Lynn Granger, Executive Director, American Petroleum Institute Colorado

Lynn Granger - Executive Director - API

Colorado is facing the loss of more than 350,000 jobs and a cumulative $7.1 trillion in economic activity by 2030 if the federal government resumes its ban on hydraulic fracturing for oil and gas production, according to a new economic analysis from the American Petroleum Institute.

President Joe Biden banned new oil and gas leasing on federal lands by executive order days after his inauguration, and a flurry of litigation quickly followed, including a lawsuit filed by officials in 13 states challenging the ban in federal court.

In June 2021, U.S. District Judge Terry Doughty ordered federal officials to resume lease auctions pending a final ruling in that case.

The Denver Gazette sat down with API President and CEO Mike Sommers and Lynn Granger, executive director of API Colorado, at the institute's Denver headquarters for a wide-ranging discussion on the future of fossil fuels in Colorado.

API is the largest oil and gas trade association in the world, comprising some 600 members, including Exxon Mobil, Chevron and BP Shell.

“Colorado's natural gas and oil industry is a pillar of the state's economy and plays a central role in the broader American energy revolution,” said Sommers, who visited Colorado to meet with elected officials and tour production facilities last week. “Our industry supports over 232,900 good-paying jobs and contributes $31.4 billion per year to Colorado’s economy alone.”

“The fact is that natural gas will remain a critical component of Colorado’s energy landscape — and the world’s energy landscape — for decades to come,” Granger added.

The Denver Gazette: What brings you to Colorado?

Sommers: The reason I'm here today is speaking to the Economic Club of Denver at noon today to talk about the benefits of this industry and how we're really at a hinge point in history because of what's going on with Russia and Ukraine, and really reflecting on the history of our industry and how this industry is going to continue to propel the American economy.

The Denver Gazette: What do you see as the future for fossil fuels in this time of transition to renewable energy?

Sommers: Let's start with some facts. The world consumes about a hundred million barrels of oil every single day, even in the depths of the pandemic. When Western world economies were completely shut down, the world consumed 81 million barrels of oil every single day.

I think that's a reflection that this industry isn't going anywhere. That number is about at 99 million barrels right now and we expect that it's going to exceed those numbers going into the rest of 2022 and 2023.

Even the International Energy Agency, which is based in Paris, where we get a lot of our data, says that even if every country meets its Paris Climate Accord commitments, which I think is unlikely, we'll still be getting 50% of our energy from oil and gas in 2040.

The Denver Gazette: What does that bode for American fossil fuel production?

Sommers: The real question that policymakers have to address is when you conclude that oil and gas are going to play a significant role in our energy future, where should that oil and gas come from? Should it come from Saudi Arabia? Should it come from Russia? Should it come from OPEC countries? Should it come from Venezuela? Should it come from countries that are hostile to American interests? Or should we produce it here right here in the United States?

The Denver Gazette: How do you address complaints that the industry is ignoring climate change?

Sommers: All my member companies are making environmental commitments to ensure that their missions continue to go down. We need to continue to produce here to supply the world with the energy that we need, that the world is going to need.

I think a lot of that has come home in the last couple of months as a consequence of (Russian President Vladimir) Putin's invasion of Ukraine. And I think people are starting to realize that energy reality is going to require a lot more oil and gas in the future. I'm hopeful that it focuses politicians' minds on the importance of this homegrown energy right here in Colorado.

The Denver Gazette: How do you respond to those who believe that oil and gas production should be ended completely and immediately?

Sommers: Well, one thing we know is that the world is going to require all forms of energy going forward. I often say that we, as an organization, accept that renewables are going to play a bigger part of our energy future. There's no doubt about it.

What opponents of the oil and gas industry don't acknowledge is that oil and gas is going to play a significant role going forward, as well. The IEA expects that world energy demand is going to go up by 50% by 2050, and there are going to be 2 billion more people in 2050. Where are they going to get their energy?

It's going to be a mix of renewables, oil and gas, nuclear, and all sorts of different kinds of energy solutions. We embrace that. But we also know that the core of that energy is from this industry. So, we embrace it and we know that we're going to have to continue to grow our footprint here in the United States.

The Denver Gazette: What are the consequences of shutting down oil and gas extraction before renewables are completely able to replace them?

Sommers: What you're really doing is you're subjecting billions of people to poverty. There are almost a billion people in the world today that don't have access to reliable energy. They're still getting their energy from wood or dung … sources like that, which would be unheard of here in the United States.

I think one of the ways that we improve the human condition is to ensure that those people can get access to natural gas and oil, hopefully from the United States.

I think the concern would be that, if this so-called energy transition happens too fast, those are the people … the most vulnerable among us … that are going to be the biggest losers. We're about trying to uplift people, trying to get them out of energy poverty. That's what our focus really needs to be.

The Denver Gazette: Given that fossil fuels, as you say, are going to be needed into the foreseeable future, is this transition to 100% renewables a realistic goal?

Sommers: The truth of the matter is we've been transitioning through energy for thousands of years. But very rarely is it an actual transition.

If you think about the fact that, in the 1950s, oil and gas overtook coal as the No. 1 source of energy, but we're still using three times more coal than we were in the 1950s. We didn't transition from coal; we added in another energy source. And I expect that's what's going to happen in the future, as well. It's going to be about energy addition. It's not going to be about energy transition.

The Denver Gazette: What about CO2 emissions from other nations?

Sommers: Our emissions in this country have been going down for over a decade because of the switch from coal as the primary way that we heat our homes and power our lives to natural gas, which is 50% more clean than coal. So, we are doing everything that this country can do to make that transition to cleaner fuels.

On the other hand, you have countries like China that are building more and more coal plants every single day. So, here in our country, emissions are going down while production is going up, whereas in China emissions are going up because they're adding more coal to their energy fleet. And that should get the attention of policy makers.

I think the way that we help improve that is we continue to produce natural gas here in the United States because we want to export the environmental progress that we've made here.

The Denver Gazette: What are the obstacles to exporting natural gas to Europe?

Sommers: The fastest way to get it is from the most prolific natural gas field in the world, the Marcellus shale in Pennsylvania and Ohio, and get it quickly to an LNG terminal and get it out of the United States. But unfortunately, because of how this system works, you have to get that LNG all the way to Louisiana, go through the Gulf of Mexico and then transport it to Europe.

The Denver Gazette: Why not ship LNG to Europe from East Coast shipping terminals?

Sommers: There is one, but it's not enough to supply what Europe’s needs are right now. It's in Pennsylvania, and they've been trying to site another one right on the Delaware River for over a decade. And they can't get the permitting done.

They're incredible facilities and they're really exporting American environmental progress. And, by the way, American democracy. Europe could not make the decisions that they are making today were it not for U.S. LNG and U.S. oil.

Think about the fact that when Russia invaded Ukraine, a week after that the industry said, ‘We're not importing any more Russian crude oil.’ We couldn't have made that decision 10 years ago when production in the United States was actually going down, not up. And the amount of gas that we're producing now is incredible. It is because of this industry that we are able to make the foreign policy decisions that we're making today.

The Denver Gazette: Why is the war in Ukraine so impactful?

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Sommers: Russia supplies about 30% of Europe's gas needs. And one of the reasons why Ukraine is such a prize for Putin is because there was a lot of pressure on that so-called Nord Stream 2 pipeline. But there are direct pipelines that go through Ukraine to Europe. So, if he were to get the prize of Ukraine, it doesn't even matter because he has pipes that would be going through Ukraine to get directly to Europe.

The Denver Gazette: Why is Europe in such dire energy straits just now?

Sommers: Germany, and Europe in general, are examples of a continent that has been trying to make this transition too fast. And unfortunately, foreign policy reality has entered into the mix, and they've been left in an energy (insecure) environment.

But I'll remind you that they dealt with the exact same thing during World War II. You know, 90% of the crude oil that was used to win World War II came from the United States.

So, they've been energy insecure for decades. And it's really been the United States that's been able to provide the energy that they need to empower their economies. They made this decision, whether it was to close nuclear plants or to close coal plants prematurely and get all their gas from Russia.

That's fine if you forget who's on the other end of that pipeline. The warning signs from Russia have been there for more than five years. (Putin) really did try to integrate his economy for 22 years more into the Western economy, and he's destroyed it all in three months’ time.

The Denver Gazette: Recently, the UK, which relies heavily on wind power, suffered through several weeks of low or no winds and had to spend a great deal of money to buy power from the few remaining private coal-fired power plants they have. What’s your take on that?

Sommers: Well, that's why natural gas is so important. It is really the perfect partner to renewables, whether it's wind or solar. You need natural gas to back it up for when the wind isn't blowing, or the sun isn't shining. And that's why natural gas is such a great partner because it provides that resiliency to the system that wouldn't be there without it.

The Denver Gazette: What about the carbon impacts of natural gas? A lot of people are talking about that. Are there solutions to those impacts?

Sommers: I think the real concerns that have been raised, and one that we want to address, is the methane emission issue. We know it's a problem. I'm confident that this industry is going to solve the methane problem in short order because ultimately, we have an economic incentive to do it.

And there's a room here for regulators, both at the state and the federal level as well to help prod the industry to get this done. We're working right now with the Environmental Protection Agency on a new methane regulation. And we're hopeful that it comes out soon.

The Denver Gazette: Ms. Granger, what's your take on all the regulations that were put in place recently in Colorado?

Granger: We've been in a constant state of rule making here in Colorado for the last several years. As part of the governor's greenhouse gas roadmap that you referenced, and as part of a couple other pieces of legislation from a few years ago as well, I think what we've focused on is coming to the table.

We've been having these discussions. A lot of our member companies have been doing, as Mike said, focusing on lowering their emissions without government interference for a very long time. But what we've tried to do is come to the table with other stakeholders to get to a point of consensus on some things.

But I think what we're seeing now, after constant rule making over the last couple years, is the low hanging fruit from our industry, it's been picked here in Colorado.

And it’s obviously very frustrating. When our emissions continue to decline in Colorado, but we've quadrupled production here over the last decade while simultaneously reducing our emissions by 50%. That is huge.

So, we are coming to the table; we are doing our part. I think what we would like to see is the state recognize all of the hard work that this industry has done and celebrate those wins that we've been able to accomplish here in Colorado, instead of consistently being attacked.

The Denver Gazette: What has the economic impact of these new regulations been on the industry?

Granger: That’s a great question. I think that's yet to be seen, as we are just now concluding the rule makings from Senate Bill 181. We are continuing to see rule makings over at the Air Quality Control Commission and we will for the next year. But back of the napkin math, we've really added about a half a billion dollars annually in new regulatory costs for this industry in the state.

The Denver Gazette: Can you give us a general figure of what the industry itself produces by way of revenues?

Granger: This is a $30 billion industry here in the state. We directly and indirectly employ about 340,000 folks here. This is a cornerstone of the Colorado economy. We would like to see it continue to be that, but unfortunately Colorado has also been the slowest to recover for this industry across the nation by far.

We are now up to about 14 rigs, but pre-pandemic we were sitting at about 23. So, when you look at the recovery everywhere else, it's come on pretty fast and furious. Unfortunately, it hasn't here because the regulatory and the political environment remains uncertain. So, when folks are looking where to invest their dollars, Colorado is not at the top of that list right now, and we'd like to see that change.

The Denver Gazette: What does the political and regulatory environment look like in the future for oil and gas here in Colorado?

Granger: Man, if I had a dollar for every time I was asked that question. I wish I knew the answer. Again, the uncertainty and the instability around this industry … it's been like that for the last decade. I would say, obviously, in the last five years that uncertainty has grown. I think right now we are hoping that we have some stability.

The message we're trying to send is we've gone through these years of rule makings. We've come to the table. We don't agree with everything that's happened, obviously, but we really want to try to work under this new regulatory framework and see what we can do.

But those rules need to be allowed to work. You know what we're seeing this legislative session? We were told there will be no legislation directed at oil and gas this year. That is absolutely not the case.

So, while we're still in rule makings from Senate Bill 181 years ago, we're continuing to see more legislation directed at our industry that calls for additional rule makings. And so, there's never a time for us to catch our breath and say, ‘Here's the new landscape. Here's how we can function and operate under this new landscape,’ because it's just a constant battle here.

The Denver Gazette: What legislation came up this year?

Granger: We had a number of air bills. Everybody is very concerned that we've just recently been redesignated in the Denver metro area for ozone.

It's just that it's constant. It's never good enough. And so, we've got to continue to increase what we're doing here in Colorado. And it's been very frustrating.

The Denver Gazette: Have there been any substantial verified instances in Colorado where fracking has contaminated anything?

Granger: I'll say one of the issues that we were faced with this session, and why we saw this chemical disclosure bill, was because there was a report that came out that said that PFAS chemicals, the forever chemicals, are being used in hydraulic fracturing fluid. That might have been the case a decade ago, but our members do not use PFAS in hydraulic fracturing fluid.

But then they accused us of hiding them in trade secrets. The state did testing of around 400 frack sites in Colorado, and none of them came back with PFAS chemicals above the EPA recommended limits.

The Denver Gazette: Do you know of any contamination above ground?

Granger: Not from hydraulic fracturing, not in groundwater, no. With all of our rule making last year, we went through a whole well-bore integrity rule making here in the state of Colorado. We have the most stringent regulations on well bores in the nation that continues to increase protections for groundwater.

And so, let’s talk about belt and suspenders. That is absolutely what we have here in Colorado by way of regulations. Again, it’s very frustrating to not be able to work within the framework that has been developed here and continue to see the goal post move on a monthly basis.

The Denver Gazette: How does the industry dispose of frack fluid once the fracking has been completed?

Granger: Water is a huge issue here in Colorado. Our operators are really focused on our produced water. And everything we put down hole, we take right back up, we clean, and we move on to the next site. We are very focused on water conservation here.

Editor's note: This article has been updated with correct data. Two other clarifying changes were also made. 

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