August 29, 2019 10:24 AM UTC

Polis 'Splains Global Energy Economy To COGA, COGA Freaks Out

• 12 Comments
• by: Colorado Pols

The Denver Post’s John Aguilar reports on a delightful and long-overdue showdown between Gov. Jared Polis and the Colorado Oil and Gas Association yesterday, which culminated in Gov. Polis giving attendees at COGA’s annual meeting a remedial run-through of the state of global energy markets and oil prices in particular that left industry flacks, hacks, and shills with their jaws agape at the galling effrontery of it all:

Gov. Jared Polis told a large gathering of energy workers and executives Wednesday that what happens in oil-rich Venezuela and Russia — and in global commodity markets far and wide — has more bearing on the industry’s future in Colorado than do the potential effects of a sweeping and controversial state oil and gas bill passed earlier this year.

“Commodities pricing and the market is what drives things,” Polis said during a question and answer session with Colorado Oil and Gas Association President Dan Haley during a packed luncheon at the Colorado Convention Center in downtown Denver. “It has nothing to do with me, nothing to do with — well you know — our state politics and less even to do with national politics. It really has to do with supply and demand.”

But many in the room felt that emphasizing market forces over the effects of new regulations on energy extraction brought about by Senate Bill 181 was disingenuous on the part of the governor…

The Colorado Sun’s John Frank and Mark Jaffe, oh my!

“Well you know, I happen to be a Democrat so I worry much more about Trump’s tariffs and their impact on the infrastructure for the oil and gas industry and other industries, the closing down of overseas markets, the damage to the workforce readiness that he’s done with cracking down on immigration. So you can choose which side you worry about the economic threats from, but obviously I’m much more worried about who is president today than who will be president in a couple years,” Polis responded.

A moment later, after Polis rejected the suggestion that government regulation has the power to move markets, contradicting some economists, Haley asked the governor the question that served as the title for the conference session: “Can you still drill for oil in a blue state?”

“It’s just a silly question,” Polis said, adding that “it’s a geological question, it’s not a political question.” [Pols emphasis]

The Denver Business Journal’s Greg Avery–it’s just downright heresy!

“As long as commodity prices are good, you’re going to have a good business,” said Polis, a Boulder Democrat. “It has nothing to do with me, or very little.” [Pols emphasis]

…Polis’ remarks sounded outrageous to some. Barbara Kirkmeyer, Weld County Commissioner and a vocal supporter of the oil industry, afterward said she didn’t think the governor was being genuine when he said industry jobs are important.

“Telling oil operators about economics and then mocking?” Kirkmeyer said. “That’s unreal to me.”

Ever since the passage of Senate Bill 19-181 in the Colorado General Assembly this year, opponents have warned of dire consequences for the fossil fuel industry, lost jobs, and massive declines in oil and gas production. These warnings were never well-grounded in reality, especially after a host of amendments were made to the bill to placate the industry late in the legislative process. Dan Haley of COGA himself admitted that the bill would not have the destructive impact some opponents had irrationally forecast, the industry has continued to expand in key producing regions, and Barbara Kirkmeyer’s avowedly pro-oil Weld County just signed an agreement with the state to ensure a backlog of permit requests panic-filed during last year’s fight over Proposition 112 are processed quickly.

So, there’s that. But more importantly, Gov. Polis is absolutely right that the economics of drilling for oil and gas in Colorado and everywhere else are set by global energy markets, not by local regulations. Currently the price of oil is hovering between $55 and $60 a barrel, having recovered somewhat from a plunge at the beginning of 2019 to as low as $45 a barrel. Persistently high oil prices from 2010-14 ($80-$110) drove expansion of drilling in Colorado under Gov. John Hickenlooper, and the current low price of oil represents a vastly greater threat to the profitability of drilling here than any regulatory factor.

This is not liberal propaganda. It’s Energy Economics 101.

That energy industry bigwigs attending the COGA conference yesterday became so incensed over this reality check from Gov. Polis is more an indicator of long-term concerns about the viability of the fossil fuel industry than it is a reaction to any genuine impact of SB-181. When Polis tells them that if commodity prices support drilling, drilling will happen, he is right. And if the economics support drilling in Colorado, drillers can afford to follow rules to protect public health and safety.

We’ve remarked previously about the odd, almost religious devotion the fossil fuel industry demands from the political establishment in Colorado, backed up by a potent electoral operation and perfectly willing to mount wildly destructive attacks on the entire system like 2018’s Amendment 74. Popping that bubble makes the industry’s backers very upset, but that’s all Polis did yesterday–with facts no one can deny.