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THE JOURNAL OF ENERGY

AND DEVELOPMENT

J. C. Whorton, Jr. and John Whorton,

Reinventing the West:


The Role of Its Natural Resources
in the 21st Century,
Volume 39, Number 1

Copyright 2014

REINVENTING THE WEST: THE ROLE OF ITS


NATURAL RESOURCES IN THE 21ST CENTURY
J. C. Whorton, Jr. and John Whorton*
What the Western experience has demonstrated perhaps more clearly than any
other is the astonishing speed with which things can change.
Larry McMurtry, author

New Economy Myths versus Old Economy Realities

ow do we begin to define the American West? Geographically, it is the


classic novel context of everything west of the Mississippi River. Ideologically, it becomes much more challenging, especially depending on who is defining
*J. C. Whorton, Jr. is a senior-level energy professional with over 35 years of experience
spanning all segments of the corporate value chain from both the physical and financial perspective.
This experience and his leadership positions with six Fortune 500 companies have given him the
opportunity to work with many of the worlds leading energy companies at the executive and board
level. The author has extensive upstream E&P operational experience and was a member of the
National Energy Consulting Practices at PA Consulting, PricewaterhouseCoopers, Andersen, and
Caminus (now SunGard) where he was recognized as an international Subject Matter Expert on
strategy and risk management. He is a registered Commodity Trading Advisor with the National
Futures Association and has held all major trading and principal licenses with the Securities and
Exchange Commission and Commodities Futures Trading Commission. Mr. Whorton managed
institutional energy trading desks at Prudential Securities and Morgan Stanley. He has provided
strategic insight and market commentary for Dow Jones, Wall Street Journal, New York Times,
Bloomberg, and McGraw-Hill. He coauthored Power Play Whos in Control of the Energy
Revolution? (PennWell, 1998) and has contributed to over 40 publications in addition to being
a frequent speaker on energy and financial topics. The author holds a M.A. in public administration
from Oklahoma City University and a B.A. in political science from the University of Oklahoma.
John Whorton serves as the Managing Director of Stratcom Advisors LLC. Since assuming
a leadership role in 2011, he has transformed the firms business model from a traditional land/lease
(continued)
The Journal of Energy and Development, Vol. 39, Nos. 1 and 2
Copyright 2014 by the International Research Center for Energy and Economic Development
(ICEED). All rights reserved.

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what issue or facet of the area and from what perspective. You can map a region,
but it becomes very difficult to describe the many cultures, myths, and issues that
define that region, especially in the West where novels, movies, TV, and product
advertisements have illustrated it so vividly with their own spin. Now political
campaigns and other groups with staked agendas strive to tell, or better yet twist,
their own version of the many interests that affect their party, platform, and financial supporters. The Zeitgeist of the West has now transcended to an age where
truth seems to matter only to the extent that special interest groups want it to
matter or, sadly put, it has now become an age of choreographed realities based on
calculated, scripted politics. The West provides so much valuable fodder in the
ebre
`
form of nostalgia, emotion, and cause cel
that it has become an indispensable
tool for choreographed realities to achieve certain means.
The western United States contains some of the largest open areas in the
country. In some areas it is not clear whether a single unadulterated Western
cultural region actually exists. Unlike the eastern United States, where settlement
is virtually continuous across distance and in which cultural and ethnic neighborhoods abut and overlap, the major and lesser centers of population in the
western United States are still oasis-like, separated from one another by wide and
barren expanses. These vast distances are often so great that to describe them is
best said by the frequently quoted phrase: In the west, it often takes an hour to
drive to a town and a minute to pass through it. The only noticeable properties
that many of these isolated settlements have in common are the blending of several

brokerage firm into an industry leader in energy due diligence practices. The author is widely
recognized for his extensive experience in managing due diligence engagements for merger,
acquisition, and divestiture projects totaling several billion dollars. He also has deep experience in
originating and managing large oil and gas exploration and exploitation lease plays throughout the
Midcontinent and Rocky Mountain regions. Mr. Whortons experience and expertise in complex title
examination and due diligence led him to develop TractMaster Energy Management System,
a methodology designed to more efficiently manage the workflow from the field to the land
department. TractMaster is a MS Excel-based ownership reporting technique, which is
customized to a companys specific land, title, and division order needs, and facilitates the due
diligence processes in merger, acquisition, and divestiture transactions. The author holds a B.S. from
Oklahoma State University and a Certificate of Petroleum Land Management from the University of
Houston.
A special acknowledgement to StratCom Advisors, LLC Directors Amanda Wynn Bidgood and
Chance Snook. As invaluable members of the StratCom Management Team, they embrace the vision
of a rapidly transforming West with infinite challenges and possibilities emerging on a daily basis.
We are extremely grateful for their time and invaluable input in assisting us address the many
challenges and issues that this paper presented.
This article is an updated version of Occasional Paper #50, Reinventing the West: The Role of Its
st
Natural Resources in the 21 Century (Boulder, Colorado: International Research Center for Energy
and Economic Development, 2014).

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origins of a culture, or multiple cultures, and a gradual drift to modernity that has
been slowly evolving since the late 1800s. Many of these communities were
initially settled along streams, railroads, and trails as trading-post extensions into
hunting, agricultural, or natural resource regions and have only in recent times
begun to develop their own contemporary economic personalities, such as the
emerging megaurban region along the front range of Colorado.
The mountain west evolved as a hinterland once subject to several dominant
feeder cities. Oddly enough, Washington, D.C. was not one of these cities, even
though the federal government was and still is the largest landowner through its
public land holdings acquired from the Louisiana Purchase (1803), Oregon
Territory (1848), and the Mexican Cession (1848). The early dominant cities of
the West were Chicago, St. Louis, and Kansas City. Most of what we think of as
the Old West was really the Chicago-influenced West that developed after
the Civil War. Under the Chicago plan for social and economic engineering on
a continental scale, the land would be populated with farmers and ranchers who
would send their grain and beef to Chicago elevators and processing plants, use
its banks and insurance companies, and trade their commodities on its exchanges. Western settlers would ship their commodities on Midwest-based railroads
and buy from its businesses and manufacturers. Under this plan, public land was to
be put into private hands as quickly as possible, and the land was to be managed for
maximum economic production. Western cities such as Denver, Salt Lake City,
Albuquerque, and Cheyenne were established and nurtured as little more than
economic satellites for Midwest-based railroad centers.
This plan for settlement and expansion was accelerated quickly when the
Transcontinental Railroad became operational on May 10, 1869. This event
immediately established a mechanized transcontinental transportation network
that revolutionized the settlement and economy of the American West by bringing
these western states and territories firmly and profitably into the Union and
making goods and transportation much quicker, cheaper, and much more efficient
from coast to coast. Also during this time, in the 1850s, California had just been
allowed into the union as the thirty-first state and was isolated from the rest of the
nation by nearly 2,000 miles of unsettled wilderness. There was some fear that
without more control by the national government, Californiawith its newly discovered mineral wealthmight secede into independence.
This transcontinental transportation network also created the second largest
landowner in the West. After the Civil War, rail lines such as the Union Pacific
Railroad and Northern Pacific Railway (now Burlington Northern) accepted huge
grants of land to subsidize expensive and risky railroad construction and operations across the American Plains and to gain access to the heartland and Pacific
Coast. It should be noted that these land grants were in fee simple absolute in
which the surface and mineral estate were, and for the most part still are, a single
estate.

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The construction of railroads in the plains and prairies differed from that in
eastern North America in that it preceded the settlement of the land. These lines,
rather than the communities themselves, shaped the architecture, layout, and
placement of towns. In the United States, federal, state, and local governments as
well as individuals gave railroad companies gifts of land to build their lines through
the plains and, of course, near their particular economic interests. Railroads received
an estimated 185 million acres of land from these sources, an area more than onetenth of the whole United States and larger in area than the state of Texas.
The largest contributor by far was the federal government, which made the
grants directly to the companies or through state government intermediaries.
Under grants to the Union Pacific and Central Pacific (later the Southern Pacific)
lines, the federal government offered 20 square miles of land for each mile of track
laid in territories and 10 square miles of land for each mile of track laid in states.
The land grants were laid out in a checkerboard pattern in alternating sections,
next to government reserved lands. During and after construction, critics debated
whether the land grant was a reasonable subsidy or an opportunity to plunder the
wealth of the prairies and plains. Apologists for the railroad grants admitted that
the legislation appropriating the lands was often poorly drawn and contradicted
land settlement plans, but noted, however, that building and running a railroad was
an expensive and unstable business. Land grants, they wrote, offered companies
immediate revenues and the means to meet future capital costs. Although critics of
the railroad land grants in the United States argued that the gifts made railroads the
proprietors of the West, the rail lines that bound the Atlantic and Pacific together
certainly would not have been constructed so early without them.1 Today, along
with the federal government, the railroads and their successors in interest are the
largest mineral owners in the West.
In addition to the federal government and railroads, two other significant
western surface and mineral owners and their genesis must be understood to fully
comprehend many of todays western issues. They are Native American tribal
lands and lands held in trust by the states for public education.
The relationship between Native Americans and the United States predates
western expansion. In fact, the U.S. Constitution specifically mentions this relationship between the federal government and Native American tribes in three
different sections.
As expansion reached into the West, settler and miner migrants came into
increasing conflict with most, if not all, of the Western tribes. These western tribes
were complex nomadic cultures based on an introduced horse culture and seasonal
hunting. They carried out strong resistance against this ongoing incursion in the
decades after the completion of the Civil War and the Transcontinental Railroad in
a series of Indian Wars, which were frequent up until the 1890s with a few continuing into the 20th century. Over time, the U.S. government forced a series of
treaties and land cessions by the tribes and established reservations for them in

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many of the western states. Government programs encouraged the western tribes
to adopt European-style farming and similar pursuits, but European-U.S. agricultural technology of the time was inadequate for often arid or semi-arid reservation lands in the West.
In 1924, Native Americans who were not already U.S. citizens were granted
citizenship by Congress. Contemporary Native Americans have a unique relationship with the United States because they may be members of nations, tribes,
or bands with sovereignty and treaty rights. Tribal sovereignty in the United States
is the inherent authority of indigenous tribes to govern themselves within U.S.
borders. The federal government recognizes tribal nations as domestic dependent
nations and has established a number of laws attempting to clarify the relationship between the federal, state, and tribal governments. The Constitution and later
federal laws grant local sovereignty to tribal nations but do not grant full sovereignty equivalent to that of foreign nationshence, the term domestic dependent
nations. The relationship between Native Americans and the federal and state
governments historically has been extremely complex and complicated and is no
less so today. Needless to say, natural resource leasing and extraction on lands
controlled by the Bureau of Indian Affairs is a delicate and transitional art and far
from a repeatable, predictable science. Today, tribal lands still represent a significant amount of land in the West (figure 1).
The other significant landowners are states holding lands in trust for public
education. As the western expansion progressed from the late 18th century through
the middle of the 20th century, the federal government granted control of millions of
acres of federal land to each state as it entered the Union. These lands were given in
trust, with the stipulation that proceeds from their sale or lease be used to support
various public institutionsmost notably, public elementary and secondary schools
and universities. These lands eventually totaled more than 80 million acres in the
lower 48 states. State trust lands were spread across the country but were concentrated west of the Mississippi River, and encompassed every sort of terrain and use.2
Land grant policies have evolved significantly over the years and vary from
state to state. The regulations governing the management and administration of the
granted lands also have changed over time. Today, western states typically hold
two sections per township (36 sections per township) in trust for school lands.
These sections are usually Sections 16 and 36 and often provide significant revenues from grazing, timber, and mineral leases.
There can be little question of how these state land grants have played an
invaluable role in the development of the U.S. system of public education and,
especially in the natural resource rich western states, continue to provide significant revenues to maintain that system today.
Lands owned and controlled by the railroads, federal government, state school
grants, and Bureau of Indian Affairs offer tremendous opportunity for the development of natural resources, but also present some of their greatest challenges.

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Figure 1
NATIVE AMERICAN TRIBAL LANDS

Source: National Atlas of the United States of America.

The western cities of the 21st century are no longer satellites for midwest
railroad hubs but are now viable economic partners to a host of other cities such as
Houston and Los Angeles, economically, physically, and culturally.
The physical connection to Los Angeles is as close as the Colorado River,
which is managed primarily by federal agencies to serve Arizona, Nevada, and
Southern Californias unquenchable thirst. California also has one other unquenchable thirst: the energy required to power its growing cities and its rapidly
growing technological industries. With densely populated urban centers such as
the Silicon Valley, California must have an abundance of cheap, clean, reliable
energy in order to maintain its ranking of the eighth largest global economy.3
California practices NIMBYism (Not In My Backyard) and BANANAism (Build
Absolutely Nothing Anywhere Near Anything) on a grand scale and encourages
generation of power and greenhouse gas emissions elsewhere. It needs a tremendous amount of reliable and sustainable power to feed an economy of global
proportion, but its environmental laws make it almost impossible to build new
refineries, power plants, transmission lines, or natural gas pipelines within the
state. This immense and growing demand for energy presents Houston, the selfproclaimed Energy Capital of the World, the gateway that its countless energy
companies need to access the abundance of oil and gas found mostly under public
lands in the West.

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When you watch national television, do you see any announcements about the
Wests abundant natural resources fueling the New Economy from its public lands?
No, what you see are ads for SUVs sitting on top of some rugged mountain or ads
for recreational activities. People are skiing, rafting, fishing, camping, hiking, and
horseback ridingthats what the California West says that our public lands are for.
Our public land management policies are at a crossroads. Agencies need revenues to
sustain their growing budgets, but it is much more politically correct to charge user
fees for recreation on public lands than the politically incorrect choice of extraction
of natural resources, especially if it involves timber harvesting, coal mining, or hydraulic fracturing.4 User fees may be where most of the value in the California West
public lands are now, if not monetarily, at least psychologically. Public lands were
originally created for livestock grazing and natural resource extraction such as coal
and timber. Today, Americans spend far more on recreational paraphernalia such as
skiing equipment, camping gear, RVs, ATVs, bikes, and fishing and hunting equipment than the Forest Service now realizes from timber lease sales or grazing leases.
Another interesting commercial aspect of public lands is their value to real
estate. Look at any ad for upscale property and you will often see phrases like
near public lands, access to public lands, or adjoins public lands. Why are
these adages such popular promotional ploys? Because it allows buyers to assume,
or fantasize, that they will never have neighbors, let alone undesirable neighbors.
It preserves the wide open spaces and images of the vast western skies. The undesirable neighbor list at one time was probably based upon race, religion, or creed
but now is targeted for anyone involved in the extraction of natural resources,
related infrastructures, and/or livestock feedlots or processing plants.
Thus becomes one of the first crises of the New Economy Myths versus the Old
Economy Realities. Californias energy crisis more than a decade ago was a sobering wake-up callparticularly to the other rapidly growing Western states and
economies. The lesson: more people, transportation, industry, and technology
require more energy, and more energy requires the formation and execution of
public and private policies that do not discourage growth of the energy value
chainexploration, production, distribution, and the infrastructure that goes with
them. The Chicago West plan of managing the land for maximum economic
production included natural resources and transportation as a vital part of that
economy. The Old Economy of the Chicago West is now being asked to support
the California New Economy in many ways. As we are quickly discovering, the
New Economy, the age of information and technology, is very, very dependent
upon the energy and the policies of the Old Economy. The formula for the New
Economy may be very simple: Fuel = Power = Technology.
The Old Economy was built around regional agricultural and industrialized
societies that produced and moved tangible goods. The New Economy is a global
workplace that has shifted toward intangible services and information services and
products now often paid in digital currencies such as bitcoins.5

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Two fundamental Old Economy industries are agriculture and natural resource
extraction, both of which were the key drivers for settling the western United
States. Both are deeply rooted in the age-old adage land is the basis for all
wealth, an axiom that the New Economy industries are challenging on a daily
basis. Agriculture, like other commodities, is supply/demand driven, and thus
subject to periods of extreme volatility. With agriculture, whether farming or
ranching, the modern basis for wealth is now more often a trade-off between
a lifestyle that one loves and respects rather than the promise of great economic
reward. Do you stay on the land and carry on a generational tradition of farming
and ranching, sell out to a real estate developer subdividing into ranchettes,6 or
even monetize your water rights for non-agricultural commercial use?
Early on, the energy industry provided the American farm with power to light
its homes and fuel to mobilize its activities. In the 21st century, Rural America has
most, if not all, of the conveniences and technology of its urban cousins. As far as
quality of life, the distinction between rural and urban is now very blurred. For
those areas fortunate enough to lie over productive geological basins, the energy
industry has subsidized much of the western agricultural industry. Oil and gas
lease bonuses, surface damages, and royalty income have long subsidized inflated
land prices, expensive farm machinery, rising labor costs, high interest rates, and
volatile agricultural commodity prices. This supplemental income derived from
mineral estate ownership associated with surface estate ownership has allowed
many a farmer and rancher to continue to pursue an otherwise uneconomical
American Dream.
Agriculture and energy have both contributed much to the myths of the American West Old Economy. Fourteen years into the new millennium, the concept of the
American West is still very strong in the popular imagination and is constantly
reinforced by romanticized cinematic, TV, and literary images of wide open spaces,
majestic views, freedom to roam, and the lifestyle of the cowboy. The cowboys
West is so vast in area and myth that at times it seems impossible to define and
conceptually map. After viewing movies and TV ads it is tempting to fully embrace
the assumption that the cowboy and his ranches completely epitomize the full gamut
of Western life. After all, not too many great western epics take place on dairy
farms. Although the early cowboy and cattle industry may have accounted for
a great portion of the Western domain area wise, it actually engaged a relatively
small fraction of the Wests population and lasted a very brief time in the history of
the civilized West. Today, the preponderance of unpopulated wide open spaces
consists of large corporate farms, ranches, and public lands.
The oil and gas industrys contribution to myths is that of the early day
wildcatter who took chances and gambled against high odds for fame and fortune.
Oil and gas have long come to symbolize wealth. In recent times, the image
transposed to the slick, greedy promoter J.R. Ewing, the Dallas TV series icon.
While the J.R. image has been a successful story line for Hollywood, it has been

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misaligned and damaging for the current industrys image, especially when it
comes to the issue of developing public lands for oil and gas exploration. TV ads
supporting or condemning hydraulic fracturing (fracking) now flood the airwaves
during prime-time local television.
What is now interesting is that both agriculture and energy must look to the
West and its public lands for future growth. It is estimated that a large percentage
of North Americas natural gas reserves lie in the Rocky Mountain region with
most of those reserves being found on public lands (see figure 2). An estimated 30
percent of North Americas coal lies in the Powder River Basin of Wyoming.
Grazing leases on public lands are still very critical to the economics of western
ranching; however, natural resource extraction such as oil and gas, coal, and timber
are in serious competition for both agricultural access and their increasingly valuable water rights.
Today, the energy industry is one of the most visible cracks in an old economy
trying to keep pace with the new. Coal, and now crude oil, have difficulty moving
on an antiquated railroad system and natural gas production and its aging infrastructure has struggled to keep up with an emerging economys demand for its
Figure 2
U.S. FEDERAL PUBLIC LANDS SURFACE AND SUBSURFACE

Source: U.S. Department of the Interior, Bureau of Land Management (BLM), Washington,
D.C., BLM, 2005.

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environmentally favored source of power. Pipeline leaks and ruptures and train
derailments with volatile crude and refined product cargoes are becoming more
commonplace by the day. The rapid expansion of the New Economy, driven by
escalating technological and telecommunications power needs, becomes more
dependent on energy and its aging infrastructure by the day.
So, the last few years have set the stage for a new era in the American West.
Booming technological centers of commerce, such as the Silicon Valley and
Colorados Front Range, demand a highly skilled, specialized workforce that
demands high quality-of-life accompaniments such as access to recreational facilities on public lands. These New Economy technological centers of commerce
in turn have huge power requirements from Old Economy energy companies that
need access to the same public lands to satisfy the associated growing power
demands.
The West may very well become the casebook study for the rest of the world, as
the ultimate balance of its policies, planning, and action will determine this Tug
of Wars final outcome.
While the present Tug of War over public lands natural resources is being
waged, interesting observers and passive players in the background are foreign
national oil companies (NOCs) that are silently competing for and buying interest
in North American oil and gas assets. China, much like the United States but on
a much larger scale, must secure energy resources to fuel its rapidly developing
urban centers and their huge power demands. Realizing that certain commodities
such as oil and gas are in finite supply and becoming scarcer by the decade, these
energy resource-deficient countries must look abroad for reserve replacement and
accumulation security. Recent joint ventures with U.S. energy companies for proven
reserves and shale formation completion technology have dominated the energy investment agenda.
The recent expansion of the oil and gas industry in the United States resulting
from increased production and lower prices has created significant economic
growth and over 1.2 million jobs directly or indirectly, which is expected to grow
to 3.3 million by 2020.7 The energy industry is a significant employer in the West,
with a vast supply chain that includes, but is not limited to oil and gas drilling,
extraction, support activities, transportation, refining, and sales. This boosts the
economic output and employment needs by creating demand for a wide range of
associated goods and services. It also has contributed significantly to greater energy independence for the country. The oil and natural gas industry currently
supplies more than 60 percent of the nations total energy demands and more than
99 percent of the fuel used by Americans in their cars and trucks.8
Shale gas has transformed the North American market and has grown from less
than 1 percent of U.S. production in 1995 to nearly half of U.S. natural gas production in 2013. U.S. prices have fallen to one-third of European levels and onefifth of Asian levels. Tight oil, produced with the same techniques (horizontal

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drilling and fracking) as shale gas, is the main reason U.S. oil production has
increased 60 percent since 2008. This increase of 3 million barrels per day is larger
than the national output of nine of the twelve OPEC countries. The International
Energy Agency (IEA) predicts that the United States will soon overtake Saudi
Arabia and Russia to become the worlds largest oil producer.9
When it comes to national energy security, the United States has a strong
competitive advantage over the rest of the world. It has abundant reserves; privately
owned mineral rights; a large, safe, modern, efficient domestic drilling fleet and
service industry; a skilled workforce with experience and expertise; supporting road,
utility, and other infrastructures; a well-established and stable regulatory and legal
system; substantial pipeline and storage capabilities; and access to vast capital
markets. Additionally, the country is fortunate to have a very robust and mature
financial and physical energy marketplace. The producer-marketer-end-user value
chain is one of the most efficient, liquid, and transparent market models in the world
where producers and end users can hedge present and future pricing exposure and
volatility. All of these factors contribute greatly in making the United States one of
the most competitive energy producers globally, particularly as far as commodity
pricing and transparency and investment security and stability.
Just as its vast lands are needed for agricultural sustainability to feed its
growing population, the Wests finite natural resources are clearly the critical key
to providing the required energy for its future. Unfortunately, both need the same
limited resource of water, as do its growing urban centers. In resolving this festering competition, the region must produce a viable plan that can re-define and revitalize itself, launching from its past and present outpost status to a predominant
role on a par with the more populated East and West Coasts. This plan may very
well serve as a blueprint for Canada, Mexico, China, and other countries that face
many of the same issues now and in the coming years.
All of the concerns confronting the New Economy of the West are paramount, but
none are mutually exclusive. To face the challenges that lay on the immediate horizon, ensure the security of the future, and correct the mistakes of the past, the energy
industry and their government and environmental peers must reinvent and realign
themselves with a set of common goals. To achieve such an aggressive agenda, the
following key issues must be addressed and resolved in mutually beneficial ways.

Urban Encroachment into Rural Areas


Access to and Responsible Use of Water
Environmentally Sound Extraction and Transportation of Resources
The Financial and Political Effects of Split-Estate Law

Urban Encroachment into Rural Areas The Great Divide


Whats bad about sprawl is not its uniformity, but that it is so uniformly bad.
James Howard Kunstler

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The Great Divide is a stark division between cities and what remains of the
countryside. The monumental conundrum of the West today is how to manage the
unique lifestyles that this Great Divide has createda new age socio-political
ecosystem that confounds planners, developers, and governments. How do we
design urban business centers and suburban shopping malls that do not look exactly like the ones in neighboring cities? How do we maintain rural and wilderness
landscapes that bear any resemblance to what our forebears witnessed?
Urban and rural America both require the same land and the same water,
whether it is for mineral development, a golf course, or a livestock feed lot all of
which serve a purpose for the common good. The competition is intense as both
also have the same needs for energy, food, and expansion.
The American past was one where you could claim a piece of land and make
your own home but it was also dangerous and you had to defend it knowing that
help was often several miles or even days away. This frontier mindset is still
a deep part of those rural values even if we no longer have a hostile, unsettled
frontier. Even today emergency response times for police, fire, and ambulance are
vastly different for rural than in urban areas.
It is estimated that by 2050, 89 percent of Americans will live in an urban area,
up from 83 percent now, and by 2040 there will be a half-dozen metro areas with
populations of more than 10 million, up from two now (New York City and Los
Angeles) with about 10 others with over 5 million inhabitants. This same study
estimates significant expansion of many midsize and inland cities.
This urban/rural divide continues to grow and play a major role in the evolution
of the West. Not just some cities and some rural areas, eithervirtually every major
city (100,000-plus population) in the United States of America has a different outlook
from the less populous areas that are closest to it. The difference is no longer about
where people live, its about how people live: in spread-out, open, low-density privacy or amid rough-and-tumble, in-your-face population density and diverse communities that enforce a lower common denominator of tolerance among inhabitants.10
People and economies need energy to grow and thrive. Energy use rises with
improved living standards. Technology requires power, and a lot of it. Urbanization and industrialization form a main driving force for energy demand. Energy
is a necessity in improving the quality of life and economic growth. Approximately two-thirds of energy consumption comes from cities. Global energy demand is rapidly outpacing supply. One hundred years ago, two out of ten of the
worlds population was living in cities. By the middle of the 21st century, that
figure will be almost seven out of ten. From 2010 to 2040, the worlds population is
projected to rise from 7 billion to nearly 9 billion and the global economy will more
than double. As we have seen in developed economies over the previous century,
one critical fundamental of energy demand is the migration of populations from
rural to urban areas. Naturally, the expansion of urban infrastructure creates demand
for iron, steel, cement, and other industrial goods that are also energy intensive.11

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As population density increases, energy production and independence also has


increased to meet the growing urban demand. Historically, much of the oil and gas
drilling has been in rural and remote areas away from cities and towns; this urban
growth has now led to a rising amount of drilling occurring in or near cities, residences, and businesses. The resulting change in the balance of interests, increasing
requests for noise abatement, and the elimination or lessening of perceived environmental impacts has been at the heart of many heated controversies. Certain cities
recently affected by this new or expanded activity have tried to regulate, greatly
restrict, or even ban drilling within their boundaries. The energy industry is now
going to great lengths to accommodate its drilling and operations within or near
urban areas to lessen its impact on local residents and local businesses.
While advancements in drilling techniques have led to increased drilling in
recent years, urban drilling is certainly not new. Drilling operations within urban
corridors has been occurring since the early 1900s. In many cities, such as Los
Angeles and Dallas/Ft. Worth, there are locations where most neighbors are
largely unaware that drilling and production is occurring. The drilling is conducted
behind high walls that serve as sight and sound barriers.
The recent concern about drilling arises from several factors, including fears of noise,
dust, traffic, and potentially emissions of unhealthy chemicals. Some of these issues can
be dealt with using reasonable steps; others may prove not to be of any real risk.
Concerns about fracking have been widely discussed in the media and, as a result, many in the public do not want any drilling near their properties, i.e., NIMBYism and BANANAism. On the other hand, other landowners would like to take
advantage of the income generated from leasing their mineral rights. Thus, in many
cities and counties in states where oil and gas development is occurring, there is an
emotional debate as to what or if any further regulation or restriction is necessary.
Urban residents seem to want all of the modern conveniences that abundant and
efficient low-cost energy provides, but prefer all of the direct nuisances of drilling
and production to be borne exclusively by their rural counterparts.
Those who seek to bring in the additional income to mineral interest owners
and the jobs and economic growth associated with drilling and production tend to
want to work through reasonable accommodations with the oil and gas companies.
Reports in The New York Times discuss Greely, Colorado, as working to set certain
restrictions on drilling, while Boulder, Colorado and several other neighboring
cities imposed a year or longer ban on drilling. These restrictions were challenged
aggressively in the courts.
A similar ban on drilling has occurred in many states. In some states, like
Pennsylvania and now Colorado, these bans have been struck down by courts
because the state laws preempt local regulations or are inconsistent with the
regulations set by the state regulatory agencies. As a result, in some states, local
restrictions are significantly limited, while in others, municipalities can currently
exercise significant regulatory authority over oil and gas activities.

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As oil and gas companies evaluate drilling plans, some steps can be taken to
reduce impacts and potentially reduce complaints from neighbors. For noise,
distance is sometimes the best way to reduce impact. Locating as far away from
residences is clearly the best approach if it can be achieved. At times, the distance
can only be reduced so much in order to drill in the particular formation, lease, or
regulatory approved unit boundaries.
Drilling in towns and cities will likely continue over the next few years or
even decades, as oil and gas formations are often found in and around these
areas. Not all cities or their residents will welcome drilling. Oil and gas companies can attempt to educate, inform, and engage in practices that reduce impacts from perceived encroachment of drilling activities near residents and
business owners. Care in moving into these areas is critical to understand the
potential concerns and to work with local leaders to develop an approach that
may reduce the attempts to significantly limit, if not ban, drilling activities while
allowing reasonable accommodations for drilling to take place with reduced
local impacts.12
Access to and the Responsible Use of Water We All Need It: Who Owns It and
Who Gets It?
Whiskey is for drinking; water is for fighting over.
Mark Twain, 1884

With its vast rustic and majestic beauty, the American West is distinctive in
numerous ways, yet one factor above all else sets it apart from other geographic
regions of the United States: its lack of precipitation. Beginning with the early
settlers migrating from a moist East to an arid West, the lack of rainfall has
always been a delineating regional problem. Depending on which particular
point you choose to divide the annual rainfall amounts of the verdant East from
the dry West, states east of the Mississippi River enjoyed annual precipitation in
excess of 20 inches, making it possible to raise crops without irrigation, while
most western states, with notable exceptions such as the Pacific Northwest,
receive less than 20 inches and can drop to under 5 inches in the arid southwestern regions.
The Reclamation Act of 1902, which created what is now the Bureau of Reclamation, committed the federal government to construct and maintain irrigation
works for the development of water storage and delivery resources, such as dams,
reservoirs, and canals, to irrigate semiarid land in 16 western states and territories.
Today, as in 1902, water remains indispensable to life in the American West.13
Natural aquifers such as the Ogallala Aquifer help to augment natural rainfall
(see figure 3). However, over the years powerful pumps have taken far more water
than aquifers can recharge. Machinery and chemicals have taken the place of

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Figure 3
THE OGALLALA AQUIFER

natures wisdom and manual labor, allowing farmers and ranchers to grow crops and
livestock in places where they ostensibly should not be grown. Through government
subsidies, farmers are encouraged to use water for crops that are otherwise difficult
and unnatural to sustain in certain areas. Forget feeding a family; the globalization
of commodity prices, government subsidies, and the hue and cry of maximizing
yield, have created a modern agricultural process of destruction. Water rights in the
West have evolved into a philosophy of use it or lose it.14
The issue of water rights in the West is quickly approaching a crisis level. The
expansive encroachment of urban areas into the agricultural areas has sparked a new
battle. Who gets the water: the ever expanding cities, with the newer, nicer golf
courses and city parks, or the agricultural lands upon which much of the nations
crops are produced? The introduction of the new hydraulic fracturing techniques
used to extract natural resources from shale has added an additional argument. Are
the oil and gas companies using too much water to develop our resources?
With much of the West recently facing historical droughts, federal and state
governments have mandated intricate water policies. The federal government is
spending hundreds of millions of dollars a year on drought relief programs, but
with the subsidies come extensive water-usage restrictions. These restrictions
are forcing farmers to leave thousands of acres of rich farm lands fallow, as well

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as forcing cattle ranchers to sell large portions of their herds. The impact of
water restrictions is changing the face of the newly designed golf courses and
parks by introducing more water resourceful xeriscaping rather than the lush
grasses.
As demand increases, the battle for water rights in the West will become even
more intense in the coming years. California is currently experiencing historical
droughts with no relief in sight. The current snowpack for the state is estimated at
only 12 percent of average. The spring runoff will not be able to provide California
farmers with the resources needed to plant and maintain their crops. In early 2014
President Obama pledged $183 million in federal aid for Californias drought
relief programs.15 The arguments over who should receive the funds are taking the
stage in California politics. The battle for water rights can clearly be seen here, the
most populous state in the union, which produces nearly one-half of the nations
fruits and vegetables.
The volume of water needed for the hydraulic fracturing process has once again
drawn negative publicity to the oil and gas industry. The media recently has
slammed the industry with accusations of water contamination by fracking processes. Oil and gas companies have been forced to create alliances, such as the
Western Energy Alliance and Coloradans for Responsible Energy Development,
to reveal the inaccuracies and inconsistencies of the anti-fracking movements
claims. The media-driven negative publicity is now pointing their fingers at the
amount of water used by oil and gas companies during the hydraulic fracturing
process.
The average horizontal well uses 3 to 5 million gallons of water during the
hydraulic fracturing process. Though this figure seems high on a per well basis, the
oil and gas industry accounts for less than 1 percent of the nations water usage.16
Finding the water has become the largest challenge facing producers in the West.
As in the rest of the country, in Colorado oil and natural gas operations use less
than one percent of the states total water usage, according to the Colorado Water
Conservation Board and the Colorado Oil and Gas Conservation Commission.
(Nationwide, the entire oil and natural gas industry represents about 0.025 percent of
total water use.) The oil and gas industry takes regulatory compliance seriously.
When it comes to water, the industry is a very heavily regulated sector with numerous
federal laws in place such as the Clean Water Act and Safe Drinking Water Act to
protect water resources. Colorado also requires base-line water testing before, during,
and after drilling to ensure oil and natural gas operations do not impact drinking
water. These, along with other state regulations, ensure the protection of water.
Only relatively shallow aquifers, usually 1,000 feet or less below the surface, have
high quality water for human consumption, crop irrigation, or livestock watering. Oil
and natural gas is contained far deeper underground, usually a mile or several miles
below the surface. The water encountered when drilling to these depths cannot be used
for drinking or agriculture as it does not meet quality standards.

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In the drilling and production process, wells are carefully constructed to ensure
that any fluids pumped into them, as well as the oil and natural gas coming out, do
not contaminate underground sources of drinking water. Two to three alternating
layers of steel pipes and cement are constructed in the wellbore to keep frack
fluids, oil, and natural gas in the well and out of drinking water aquifers.17
The use of water in Colorado is governed by what is known as the Prior
Appropriation System. This system of water allocation controls who uses how
much water, the types of uses allowed, and when those waters can be used.
A simplified way to explain this system is often referred to as first in time, first
in right. An appropriation is made when an individual physically takes water
from a stream (or underground aquifer) and places that water to some type of
beneficial use. The first person to appropriate water and apply that water to use has
the first right to use that water within a particular stream system. This person (after
receiving a court decree verifying their priority status) then becomes the senior
water right holder on the stream, and that water right must be satisfied before any
other water rights can be fulfilled.
For example, assume three water-users exist on a stream system with adjudicated (court-approved) water rights totaling 5 cubic feet per second (cfs). The user
with the earliest priority date has a decree for 2 cfs, the second priority has a decree
for 2 cfs, and the third priority right has a decree for 1 cfs of water. When the
stream is carrying 5 cfs of water or more, all of the rights on this stream can be
fulfilled. However, if the stream is carrying only 3 cfs of water, its priority number
3 will not receive any water, with priority number 2 receiving only half of its 2 cfs
right. Priority number 1 will receive its full amount of 2 cfs under this scenario.
This process of allocating water to various water users is traditionally referred to
as Water Rights Administration and is the responsibility of the Colorado Division of Water Resources. Of course, the appropriation system is much more
complicated than this. Some priorities on major stream systems in the state date
back to the 1850s, and most of the stream systems have been over-appropriated
since the 1890s (over-appropriated means that at some or all times of the year,
a call for water by a senior appropriator is not being satisfied.)
The preceding example, however, does describe the basic theory behind the system. How does this affect you? Practically speaking, it means that in most river
drainages a person cannot obtain an underground water right without a plan for
augmentation that replaces the depletions associated with that diversion. (Surface
water appropriations may still be allowed if they can be shut off when a senior water
right is calling for water. Domestic surface water rights are discouraged in overappropriated basins without augmentation so the domestic supply does not have to be
shut down.) For the most part, only small residential and livestock wells (exempt
from water rights administration and meeting strict criteria set forth by the
legislature) are allowed to be drilled without providing for protection to senior
water rights.

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In Colorado, where oil and gas development accounts for 0.8 percent of the
states water usage, and agriculture accounts for 85.5 percent, producers are forced
to search for alternative methods of obtaining water.18 The most common method of
obtaining surface water is not an option as many municipalities claim rights to lakes
and rivers, and state laws govern the usage water in irrigation ditches and canals for
agricultural use. Water purchased from municipalities can prove to be very expensive and the added cost of transportation makes it uneconomical. The state laws
regulate the amount of ground water that can be removed from the aquifers, leaving
very little for oil and gas development. As a result, producers are using new techniques, such as treating and reusing production water from the surrounding wells.
The West is setting the stage for political platforms surrounding oil and gas development. With environmental issues driving the anti-oil and gas campaigns, water
will be at the forefront of future discussions. The new breed of western inhabitants
will stop at nothing to preserve their resources and protect their re-creations.
Environmentally Sound Extraction and Transportation of Resources Im
Right, Youre Wrong!
Conservation is a state of harmony between men and land.
Aldo Leopold

Arguably the most difficult challenge to modern industrial development has been
operating in a way that benefits the end user while respecting and maintaining the
environment. In recent times, the energy industry has been presented with obstacles
in this area that have centered around two major categories: transportation and resource extraction.
The New Economy West is at a crossroads. The number of goods and services
needed to be delivered on its infrastructure is increasing by the day, while expansion of the infrastructure itself is at a proverbial stand still. Litigation and
political red tape have slowed the delivery of crucial pipelines, leaving crude oil
and natural gas to compete for space on rail and truck. While this presents the
obvious issues of pollution, infrastructure deterioration, and resource consumption, other issues arise that, in the long run, may be more harmful. Cases in point
are the recent train derailments in the United States and Canada where railcars
carrying Bakken crude, which is rich with volatile, high British thermal units (Btu)
liquids, causing loss of life and substantial property damage.
All commodities must be transported between stages of supply chains, often
several times over thousands of miles, before reaching their end user. When supply
lines become overcrowded with goods, the price of transportation and, therefore, the
price of those goods increase. Much like petroleum, wheat, corn, timber, and other
crops are used in the production of almost everything in which we find value in
modern life. If all commodities continue to burden the same transportation

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infrastructure, as a society we cannot expect to see a reduction in pollution from that


infrastructure and must expect extreme pricing volatility on the goods and services
that have become essential to us.
While the transportation of oil and gas will become more of a key issue on the
horizon, the concern that must first be addressed is the extraction of that oil and gas.
Because of mistakes like the Exxon Valdez and Deepwater Horizon spills, energy
companies have invested billions in adhering to some of the strictest environmental
guidelines facing any industry. In the last few decades, the development of tight oil
and natural gas fields has played a key role in contributing to the new energy
economy in what has proven to be the most environmentally responsible way to date.
For decades production from American oil fields has been entering decline
curves faster than new fields have been discovered. To date, alternative sources of
energy are neither capable of meeting the demand currently being supported by
hydrocarbons nor economically feasible to develop competitively and without
government subsidies in the short term.19 Without a suitable alternative to crude oil
that can be delivered quickly, efficiently, and in an environmentally sound manner, complete dependence on foreign energy has looked all but inevitable. Vast
formations of liquids and natural gas-rich shale had never been economically
feasible to develop; however, in the 1940s, the advent of hydraulic fracturing gave
the energy industry a means of extracting this crucial commodity.20 In the subsequent decades, the technology involved with fracking and the introduction of
horizontal drilling have made abundantly more of this gas accessible and have
presented the United States with an opportunity to not only become energy independent, but an energy exporter.
Cheap and readily available natural gas has sparked an overhaul in heavy industry. Power plants and other large-scale consumers of coal have increasingly
converted their operations to be powered by natural gas. This has been one of the
largest contributing factors to greenhouse gas emissions decreasing to what are
now pre-1994 levels.21 Additionally, the abundance of American natural gas has
made it the least-expensive feedstock in the world and, as a result, has revitalized markets such as the petrochemical industry along the Houston shipping channel.
While resource extraction and transportation may be the keystones in the New
Economy of the West, they must continue to be carried out in ways that preserve the
culture, beauty, and ideological definitions of the region. To help ensure that this will
be the case, programs such as conservation easements are continuously being established and utilized, while being respected and adhered to by the energy industry.
In the United States, a conservation easement is a program to invest in a
qualified private land conservation organization (often called a land trust) or
government entity to constrain, as to a specified land area, the exercise of rights
otherwise held by a landowner so as to achieve certain conservation purposes.
It is an interest in real property established by agreement between a landowner

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and land trust or unit of government. The conservation easement runs with
the land, meaning it is applicable to both present and future owners of the
land.
The conservation easements purposes will vary depending on the character
of the particular property, the goals of the land trust or government unit, and the
needs of the landowners. For example, an easements purposes or objectives
might include any one or more of the following: maintain and improve water
quality; perpetuate and foster the growth of healthy forest, grassland, or other
eco area; maintain and improve wildlife habitat and migration corridors; protect
scenic vistas visible from roads and other public areas; or ensure that lands are
managed so that they are always available for sustainable agriculture and
forestry.
The most distinguishing feature of the conservation easement as a conservation
tool is that it enables users to achieve specific conservation objectives on the land
while keeping the land in the ownership and control of landowners for uses
consistent with the conservation objectives.
The Financial and Political Effects of Split-Estate Law Surface vs. Mineral
Rights: How Did This Happen?
No power on earth has a right to take our property from us without our consent.
John Jay, First Chief Justice of the U.S. Supreme Court

Few issues in oil and gas exploration and production are more divisive than the
issue of split-estate law. When it comes to property rights, the United States is unique
in that no other country in the world allows its citizens to own the minerals beneath the
land. In all other countries, the minerals are owned by the monarch or crown (aka,
crown lands, crown estate, royal domain, or government), the equivalent of an entailed
estate (limited to specific heirs) that passed with the monarchy and cannot be alienated
from it.
In the United States when land was originally deeded to individuals in the 18th,
19th, and 20th centuries, the mineral estate naturally came with the land and, as
long as it has not been severed (meaning the land and minerals remain together), it
stays with the land.
In a split estate, the surface rights and subsurface rights, such as the rights to
develop minerals, for a piece of land are owned by different parties who both have
legal property rights. In these situations, mineral rights are considered the dominant estate, meaning they take precedence over other rights associated with the
property, including those associated with owning the surface. Moreover, courts
have held that the mineral right has no value unless the oil or gas can be removed
from the ground. That means that mineral owners have the right to reasonable use
of the surface, regardless of whether or not the surface owner grants permission.

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However, the mineral owner, or its lessee under a mineral lease, must show due
regard for the interests of the surface estate owner, or its tenant, and occupy only
those portions of the surface that are reasonably necessary to develop the mineral
estate. The various State and Bureau of Land Management (BLM) regulations
have further defined this relationship. Surface and mineral owners are encouraged
to open a line of communication as soon as possible to discuss plans and needs.
Most often the problem lies in the fact that neither party knows the other until the
mineral extraction process has already started through the mineral owners lessee.
The BLMs split-estate policy only applies to situations in which the surface
rights are in private ownership and the rights to development of the mineral resources are publicly held and managed by the Federal government through the
BLM. These public lands, including the Federal mineral estate, are managed to
enhance the quality of life for present and future generations, under a mandate of
multiple use as described in the Federal Land Policy and Management Act.
Oil and gas leasing is much easier when the surface owner owns all or
a portion of the mineral estate in that many of the terms and conditions for the
surface usage can be incorporated into the oil and gas lease. This becomes much
more difficult and contentious when the surface and mineral estates are severed
and separate.
Surface ownership without mineral ownership is most often an extremely divisive situation in oil and gas exploration. Few things are more irritating and
frustrating than the thought of your surface estate being utilized against your will
with drilling and operations imposing upon the use of your land for the financial
benefit of others. In many cases, the financial rewards of oil and gas production
from the mineral estate are huge while the surface estate can only tolerate the
inconvenience and envy the benefits the mineral estate is receiving.
In most of the states where active shale resource plays exist, such as New York,
Pennsylvania, Texas, Colorado, and California, there are spirited initiatives by
state and local governments to ban hydraulic fracturing. This ban on fracking
obviously severely restricts a split estate mineral owner from realizing potential
value from his mineral estate.
The Fifth Amendment to the U.S. Constitution says, in part, that private
property cannot be taken for public use without just compensation. Further,
the Amendment requires that the power of eminent domain be coupled with
just compensation for those whose property is taken. Government regulations that substantially reduce or inhibit the value of the owners property
may also constitute a taking, an action in which a government regulates
a property to such a degree that the regulation effectively amounts to an
exercise of the governments eminent domain power without actually
divesting the owners of title to the property. With respect to oil and gas
activities, there have been a number of instances of regulatory taking over the
years.

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While state and local governments may enact zoning restrictions, such as
prohibiting drilling less than a prescribed distance from residences, schools, or
businesses with the goal of protecting the health and safety of their citizens, an
outright ban on fracking or drilling may very well constitute a taking. Such an
action may likely mean the municipality, via its taxpayers, would have to compensate mineral rights holders for their losses. Furthermore, actions such as these
represent violations to many states constitutions and have already resulted in
costly constitutionally mandated lawsuits by the state regulatory agencies against
the municipalities exerting control.
When surface and mineral estates are split and publicly sensitive issues such as
fracking arise, especially within municipality or city limits, surface owners most
often live within the community, pay property taxes, and, thus, have voting rights.
On the other hand, mineral owners often are absentee interest owners living in
other jurisdictions, not required to pay taxes on their severed mineral interests in
most counties. As a result, their addresses are not recorded in the county office and
they consequently have no voting representation where their mineral interests are
owned. This absenteeism and lack of tax liability, in effect, makes them a silent
stakeholder having a strong economic interest but no voting rights on issues that
affect their propertys development and value. This intensely debated and emotional property law issue will likely be tested in numerous state courts before it is
eventually resolved at the federal level, conceivably making it all the way to the
United States Supreme Courts Docket. Perhaps honoring voting rights to mineral
as well as surface owners would give all economically interested parties a voice in
the election process rather than the current court of public opinion on its way to
a court of competent jurisdiction.

Summary
Even if youre on the right track, youll get run over if you just sit there.
Will Rogers, American Humorist and Writer

Go West, young man was a quote by American author Horace Greeley in the
mid-1800s supporting westward U.S. expansion, related to the then-popular
concept of Manifest Destiny.
Manifest Destiny was a phrase used by leaders and politicians in the 1840s to
explain and justify continental expansion by the United States. It served to revitalize a sense of mission or national destiny for Americans in that no nation
ever existed without some sense of national destiny or purpose. During this period,
the people of the United States felt it was their mission to extend the boundaries
of freedom to others by imparting their idealism and belief in democratic institutions to those who were capable of self-government.

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Manifest Destiny served a vital function during that period of westward expansion for achieving an aggressive public policy agenda. Although the term is no
longer used, it appears that the concept is still very much in practice to achieve
what is perceived as the common good. For whom or what special interest group
this common good is achieved is still very much in question.
Today, energy use is not just about comfort and mobility. Energy creates
wealth by increasing productivity. When productivity is reduced, jobs are lost,
wages are diluted, and standards of living decline. These are consequences that
any economy, regional or national, cannot overlook.
It is often said that one definition of insanity is to keep doing the same things over
and over againand expecting a different outcome. Market-distorting regulation,
unreasonable environmental and political restraints, and a lack of meaningful longterm natural resource policies have resulted in decades of neglect of energy supply
and infrastructureneglect for which we have paid dearly and will pay ever greater
in the future. To assume that we can magically restore and maintain the Wests
energy stability within the confines of business-as-usual constraints is true insanity.
The same can be said for our water, land, and environmental stewardship policies as
well. The current shale boom will be meaningless unless we augment it with a viable
long-term energy policy that provides a meaningful solution to the issues addressed
herein: safe and reliable infrastructure, clean and stable water resources, responsible
land usage, prudent environment standards, and acknowledging and addressing split
estate legal rights. Current misconceptions, conflict, and dissention may quickly
unravel the deeds of many good intentions.
The West has evolved into a thriving and desirable region with a swelling
population to prove it. It is a unique mixture of the frontier past and the high-tech
future. Its denizens are well-educated, energetic, and motivated. The one crucial
advantage that these new western megaurban regions have in common: public
land at their doorstep. No other place on earth is like it. Where else do you find
natural wonderlands little changed since their discovery in the shadows of thriving
metropolises? Seven out of the top ten states where people want to live are in the
West and Mountain States currently lead the nation in small business job gains.22
But populating the West is no longer the problem; maintaining the jobs and the
quality of life that attracts the people will be the problem. Money and people go
where they are treated best.
Continuing sustainable growth in the New Economy will require fundamental
shifts in both policy and perception that will allow the Old Economy to both catch
up and continue to grow. This will be achieved through the development of
economically viable long-term energy supplies and the necessary infrastructure
with which to deliver them. Alternatively, the suffocation of the New Economy
may be at hand by the deterioration of the Old Economy.
Crude oil and natural gas have gone from periods of scarcity (largely due to
OPEC supply disruptions and reduced drilling resulting from low commodity

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pricing and demand, all leading to subsequent price shocks) to current near record
levels. Presently, the shale oil, natural gas, and liquids abundant production levels
have greatly reduced the publics concerns for any near-term supply shortages and
price spikes. If familiarity breeds contempt, then todays hydrocarbon supply and
pricing sentiment is pretty much epitomized by the current complacency of the U.S.
voters and consumers who have apparently forgotten the inconveniences of the past.
The western landscape, economics, and demographics are changing rapidly.
None of the issues addressed herein are diminishing but rather are compounding
daily. The West is no longer the dependent satellite for many distant feeder cities
seeking to exploit its resources, but a stand-alone vibrant economy growing from
within while still seeking to balance the demands from those outside its confines.
So when you look to the West and its abundant resources for opportunity and
growth, just remember that things change rapidly in the West and, as the old
saying goes, trouble rides a fast horse.
NOTES
1

David J. Wishart, ed., Encyclopedia of the Great Plains (Lincoln, Nebraska: University of
Nebraska Press, 2004).
2

P. Culp, D. Conradi, and C. Tuell, Trust Lands in the American West: A Legal Overview and
Policy Assessment (Cambridge, Massachusetts: Lincoln Institute of Land Policy, 2005).
3
Californias economic recovery along with the economic crisis in Europe should allow the state
to regain its number 8 ranking in the global economy, according to the Center for the Continuing
Study of the California Economy (see Dan Walters, California Poised to Regain No. 8 Ranking in
Global Economy, Sacramento Bee, July 11, 2013).
4

Hydraulic fracturing is the fracturing of rock by a pressurized liquid. Some hydraulic fractures
form naturallycertain veins or dikes are examples. Induced hydraulic fracturing or hydrofracturing
is a technique in which typically water is mixed with sand and chemicals; the mixture is injected at
high pressure into a wellbore to create small fractures, along which fluids such as gas, petroleum,
uranium-bearing solution, and brine water may migrate to the well. Mindy Lubber, Escalating Water
Strains in Fracking Regions, Forbes, May 28, 2013.
5
Bitcoin is a peer-to-peer payment system and digital currency introduced as open source software
in 2009. It is a cryptocurrency, so-called because it uses cryptography to control the creation and
transfer of money. Conventionally, the capitalized word Bitcoin refers to the technology and
network, whereas lowercase bitcoin refers to the currency itself. Bitcoins are created by a process
called mining, in which computer network participants, i.e., users who provide their computing
power, verify, and record payments into a public ledger in exchange for transaction fees and newly
minted bitcoins. Users send and receive bitcoins using wallet software on a personal computer,
mobile device, or a web application. Bitcoins can be obtained by mining or in exchange for
products, services, or other currencies. Maria Bustillos, The Bitcoin Boom, The New Yorker,
April 2, 2013.
6
A ranchette is a small ranch or large acreage lot, often on the outskirts of a major metropolitan area
and just past the planned residential neighborhoods but frequently in a subdivision with building and

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usage restrictions, consisting of 40 acres or less and is usually a house and possibly a barn or other
outbuildings. A ranchette is typically zoned Agricultural A2 or some other similar zoning restriction
permitting a limited number of livestock with appropriate water well or rural water district restrictions.
7

Tim Mullaney, U.S. Energy Lifting Economy More Than Expected, USA Today, September
4, 2014.
8

PricewaterhouseCoopers LLP, Economic Impacts of the Oil and Natural Gas Industry on the
US Economy in 2011 (Washington, D.C.: American Petroleum Institute, July 2013).
9
Daniel Yergin, CERAWEEK 2014: American Shale Gas and Tight Oil: Reshaping the Global
Energy Balance, Wall Street Journal, January 22, 2014.
10

Josh Kron, Red State, Blue City: How the Urban-Rural Divide is Splitting America, Atlantic
Monthly, November 30, 2012.
11

ExxonMobil, The Outlook for Energy: A View to 2040 (Irving, Texas: ExxonMobil, 2014).

12

Scott D. Deatherage, To Drill or Encroach Oil and Gas Balancing Act, Oil & Gas Monitor,
August 12, 2013.
13

Cowboys and Indians Magazine, May/June 2014.

14

Julene Bair, The Ogallala Road A Memoir of Love and Reckoning (New York: Viking, 2014).

15
Norimitsu Onishi and Coral Davenport, Obama to Announce Aid for Drought-Stricken
California, The New York Times, February 15, 2014.
16

Colorado Division of Water Resources, the Colorado Water Conservation Board, and the
Colorado Oil and Gas Conservation Commission, Water Sources and Demand for the Hydraulic
Fracturing of Oil and Gas Wells in Colorado from 2010 through 2015, Denver, Colorado, 2012.
17

Ursula Rick, Waters Role in Fracking, Colorado Biz, May/June 2014.

18

New York State Water Resources Institute, Water Withdrawals for Hydraulic Fracturing
Water Withdrawal Volumes Required for Hydrofracking, February 27, 2012, available at http://
wri.eas.cornell.edu/gas_ wells_ water_use.html.
19

Morgan Downey, Industry Overview, Oil 101 (New York: Wooden Table Press, 2009).

20

The first use of hydraulic fracturing occurred in 1947, since then more than 1.2 million wells
have been fracked at some point in their lifecycle nationwide, website of Coloradans for Responsible Energy Development, available at www.cred.org
21
David Blackmon, Shale Oil & Gas, Keystone XL, and Climate Change Policy, Forbes, June
20, 2013.
22

Paul Davidson, West Leads in U.S. Job Growth, USA Today, March 7, 2014.