STERLING — The Rotary Club continued their “Distinguished Speakers” series Wednesday, with Dan Eberhart, CEO of Frontier Energy Group, LLC, the parent corporation of Cable Inc., and Luft Machine & Supply, Inc.
“I’m here today to speak on the economic outlook for the oil and gas industry in northeastern Colorado,” he said.
Eberhart spoke about the Niobrara formation in the Denver-Julesburg Basin, which contains natural gas, and how Sterling can take advantage of the potential boom.
“To a certain extent, most of the Niobrara’s hydrocarbons were inaccessible using the conventional methods typically used in the past until very recently,” he said. “Accessing future reserves is becoming more complex, technologically intense and is associated with additional costs and risks for the oil companies, not to mention increased safety concerns.”
Initial production figures for the JAKE No. 2-01 well, in Weld County were an “astounding” 1,558 barrels per day, Eberhart said. Over the first 90 days it averaged 555 barrels a day, and now the well’s producing 250 to 300 barrels per day.
“This is a significant chance and opportunity for northeastern Colorado. Communities such as Sterling are in a great position to take advantage of this Niobrara play, regardless of whether the fuel is in Weld or Logan County,” Eberhart said.
He noted oil booms can help lower the unemployment rate, and bring more development to the area, as well as tax breaks for everyone.
Eberhart gave three suggestions of how Sterling can take advantage of the Niobrara play.
“Shape your vision,” he said. “Do what it takes to make Sterling stand out for the oil companies and service companies if you want to bring in the jobs, bring in the companies.”
Eberhart encouraged the community to be knocking on the doors of the medium and large service companies that have made noise about or are considering getting involved in the Niobrara play, and tell them why they should come to Sterling. Point out the area’s assets, like the rail line and the low cost of housing.
His second tip is to “leverage your resources.” Oil exploration production companies require a massive amount of trucks, water, sand, manpower, housing and so on.
Lastly, he encouraged people to keep an open-minded entrepreneurial approach.
“This budding oil boom will give northeastern Colorado an exciting chance to build and maintain a substantial growth curve,” Eberhart said.
When asked for specific examples for what the community can do, he suggested offering economic incentives or just doing general marketing to people in the industry moving here or service companies or oil companies that are coming in.
Eberhart noted the oil and gas industry directly employs about 55,000 people in Colorado and supports about another 190,000 ancillary jobs, creating about $24 billion in added economic value. About 9.3 percent of the state’s total gross domestic product is directly related to oil and gas.
According to the Energy Information Administration, Colorado has 10 of the largest gas fields and three of the largest oil fields in the country.
The last 10 years has seen a doubling in the number of land and offshore rigs operated worldwide. Eberhart noted that as of February 24, there are over 1981 active rigs in the U.S., an increase of 282, or 14 percent, since this time last year.
Most of the drilling represents tougher, more complex drilling conditions, but new technologies are making unconventional oil and gas more palpable now.
“Coupling the higher commodity prices with the new technology leads to a lot more plays,” Eberhart said. “We’re seeing the economic growth, we’re seeing some jobs, etc., etc.”
Fracking is one of the new technologies being used.
“One of the major issues with fracking is the water table and what it does to the water table,” Eberhart said.
It’s important to note that there is usually roughly a good mile between where the fracking is occurring and where the water table sits, he said, and the fractures, the green or purple bubbles, don’t actually go up, they stay pretty level. Even if they do go up they come back down to where the drilling is occurring; they don’t go just straight up to the water table.
“Fracking has provided a bright economic spot for a country struggling to keep and create good paying jobs,” Eberhart said.
He pointed out a recent study concluded that forcing the Environmental Protection Agency to regulate fracking would cause domestic gas production to drop by about 245 million feet per year. That in turn would force the closure of about one third of the natural gas facilities, resulting in a massive loss of revenue for a lot of local communities, the state and the U.S.
Additionally, he talked about Frontier’s commitment to the community.
They have already moved all of the company’s accounting operations to Sterling and are about to complete an expansion on Luft Machine, which will close to double their capacity there. Frontier intends to move all of their capital expenditure budget to Luft Machine, last year Luft did about one third of Frontier’s work, this year they’ll do about two thirds.
Erberhart also mentioned that as part of the build up in the DJ Basin, Frontier has spent over $2.5 million on new equipment since the beginning of 2010,”
“Frontier has made a big stride towards increasing our capacity through that new equipment, through an extended facility in Evans, Colorado, which will increase our fleet capacity by about two thirds,” he said. “In addition to that we’re planning about $1 million of expenditures in northeastern Colorado in 2012.”
“We’re committed to the community and we’re committed to trying to grow our business here.”
Callie Jones: (970) 526-9286; firstname.lastname@example.org