by Gail Binkly | December 1, 2014 5:02 pm
Second of a two-part series
Part 1: Strained Relations
Like an old married couple, Montezuma County and carbon-dioxide giant Kinder Morgan sometimes squabble. . .
. . . but they really can’t get along without each other.
The county is home to much of the McElmo Dome, a rock formation that contains the largest accumulation of naturally occurring CO2 in the world, according to a Kinder Morgan official. That rich source field provides CO2 for oilfields in west Texas, where it is used to force more oil out of the wells.
Demand for CO2 is high right now.
“We are supply-short,” Val Brock, a Kinder Morgan vice president from the company’s Houston headquarters, told the Montezuma County commissioners during a presentation on Oct. 27.
That’s despite the fact that the company produces about 1.3 billion cubic feet per day from the McElmo Dome.
In siphoning CO2 from the ground, the company pumps money into both Montezuma and neighboring Dolores counties:
In 2013 Kinder Morgan paid a total of $20 million in taxes in the two counties (and La Plata County). It is the largest single taxpayer in both, contributing roughly 45 percent and 53 percent of Montezuma County’s and Dolores County’s total property taxes, respectively, in 2013.
In addition, the company provides a local payroll of $7.3 million (for about 60 employees who work out of its Cortez office) and other economic benefits through construction of new roads and buildings for CO2 extraction.
And the Lakewood, Colo.-based Kinder Morgan Foundation provides donations to organizations associated with children, the arts, and charitable causes. In 2013, the foundation gave $2.06 million to a host of entities nationwide and even in Canada. A company spokesperson could not provide a total for how much was contributed in the local counties, but according to the company’s tax return, donations in 2013 amounted to at least $37,000 in the area, including $5,000 to Montezuma-Cortez High School, $4,092 to the Dolores Rotary Club, $4,000 for Crow Canyon Archaeological Center, $3,425 to the Dolores Elementary School, and $2,500 to the Mancos Public Library.
But the relationship has its ups and downs.
In 2008, Mark Vanderpool, then the Montezuma County assessor, became suspicious because KM’s self-reported revenues were declining. He hired an expert to examine KM’s books in Houston; she found that the company had under-reported its production by about $50 million.
The county and KM then became embroiled in a dispute over whether KM was allowed to deduct from its revenues the cost of a “tariff ” for the pipeline company that carries the CO2 to Texas. Montezuma County said this cost wasn’t valid because KM owns 50 percent of the pipeline company, and a KM partner, ExxonMobil, owns another 37 percent.
The company was basically paying itself the transportation costs, then deducting them from its revenues, the county maintained.
That dispute is still ongoing.
KM paid taxes of about $2 million on the additional revenue for 2008, but did so under protest, and appealed to the Colorado Board of Assessment Appeals, which hears such tax disputes. In 2013 the BOAA ruled in favor of the county.
But KM has appealed that decision to the Colorado Court of Appeals, which has yet to hear the case, according to county Assessor Scott Davis.
“I’m optimistic,” he said. “The BOAA ruled overwhelming in our favor, which is why I’m fairly confident, but you never know. “
Even if KM loses at the appellate level, the company could then appeal to the Colorado Supreme Court. In the meantime, the assessor’s office has warned the various entities that benefited from the additional tax revenue – such as schools and special districts – that they shouldn’t actually spend the money until the case is resolved.
Ironically, even if KM loses, it won’t wind up paying much more in taxes because oil and gas producers in Colorado may deduct 87 percent of the local property taxes they pay from their state severance tax. In other words, the ruling would just mean that more money came to Montezuma County instead of going to the state.
“It changes their severance tax, so in the end it wouldn’t cost them much of anything, just a couple hundred thousand dollars,” Davis said, noting that, in contrast, $2 million a year in additional tax revenues would be a huge boon in the county.
But KM has been dogged in fighting the battle.
Kinder Morgan and both Montezuma and Dolores counties have argued in the past over how much KM should pay to improve and maintain the roads it uses to access well sites, compressor stations, cluster facilities, and other equipment.
And KM and Montezuma County are engaged in another, more recent legal dispute. KM wants to build an electric transmission line about 10 miles long in the farming area around Pleasant View, which has seen a flurry of CO2-related development in the past year.
At a Sept. 22 hearing on the permits required for the project, a number of landowners voiced concerns to the county commissioners over how the lines and poles would affect their views, their irrigation equipment and their plowing. The commissioners decided to approve the permits, but only on the condition that KM first obtain surface-use agreements with all the affected landowners (about 21).
KM promptly filed a lawsuit against the county, saying that was an illegal and unreasonable requirement.
The county has provided a reply, and the case is ongoing.
The county commissioners’ often-voiced view is that more CO2 development should take place on public land rather than private. They point to the 164,000-acre Canyons of the Ancients National Monument, saying production should be shifted there.
But Brock, the KM vice president, said in his presentation that the company has to develop where the carbon dioxide is, and seismic testing found very favorable results in the Cow Canyon area, a largely agricultural region near Pleasant View and northwest of Cortez.
A host of concerns
Since then, KM has applied for permits from the county on a steady basis – it sought and received seven permits at the Nov. 17 county-commission meeting alone – and hearings regarding the applications have often been held in front of a packed room. An unusual mix of environmentalists and rural farmers has voiced concerns about all the development’s effects on air quality, health, traffic, bright lights, noise, and general quality of life in the formerly peaceful area.
Planners and the commissioners have struggled to keep up with the flow of complaints and concerns.
One frequent complaint is the sudden and dramatic increase in traffic that has occurred with the development in the Cow Canyon area. Heavy trucks rumble along roads every few minutes in some places.
Residents often complain about trucks speeding, but others say the Kinder Morgan drivers are generally respectful of speed limits.
“We have had several complaints about traffic and driving around Kinder Morgan sites,” wrote Montezuma County Sheriff Dennis Spruell in an email. “Our Deputies patrol the areas and have come up with some interesting findings. We discovered local residents are more than 10 to 1 to be the speeders.
“If we have a chronic traffic issue with Kinder Morgan employees or sub-contractors a call to the Kinder Morgan office usually takes care of the problem. While setting up the radar trailer, which reminds drivers of their speed, a local resident was caught going almost 75 mph in a 40 mile zone. He was given a ticket.”
Other concerns involve issues around health and air quality.
At the Nov. 10 county-commission meeting, residents voiced distrust of Kinder Morgan, particularly regarding “venting,” the release of gases from exploratory wells. In one case this summer, a local family in the Pleasant View area smelled strange odors from nearby venting and were put up in Cortez overnight at KM’s expense, while another nearby family stayed put but had an air-quality monitor put up at their home.
“We need to find out the facts,” said Betty Ann Kolner. “I don’t think Kinder Morgan is being honest.”
“What help and information can I expect from the county management?” asked John Wolf, the resident who stayed in his home along with his wife and an elderly relative. “I would never ask somebody who was poisoning me what they were using. . . Tell us what’s in the air. Tell us what they’re going to release. Don’t ask the fox to guard the hen house.”
Another area resident, M.B. McAfee, asked the commissioners to set up a public meeting to let citizens know what is happening with energy development. “How about letting us be part of some of your decisions?” she asked. “Help the public understand what is happening with mineral extraction in Montezuma County. We would start to think that you really have the interest of our citizens at heart.” The commissioners said they would set up an informational public meeting with energy producers in early December. However, at press time the meeting had not been set, according to James Dietrich, the county’s federal-lands coordinator. He said it had proven difficult getting all the relevant parties together and organizing a meeting of such broad scope.
Kinder Morgan’s flurry of production in the Cow Canyon area prompted a far-ranging discussion at the monthly meeting of the county Planning and Zoning Commission back in August.
Several Kinder Morgan employees had presented for review the company’s proposal for the 10-mile electric transmission line. A number of landowners begged for the lines to be placed underground, saying the lines would ruin the views that were part of the reason they’d brought their property. Others worried about whether the electrical transmissions could cause harmful health effects. KM said the power load would be below anything considered potentially hazardous.
Lynn Anderson of Road 10 voiced a common complaint – that the individual applications make it difficult to see the scope of KM’s overall plans. “Kinder Morgan brings its proposals to the county piecemeal,” Anderson said. “Any one thing may seem trivial or insignificant, but you add them all together and this rural farming area we live in 25 miles from the city limits is turning into an industrial area.”
Planning Director LeeAnn Milligan said Kinder Morgan had in fact been fairly transparent and had said in the information packets given to the county what the overall project is to be.
But Anderson wasn’t buying it. “Things are approved a piece at a time. You take it all together and it changes the whole character of the environment. It changes what it is.”
Sue Dusenberry said when she came home this winter after being away, she found a well right on the corner on Road 10 that she had not been informed of, perhaps because she was more than a mile away, and another across the road on CR 9. She said there were now three wells in the vicinity, and said Kinder Morgan applies for them one at a time “so we don’t all show up to comment at the same time.”
Bob Clayton, a former KM employee and a member of the planning board, said the noise, lights, traffic and other disturbances are only temporary. “Take a trip to Hovenweep or Goodman Point or Yellow Jacket, or other places where Kinder Morgan has put in these large developments, and see what it looks like when it’s all done and the trucks have gone away,” he said. “It’s really not as scary as you’re imagining it to be.”
“But that construction phase is hell, Bob!” countered Gala Pock, another member of the planning group at the time (she is no longer on the board).
“So is having a baby, but look at what you get!” joked board member Michael Gaddy.
He and others pointed out the many economic benefits of Kinder Morgan’s presence in the area.
But, Anderson added, power lines are one impact that will not be reclaimed and then disappear; they will be permanent.
Clayton noted that residential development has impacts. “Where people once had privacy, now it’s developed,” he said. “People’s [scenic] views are constantly being changed by growth in this area. It’s not just the energy industry, it’s growth in the area that affects a lot of people.”
A complex analysis
The idea of concentrating more energy development on Canyons of the Ancients National Monument, even if it were feasible, would not be without its own controversies.
Early in 2014, the BLM, which manages the monument, sought public comment on a proposed “geographic area development plan” for the Yellow Jacket area southwest of Pleasant View. The development plan is an agency document designed to analyze potential CO2 development over the next five years on a 30,000-acre area that includes public lands as well as some private.
Two retired BLM employees – former monument manager LouAnn Jacobson and retired monument archaeologist Linda Farnsworth – wrote a letter in response to the BLM’s scoping letter for the development plan. Their response was critical of the proposal in a number of instances.
“The scoping letter refers to the Proposed Action as supporting ‘BLM’s goal of responsible, environmentally sound mineral resource development’,” they wrote, but it did not cite the presidential proclamation which established the monument. That proclamation states, …”the Secretary of the Interior shall manage the development, subject to valid existing rights, so as not to create any new impacts that interfere with the proper care and management of the objects protected by this proclamation…”
Kinder Morgan’s plan to use existing facilities and disturbed areas to improve production, rather than venturing into new ones is “commendable,” they wrote; “however, it cannot be assumed that existing developments within existing rights-of-way did not previously impact cultural resources and that cultural resources will not be impacted with additional proposed development.”
The development plan called for “proposed short-term 2014 projects” including new pipelines from some cluster facilities to a valve station; the completion of minor building and equipment upgrades at cluster facilities; and the installation of new tanks and pumps at a disposal well (where water used in production is disposed of).
Jacobson and Farnsworth wrote that the completion date for the short-term projects seemed “unrealistic” and that such projects should occur only after completion of resource inventories, development of the complete plan, and numerous analyses required under regulations.
“The size of the area covered by the Proposed Action, the importance and complexity of the cultural landscape, and the fragility, interconnectedness, and significance of the cultural and natural resources all contribute to what will be a complex, time-consuming analysis,” they wrote.
The BLM had not yet completed the development plan as of press time. Marietta Eaton, current monument manager, was on vacation and was not available for comment.
Clearly, carbon-dioxide production is going to occur on private lands as well as public, and for the residents in the heavily impacted Cow Canyon area, the prospect is unsettling.
Jo Shane, one landowner in the area, said she has no wells or other facilities on her lands, so she’s lucky. However, she worries about her neighbors.
“We put a lot of money in this place,” she said. “Our property value will probably stay the same, but it [all the industrial development] is affecting other people. There are some who have their place for sale and they’re concerned.”
Others are worried about how CO2 production will affect farming in the region. Kinder Morgan has purchased one 580-acre agricultural parcel with an eye to possibly building its own power plant there. Some farmers say the company’s power poles may require them to shorten the end of their center-pivot systems, meaning some land would go unirrigated.
“Farmers have a lot of money invested in their equipment and their way of life,” Shane said. “We need to protect the people who may not contribute billions of dollars but who contribute to our hay and food sources throughout the United States.”
All in all, the pace of recent development in her area has left her – and many others – concerned.
“It just feels like our little piece of heaven out here is being invaded,” Shane said.
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