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Colorado Sees Oil and Gas Opportunity in Russian Aggression

Political leaders, mostly Republican, are calling for increased production of oil and gas in Colorado to reduce reliance on Russia and Saudi Arabia. But environmental advocates see this as further reason to invest in renewable energy.

(TNS) — Russia's invasion of Ukraine set off the latest shock to international energy markets, renewing a call among politicians at the state and national levels — mostly Republicans so far — to reduce the heavy U.S. reliance on imports by ramping up oil and gas production in places like Colorado.

Republican gubernatorial candidate Heidi Ganahl argues it's the quickest way to make a dent in U.S. imports from Russia, the world's second-highest oil producer behind the United States. U.S. Rep. Ken Buck of Windsor suggests increased Colorado natural gas production could help European utilities offset their heavy reliance on Russian gas. And at President Joe Biden's State of the Union address to Congress this week, U.S. Rep. Lauren Boebert wore a black shawl with a simple message on the back: "Drill Baby Drill."

More domestic production is one route toward energy independence over Russia, Saudi Arabia and others that have come under international scrutiny for their policies, military actions and human-rights records. And there's no question Colorado's industry — which ranks fifth in the nation for crude oil production and seventh for natural gas — has the capability to produce more in the state's expansive reserves, at least in theory.

Just three years ago, the state's oil wells produced a record 192 million barrels of crude — 30 percent more than what pandemic-rattled producers were estimated to extract here last year, according to state figures. Natural gas production has declined much less from recent highs.

" Colorado is poised to ramp up production, as are other basins" across the country, said Dan Haley, the president and CEO of the Colorado Oil and Gas Association. "And I would argue that this is the place where we should ramp up production, just based on the fact that we are doing this cleaner and more efficiently than any other place on the planet."

But if Democrats and environmental advocates tend to share the broader goal of achieving energy independence, they see more investment in renewable energy as the obvious path forward, since fossil fuels exacerbate climate change. In the last decade, they point out, a surge in innovation and investment has made solar and wind power much cheaper and easier to scale up.

"Tell me a time when the oil industry (and its backers) didn't say more drilling is the solution," said Kelly Nordini, the CEO of Conservation Colorado. "That's why we're in this dilemma."

In the complex global energy market, experts say incremental increases in oil and gas production in the United States don't directly translate to lower prices at the gas pump — though over time better domestic supplies could insulate against international currents.

In Colorado, Gov. Jared Polis and the Democrat-majority legislature in recent years have overhauled the state's oversight of the oil and gas industry and approved new buffer restrictions on the placement of fracking wells near homes. They've also pushed for a faster transition to solar and wind power, along with conversions of coal power plants to cleaner-burning fuels.

The industry regulations, still being implemented, still stoke heartburn for the oil and gas industry, as does the industry's legal wrangling with the Biden administration over new mineral leases on public lands, including in Colorado. Haley cites an uncertain regulatory climate as one factor that has slowed producers' pandemic recovery here compared to other states. Also in play are broader economic forces, including a wave of mergers and acquisitions affecting Colorado-based producers; shortages of rigs, trucks and workers; and investor pressure on some companies to focus more on transitioning to renewable or cleaner energy sources.

Still, Haley insists: "We have the energy we need, we just need the ability to develop it."

U.S. Has Imported More Russian Oil Recently

While the factors affecting domestic production are complex, one thing is not: The United States was growing more dependent on Russian oil before that country's recent invasion of Ukraine, not less. U.S. companies don't directly import Russian natural gas.

Oil from Russia made up 7.9 percent of monthly imports to the U.S. last year, according to a recent Wall Street Journal analysis of data from the U.S. Energy Information Administration. Russia accounted for the third-highest share of imports, behind Mexico (8.4 percent) and Canada (51 percent) — making Russia a sizable, but not dominant, supplier.

U.S. oil companies began importing more Russian oil in reaction to another geopolitical shock: the United States' aiming of economic sanctions at Venezuela's regime in 2019, which turned off the spigot from that country, according to PolitiFact. Though crude oil imports from Russia remain comparatively low at 3 percent of U.S. imports, they more than doubled last year.

Meanwhile, imports of refined oil products from Russia, including gasoline, accounted for 21 percent of U.S. imports in that category last year but grew much more slowly.

Some Democrats at the federal level have joined Republicans in pushing for a ban on oil imports from Russia, including both of Colorado's U.S. senators, Michael Bennet and John Hickenlooper. Hickenlooper on Thursday said he signed onto a bipartisan bill that would enact such a ban, and he called for efforts to "accelerate the deployment of renewable energy sources" to fill the gap.

Sen. Joe Manchin of West Virginia, another sponsor of that bill, is the most prominent Democrat also to call for increased domestic oil and gas production.

Colorado's energy industry is still coming back from pandemic shocks. The Colorado Business Economic Outlook for 2022, issued by the University of Colorado's Leeds School of Business in December, forecast that oil and gas extraction would increase modestly in the coming year. But it noted that just a third as many active rigs were digging new wells last year compared to 2020.

The school's researchers forecast that the broader natural resources and mining sector, which lost nearly 9,000 jobs in the last two years, would add 600 jobs in 2022.

Ganahl, a CU regent who's one of several GOP contenders for the party's nomination to run against Polis in November, has been outspoken in recent days in support of more production. In one radio interview, she mentioned Ukrainian President Volodymyr Zelenskyy in arguing that an expansion of renewable energy shouldn't be the current priority.

"There is a place for all energy options, but Zelenskyy cannot rely on solar and wind power right now," she quipped.

In an interview, Ganahl said she sees big potential for renewable energy sources in the long run. But the pace of adoption is too slow, she said, and Colorado should support the fully developed energy industry it's got, one that an industry group estimated employed 69,000 people directly and 271,000 indirectly as of two years ago.

On Monday, a new report from the Intergovernmental Panel on Climate Change, convened by the United Nations, warned that nations weren't acting quickly enough to address climate change, including transitioning away from fossil fuels for energy.

Asked about that warning, Ganahl said: "As the governor, I would think that we should produce the cleanest energy that we possibly can. That happens far more often in Colorado than it does in Iran or Russia. ... Let's do more of it here where we have more control over it, instead of handing it off to countries that don't care about the environment."

"Double Down On Affordable Renewable Energy"

Ganahl and other Republicans plan to make energy a big issue in this year's elections, and Russia- Ukraine conflict gives them a new cudgel.

Expect Polis and other Democrats to hold their ground and defend their record.

"Colorado consistently ranks among the top seven states in the country when it comes to total (energy) production," said Conor Cahill, a Polis spokesman. " Gov. Polis also believes we must double down on affordable renewable energy produced right here in our country, so that America's energy future should not be tied to geopolitical conflicts and global commodities markets."

Cahill's statement came with an acknowledgment that even with more stringent industry oversight and permitting, it's ultimately the oil and gas companies that decide where and how much to invest. A big factor is whether commodity prices make it worth their while; they've risen lately because of the Russian conflict.

"If prices remain in excess of $100 per barrel (of oil) as they are now, investment would flow to the Niobrara and Denver basins," Cahill wrote, "but that would be up to private companies to decide for themselves, not the government."

For Ramesh Bhatt, who chairs the Colorado Sierra Club's conservation committee, the recent IPCC report is an alarm bell that makes any expansion of oil and gas production reckless, no matter the intention.

"We're already in a hole here. We don't want to dig deeper," Bhatt said. "We should also remember that the very reason that despots like (Vladimir) Putin are doing what they're doing is because of our dependence on fossil fuels."

Nordini, from Conservation Colorado, also argues for longer-term thinking.

"I think the public knows what is really expensive is a future where we have not dealt with our climate," she said, "and where we're still dependent on bad actors in other countries and hit by the massive costs of dirty air, extreme storms, wildfires (and) drought. So we know that we've got to build a clean energy economy that cuts costs and pollution — and builds security and stability."

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