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Colo. Small Towns May See Rise in Oil Drilling

Wed August 18, 2010 - National Edition
Steve Raabe



GROVER, Colo. (AP) In the shadow of Colorado’s largest wind farm, the new-energy economy is taking a back seat to old-fashioned oil. Drilling rigs are springing up in areas of Weld County largely bypassed by the natural-gas boom of the past decade. Dying agricultural communities where boarded-up storefronts outnumber open businesses envision a fiscal jolt from oil that could keep the towns’ fragile economies afloat.

The impetus is a new horizontal drilling technique that allows energy firms to produce more oil with fewer wells. A handful of wells drilled this year in a geologic formation known as the Niobrara Shale have been gushers by Colorado standards.

Oil drilling is nothing new in Weld County — exploration has taken place for nearly a century — but energy analysts say horizontal drilling has the potential to open up millions of acres that previously were deemed uneconomic for production.

Townspeople and energy executives alike are trying to guard against excessive optimism based on only preliminary results from a few months of production.

”But when you’re out here in the middle of nowhere, every little bit helps,’’ said Mark Zitek, owner of the Hereford Bar & Grill.

Barely registering a blip on a road map, minuscule Hereford, just south of the Colorado-Wyoming state line, maintains a population of “about 20 if you don’t count the dogs and cats,’’ Zitek said.

On a recent weekday lunch hour, the bar and grill would have been empty save for a table of six oilfield-services workers grabbing a bite before heading out to a drilling rig.

Eight miles south, the same scene unfolds on a daily basis at the Grover Market Basket, a hybrid grocery-cafe that is the only surviving business on Chatoga Avenue, Grover’s six-block-long main drag.

Owner Steve Wolff is hoping for a repeat of the business surge he saw in 2007 when the nearby Cedar Creek wind farm was built with an army of 300 construction workers.

“That was a captive audience for us,’’ said Wolff, whose shop is the only place to buy food in a 30-mi. stretch between Hereford and Briggsdale.

“We were able to pay off a bunch of bills during the wind-farm construction,’’ he said. “We’re hoping for more of the same with the oil drilling.’’

Energy production on Colorado’s Eastern Plains traditionally has generated less environmental and land-use opposition than drilling on the Western Slope.

Yet Wolff acknowledged that some of his neighbors and customers who don’t benefit financially from the drilling surge have been upset with the truck traffic, noise and dust plumes coming from just the first few new wells.

The impact — good and bad — from wind-farm construction was temporary for Grover.

Oil drilling’s employment also is front-loaded, with up to 75 workers at a rig site. When drilling is complete, only a handful of workers service the producing wells.

But unlike the wind-farm workers’ temporal boost, oilfield roughnecks move from drilling site to drilling site as long as the oil keeps flowing.

Excitement built earlier this year after Houston-based oil and gas firms EOG Resources and Noble Energy disclosed impressive results from new horizontal wells in Weld County.

Noble’s Gemini well south of Greeley produced 100,000 barrels of oil, mixed with natural gas, in its first four months of production — making it one of the most prolific in Colorado history.

Horizontal wells are more expensive than conventional vertical wells to drill — about $3.5 million per well versus $650,000 — but early results show them yielding from five to seven times more oil than vertical wells.

“The Niobrara Shale has been somewhat of an enigma, with production efforts in the 1980s and ’90s having only limited degrees of success,’’ said Ted Brown, Denver-based senior vice president of Noble Energy. “But we think horizontal drilling has tremendous potential.’’

Brown said if oil drilling increases substantially in northeastern Colorado, the economic boost enjoyed currently by a handful of cafes could extend to broader development of motels, grocery stores, housing developments and industrial parks.

Cirque Resources of Denver has leased about 250,000 acres of mineral rights in Weld County and southeastern Wyoming, and plans to start drilling soon.

“All of a sudden, oil is the flavor of the day. Oil prices are so much better now than [natural] gas prices,’’ said Peter Dea, chief executive of Cirque. “If the [Niobrara] play works the way we think it will, we could see a whole lot of rigs out here by 2011.’’

The region was the focus of a recent mineral lease auction by the Colorado State Land Board that brought in a record $12.7 million for 45,000 acres.

In tiny Briggsdale, few signs of a prospective drilling boom have surfaced so far. But there is anticipation.

The Briggsdale Market is the sole commercial presence on the town’s unpaved Main Street.

“Some of the guys stop in for a pop before or after work, but it’s nothing I would call very dramatic,’’ said market owner Nancy Allshouse.

“But sure, it would be great. Who in their right mind wouldn’t want to see this take off?’’