KONOLA: Leave it in the ground | PostIndependent.com
YOUR AD HERE »

KONOLA: Leave it in the ground

Claudette Konola
VOICE OF THE PROGRESSIVE
Free Press Opinion Columnist

Drill, Baby, Drill, is turning into Sell, Baby, Sell which does not bode well for those of us living in the middle of the resource-rich Western Slope. We’ve been sold on the idea that it is “conservative” to get all of our resources out of the ground as quickly as possible, and sell them to the highest bidder. As a farmer that I recently met in North Dakota said, that isn’t conservative thinking, that’s radical thinking.

The latest example of amazingly poor thinking about what it means to be conservative is the Fram Whitewater Proposal to drill 108 wells on 12 new pads about 15 miles southeast of Grand Junction, north of Kannah Creek Road. This proposed development has the potential to impact the air quality of our valley and the pristine water supply that becomes drinking water for Grand Junction residents.

First about the company. Fram Operating LLC (LLC) wants to drill for oil in this proposed project. The LLC is managed by the Norwegian company Fram Exploration, ASA (Fram). With a background as a financial analyst, my first instinct was to look at the financial statements of this company. Evidently, that is not part of the BLM review process when deciding who should be allowed to drill on property that is owned by the American people.



Fram’s 2011 financials carried a warning to investors about their ability to continue as a going concern. Fram spent time restructuring its debt during 2012, the most recent year for which complete information is available online. Liquidity improved in 2012, thanks to debt restructuring. However, the devil is in the details. A careful reading of the financial statements discloses that the company has about $3.6 million available for operations, nowhere near enough to support their current burn rate.

Fram’s liabilities include a secured bond transaction, bearing interest at 13%. A payment of $26 million, comes due on Oct. 30, 2015. Interest rates reflect risk. Companies with low risk profiles are currently paying less than 4% for Investment Grade European and US Corporate Bonds according to Bloomberg. Why is Fram paying 13%? Because investors see this as an extremely risky bet.



Fram’s total revenues were $2.2 million in 2012, but their total expenses before financing costs (interest and fees on loans) were $7.2 million. After the impacts of financing activities were taken into account the company registered a net loss of $9.6 million in 2012 and $13.7 million in 2011. No company can sustain that kind of loss over time and survive. Note 31 in the company’s 2012 financial statement says, “These factors raise substantial doubt about the Company’s ability to continue as a going concern.”

So, the bottom line is that Fram is barely surviving and yet we are going to allow this company to drill for oil in our air and watersheds. What if something goes wrong? Do they have the financial ability to clean up a mess that they make? Nothing in their financial statements gives me any reason to believe that they have any financial strength.

What is at risk? Air quality. About 75% of air pollution enforcement cases in Colorado during the first three months of 2013 were oil and gas related. Given that this proposed development is on the Mesa, and pollution caused by drilling is usually heavier than air, we can expect that any inversion would trap toxins in our valley, subjecting anyone with lung problems to severe health distress. Environmentalists are suggesting that “BLM should complete a fugitive emissions analysis and an air modeling study for the Grand Junction Field Office before proposing, reviewing or permitting any new drilling activities.”

Conservation Colorado has developed a list of talking points for people wanting to comment on this proposal. They include requiring industry to take steps to mitigate air quality impacts, to exclude watersheds from leasing, and to protect “the habitat of sensitive species, including that of the burrowing owl, prairie dog, hookless cactus, as well as elk and deer winter habitat in the Whitewater area.”

There is still time for you to weigh in on this proposal. Comments can be emailed to BLM_CO_GJ_Public_Comments@blm.gov or by mail to 2815 H Road, Grand Junction, CO 81506.

Claudette Konola thinks that we should carefully develop our resources, leaving some in the ground for the future of our kids and grandkids. She can be reached at ckonola@optimum.net.


Support Local Journalism

Support Local Journalism

Readers around Glenwood Springs and Garfield County make the Post Independent’s work possible. Your financial contribution supports our efforts to deliver quality, locally relevant journalism.

Now more than ever, your support is critical to help us keep our community informed about the evolving coronavirus pandemic and the impact it is having locally. Every contribution, however large or small, will make a difference.

Each donation will be used exclusively for the development and creation of increased news coverage.

 

Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.

User Legend: iconModerator iconTrusted User