instance, he explains, Longmont officials also wanted the parcel so they could complete storm drainage along Spring Gulch, construct a pipeline allowing raw water from Union Reservoir to be pumped back into the city to irrigate municipal parks and golf courses, and build the Spring Gulch Trail.
Rademacher also points out that the $850,000 owed to TOP to help reimburse the company for the cost of developing the new well at Adrian will come from future oil and gas royalty revenues. But the city only collected about $22,000 in those royalties last year, so if that rate remains steady, it would take nearly 40 years to pay off the debt to TOP.
Rademacher counters, however, that wells just east of Union Reservoir are now producing royalties of about $50,000 a month.
He acknowledges that wells within city limits would have to be fracked to gain such yields. When reminded that Longmont, for now, has a voter-approved ban on hydraulic fracturing, Rademacher says there are other types of fracturing besides the hydraulic variety, but admits he’s not familiar with them.
In another twist, one of the things the city wanted — and got — in the amendments to the TOP contract is a drilling permit application from the company. City officials want to issue a drilling permit to TOP not to pave the way for it to frack but to demonstrate that the city’s new oil and gas regulations do not preclude a company from accessing its mineral resources, as the Colorado Oil and Gas Conservation Commission is claiming in its lawsuit.
“It’s a little bit of a tricky situation,” says Brad Schol, planning manager for the city of Longmont. “What we want [TOP] to do is demonstrate that they can submit a permit that’s fully compliant with the city’s oil and gas regulations, and then we can demonstrate to the state, and potentially the court, that our oil and gas regulations do not unreasonably frustrate and make it impossible for oil and gas exploration and production to occur.”
Rod Herring, president of TOP Operating, confirmed in an interview with BW that issuing his company a drilling permit could bolster the defense of the city’s regulations.
“The city was very eager for us to get this permit submitted to them, and I can only assume the reason for that was they had some motivation to present it as evidence in court, to help them in their battle with the state and [the Colorado Oil and Gas Association],” he says, adding that his company supports the city’s regulations and doesn’t view the drilling permit as giving ammunition to the opponent of its allies at the state or association.
Herring confirmed that his company recently filed that application with the city; has no imminent plans to drill unless it can also frack, since the two processes are intertwined; and is in the process of asking the COGCC to close its remediation case at the Rider well, since it’s gotten “a clean bill of health.” When asked if that well could pose a continuing health threat, he replies, “We don’t believe so. It’s always been a puzzlement to me that the St. Vrain School District built their school as close as they did to our well. Our well preceded the existence of that school by several years. Apparently they didn’t believe it either.”
And when asked to respond to the claim from former Longmont City Manager Gordon Pedrow that TOP is “among the lousiest operators that has ever existed in the state,” Herring says, “I’d rather not get into that type of bickering and name-calling.”