Anadarko Goodwill Campaign Tested After Colorado Blast

By Erin Ailworth Features Dow Jones Newswires

Anadarko Petroleum Corp. has worked hard to be a good neighbor in fast-growing Colorado, where sprawl has encroached on oil and gas operations, and homes and wells are sometimes now side by side.

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Through a hotline and a community engagement team that often goes door-to-door, the company has tried to proactively defuse tensions with those who live and work near its sites. It implemented plans to minimize truck traffic and noise and lower methane emissions, and has tried to make its operations as small and unobtrusive as possible.

That goodwill campaign now faces a tough test, following an explosion last month that killed two people at a home built less than 200 feet from a natural gas well operated by Anadarko.

Authorities on Tuesday said the April 17 blast at a home in Firestone, a town about 30 miles north of Denver, was caused by unrefined and odorless gas that appears to have leaked from an abandoned gas line attached to the well.

The line had been cut at some point near the home's foundation, and the gas went into the soil before migrating into the home through a French drain and sump pit, said Theodore Poszywak, chief of the Frederick-Firestone Fire Protection District.

The well was drilled in 1993 by Gerrity Oil & Gas Corp. and later acquired by Anadarko in 2014. The single-family home was built in 2015. Homeowner Mark Martinez and his brother-in-law, Joey Irwin, were killed. Mr. Martinez's wife, Erin, was severely injured.

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Anadarko has responded by voluntarily shuttering more than 3,000 wells that it operates across northeast Colorado. Its shares plunged 9% Wednesday morning following the news about the cause of the blast, and first quarter earnings released late Tuesday that were below analysts' expectations.

A representative for Century Communities Inc., the developer of the subdivision where the home was located, said "we have no definitive answers."

Under local code, homes can be built within 150 feet of an existing oil and gas well. The Martinez home was 178 feet from the well.

The incident represents a political challenge to the oil-and-gas industry, whose social license to operate has been pressured in areas, such as Colorado, where oil and gas operations are cheek by jowl with residential communities.

The explosion that killed Mr. Martinez and Mr. Irwin happened in Colorado's Weld County, which has far and away the most wells in the state and has also seen a surge in urban development in recent years. Greeley, Colo. -- in Weld -- recently was named the fourth fastest-growing metro area in the U.S. in 2016.

In response to the blast, Colorado Gov. John Hickenlooper on Tuesday called for a review of existing oil and gas operations. Regulators with the Colorado Oil and Gas Conservation Commission directed producers to re-examine all flow lines and pipelines within 1,000 feet of an occupied building by May 30.

On a conference call scheduled to discuss earnings Wednesday, analysts repeatedly questioned Anadarko Chief Executive Al Walker about the ramifications of the blast.

Mr. Walker said it was too soon to tell how Anadarko's operations might be affected, but offered his condolences to the families of the men who lost their lives. The 3,000 wells Anadarko voluntarily closed after the explosion remain offline.

"We are saddened by the tragic events in Colorado," Mr. Walker said. "We are committed to the public trust and safety in the communities where we operate. We will cooperate with the ongoing investigations."

Write to Erin Ailworth at Erin.Ailworth@wsj.com

Anadarko Petroleum Corp. has worked hard to be a good neighbor in fast-growing Colorado, where sprawl has encroached on oil and gas operations, and homes and wells are sometimes now side by side.

Through a hotline and a community engagement team that often goes door-to-door, the company has tried to proactively defuse tensions with those who live and work near its sites. It implemented plans to minimize truck traffic and noise and lower methane emissions, and has tried to make its operations as small and unobtrusive as possible.

That goodwill campaign now faces a tough test, following an explosion last month that killed two people at a home built less than 200 feet from a natural gas well operated by Anadarko.

Authorities on Tuesday said the April 17 blast at a home in Firestone, a town about 30 miles north of Denver, was caused by unrefined and odorless gas that appears to have leaked from an abandoned gas line attached to the well.

The line had been cut at some point near the home's foundation, and the gas went into the soil before migrating into the home through a French drain and sump pit, said Theodore Poszywak, chief of the Frederick-Firestone Fire Protection District.

The well was drilled in 1993 by Gerrity Oil & Gas Corp. and later acquired by Anadarko in 2014. The single-family home was built in 2015. Homeowner Mark Martinez and his brother-in-law, Joey Irwin, were killed. Mr. Martinez's wife, Erin, was severely injured.

Anadarko has responded by voluntarily shuttering more than 3,000 wells that it operates across northeast Colorado. Its shares were down nearly 8% Wednesday afternoon, following the news about the cause of the blast, and first quarter earnings released late Tuesday that were below analysts' expectations.

A representative for Century Communities Inc., the developer of the subdivision where the home was located, said "we have no definitive answers."

Under local code, homes can be built as close as 150 feet to an existing oil and gas well. The Martinez home was 178 feet from the well.

The incident represents a political challenge to the oil-and-gas industry, whose social license to operate has been pressured in areas, such as Colorado, where oil and gas operations are cheek by jowl with residential communities.

The explosion that killed Mr. Martinez and Mr. Irwin happened in Colorado's Weld County, which has far and away the most wells in the state and has also seen a surge in urban development in recent years. Greeley, Colo. -- in Weld -- recently was named the fourth fastest-growing metro area in the U.S. in 2016.

In response to the blast, Colorado Gov. John Hickenlooper on Tuesday called for a statewide review of existing oil and gas operations. Regulators with the Colorado Oil and Gas Conservation Commission directed producers to re-examine all flow lines and pipelines within 1,000 feet of an occupied building by May 30.

On a conference call scheduled to discuss earnings Wednesday, analysts repeatedly questioned Anadarko Chief Executive Al Walker about the ramifications of the blast.

Mr. Walker said it was too soon to tell how Anadarko's operations might be affected, but offered his condolences to the families of the men who lost their lives. The 3,000 wells Anadarko voluntarily closed after the explosion remain offline.

"We are saddened by the tragic events in Colorado," Mr. Walker said. "We are committed to the public trust and safety in the communities where we operate. We will cooperate with the ongoing investigations."

Great Western Oil and Gas Co., a private producer in Colorado, also decided to voluntarily shutter 61 wells after the blast.

Municipalities are responsible for dictating how close to an existing well that development takes place, while state regulators determine the setbacks for new wells.

Two measures that would have changed those rules failed to make the November ballot. One called for new oil and gas development to be at least 2,500 feet from any occupied structure, a step that would have prohibited oil and gas development in much of the state.

It remains to be seen whether activists will try to revive those efforts in the wake of the April 17 explosion.

In interviews before the blast, Anadarko representatives said they recognized the need for more community engagement several years ago, when they were finalizing an acreage swap with Noble Energy Inc. that gave Anadarko a larger footprint in Colorado's DJ Basin.

The company set up a number where community members could offer suggestions and complaints and sent out employees to connect with them. The conversations prompted Anadarko to reduce truck traffic, find ways to make machinery less noisy, and execute loud operations when they would least disturb neighbors, among other measures.

"We're still learning a lot about how we can improve," said Alysha Guenther, a stakeholder relations representative for Anadarko.

Andrew Logan -- director of the oil and gas program at Ceres, a Boston-based nonprofit group that pushes companies to be more environmentally responsible -- said Anadarko deserved credit for its efforts. But the Firestone explosion highlights the need for the industry to do more, he said.

Write to Erin Ailworth at Erin.Ailworth@wsj.com

(END) Dow Jones Newswires

May 03, 2017 16:44 ET (20:44 GMT)