As the Colorado Supreme Court hears its case on whether state or local governments have the authority to regulate fracking, we use our North America Well Analysis Tool and our Global Economic Model to estimate potential tax losses per well in the areas currently banning hydraulic fracturing.
Arguments began on December 9 before the Colorado Supreme Court on whether authority lies within state or local governments to ban or limit fracking.
Five Colorado cities — Boulder, Broomfield, Fort Collins, Lafayette and Longmont — either banned or passed five-year moratoriums on fracking in 2013, and the Colorado Oil and Gas Association brought suit against two cities. After a lower court threw out the ban, both parties appealed to the state Supreme Court, which will ultimately rule on whether the state of Colorado or its cities, towns and counties are responsible for regulating fracking.
To see how Colorado's tax revenues could be affected should these fracking bans and moratoriums be upheld, we used our North America Well Analysis Tool to study the Greater Wattenberg sub-play as an example. Development near Longmont and Lafayette is potentially most at risk given its proximity to current development in the Wattenberg area, affecting players such as Anadarko, Encana (acreage recently acquired by CPPIB/Broe group), PDC Energy and Synergy Resources.
We estimate that if development were halted in and around these cities, US$750,000 to $1,000,000 per well in potential tax benefit would be lost, with more than US$3 million per well foregone in development spend.
Although we are likely months away from the court's decision, the eyes and ears of the oil and gas industry are fixed on this case, since it will likely set a legal precedent for fracking regulation in other states. We will continue to bring you timely analysis as the case develops and draft legislation is published.
As well as being available as part of our subscription service, our full US Upstream Week In Brief report is available to purchase.
In addition to the landmark Colorado fracking case, this week's brief examines the implications of a repeal of the US crude oil export ban, the economic attractiveness of Mexico's assets as licensing enters its third phase, the latest M&A activity in the Lower 48, and W&T's Ewing Banks discovery in the GoM Shelf.
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