The New North Dakota: Shale Oil Takes Off in Colorado

The shale oil and shale gas revolution is coming to Colorado, which already ranks tenth among the states in oil production.[i] Thanks to new shale production in the Wattenberg Field, the Centennial State could almost triple its output and climb to fifth among the states, right behind North Dakota. And with that increase in oil production would be the additional benefits of more jobs, more state revenues, more housing demand, and economic prosperity to the citizens of Colorado.

New oil finds in Colorado should produce about $50 million per year in severance taxes to state and local governments, with more revenues being generated through property and sales taxes.  New drilling jobs would be generated through 2012, and for each drilling job, an estimated 3.3 jobs in related industries such as pipeline construction and trucking would be created.  And these are not low-paying jobs either.  In fact, oil and gas jobs in Colorado pay an average of $103,000, including benefits.[ii]

Colorado’s Oil and Natural Gas Boom

Shale discoveries on non-federal lands are beginning to fundamentally transform America’s energy outlook in ways thought inconceivable just a few short years ago.  In Colorado, these oil and natural gas resources are locked in a shale formation called the Niobrara, which is a 90-million-year-old oil bed that has become economic due to hydraulic fracturing and horizontal drilling technology.[iii]  Some experts predict that the Niobrara shale could have greater potential than the Eagle Ford Shale in Texas, where drilling is rapidly expanding.  The potential  exists for Niobrara to mirror the Bakken Shale in North Dakota as a major oil field.

Anadarko, the company drilling in the Wattenberg field in the Niobrara, has drilled 11 horizontal wells so far to test the field’s potential. Initial production from one well showed high rates of 1,100 barrels of oil and 2.4 million cubic feet of natural gas per day. By the end of this year, Anadarko will have about 40 horizontal wells drilled in the Wattenberg field, and the company is planning to drill 160 wells next year. Ultimately, Anadarko estimates that it will drill between 1,200 and 2,700 horizontal wells in the Wattenberg field.[iv]

The Wattenberg field is expected to yield 1 to 2 billion barrels of oil equivalent composed of 70 percent oil and 30 percent natural gas.  Finding a billion barrel field is extremely rare, and only a few such fields have ever been found in the United States. The Wattenberg field, discovered in 1970, is one of the 20 largest oil and gas fields in the United States.[v]  Anadarko holds 350,000 acres in the Wattenberg field and estimates a potential output of 55 million barrels per year.[vi]

That level of production has caught the eye of other oil companies (e.g. Conoco Philips) that are now obtaining lease holdings in the Niobrara with hopes to gain some of the benefits that Anadarko has found. In the end, crude production in the Niobrara could increase to about 286,000 barrels a day by 2020, according to The Western Energy Alliance.[vii]

Conclusion

Technology and American ingenuity have again found energy that is economic in today’s markets, providing good-paying jobs and more government revenues in the meantime. American energy resources are vast, but U.S. companies need access to them. Studies have shown that the United States could be almost free of overseas oil if the U.S. government would re-open development on federal lands and waters and allow greater access to Canadian resources.[viii]  Why should we pour millions into green energy when American entrepreneurship can provide domestic resources that are secure, abundant, and economic?