Two contracts involving service and maintenance on Denver International Airport’s 76 oil and natural gas wells could be extended through 2024.
The first contract, at $2.5 million, would allow ATP Oilfield Services to provide on-call, above-ground services, such as maintaining oil and gas well equipment, monitoring gas lines and tanks, and cleaning up leaks and spills if needed. The agreement would run through 2022, with two possible one-year extensions.
For another $1.3 million, DIA also is pursuing a contract extension with Bohler Well Service LLC. The two-year contract — with two possible one-year extensions as well — would secure on-call services for below-ground infrastructure, or workover rigs, which are specialized for moving pipe tubing in and out of wells when an oil well has been tapped, is being fixed, or is retired.
The contracts don’t enable oil and gas production, said George Karayiannakis, DIA’s senior vice president for airline affairs, and commercial properties, during Wednesday’s Business, Arts, Workforce, and Aviation Services Committee meeting.
In fact, none of the airport’s 76 oil and gas wells have been producing for about a year and a half, he said.
“These contracts simply allow us to meet the environmental and safety regulatory requirements we have, given that these wells are on our property,” said Rachel Marion, director of government affairs for the airport.
The vast majority of wells on airport lands existed before the airport did. DIA inherited them in 1995 and ultimately purchased the mineral rights.
Revenue from oil and gas, historically in the millions of dollars, has helped fund airport operations, keeping cost per plane passenger low and DIA competitive as airlines have invested in more direct flights.
But a 2018 report from Denver Auditor Timothy O’Brien found that about a third of them were now losing money — about $227,000 in the first nine months of 2017 — and altogether only brought in about $618,000.
Today, Marion said, “we’re at $0 of revenue because everything was shut-in since May of 2018.”
Denver International Airport has owned oil wells since it opened in 1995, generating millions of dollars in revenue, but a new city audit found that in 2017 a third of the 71 wells were losing money. The audit also found while DIA has a contract with an operator, PetroPro Engineering, to manage the wells the airport paid even more to third party contractors.
Lack of lucrativeness aside, Councilwoman Amanda Sawyer still wanted to know if plans differed down the line: “Do you intend to extract oil and gas from the airport land? Do you intend to close these wells? Are these contracts to abandon the wells? Are they to maintain them? What is the landscape of what we’re looking at here?”
“There are no immediate or near or long-term plans in place today to begin production again of oil and gas at the airport,” Marion said. “We are actually plugging and abandoning five of the wells this year.”
And the plan is to “keep plugging as our budget and things allow,” Karayiannakis said.
Plugging a well cost between $80,000 and $85,000, he said. That cost can rise to $45,000 if a tank battery is associated with it.
Councilwoman Deborah Ortega asked what will happen if future leadership of the city and DIA decide “to go back and frack” any of the plugged wells. However, Karayiannakis said that doesn’t happen.
“Once you plug and abandon a well, it’s done.”
With oil and gas revenue currently drying up and parking revenue expected to decrease in the future, DIA is exploring other sources of revenue to tap over the next half-decade, including real estate.
“Concessions is another area that we see growing over the next 50 years,” Marion said, “and whether that’s oil and gas development or future other revenue sources, those are all part of the conversation.”
Councilman Chris Hinds, who had remained mostly quiet during the meeting, had one request for DIA: “I’d like to ask for your commitment that if you do choose to reconsider fracking at the airport, that you would let us know in advance,” he said, upon which Marion agreed.
“I don’t believe the people of District 10 want fracking in Denver — frankly, they don’t want it at all — but I don’t have any control beyond our city limits,” he said.
Councilwoman Sawyer said that although it “makes a lot of sense to have these contracts to make sure that we are protecting our land and make sure that we are doing the right thing by the environment in daily checking on all of the wells that are there,” she also thinks “there are other much deeper conversations to come.”
The two contracts will head to the floor of Denver City Council.
DENVER — Instead of gushing revenue, oil and gas wells on Denver International Airport’s property are a money pit, with the airport losing more than $200,000 over a nine-month period last...