Loveland’s lack of local oil and gas regulation is creating a pathway for a developer to frack as close as 500 feet from planned home sites, within the radius that research suggests is most harmful for human health.
McWhinney, the developer of Centerra, announced plans in January to drill 26 wells across two well pads in east Loveland’s Centerra area. The south pad would be located just south of U.S. Highway 34 and Interstate 25, near the Big Thompson River, about 3,000 feet from Loveland’s Youth Sports Park and likely less than 500 feet from a wetland, according to city planners. The east pad would be located east of I-25 and the Shops at Centerra, on the eastern edge of McWhinney’s under-construction Kinston development.
The developer broke ground on Kinston in late 2020 and recently began building homes in the development. Kinston will include an estimated 2,800 homes built over the next 10 to 15 years and could make its first home sales as soon as this year.
McWhinney submitted letters of intent for its oil and gas plans to the city last month and plans to file applications with both the city and state regulators as soon as May or June. If all applications are approved, McWhinney plans to begin drilling the wells in 2023 and operate them for about 20 years.
During a recent tour of the proposed pad sites, McWhinney Chief Investment Officer and co-founder Troy McWhinney said the company chose the pad sites with the intention of reducing any impacts on neighbors. The developer has scaled down the number of pad sites during its internal planning over the last 10 years, from seven pads to two, and moved them further from the Lakes at Centerra development. The south pad site is now located about a mile southeast of the Lakes at Centerra.
“When we built all these homes,” he said, motioning to the Lakes at Centerra development as he drove through east Loveland, some neighbors “were saying we were going to destroy the quality of life in Loveland. I think we proved them wrong. We believe the same can be done, intermixing responsible oil and gas development with community development, if you place them in the right location with the right buffers and screens.”
A coalition of Centerra-area residents disagrees. With the help of environmental advocacy group Colorado Rising, the residents are protesting McWhinney’s plans and looking for ways to circumvent a city review process that leaves few options for stopping the project. The majority of Loveland City Council so far has rejected efforts to pause review of oil gas applications while the city reexamines its regulations.
Council “can take action to help protect people from the negative impacts that we know happen when you add more fracking sites, and they’re not doing that,” said Waterfront North resident Brad Stanley. “I don’t know why it is that they don’t feel the need to help people they represent.”
Perspectives differ on local regulation of Loveland’s oil and gas industry
McWhinney’s fracking proposal is the first attempt at oil and gas development in Loveland since local governments gained the authority to set standards stricter than the state’s rules. The debate exposes a rift in perspectives on local regulation as well as a loophole in the landscape of oil and gas regulation: If the wells are drilled before the homes are built, Colorado’s 2,000-foot setback doesn’t apply.
The Colorado Oil and Gas Conservation Commission, the state authority for oil and gas regulation, adopted a setback measure in 2020 requiring that wells be drilled at least 2,000 feet from homes.
The setback requirement was partially inspired by a 2019 Colorado Department of Public Health and Environment study, which found that people within 2,000 feet of oil and gas operations are likely exposed to levels of air pollution that elevate the risk of health impacts.
But COGCC regulates the siting of oil and gas facilities, not the siting of homes. Homebuilders aren’t required to stay a minimum distance away from existing wells unless local governments have adopted what’s known as reciprocal setbacks. Loveland doesn’t have reciprocal setbacks, though it does have zoning restrictions in place that require developers to apply for a variance if they want to build a home closer than 500 feet from an oil and gas site.
Without action from Loveland City Council, some of Kinston’s 2,800 homes will be as close as 500 feet from a 15-well fracking operation, according to McWhinney. Council in January voted to reject a moratorium on oil and gas development while the city reviews its oil and gas regulations. They also rejected a proposal to convene expert panels to advise city leaders on oil and gas development impacts.
Loveland Mayor Jacki Marsh and council member Andrea Samson were the only two of Loveland’s eight present council members who supported those proposals. Marsh, who brought up the expert panels idea, said she’d hoped Loveland could mirror the process it used to form regulations for metro districts. Loveland created its current oil and gas regulations prior to the 2019 passage of Colorado Senate Bill 181.
The state law gave local governments more authority over oil and gas development and directed the state to redraw its own regulations to enhance protections for the environment, health and safety. As a result, many of Loveland’s regulations are outdated — overwritten by more stringent state standards or not taking full advantage of the new local authority.
“I would love to see our council take back some of the power that we’ve given away, because Senate Bill 181 significantly changed the role the city has to play,” Marsh said. “Our planning department is looking at revising our rules and regs, but we’re six to 12 months out before that comes to council.”
“I’m not saying I’m anti-fracking,” she added. “I still drive a gas car; I’m still dependent. But to do it next to development or future development, to me, is short-sighted and wrong.”
Mayor pro-tem Don Overcash questioned the intent and necessity of a moratorium.
“There may be certain mitigations that are requested or required, and I think we’ll find those out on a site-by-site basis,” he said. “But I think, for the most part, we should rely on and trust the state as well as the developer to follow the regulations imposed by the state, which are some of the strictest in the nation.”
Colorado’s new oil and gas regulations are significantly more protective than they were prior to SB 181. The 2,000-foot setback is among the largest in the nation, though the state allows discretionary off-ramps to place wells as close as 500 feet from homes. COGCC has allowed at least one variance of that provision with informed consent from nearby homeowners, a process that McWhinney is pursuing for several homes near the Loveland pad sites. The commission recently rejected an application from Kerr McGee to place two well pads within 2,000 feet of about 70 homes in Firestone.
Opponents of McWhinney’s proposal, responding to the assertion that Colorado’s standards are the strictest in the nation, point out that fracking is banned entirely in several states and localities.
McWhinney said the comprehensiveness of the new state regulations negates any need for stricter local rules.
“What we’re saying, and the industry is saying, is the state is so strict now that they should be good,” McWhinney said. “You don’t need to stop again (by placing a moratorium on development). Every time you stop, it takes a couple of years. And we want to get going, because these homes are getting closer and closer.”
How McWhinney is coordinating home construction with its drilling plans
Construction began recently on Kinston’s clubhouse and a few spec homes. McWhinney said no homes had been sold as of April 1. Builders are starting from the west side of the development and moving toward the east, so the wells can be drilled before the closest homes are built.
McWhinney said the company is proceeding in that fashion so prospective buyers in the whole development, particularly on the east side, will be fully aware of the well pad’s proximity. The homes closest to the well pad would be built at some point after the wells are drilled in 2023, McWhinney said.
If all goes to plan, that order of construction will result in a number of homes located between 500 and 2,000 feet from the east pad. Research from the state health department and the Colorado School of Public Health suggests that residents of those homes will face elevated health risks, particularly from concentrations of the carcinogen benzene and air pollutants toluene and 2-ethyltoluene.
Among other impacts, the state health department study found a higher risk of short-term health impacts like dizziness, nosebleeds, breathing difficulty and headaches during the worst-case-scenario for emissions. The Colorado School of Public Health study found elevated lifetime cancer risk as well as impacts to the brain, blood and bone marrow.
McWhinney took a Coloradoan reporter on a driving and walking tour of the proposed well pad sites and Windsor’s RainDance and Water Valley neighborhoods, where some homes sit within about 250 feet of wells. Landscaping blocked the pads almost entirely from view in the neighborhoods. He approached about five residents in the neighborhoods to ask if the nearby oil and gas activity bothered them.
None of the residents reported any significant issues. Some of them said they or their neighbors had occasionally noticed light and sound from the nearby pads. One woman, while holding a baby on her hip, said her family had purposely chosen a lot nearest to the pad because it meant they wouldn’t have a neighboring home behind their yard.
McWhinney said residents concerned about the pads should take a drive around RainDance or Water Valley to see how homes can coexist with well pads.
What can fracking do to the environment?
But you can’t see or smell all the health and environmental impacts of oil and gas development, project opponents pointed out. In addition to the health risks, fracking degrades air quality, exacerbates climate change and contributes to ozone production. Fracking can also contaminate groundwater and drinking water in the case of spills, fracking fluid leaks and other potential mishaps. The latter is of special concern for the south pad because of its proximity to a wetland and the Big Thompson River.
Those risks are lower if operators strictly adhere to all state regulations. McWhinney plans to use containment berms and liners to address potential impacts to groundwater in the case of a spill, as well as closed-loop, tankless systems that are known to reduce air quality impacts. Other protective measures will become clearer as the plans progress.
“Everything we do, we’re responsible,” McWhinney said. “That’s just the way we operate our businesses. We follow rules and regulations with all of our businesses. There’s no reason why we would not do that with oil and gas.”
He suggested that findings about the health impacts of living close to wells may be overblown. Many day-to-day activities pollute the air and water, he said.
Stanley dismissed that argument as “using risk to justify more risk.”
Loveland residents react to McWhinney’s fracking plans
Other residents said they wouldn’t feel safe even 2,000 feet from the well pads. The setback is “a step in the right direction, but to me, that doesn’t mean that it’s safe just because the regulation has set that boundary,” said Laura Light-Kovacs, a resident of the High Plains Village neighborhood about 4,000 feet northwest of the south pad site.
When McWhinney gave a community presentation about the fracking plans in January, “he seemed to think that people were more worried about the visibility of the oil wells and the sound, but that’s not really my biggest concern,” Light-Kovacs added. “Of course I wouldn’t want to hear or be in sight of an oil well, but the health risks are still there. And to me, my health is worth more than all this money he says is going to go back into the economy. I don’t care to get cancer just to help my local economy.”
Overcash wouldn’t say whether he’d feel comfortable with homes being located closer than 2,000 feet from wells. He said he wants to have a conversation with all the major players “in the same room at the same time” and added he wasn’t sure if the information about the 500-foot distance between the east pad and planned homes was correct.
“I really can’t speak to that,” he said. “I just know it’s working very well at RainDance and Water Valley. … I would rather start from a position of trust and then continue to learn about things than to assume the world’s going to end tomorrow.”
McWhinney and Overcash both mentioned the tax funds that the developer expects the sites to generate. McWhinney said his team is still studying the tax revenue projections, but they expect the wells will generate $50 million or more for the city of Loveland, Thompson School District, Larimer County and other tax districts over the course of 20 years. Most of the money would come in the first 10 years, he said.
Another theme in the residents’ concerns is the feeling that McWhinney misled homebuyers. Several newer homeowners, including Lakes at Centerra resident Richard Hahn, said they were drawn to the area by its environmentally conscious branding and researched the likelihood of oil and gas development before buying.
Hahn recalled McWhinney saying in his presentation that the fracking plans have been in the works for 15 years.
“If that’s true, then why on earth did he not make that out in the open so that everybody knew that and they could make a decision?” Hahn said. “Some people would have gone ahead and bought a brand-new home (anyway). But there are people like myself that would have passed. We would have moved on and not bought in Centerra if we knew that was in the plans in the future. He deceived everybody.”
McWhinney pointed to newspaper articles about seismic tests and potential drilling applications in Centerra over the last 10 years. He also shared copies of three real estate documents referencing oil and gas activity: A copy of the covenants, conditions, and restrictions from a home purchase at Lakes at Centerra, which included a disclosure that oil and gas drilling “may occur beneath the surface of the property from an offsite location utilizing hydraulic fracturing practices pursuant to existing and future oil and gas leases”; a memo of surface use agreement describing an oil and gas agreement between McWhinney and Kerr McGee, which he said has been included on Lakes at Centerra home titles since 2012; and a disclosure that residents don’t own the mineral rights under their properties.
Hahn reviewed the documents associated with his home purchase at the request of a Coloradoan reporter. He could only find the final disclosure, which referenced a title report “available for review in the Sales Office” that would “provide a fuller descriptions of the limitations, if any, on your mineral, oil and/or water rights.”
“Title review is a very important step in all real estate transactions,” McWhinney wrote in an email when the Coloradoan asked him about the discrepancy. “There may be certain buyers who elect to not review title, but that would be a choice they would make on their own. I have never been involved in a real estate transaction where title review was not allowed.”
What’s next for the Loveland fracking proposal?
The city’s review process for oil and gas doesn’t present many opportunities for residents trying to stop the project. Loveland staff said the applications for the two pads will go through separate paths of review: The east pad, in the Kinston development, will go through Track 2, or “fast track” administrative review, because it meets Loveland’s enhanced oil and gas standards. The city will hold a neighborhood meeting, and staff will review the application before passing it off the city’s director of development services. The director’s decision can only be appealed in court, senior city planner Troy Bliss said.
The south pad will likely go through Track 3 review, which includes a neighborhood meeting and review by Loveland’s Planning Commission, because it appears to be closer than 500 feet to a wetland in preliminary plans. The proximity to the wetland isn’t grounds to reject the application, Bliss said, though the commission can set conditions of approval such as landscaping or site design. The commission’s decision could be appealed to City Council, whose decision could be appealed in court.
The city will update its website as the applications progress. Staff don’t plan to review any applications until after McWhinney gets sign-off from the COGCC, Bliss said.
Caitt Brown, Colorado Rising’s outreach coordinator, said the group plans to follow the process closely and find ways to organize around it.
“It’s a shame, because the east pad looks like it’s just going to go through smooth sailing because it does meet those requirements for Loveland and the COGCC,” she said. “But in the end, it will be a lot closer once those houses are built.”
Still, she added, “we intend on staying loud and not backing down.”
Jacy Marmaduke covers government accountability for the Coloradoan. Follow her on Twitter @jacymarmaduke. Support her work and that of other Coloradoan journalists by purchasing a digital subscription today.