Energy Pipeline: COGCC director Matt Lepore looks back at volatile year in oil and gas

Matthew VanDeventer
Greeley Tribune
December 1, 2017

https://www.greeleytribune.com/news/energy-pipeline/energy-pipeline-cogcc-director-matt-lepore-looks-back-at-volatile-year-in-oil-and-gas/

Matt Lepore, first heard about the April Firestone explosion that burned a house down and took the lives of two Monday morning following the incident. Like many others, he was told that emergency crews were linking it to a hot water heater repair gone wrong, and that flow lines were in the area. Lepore, who heads the Colorado Oil and Gas Conservation Commission, was headed to the Western Slope for work the next day when he got a call from his staff that the explosion was indeed linked to the flow line and that it did not go where the operator, Anadarko Petroleum, thought it went.

"At that point, our concerns were understanding what impacts to the environment had occurred, understanding and making certain as best we could that there was not a continuing source of hydrocarbons into the environment," explains Lepore. "I mean, that was really highest priority."

Workers on the ground worked from the epicenter out: Crews on the ground spent through Thursday trenching the flow line. COGCC staff worked with the Fredrick-Firestone Fire Protection District to measure methane levels in the surrounding soil and air and made sure all wells in the neighborhood were shut in. Quickly following, the COGCC directed operators to test flow lines within 30 days and then cut off all flow line risers within the following 30 days. Looking back, Lepore says in some ways the incident could have been prevented. He hopes measures they took and are continuing to take could, in the future, break the long, causal chain of events that caused the explosion.

Colorado is the seventh largest producer of oil in the country and the sixth largest of gas. Last year was the state's second highest oil producing year after setting consecutive, annual records starting in 2012, quadrupling production levels in those four years. Meanwhile, Colorado, particularly the Front Range, regularly shows up on lists touting the country's fastest growing cities. The Firestone explosion was the perfect storm of two fast growing industries — oil and gas and real estate — colliding.

In our interview with Lepore, he looked back at 2017, a tumultuous year for him as director of the COGCC, the state's oil and gas industry, and citizens involved, with Firestone and Front Range growth topping the list of significant themes. He talks about dealing with public pressure, how a deal brokered between Extraction Oil and Gas and the city of Broomfield may charter a new way of doing things, the real estate industry's involvement in oil and gas, new rules the COGCC is working on, and what to expect in the 2018 legislative session.

Energy Pipeline Magazine: Now that it is coming to a close, what is your overall assessment of 2017?

Matt Lepore: Well, I cannot talk about 2017 without talking about the Firestone explosion and fatalities there. Certainly a landmark event. A tragic event. I think we continue to see in 2017 the increasing engagement by citizens and local governments on oil and gas issues because oil and has development and residential development and Colorado's population growth are colliding with each other. Those issues are not new, but 2017 has seen those issues kind of swell in volumes, again. I think those are the two dominant themes that I would point to for the year so far.

If there was a third, it is that industry activity is increasing after the downturn that really started in very late 2014, sort of al through 2015; 2016 was maybe sort of a retrenching phase for the industry and now in 2017, we certainly are seeing a much higher rate of drilling applications, for example. So the activity has gone back up and I think that reflects two things: primarily one, industry having reconfigured their cost structures meaningfully and then some price stability, maybe not necessarily continuous growth in the commodity price, but a certain stability and perhaps cautious optimism about commodity prices in the future. So I guess those three things would probably be the themes I would point to.

Where were you when you had first found out, when you got that call that it happened? What was your initial reaction? What did you do right after?

So interestingly, the very first reports were that the explosion and fire were the result of home repairs to a water heater. And yet we did send our flow line inspector and field inspectors, [they] went to the scene and as information began to come back to us, and it began to be clear that there seemed to be a—the well that was very close to the house and the flow line that did not go where the operator of that well expected it to go. At that point, our concerns were understanding what impacts to the environment had occurred, understanding and making certain as best we could that there was not a continuing source of hydrocarbons into the environment. I mean that was really highest priority.

So we did things like make sure that the wells around that neighborhood, that all those wells were shut in. We had staff there working with the Frederick-Firestone Fire Protection District to take samples in the soil and the soil vapor and the air around the homes to see what those looked like and understand that there were significant methane/hydrocarbon impacts still in the yard of the home that had exploded and in the yard of the home next door. And then to expand that and investigate the neighborhood more broadly—could we identify other methane signatures? So, I think in broad terms it was understand, as best we could, as quickly as we could exactly the facts that we were dealing with and take every step that we could think of to protect public health and safety and prevent an additional occurrence or anything like that.

And obviously a lot of steps were taken after that, days after, weeks, months, and still working on things. Thinking of that, what's the big lesson to take from it? At the same time do you think it could have been prevented?

I think the best way to talk about whether it could have been prevented is to talk about what we did in the aftermath. We did this notice to operators, and I know you're aware of. There were two parts to that notice and I think that in our minds those two steps were taken to minimize, absolutely minimize the risk that this happens ever again. So in that sense these were preventative measures and the first of those—so again where there's a flow line or supply line connected at the wellhead and not connected at the other end and so one of the things we did was require operators to go find every single flow line at a well head and make sure they know where it goes. So find point a, find point b, and test the line in between. We already require operators to test the integrity of their flow lines so this in a sense was sort of a emergency, required, do-it-now, do-it-again, and make sure you do it right, make sure you don't miss anything. Identify, find point a, find b, and make sure it's solid in between.

The second part was as operators move equipment, add equipment, take equipment out, sometimes these flow lines are no longer used and a flow line typically, subsurface, might be a poly-pipeline, which this one was so one-inch diameter, maybe it's a two-inch diameter. It comes up out of the surface and has what we call a riser, sort of that rigid part that comes up above grade. Until 2001 there was no rule requiring operators to eliminate that riser when they abandoned the flow line. So they could disconnect everything from that riser but leave it in place, leave it connected to that flow line underground. And that may have been what happened here, that there was an abandoned flow line riser right next to the flow line riser that had gotten plumed back to the well. So, if you make everybody cut those off, even the ones that were abandoned before 2001. See that was the thing, we changed the rule in 2001 to say you have to cut those off. But if you had abandoned that line before 2001, it wasn't retroactively applied.

Exactly. In light of this, in light of the accident what we said was OK, now it does apply retroactively, basically. You are going to go find all of those, statewide and you're going to cut them all off. So the landscape now should look like that 2001 rule had been in place from the beginning of time. Every single riser that is not being used should be cut off so that we eliminate that opportunity to inadvertently connect to something that you don't know where it ends up.

So those were the two major steps we took. We required operators to do all of that in a pretty short timeframe. It was kind of a two phase, thirty days to do the first parts of that, thirty more days to get it all done. So in 60 days we asked operators to do a heck of a lot of work and we feel that the response was robust, kind of appropriately so. I guess I feel that Firestone, a lot of things had to happen over a very long period of time to lead to that outcome that eventually happened and any number of things could have happened differently that would have sort of broken that causal chain. So was it preventable? Yes, in some ways it was preventable. The steps we took here, again, I hope are steps that would break that causal chain at some point in time.

That's kind of the illustration of the big conundrum we have: the oil and gas boom onside of the real estate boom. How do you see that playing out? What kind of steps have you taken to mitigate that?

Well, I think over the years we've taken a number of steps. First, back in 2013 we made our setbacks larger so that a new oil and gas well or oil and gas tank battery for example cannot be as close to an existing home as it once was. The new setback distance is 500 feet. If you're within a 1,000 feet of an oil and gas location, that's going to be within 1,000 feet of a home, an occupied building, then there's lots of mitigation measures that are required under our rules. We've increased substantially, I guess sort of about the same time period, about 2013, much greater sort of advanced notice to surrounding building owners that oil and gas is being planned for that area. Increased opportunities for those building owners to participate in meeting with the [operator], providing feedback, proving comments to the oil and gas operators, providing feedback to us on the permit request and things like that. So I think those were tangible rule changes that have been made. If you go back to the Governor's task force in 2015, I think a second layer of this is continuing to work with local governments to, again, encourage collaboration, cooperation between the oil and gas operators and the local governments on these same issues on where's the best place to site an oil and gas facility, engagement with the communities into which these oil and gas locations are being placed. I think that's kind of the trajectory of things.

There's been some pushback with local governments. They create they're own legislation and then it comes back to the COGCC. What's that been like?

I think, again, we can talk about it as an evolutionary process or iterative process where if we go back to 2012 or 2013, you had a number of local governments seek to ban either drilling or hydraulic fracturing or other aspects of development. Some of those cases went all the way to the Supreme Court and the Supreme Court essentially said sorry local governments, this is an area of primarily state interest and therefore local rules that conflict with the state rules are pre-emotive. So that really took until what, 2016 that decision came down in the Ft. Collins case and Longmont case.

And then I think local governments kind of regrouped and said, alright if we can't prohibit this activity then what other tools are at our disposal? What we've seen over mostly this year, so 2017, another thing it may be remembered for is kind of the Broomfield local government forming their oil and gas committee to look at their comprehensive plan, engage with a specific operator, Extraction Oil and Gas, who wants to do pretty significant scale development within the city and county of Broomfield and really work through a lot of issues together with the operator, with the local government, with the citizen committee and ultimately get to a place where the local government signed an agreement with the operator about where the well locations would be, potentially how many wells would be drilled from those locations and so forth. It was a lengthy process. It was a rigorous process and it was a process that took place exclusively between the local government and the operator, which is different historically. Historically, the operators who have come to the state said, here's where we want to put our location. Here's the wells we want to put. Here's the surface owner agreement or whatever and they get a permit from us.

Extraction deliberately chose to go to the local government first and then (in November), one of the reasons we had a lot of people here, Extraction was asking for spacing orders for us and we did not approve any actual, physical surface locations as a part of that spacing application, but the overlay of the Broomfield agreement with Extraction was felt. When the state now does look at surface locations, we'll certainly be doing so with awareness of and in deference to locations that are part of the agreement that Broomfield entered into.

They went local then state. Usually they go state then local. Was that a complication?

From our point of view that's fine. I don't want to say they should have done it the other way, I think historically it has been done the other way and I think coming out of the governor's task force, many local governments expressed the desire or the concern that they be engaged in the process earlier on. So I think in going to Broomfield first, Extraction met that sort of interest of the local governments and when they then come back to us with a local government approved location, unless we see something really inappropriate about those locations, we're going to say hey the local government is good with this, the operator is good with this, as long as it meets some of our requirements that are more technical in nature, that's great. That's a win-win. I can't help it but say here, some of the people present (in November) were unhappy about the Broomfield agreement were neighboring citizens form Adams County who felt what Broomfield approved maybe got pushed a little closer to the Adams County without the Adams County people being a part of that process.

To me it points out that it's not easy and pushing things farther away from me or you or one person might result in it being closer to someone else. So it's challenging, but overall I think what happened, where the circumstances are right now in Broomfield with Extraction really represents a potential new way to do this, a kind of paradigm shift having engagement with the local government on the front end to do the best they can to meet the community's needs, our interests, then come to the state for a more technical review.

You have local governments setting their rules, then they and their citizens come to the COGCC. What's the difference in pressure you've been getting between local governments and the public? What's that been like?

It's interesting. I will say that I think that local government officials have felt a lot of pressure from their citizens on these issues. And you know, they're the local government, they're a little bit closer to the citizens. Those citizens vote for or against those local government officials. In at least two cases that I know of those citizens have sought to have a local government official removed from office because of his or her stand on oil and gas development. So there's a lot of pressure there and those local government officials are really trying to do the same thing we're trying to do, which is protect their citizens' public health, safety, welfare. And perhaps when we are charged with seeing that the state's oil and gas resources are developed, they don't necessarily have that charged. On the other hadn't the Supreme Court has said you can't not allow development if it's there. So they're trying to balance things just as we are, maybe from a different perspective. We want them to be engaged in our process. We want to be engaged in their process to the extent that it's appropriate and that they want us to be in. I think we've done that.

To your point, at the end of the day, again, (in that November hearing) what we have are citizens of either Broomfield or Adams County or both who don't like what their local government did or the neighboring local government did and they're here to ask us to do something. So, it can be challenging.

Considering the real estate boom, is the real estate industry, agencies, brokers, developers, are they involved in this conversation at all?

Good question. So again talk about legislation, in I believe it was in 2014 there was a bill passed in the General Assembly that requires greater notice to home buyers that oil and gas operations may occur near by. That language that has to be provided to homebuyers took effect in 2016. So, hopefully buyers of new homes and buyers of secondary market homes should be getting a notice from the real estate agent if they live in Erie, for example, or Broomfield or Weld County, that oil and gas may be occurring.

Home developers are certainly involved in different ways. Again, I'm familiar mainly from sort of the legal point of view. Home developers understand in parts of the state that there are mineral rights that they probably—maybe they have purchased them, maybe they haven't purchased them — but regardless, they understand those minerals are going to be developed some day. And so they are, or they certainly should be, mindful of leaving areas where they don't build homes so that those minerals can be developed. It doesn't seem clear that that always happens.

It is a local government decision how close new homes can be built to existing oil and gas wells. We just don't do that. We do the other thing. We do how close new oil and gas wells go to existing homes. I don't know, it's a good question and since I don't regulate the building industry I'm speculating a little bit.

Moving forward, the COGCC will be working on some new rules in December. Will you talk about those and your insight or what you think will be happening come the start of the legislative session in January 2018.

The new rules are really some modifications to our existing flow line rules. Part of this really does trace back to Firestone and kind of builds on those lessons learned. I described the flow line risers. So the new rule will require that there are no above ground flow line risers no matter when you abandoned the well. So it's basically taking what we required in the notice to operators and putting it into our rules. So that's one thing.

The other thing is in our existing rules, as I mentioned before, operators are required to make sure their flow lines are mechanically sound, but we had an exception for low pressure lines. In the new rules we're taking out that exception. Just because your line operates at, current exception is at 15 psi, that is no longer a reason not to test those lines.

One of the things we're seeing as the development evolves on the Front Range is instead of putting oil in storage tanks where the wellhead is and then trucks coming to transport that oil, operators are now installing pipelines to move the oil off of the well pad to a centralized storage facility so that you can get some of that truck traffic [off the road] and those storage tanks can be somewhere more remote.

Those crude oil lines that take the oil from a wellhead to a coral storage facility, we are putting some rules in place that basically say if another agency is not regulating those lines we will regulate those lines and here are the requirements for those lines. (Gas transportation lines and larger crude oil lines are largely regulated with federal policy. For example, the Pipeline Hazardous Materials Safety Administration, PHMSA, dictates crude oil lines.) PHMSA has some qualifications around what lines they regulate and how they regulate them. We want to fill that gap and make sure that if PHMSA isn't regulating a given pipeline that is transporting crude oil we are regulating it and here's what you have to do. We're filling a potential gap we see in the regulatory structure.

Another thing that sort of came out of Firestone was this idea for mapping of flow lines and after much discussion, because we have an entity in the state that already pretty well maps flow lines and has an ability to provide information about where flow lines are located ( One Call, Call Before You Dig, 811). It's official name is the Utility Notification Center for Colorado. We are requiring operators to participate more fully in the One Call program and provide their flow line locations to One Call.

And then predictions for state legislatures?

I can tell you topics that are on legislatures' minds. I think the topic I was just talking about, mapping of flow lines, there may be legislation. They may not agree with us, but the Utility Notification Center is the most efficient and effective way to identify locations for flow lines so you may see some flow line mapping legislation.

There is consternation among some people around an issue called Statuary Pooling, more commonly called Forced Pooling (when two mineral owners have rights to parts of the same pool of underground resources and one builds a well to extract those resources, who gets what?) That is one reason that the COGCC exists, is to kind of regulate that process. And in that process, if I want to get out my oil and gas and you're part of the pool, I can offer to lease your minerals form you. I can allow you to participate in that well and if you say no to both of those things then I can go ahead and produce the resources, but I have to compensate you in some way.

Along the Front Range, the most common occurrence is that the homeowners in the subdivisions don't actually own their minerals. Sometimes they do, and when they do some of those people have said, well wait, I don't want anybody to develop my minerals and it's not fair that you can make me do that. I think we will likely see some legislation around that, all of that, that forced pooling happens by virtue of the statute. I think we will see some legislation to change some of the forced pooling requirements.

I think we will see legislation around school setbacks. There were school setback bills introduced last session that didn't get any traction. I think that might come back. I guess those are the topics that are foremost on my mind.