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Posted: October 01, 2009

Natural Wonders: Colorado is rich with mineral and energy resources

And plenty of untapped potential

David Lewis

Gold. Coal. Oil. Natural gas. Wind. Water. Solar.

Colorado is blessed with an abundance of mineral and energy resources. Mining was the main reason the state came into being, followed by ranching, which developed largely in order to feed those thousands of hungry miners. From the founding of Denver - based on a gold strike that failed to pan out - to the ‘59ers of the Pikes Peak Gold Rush - the state always has been identified with its resource wealth.

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Times have changed, of course. Today, mining, oil and gas, and other mineral extraction industries are a minor part of Colorado's economy, representing about 4 percent of the whole. The state's top economic category, services, made up 28 percent of the state economy.

Colorado, which a century or so ago ranked first or second among states in non-fuel minerals production, in 2006 stood at No. 13, down from No. 10 in 2005. (This is according to a study by the U.S. Geological Survey and the Colorado Geological Survey, the latest data available.)

Leading minerals statewide, in order, were for the most part less glamorous than our storied history would lead one to believe: molybdenum concentrates and construction sand and gravel, followed by portland and masonry cement, gold, and crushed stone, according to "The Mineral Industry of Colorado."

Including oil, natural gas, coal and other minerals, mineral production reached $11 billion in 2007, "as a result of increased production and higher energy prices," says the "2008-2009 Colorado Economic Development Data Book."

Meanwhile, you may have heard that there is a movement away from the fossil fuels portion of the above, with Gov. Bill Ritter leading the charge toward cleaner energy such as solar and wind. There, potential production remains mainly... potential. The good news is, Colorado has plenty of that, with abundant wind fortuitously gracing the portion of Colorado that most needs energy relief - the Front Range.

So what is the potential for future resource production here? Where are the cries of "Pikes Peak or Bust," or the equivalent thereof, going to come from?

To answer these questions, ColoradoBiz spoke with folks in the field from all over the state. Come with us as we tour the Centennial State's resources, region by region and resource by resource:

FRONT RANGE

Alternative: The Colorado Task Force on Renewable Resource Generation Development Areas was signed into law in 2007 in large part to map the state's renewable resources, dubbed Renewable Resource Generation Development Areas, or GDAs.

These are defined as "a concentration of renewable resources within a specific geographic region that provides a minimum of 1,000 megawatts of developable electric generating capacity." It concluded the Front Range was a wind GDA, but not a solar GDA. At the far end of the megaplex, Pueblo was deemed a solar GDA. In other words, the most populous area of the state has the potential to produce a gigawatt of electricity from wind and another from the sun. In yet other words, what blows around comes around.

The Front Range also is a world center of alternative energy technology companies. This example, from Faegre & Benson LLC partner Jim Spaanstra, head of the law firm's environment and natural resources practice, illustrates the role of technology in sometimes bridging the gap between old and new energy sources: Palmer Lake-based Auxsol Inc., which uses a patented technology already at work in the Denver Basin to separate oil from the sometimes nasty water that drilling produces.

"I've had folks say off the cuff that the Front Range of Colorado is this century's Silicon Valley in terms of the technology that is already emerging," Spaanstra says.

Mining and Minerals: The Front Range is not much when it comes to mining. The exception appears to be Boulder County's Cemex Inc. portland and masonry cement plant, plus much clay production. Potential for more? Perhaps, particularly if metals prices continue climbing.
One potential Front Range mine, Vancouver, B.C.-based Powertech Uranium Corp.'s proposed uranium operation in Weld County, suffered another in a series of setbacks in September when the Nunn town board voted against it.

The mine's ultimate fate likely will be decided at higher governmental levels, however. Meantime, Boulder-based Mount Royale Ventures LLC has been producing gold from its Gold Hill-based Cash Mine, while drawing praise for its environmentally savvy approach to the business.

Oil and Natural Gas: The Denver Basin (aka the Denver-Julesburg Basin) long has been among the state's premier oil and, especially, natural gas producing regions and it is by far the largest of the state's four major producing basins. While it might take an oilman to love oil, even alternative energy/ecology mavens crave its major product, natural gas.

"Natural gas is a vital part of the new energy economy, a permanent part of the new energy economy - not a bridge fuel, not a transition fuel, but a mission-critical fuel," Gov. Ritter said last July.

Weld County produced more than 150 million cubic feet of gas in 2008, third among all Colorado counties. According to the state Oil & Gas Conservation Commission, 904 drilling permits have been issued in Weld County in 2009, second place in the state and 27 percent of all permits here. This is an impressive number but a sharp drop from 2008. Drilling potential, here as elsewhere, doubtless will depend on global petroleum prices.

Water: The Front Range is locked in a usually quiet life-and-death struggle for water with the Eastern Plains and Western Slope, sharpened by the slow decline of the Denver Basin Aquifer.

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THE EASTERN PLAINS

Alternative: The plains region has the state's greatest potential in terms of wind-powered electricity generation, particularly in the area along the Wyoming border. The American Wind Energy Association says Colorado now has significant wind generation projects in Logan, Wray, Baca, Weld, Prowers and Bent counties.

Mining and Minerals: Not to speak of.

Oil and Natural Gas: See Denver Basin, above.

Water: The great drought that gripped the state earlier this decade has weakened its grip. Nonetheless, water remains a sore point on the plains. Probably the most poignant example of late was the April farmers' auction in Wiggins, in which well-using farmers lost a long legal battle to various ditch and reservoir companies that held senior water rights.

One farmer said he would have to pay almost $1 million per year to continue using his well. Meantime, plans for the Flaming Gorge pipeline, which would deliver H2O from the mountains to the Front Range and plains, in August suffered another blow when the U.S. Fish and Wildlife Service came out against the project.

HIGH COUNTRY/MINING COUNTRY

Alternative: Colorado's mountains have plenty of wind and solar potential, especially wind. The Governor's Office of Energy Management and Conservation has rated the high country somewhere between "outstanding" and "superb" when it comes to wind power. Solar potential, not so much. Other alternative energy sources, such as geothermal, appear promising, particularly in the Hot Sulphur Springs and Buena Vista-Salida areas.

Mining and Minerals: Now we're talking. About 80 percent of the state's major mining districts are contained in a High Country belt that stretches from Gold Hill, west of Boulder, to Telluride, Rico and La Plata County. We all know the history. The future of mining in the high Rockies includes the possibility of a new gold mine - the Little Hope Mine north of Cripple Creek - and more molybdenum. While the famed Climax Mine remains inactive, Freeport-McMoRan Copper & Gold Inc.'s Henderson Mine near Empire has produced 70 million pounds of molybdenum.

Oil and Natural Gas: In the ‘80s, oil companies had high hopes that fracturing deep wells in the high mountains would produce large quantities of natural gas. They didn't, and it's unlikely the industry will travel that road again.

Water: The Rockies is where it all comes from, and the high mountains are probably the one place in the state where water controversies are muted.

WESTERN SLOPE

Alternative: Perhaps surprisingly, NREL, the National Renewable Energy Laboratory, rates the Western Slope low as a potential solar energy source. The one fortuitous exception is the Grand Junction area.

Much the same goes for wind power, with some limited prospects around Craig. Geothermal is another story. According to the U.S. Department of Energy, the Western Slope has major geothermal prospects in and around Glenwood Springs, Steamboat Springs, Pagosa Springs, Crested Butte, plus a wide swath of turf stretching from Buena Vista through the San Luis Valley.

It's not that Colorado has any geothermal blockbusters capable of a gigawatt of power; it's that the state has scads of medium-sized sites. Aspen is planning to take advantage of one of them through a project aimed at heating 1 million square feet of space at an estimated upfront cost of $3.5 million.

Mining: The Gunnison- and Crested Butte-based Thompson Creek Metals Co. continues work on the Lucky Jack Mine, aka the Mount Emmons Mine, a possible molybdenum source. The state's largest gold mine, Teller County's Cresson Mine, continues to be operated by Cripple Creek and Victor Gold Mining Co. The mine yields silver, too. A couple of other, smaller mines operate on the Western Slope as well. In sum, Western Colorado continues to produce valuable minerals - and going forward might even contain a surprise or two.

Oil and Natural Gas: The Western Slope contains three of the state's four major oil and gas producing basins: the Piceance Basin, the San Juan Basin, and, mid-state, the Raton. They effectively represent the deep contradictions that seem to bedevil the petroleum business whenever it nears the human habitat.

Probably the most controversial drilling project in Colorado is the gas drilling in Garfield County, near Glenwood Springs, today the state's biggest natural gas producer by far. According to the Colorado Oil & Gas Conservation Commission, Garfield County produced about 489 million cubic feet of gas (including methane) in 2008, with La Plata County's 415 million cubic feet ranking second and about triple No. 3 Weld County's 151 mmcf. Conflicts in the state are hottest in Garfield, Delta, Gunnison and Pitkin counties, says Reeves Brown, executive director of Club 20.

"What I've heard over and over is that the drilling is just too close to people. I think that's ridiculous - look at Weld County, where they have drilled 150 feet from some homes, and where you don't have that outcry," he says.

Water: Jim Lochhead, attorney focusing on water and natural resources for the Denver-based law firm of Brownstein Hyatt Farber Schreck, says two water problems are hamstringing H2O development here, both related to the Colorado Compact, the multi-state agreement on downstream use of water flowing from the Rockies.

One is the uncertainty regarding how much water is allocated to Colorado under the terms of the Colorado Compact. A second is how the compact affects the Colorado Basin, the major undeveloped source of Colorado water. Fallout from these hitches also has constrained and confused the transfer of Western Slope water to the thirsty Front Range.

On the other hand, "From a water management and allocation perspective, which is critical to development or environmental protection, Colorado is way ahead of other states," Lochhead says. "The reason for that is Colorado has quantified water rights that are in use today and has a process for fairly efficiently quantifying rights for new uses, so there's a great deal of certainty regarding how much water is available for use in the state as compared to other states.

"That translates into an ability to use and develop water more efficiently and into a more open market system in Colorado than exists elsewhere," he says.

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