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Erie v. Crestone Peak Resources: Background on the Operator’s Agreement Invites More Questions Than Answers

Published on: April 1st, 2020

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Editor’s Note: This article was compiled by a team of Yellow Scene staff and freelancers. All interviews were conducted by the Managing Editor, De La Vaca. 

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Despite being in the midst of an international public health crisis, citizens across the country will still participate in national and local elections. In fact, an Erie Town Administrators email on March 23rd suggested there was no legal way for a statutory town like Erie to cancel an election, even during a crisis. Thus, we should go into our local election day knowing as much as possible about some of our candidates and the actions of the town and board over the past few years.

 

It’s no secret that the town of Erie has built, as part of that past, a strong relationship with the oil and gas industry. Erie is considered one of the most fracked towns in the state, with over 300 wells nestled in its 19.5 sq mile. This number is not sitting well with many who are new to Erie, as well as many not-so-new residents who fear for the future of their town, according to one resident.

 

Oil and gas exploration is a fact of life to those of us who live in Erie, but it’s a fact that many residents are working to change. In 2018, the majority of voters cast a vote for a board and mayor that they felt would work to stem the O&G tide. In that election, then Board of Trustee member Jennifer Carroll won her race for mayor by a landslide against challenger Dan Woog, also a trustee at that time. Mr. Woog’s campaign, as well as then trustee candidates Barry Luginbill, MacKenzie Ferrie, and Liz Locricchio, had over $55,000 spent on advertising by Vital Colorado—a now-defunct pro-Oil and Gas committee. Luginbill, Ferrie, and Loricchio all failed to win seats on the Board. Luginbill is currently running for the mayor’s seat against incumbent Jennifer Carroll and current Trustee Christiaan van Woudenberg.

 

Erie is split between Boulder and Weld Counties, along County Line Road. It is one of the most populous towns in Weld County, a county that sits atop a heap of oil and gas production in Colorado. Currently, 43.1% of statewide production and two-thirds of all active wells in the state reside in Weld County (2015). Recent data suggests that ~75% of all natural gas production is shipped out of Colorado, with much of that production shipped out of the country. 

 

Erie, as a result, draws a lot of attention from the oil and gas industry, which has subsequently become an ever-present influence in town politics. Erie, however, does not equitably benefit from the risk it takes. Data shows that for the 300 wells that exist in Erie’s neighborhoods and open space, the town only received ~$270,000 of its ~$67,000,000 budget from O&G severance taxes in 2019. To put it in simpler terms, Erie collected only about 0.4 percent (that’s four-tenths of one percent) of its total revenue, and less than $850 per well, from the supposed financial boon to Erie that is oil and gas within its borders. 

 

It seems that the boon has not extended to all of the residents of Erie. So how was this failure addressed?

 

Official documents obtained through Colorado Open Records Act (CORA) requests suggest that the recent Crestone Operator Agreement (OA), an opportunity for Erie to increase its share of the windfall, had more working parts than were made public. The Agreement was passed on an expedited timeline, while few of the details were revealed to Erie’s residents, information that apparently was kept even from those who asked for it. 

 

Here is some background on the Agreement:

 

The Crestone Operator Agreement is an arrangement signed between the town of Erie and Crestone Peak Resources for a 30-well mega pad south of the Erie Airport that will have a long-term impact on residents of two towns and three major neighborhoods. If similar past projects are any example, dramatic increases in industrial traffic, noise, odor, and dangerous airborne byproducts are expected as extraction operations begin. 

 

The pad (according to the April 2018 application for the site, which was only for 15 wells) sits 588 feet from the nearest house, ~1000 feet from the airport runway and ~400 feet from State Highway 7, a major thoroughfare. With the addition of another 15 wells on the same site, these distances have likely shrunk. The town received some concessions by signing this deal but, as outlined here, there were other important considerations that were ignored and other options that could have been taken in support of residents who would bear the brunt of the impact.

 

To understand how this happened, we’ve created a timeline based on documents we received that led to the approval of the mega Acme Pad and Crestone’s Operator Agreement. Some of these emails were shared anonymously because our sources asked to remain anonymous, although all emails are public records subject to CORA

 

    • May 2018, Crestone Peak Resources filed two applications for large 15-well pads: Vessels (surrounded by businesses, homes, and schools), and Acme (surrounded on three sides by large neighborhoods).

 

    • July 9th, 2018, the Erie Board of Trustees met with Crestone to discuss what the trustees wanted regarding an updated OA for this site. This was the first known discussion between these two parties regarding what would become the 30-well industrial operation known as Acme.

 

    • July 10th, the town passed a six-month moratorium on new drilling.

 

    • October 18th, the initial work on the OA was complete.

 

    • October 27th, a public information meeting on oil and gas matters was held with three days notice (image), on a Saturday, at the Erie Police station. The Crestone OA (Operator Agreement) and the Acme Type B Quasi-Judicial Application, discussion topics on every resident’s mind, was forbidden.

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    • October 30th, during the normal Board meeting time, the OA failed to pass by a vote of 3-4, with Mayor Carroll, Mayor Pro-tem Deakin, and Trustee Haid voting in favor, and Trustees Charles, Woog, Gippe, and van Woudenberg voting against.

 

    • November 1st, Crestone submitted a 2A application for Acme in spite of this vote.

 

    • November 4th, that following Sunday, the OA was voted on again with less than 30 hours of notice, this time passing by a vote of  4-2, with Mayor Carroll, Mayor Pro-tem Deakin, Trustee Haid and Trustee Gippe voting in favor, and Trustees Charles and van Woudenberg voting against. Trustee Woog was not in attendance.

 

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Preceding that timeline, almost immediately after the passage of an odor ordinance in November of 2017, Crestone was fined for violating the ordinance at their Pratt site, located in the Vista Ridge neighborhood. Rather than pay the fines, Crestone sued the town. 

 

Mediation for that dispute took place on August 1st, 2018, after discussions on the Crestone Operator Agreement began. On August 6th, the attorneys representing the Town of Erie filed a motion for summary judgment, arguing that the town has the authority to enforce the odor ordinance. On September 11th, a full month before the initial work on the OA was completed, Weld County Court ruled that Erie has the authority to impose an odor ordinance. Surprisingly, on November 12th, a week after the Crestone OA was passed on its second attempt, the town settled the odor ordinance case with prejudice (meaning it cannot be re-litigated).


This begs the obvious question: why would the town argue on one hand that they have local control over O&G odor ordinances, then vote for the approval of the Crestone Operator Agreement insisting they had no choice? Why would the town settle a case that had been ruled in their favor?

 

A document by the advising attorneys to Erie, Sullivan Green Seavy, LLC, Attorneys at Law, dated April 29, 2018, obtained from the Erie Town website, stated the Town can regulate Oil and Gas in the following ways: 

 

    • “regulate the impacts of oil and gas development in the same way they regulate any other development through land use permits and regulations that are within the scope of their ordinary land-use authority as delegated by the Colorado General Assembly and/or home rule powers under Article XX of the Colorado Constitution”

 

    • “county special use permit requirements setting out standards for granting or denying special use permits that address consistency with the comprehensive plan, compatibility with adjacent uses, impact on county services, traffic, environmental impacts, and related standards for mining activities”

 

    • “local governments have authority to protect water quality of surface water supplies. Protection of water supplies is a matter of both state and local concern and may be regulated by local governments.”

 

    • “Local governments can regulate non-point source discharges.”

 

    • “Local governments have the authority to regulate oil and gas activities on State Land Board lands.”

 

Why wouldn’t the town use any of the tools and powers they were confirmed to have by their own attorneys?

 

Many of the answers to these questions can be found by looking at the day to day operations of Erie. Farell Buller is currently the Deputy Town Administrator. Ms. Buller came from the Parks and Recreation division, was hired as the Assistant Town Administrator to A.J. Krieger, served as Acting Interim Town Administrator after his dismissal, and remains in her current role as Deputy TA. She became the lead in the negotiations for Oil and Gas matters. 

 

On August 3rd, shortly after the town began negotiations with Crestone for an OA, an Erie resident sent an email to former town employee Marty Ostholthoff, asking if there were any new O&G applications filed, or any new information or progress on a few named O&G sites, including Acme. 

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Image of email provided to Yellow Scene

 

Ms. Buller responded to this email, informing the resident that Ostholthoff had left his position, that she would be responding to these requests, and that there was “nothing new”. This was two days after the town began negotiating with Crestone specific to the Acme site. In an email two weeks later, the resident again, “Just checking in again. Anything new on Acme, Cornflower, Dearmin Mae, or Shumaker? Any new COGCC 2a applications in Erie?”, and received a 1-word email saying “No” from Buller. In September, the same resident asked Ms. Buller the same questions and, according to the resident, never received a response.

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According to the emails obtained by Yellow Scene Magazine, Ms. Buller was aware of talks between the Town and Crestone. Instead of being forthcoming, she twice failed to divulge that information and then ignored the third inquiry.

 

Also according to the emails obtained by YS, Ms. Buller sought to calm the fears some trustees had on a process that was moving “too fast”. An October 26, 2018 email laid out a detailed timeline that covered the time since negotiations with Crestone commenced on July 9th of that year. The timeline listed several meetings, community outreach, and Board executive sessions in that three-month span. This email also includes an apology from Ms. Buller to the Trustees, for not taking the time to “pause and connect about all of (the) pieces”, suggesting she had a large part in the OA process and may have failed to properly communicate the specifics of what she was doing to the Board. Ms. Buller insists in the same email that she is not “the decision-maker for policy matters”, but appears to have been playing a significant role in the negotiations for the Crestone OA, up to that point.

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On October 31st, the day after the first OA vote failed, Ms. Buller sent another email to the Board, stating “If there is any additional information I can provide today, prior to Crestone moving forward with the 30 pad site at Vessels Minerals, with 2015 operator agreement standards please let me know”

 

She continues to state in the email that, “The entity viewing us through the toughest lens is obviously Weld County. They are waiting to see if our BOT is willing to work with Oil and Gas. Their estimated $34,000,000 contribution is obviously critical to the project’s success”

 

She pointed out that “it will be difficult for [Anadarko] to continue working with the Town, for the Town’s benefit” along I-25, if the Crestone OA wasn’t passed. From there she discussed the Airport Urban Renewal Authority (URA), and “that the roads are in terrible condition, have never been built properly…. With the full 30 pads we have a (sic) excellent chance of making all necessary improvements to ROADS, WATER, and SEWER for the residents/businesses in the Airport URA. This would be a direct to the (sic) residents ‘welfare’ for livable conditions”.

 

Her final comment reads as a justification for approval via the benefits at stake to influence the Board away from their decision to vote against the OA, by stating: she has “received notice today, Crestone is moving forward with Vessels Minerals site. This is 25 acre, 30 well pad site”, and that “we will have 2 large well pads, definitely we now have 15-30 additional wells drilled in Erie, without the operator agreement”. She includes, if “there is the slightest chance of adopting the agreement this week…please let me know and I would (sic) discuss with Crestone”.

 

This entire exchange demonstrates the influence Ms. Buller had over the process, specifically in the area of Oil & Gas operations in Erie. (We are unsure if her goal was to scare the Board into changing their decision by pointing out that permits for an additional 30 would soon be filed, or highlighting that Weld County would withdraw the $34,000,000 they had pledged to Erie to develop the I-25 URA project—a new development area on the northwest corner of I-25 and Erie Parkway, if the board “was not willing to work with Oil and Gas”.) Her emails seem to suggest that she was reminding the Trustees that $34,000,000 of Weld County funds hung on their approval of the OA, since those funds were tied into the Town being able to work with Anadarko. It is clear from that email Ms. Buller was informing the board that if Erie would not sign an OA with Crestone, then Anadarko would resist working with Erie and Weld County would not release the funds for the I-25 project. 

 

The definition of Quid Pro Quo is “a favor or advantage granted or expected in return for something”.

 

From this email, it appears that Buller is informing the BoT that the town would lose a lot of its future prospects for the I-25 URA if the Crestone OA was not passed. And while Buller does bring up the “direct to the residents ‘welfare’ for livable conditions” in the Airport URA by the approval of the Acme pad, she ignores that these same residents would then be subject to years of noise, odor, vibrations, and toxic byproducts from the industrial operation she was working to get approved.

 

Why would a town employee attempt to sway the decision of the Board or, at a minimum, write from a subjective rather than objective viewpoint? Why is there such a determination to prevent the town from using their recently-affirmed local control authority (via the odor ordinance lawsuit win on September 11th, 2018), or ignoring their own advising attorney’s suggestions, by pushing them to approve the OA?

 

In an email dated December 10th, Erin Lind (a regulatory analyst for Crestone) says to Buller that she “stopped by [Buller’s] office last week to drop off our Christmas gift to you and the rest of your office but I wasn’t able to catch you at the time”. Lind then immediately asks about “the status of the Acme application”.

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After the OA was approved, on November 4th, the Acme application was rewritten and began moving through the amendment/approval process, spearheaded by Buller. The same concerned resident who had emailed Buller about the status of new O&G applications previously tried again to get answers about the process after the OA was approved. The resident received vague answers, telling Yellow Scene that she, “had a hard time receiving an answer–Farrell said that they were following a process similar to most Operator Agreements but wouldn’t tell me what that process was.” The resident requested a phone meeting and then an in-person meeting to discuss the process, which went unacknowledged. Eventually, Amy Teezel, the town’s Administrative Operations Manager, responded that the application was in review for completeness. As of press time, a phone request for an interview with Buller remained unreturned, and a follow-up email request was either misunderstood or evaded, and answered instead with a link to the Crestone Operator Agreement on the town website.

 

During this review, an email sent to Yellow Scene detailing a resident’s experience and research regarding the Operating Agreement indicates that the “Acme application was rewritten, sent out for referral to required agencies (many of which, including Broomfield, objected to all or part of the application), and then administratively approved in October of 2019”. It appears that from the nature of the Type B quasi-judicial application this site was filed under, authority is given to the Town administrators to approve the agreement without a Board vote, and this same classification allows for the board to avoid talking about the application during public comment periods at meetings, with all discussion happening in closed executive sessions. The Board did not see the original application, or the rewritten application, before it was approved, according to people familiar with the process.

 

It appears that the Mayor and Board were kept at least partially in the dark, as evidenced in an interview for an article written in the Daily Camera posted on October 25, 2018. While I need to dive deeper into the details of the agreement,” Mayor Carrol stated at the time, “I am optimistic our efforts will be able to find areas where the operator is willing to extend air quality monitoring and other safeguards beyond the State mandate.”

Does this mean that 2 weeks before the OA passed, the Mayor was still unaware of vital specific details of the agreement?

 

Additional documents show that Mayor Carroll was texting Board members asking them to change their vote, a not uncommon practice in politics, but one that calls into question Mayor Carroll’s investment in the passing of this OA. While no law was broken, the question must be asked as to what motivated Mayor Caroll to pressure Trustees to change their vote, and what ultimately led to the reversal. The question must also be answered as to the cause of such a rush in the process. As of press time, a request for an interview with Mayor Carroll by phone had not been returned. An email request was replied to, asking if it was urgent. Attempts to reschedule were similarly not returned.

 

According to Trustee Bill Gippe, who was the only trustee who changed their vote from no to yes, ultimately allowing the OA to pass, his motivation for changing his vote had to do with the double punch of legislation in the coming election, which was November 6, just two days after the Sunday special vote on the OA. Both Proposition 112 (increased setbacks for well sites from homes) and Amendment 74 (compensation for landowners whose mineral extraction rights were restricted) played into his decision. The negative outlook for 112, along with the governor’s statement that he would call a special session to reverse 112 if it passed, was enough to convince Trustee Gippe to change his vote, to allow for what safety and concessions for the residents the town could wring from the situation. He indicated in a phone call with Yellow Scene Magazine that, if he knew now what he knew then, he would’ve voted no a second time. 

 

Two other board members did vote no (Scott Charles and Dan Woog), though at least Mr. Woog has clear ties to oil and gas interests. Mr. Woog stated he never took part in negotiations for the OA. According to an email detailing a lunch meeting Woog had with Jason Oates, a lawyer and Director of External Affairs for Crestone, Oates said that it appeared Woog was wholly uninterested in the entire subject of the OA. This was made clear by his complete withdrawal from the process, including missing the final vote on the OA. Mr. Charles voted no, according to his closing remarks on the final vote, because if he as a trustee felt excluded from the process, how must the citizens of the town feel. 

 

As one of the no votes on the first attempt to pass the OA, a special meeting was convened on October 31st between Crestone and Trustee van Woudenberg. The meeting was specifically to extract out of him what changes in the OA would be needed to make him vote yes. According to van Woudenberg, at that point in the negotiations, the town did not have any sticks, and very few carrots (most of which had already been put on the table). All van Woudenberg had was his vote. 

 

In the process of these negotiations, van Woudenberg was able to wring a few small concessions, such as the removal of the phrase “‘to the maximum extent practicable’, which really is a legal loophole you can drive a semi-truck through” from a half-dozen places, and the addition of the Pratt and Waste Connections site to the agreement, to be subject to maintenance, inspection, and leak detection aspects of the OA. Finally, he requested that the Acme site be moved farther from residents. Crestone came back amenable on the first two changes, but the maximum they would do for the third was to change how they were measuring distances to residents to add 6 feet to the number, without actually moving the site. Because of Crestone’s refusal to move the site, van Woudenberg remained a no vote on the second attempt to pass the agreement.

 

In a Yellow Scene Magazine article, A Case of Sticks and Carrots, dated October 30, 2018, we outlined the process as we knew it at the time and questioned the reasons for the decision. With these emails, many of those questions have been answered, and a few new ones raised. 

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