The Daley Note: April 26, 2023
An environmental coalition plans to put forward a state ballot initiative to ban the permitting of oil and gas wells in Colorado by 2030.
The umbrella coalition, Safe & Healthy Colorado, includes dozens of environmental and anti-fossil fuel groups. The ballot proposal appears similar to Proposition 112, which was rejected by Colorado voters in 2018. The coalition cites the need to rein in fracking, and that Colorado Gov. Jared Polis has come up short on his promise to take bold climate action while in office. Over 124,000 signatures would be required to place the initiative on the state ballot ahead of the 2024 election cycle.
East Daley sees relatively low risk of this proposal gaining traction with voters. In 2020, Colorado completed an overhaul of the state’s oil and gas permitting rules, including a restructuring of the Colorado Oil and Gas Conservation Commission, the industry regulatory body. The process took several years and included feedback from numerous constituent groups impacted by drilling. We would expect some ‘reform fatigue’ to set in following that effort, creating a high hurdle for proponents of a drilling ban to convince voters that additional change is needed.
Nevertheless, East Daley Analytics can evaluate the potential impact of a permitting ban using our Production Scenario Tools in Colorado basins, including the Denver-Julesburg (DJ) and Piceance. The Production Scenario Tools include our long-term oil and gas forecasts across 15 North American basins, adjustable based on rig count assumptions in each region.
The DJ is the most active basin in Colorado, and therefore is where the industry has the most value at risk from a potential drilling ban. East Daley currently forecasts the DJ to produce nearly 500 Mb/d of crude oil and 3 Bcf/d of gross gas in 2023. We model volumes increasing to 561 Mb/d of oil and 3.1 Bcf/d of gas by the start of 2030. Assuming a permitting ban began in 2030, we estimate production would decline to 166 Mb/d of oil and 1.5 Bcf/d of gas by YE33 (see figure). 
Such drastic actions no doubt would negatively impact midstream operators. The largest in the DJ include Phillips 66 (PSX), which recently acquired G&P assets owned by DCP Midstream, and Western Midstream (WES). These systems gather and process ~60% of natural gas volumes in the DJ. According to East’s Daley’s Energy Data Studio, the DJ system represents 38% of Western’s estimated EBITDA in FY23. – James Taylor Tickers: PSX, WES.
1Q23 Earnings Previews Now Available in Energy Data Studio
East Daley Analytics has published 1Q23 Earnings Previews and Financial Blueprint Models for midstream companies in our coverage. Our industry-leading Blueprints provide historical and forecasted volumes and financial information for 1,300+ midstream infrastructure assets by individual company.
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Energy Data Studio leverages our G&P data set for insights into midstream assets across every major oil and gas basin in North America. Users can navigate detailed visual dashboards by region, pipeline, or individual asset to understand crude oil, natural gas and NGL supply at the most granular level.
Energy Data Studio is available through data downloads from the visual interface, in Excel files, or as a direct feed delivered into subscribers’ workflow via secure file transfer. To learn more about Energy Data Studio, please contact insight@eastdaley.com.
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