Changing energy policy rules keep Colorado guessing in election year

Reed Williams and Steve Bachar both say federal government messes with business.

Reed Williams wants to drill a gas well on Colorado's Western Slope. Steve Bachar's Denver-based company is trying to sell energy-efficient systems for cooling towers. Both say federal government messes with business.

"The one thing we aren't doing well is creating predictability in the energy business," said Bachar, chief executive of Silver Bullet Water Treatment.

"It doesn't matter whether you are an oil and gas company or a renewable energy company," Bachar said.

Williams echoes Bachar, saying, "It just feels like the rules keep changing."

The question now is what impact the 2012 presidential election will have on the rules.

President Barack Obama has been a supporter of renewable energy, which he argued was a job creator, while trying to balance opening public lands to oil and gas development with conservation concerns.

Obama's presumptive Republican challenger Mitt Romney is opposed to incentives for renewable energy — such as the wind- production tax credit — and for opening as much public land to drilling as possible.

This debate is not an idle one for Colorado, where 22,394 people worked in oil and gas production in 2010 and nearly 19,000 are employed in the renewable energy sector, based on state figures.

And yet from the Western Slope well fields to the Eastern Plains wind farms, Colorado, like the rest of the country, has had to cope for decades with a lack of a consistent energy policy.

"We've been trying for an energy policy since Richard Nixon," said Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution, in Washington, D.C.

"But we have too many conflicting interests," Ebinger said. "Everything is a fight."

Nowhere is the weight of the vagaries of federal energy policy now falling heavier than in the wind and solar industry, company executives say.

The specter of the loss of the wind-production tax credit — equal to $22 for every megawatt-hour a wind farm produces — will lead to a 90 percent drop in the U.S. wind market, according to IHS Emerging Energy, a consulting group.

"The reality is we are going from the best year we've had in the United States to the worst," said Steve Dayney, chief executive officer of REpower USA, the Denver-based American subsidiary of a German wind- turbine maker. "We are looking at the Grand Canyon of cliffs."

The wind industry employs about 5,000 people in Colorado. Danish Vestas Wind Systems A/S is the prime employer, with 1,700 workers in four factories. And Vestas, which is also a major customer for component factories in the state, will be forced to lay off 1,600 employees if the tax credit is not renewed, according to Ditlev Engel, the company's CEO.

Dayney said the industry is prepared to see a phase-out of the tax credit to give companies time to adjust.

The Romney campaign rejects that idea. "The question is whether wind is a good investment," said Oren Cass, a Romney adviser. "If it is a good investment, investors should be lining up, and if it isn't, the taxpayers shouldn't foot the bill."

Romney "supports any technology that is affordable," Cass said.

The Obama administration is for extending the wind tax credit and other incentives to renewable energy companies — pointing out that the oil and gas industry gets $4 billion in tax breaks.

Still, the administration's loan guarantees to aid startup solar panel makers — Solyndra and Loveland-based Abound — have drawn fire and left taxpayers on the hook for of millions of dollars.

The companies were done in by a 70 percent fall in the price of solar panels — due to low-cost Chinese imports.

The Solyndra bankruptcy cost taxpayers $503 million, and the Abound failure will cost up to $60 million.

In May, the U.S. Department of Commerce imposed an average 31 percent tariff on Chinese solar panels, ruling they were being sold below cost.

The Solyndra and Abound failures are also an Obama administration failure, Cass said. "Government leading investment, that has been a disaster," he said.

The Romney position is to limit support to basic research and development and "promote research and development that doesn't benefit just one company," Cass said.

The Obama administration is unapologetic about its approach and points out that renewable energy generation has doubled to 174 terawatt-hours in the last four years.

"The president doesn't want to cede the renewable energy industry, and the jobs that come with it, to China and India," said Heather Zichal, a White House energy adviser.

Still, to some the debate sounds like a cacophony. "People are going on with their business, ignoring the campaign and will deal with whatever happens after the fall," Silver Bullet's Bachar said.

Environmental tangle

Reed Williams' goal was simple — drill a natural gas well on some acres his Denver-based wildcat company, WillSource Enterprises, leased in the White River National Forest, south of Silt.

"It had been an oil and gas area with at least 80 wells in the general area, but things changed," Williams said.

In the 17 years since Williams first sought to develop the area new environment regulations — such as the rule to limit new roads in pristine forests — came on the books.

A local environmental group — the Thompson Divide Coalition — formed to oppose drilling on the land.

WillSource was required to do a second environmental assessment to address concerns that had been raised.

Rules and environmental opposition have strangled efforts to develop the land and meet the lease conditions set by the federal Bureau of Land Management, Williams says.

The problem wasn't regulations, but that Williams ran into financial difficulties, said Peter Hart, an attorney with the Wilderness Workshop, citing BLM e-mails.

"And until the conservation community started looking into it, the BLM didn't do its job," Hart said.

On July 5, the BLM cut Williams drilling area by 75 percent to 2,100 acres for failure to meet his lease terms.

The story, oil and gas industry executives say, is common across the West as regulations have increased and opposition to leasing has been fierce.

They point to a 62 percent decline in leases sold in the West in last three years — although there was also a 68 percent drop in the price of natural gas between the time Obama took office and April.

Hangover of leasesObama administration officials and environmental groups say they are dealing with a hangover of leases and permits hastily issued in the last days of President George W. Bush's administration.

"We are going to take a look at all the midnight actions of the Bush administration and see what needs to be changed," former Colorado Sen. Ken Salazar said when taking over as secretary of the Department of Interior.

At that point, 74 percent of all the leases issued by BLM in the West faced administrative or legal challenges by environmental groups.

For example, about 35,000 acres of leases on Garfield County's iconic Roan Plateau were tied up in court for 46 months before a judge sent the plan back to the BLM to be redone.

"Public lands aren't just for oil and gas drilling," said Nada Culver, a senior attorney with the Wilderness Society, a conservation group.

The Obama administration put in place new leasing rules it said would increase transparency and reduce challenges. The change has tripled the time for getting a lease to a year and a half, said Kathleen Sgamma, a vice president at the trade group Western Energy Alliance.

But the number of protests once a driller got a lease dropped in 2011 to 10 percent — showing that the reforms are working, said the Wilderness Society's Culver.

Obama and Romney take very different approaches to the problems Williams, Sgamma, Culver and Hart see.

"We have to accesses our resources, but instead people have seen a sharp decline in leasing due to byzantine regulations," said Romney adviser Cass.

Romney would "streamline" leasing and permits, create one-stop shopping for permits "in an environmentally responsible manner," Cass said.

The Obama administration holds that the leasing reforms are working — and oil and gas production on federal land are up 13 percent in the last three years, said the White House's Zichal.

"We are continuing to look at developing new areas onshore and offshore, though there are some areas that should be set aside," Zichal said.