One thing partisans on both sides of the continental divide on Colorado energy can agree on is that innovation will power the future.
Innovation for renewable energy and oil and gas have another thing in common. They will depend on evolution, not revolution, as they test out technology and the public’s patience.
Colorado’s rich natural resources and current political quagmires make Colorado a natural bridge to the future for both.
Two days after Mike Sommers, president and CEO of the American Petroleum Institute, was in Colorado to tour facilities and talk tech with oil and gas industry leaders recently, U.S. Energy Secretary Jennifer Granholm toured a solar farm east of Aurora with a Colorado U.S. senator and former governor, John Hickenlooper, a former petroleum company geologist.
The politicians were selling President Joe Biden’s $1.2 trillion infrastructure proposal at the same time they were urging investments in renewable energy.
Renewable sources, a smarter electrical grid to transport a no-emissions load and more environmentally friendly automobiles and buildings are main cogs in Biden’s agenda, much like the one current Gov. Jared Polis rode into office in 2019.
After he was picked to lead the national trade association in 2018, Sommers’ first work trip outside the Beltway was to Colorado.
“I came to Colorado because really what happens in Colorado has a tendency to spread to the rest of the country, sometimes for the good, and then sometimes for the bad,” he told the Colorado Business Roundtable on June 29.
Sommers has led a new way of thinking for the staid industry, professing a need for government policies, industry initiatives and ongoing innovation.
The industry is holding up its end, he told Colorado Politics in an interview.
“I would argue that the most important environmental movement in the world in the last two decades is the oil and gas industry,” he said, talking of the progress in cleaning up emissions and developing natural gas to generate electricity.
He added, “You know, we’re never going to get credit for that continuous innovation that we brought to the fore that has led to that environmental performance, and I do think that there’s been a significant amount of moving the goal post, but we’re proud of the progress that we’ve made.”
Hodge Walker, vice president of the Chevron Rockies Unit, was more direct.
“The future of energy is cleaner energy,” he said. “… One of the things that we need to do is think about how do we produce cleaner energy and how do we do that in a way that delivers returns that our investors are looking for, and how do we make sure we do that in a capital-ly efficient way.”
Granholm in Colorado pointed out the Biden infrastructure package includes $20 billion for carbon capture technology to help oilfield operations cut emissions.
The Department of Energy calls itself the solutions department, “because we want to reduce carbon from fossil fuel generation, and encourage nuclear (and) encourage geothermal,” she said.
Granholm nodded to the 11-acre solar panel farm behind her and said China is leaps and bounds ahead of the United States in developing supply chains for green energy.
“We’ve let that happen,” she said. “We want to do that. We want to provide that supply chain.”
The return? An expected $23 trillion global market, the energy secretary said.
Innovation in energy has to come from both sides simultaneously, said Alice Madden, the former state senator and candidate for the U.S. Senate last year, who is now the executive director of Getches-Wilkinson Center for Natural Resources, Energy, and the Environment at the University of Colorado Law School.
Madden also was a climate adviser to former Colorado Gov. Bill Ritter, a climate fellow at the Center for American Progress in Washington, D.C., and a former deputy assistant secretary in the Obama Energy Office.
“It’s the key to everything, frankly,” she said of tech advances for legacy energy sources and new ones, too. “No one knows the cost to address climate change and create a sustainable future. Everyone in every sector needs to be innovating, so I applaud everyone’s work.
“For the gas industry to be part of a real energy transition should be sharply focused on emissions capture, and I know that they’re working on carbon capture and sequestration. Those technologies are budding and need to be vetted and tested, and hopefully they can play a big part.”
The day before Sommers met with energy and business leaders, he toured Chevron’s Weld County plant, impressed with its carbon-reduction technology.
Chevron is switching to electricity-driven compression engines and drilling equipment, eliminating nitrous oxides and other ozone precursors during rig operations. Chevron also is switching to tankless production facilities to reduce greenhouse gas emissions by up to 90% and shrink the footprint of operations as much as 95%, the company boasts.
“It’s an incredible innovation that they’re bringing online and it’s all about how do you reduce emissions from our operations,” Sommers said. “They’re close to having almost a net-zero operation up there on the production of oil and gas.”
Occidental is major player in Colorado after acquiring the state’s largest driller, Anadarko, in a bidding war with Chevron in 2019. The company, however, has been focused on carbon capture and storage since 2018, said Brian Owens, the company’s general manager for the Rockies.
“Oxy’s overall business strategy involves the transition to a carbon management company,” he said in a statement to Colorado Politics. “We believe this is the right thing to do for the environment, our workforce, communities and shareholders.”
The company formed Oxy Low Carbon Ventures LLC in 2018. Last December the subsidiary landed a contract for storage consulting services for Minnkota Power Cooperative’s Project Tundra, the world’s largest carbon capture facility to date near Center, North Dakota. Minnkota projects the facility will reduce the power plant’s carbon output by 90%, a savings equal to 800,000 fewer cars a year.
The next year Oxy Low Carbon Ventures started Occidental’s first solar farm to power oil and gas operations on a 120-acre site near Odessa, Texas.
“Occidental is taking an important step toward realizing our aspiration to become carbon neutral through the use of emissions-free solar electricity,” Vicki Hollub, the company’s president and CEO, said in a press release. “Using solar energy in our operations is another way Oxy Low Carbon Ventures is enhancing the profitability and sustainability of our business while meeting the challenge of reducing atmospheric greenhouse gases.”
Occidental also is developing carbon capture technology it hopes to someday deploy on its field sites.
“Oxy has done some really innovative stuff, including here in Colorado and in Texas, with carbon capture and sequestration, but there are other exciting ideas out there, too,” said Dan Haley, president and CEO of the Colorado Oil and Gas Association. “The question then becomes cost and how you can deploy it at scale so it makes sense financially. So while some of the technology is reality, some of it is moonshot stuff at some level but, look, we made it to the moon.
“Instead of just being carbon neutral, can we be carbon negative? I think so. Let’s have that conversation instead of pretending that renewables can shoulder the entire load. That’s just not feasible.”
Supply and demand
Shutting off the pipe won’t be an option for some time, Haley said.
“The world needs energy and demand is still increasing,” he said. “The world will need oil and natural gas through 2050 and beyond. More natural gas will be used in 2050 than we use today so it will still be a critical source of energy. The question is, can you develop it even cleaner so as not to contribute greenhouse gases, etc.
“Most of that energy is going to come from oil and gas.”
Gov. Jared Polis, a clean-energy advocate, launched a two-decade countdown when he took office two years ago. He was elected with a primary pledge to switch to all renewable energy by 2040. He’s signed a raft of legislation to reduce emissions, promote electric vehicles and lay the groundwork for Front Range commuter rail.
In 2019, he unveiled his renewable energy roadmap at the Jefferson County Community Solar Garden in Arvada.
“We are very excited about the opportunity for Colorado to achieve 100% renewable energy by 2040,” he said. “What does that mean for every Coloradan? It means cleaner air. We have an air-quality crisis across the Denver metro area with significant health impacts.
“It means good green jobs that will never be outsourced and aren’t dependent on commodity pricelines for Colorado innovators and workers to build a renewable energy future. It means lower rates for ratepayers.”
The public might need more time to warm up to the idea, however.
Alice Jackson, the president of Xcel Energy in Colorado, said the utility surveyed customers last year and asked if people would be willing to trade in their natural gas appliances for newer, greener technologies.
“Regardless of political position, two-thirds of them came back and said not only no but Hell no, so that is where public sentiment is,” she said.
In the last legislative session, Polis threatened to veto a Democratic bill that would have beefed up enforcement on oil and gas companies, but then he signed another bill that was amended to include many of the provisions from the first bill. The switch occurred in the final days of the last legislative session.
Lynn Granger, executive director of API Colorado (formerly known as the Colorado Petroleum Council), called it frustrating.
“At the end of the day, facts are facts,” she told Colorado Politics. “We are providing solutions and we’re making real progress, so to see conversations happening that specifically directly impact our industry without us at the table — is frustrating the regulators and industry.”
“Leaving out industry is leaving out ways to continue the progress on emissions,” Granger said. “We are coming with the solutions and the technology and making progress, real numbers, real facts, real data, and we’re doing a really great job. I would argue Colorado is helping to lead the U.S. on this front, but that can only continue to happen if we’re at the table.”
Former state Rep. Joe Salazar found it hard to believe the industry was uninformed or caught unaware about any piece of legislation that would affect their bottom line, based on his experience with its cavalry of plugged-in lobbyists with business allies and supportive lawmakers.
“The more likely story is the industry is upset that our feisty coalition whipped their backends,” said the former lawmaker from Thornton, who leads the environmental group Colorado Rising. “Yet, we know we are working against a long history of industry legislative wins.”
Salazar said all the promises about future technology are a scheme to buy time for the industry to outlast the current public demand to address climate change and Democrats’ political will to do it.
“There is no better way to capture carbon than to just leave it in the ground,” he said.
Salazar compared the industry’s new religion on climate change to Big Tobacco’s public relations’ campaign that included commissioned studies and paid experts.
The trust gap widened on July 2, when the chairman of a U.S. House subcommittee threatened to subpoena executives of Exxon, Chevron, Mobil Corp., Shell and other big producers to testify before Congress about an alleged disinformation campaign around climate change.
Rep. Ro Khanna, a Democrat from California, responded to a sting video captured by Greenpeace showing an Exxon lobbyist, who thought he was in a job interview, saying his company relied on “shadow groups” to greenwash its work on climate change, and the company’s support for carbon taxes was just a meaningless talking point, because members of Congress won’t pass them.
Darren Woods, Exxon’s chief executive, disavowed his lobbyist’s candid remarks, saying they “in no way represent the company’s position on a variety of issues, including climate policy, and our firm commitment that carbon pricing is important to addressing climate change.”
Salazar said there’s little practical result of the industry’s innovation, as the Front Range teeters on being out of compliance with federal clean-air standards. That’s largely because of auto emissions and buildings. The state’s disasters and droughts are only getting worse. The next weekend the Gulf of Mexico burst into flames because of a leaking Mexican gas pipeline.
States, counties and cities — Colorado not included — are lining up to sue oil and gas companies over climate change and damages from long droughts, devastating wildfires and stronger hurricanes, much as they did over the public health costs related to tobacco use.
“The industry counts on people being uninformed and apathetic,” Salazar said. “As the climate crisis worsens, people are waking up, and they are looking for those responsible for this existential threat.”
Laurie Cipriano, spokeswoman for pro-industry Coloradans for Responsible Energy Development, countered Salazar’s assertions.
“We absolutely want Coloradans to be informed,” she told Colorado Politics. “Colorado’s oil and natural gas industry is focused on responsible energy development that protects our Colorado wildlife, air and water, and strengthens local communities and economies.”
The bottom line
Danny Splettstosser, a vice president of origination and investor relations for Renewable Energy Systems, said as the nation makes the transition from extraction to electrification for its energy, Colorado has opportunities to cash in on all fronts.
“I think that Colorado is well-positioned in that it has an abundance of energy of all sorts here in the state to build on to bring about that more sustainable future,” he said. “We have the ability to power the majority or a large portion of our electric generation from natural gas and renewables, increasingly so.”
The bottom line of the discussion, however, is always the bottom line. Adding cost to production adds cost to electricity and other fuel bills.
Sommers said the nation has to answer three simple questions: How do you provide affordable energy, how do you provide reliable energy and how do you provide that energy cleaner?
“That’s what consumers are demanding,” he said. “They don’t want to pay more for their energy. And no one wants to pay more. Oil and gas are going to continue to be the low-cost provider for world energy, but we also know that they’re demanding that it be cleaner. That’s what I think our members are responding to on a daily basis.”
Granger noted that Colorado producers paid $112 million in severance taxes the year before the pandemic. Additionally, oil and gas operations are taxed at three times the rate of other businesses and 12 times more than residences.
Up to 80% of the tax bill the industry’s operators pay supports local government, including schools, fire departments and the main source of funding for state water projects.
For all the talk of bells and whistles, politicians haven’t begun to address those taxes that would be paid by renewable sources of energy.
If emerging sources of energy can’t or won’t, then which other taxpayers will? That question will be answered by statehouse politicians, not energy innovators.
This story was updated from the print edition to correct that the Colorado Petroleum Council, a branch of the American Petroleum Institute, now goes by API Colorado.