Overview

Resources and Consumption

Colorado has substantial conventional fossil fuel and renewable energy resources. The State contains several fossil fuel-rich basins, including the Sand Walsh, Piceance, Paradox, and San Juan basins in the west, and the Denver and Raton basins in the east. Ten of the Nation’s 100 largest natural gas fields and three of its 100 largest oil fields are found in Colorado. Substantial deposits of bituminous, subbituminous, and lignite coal are also found in the State.

Colorado's high Rocky Mountain ridges offer wind power potential, and geologic activity in the mountain areas provides potential for geothermal power development. Major rivers flowing from the Rocky Mountains offer hydroelectric power resources. Corn grown in the flat eastern part of the State offers potential resources for ethanol production. The Colorado economy is not energy intensive. The transportation and industrial sectors are the leading energy-consuming sectors in the State.

Petroleum

Colorado oil production typically accounts for around 1 percent of the U.S. total. Most production takes place in the Denver and Piceance basins. Crude oil output serves Colorado’s two refineries in Commerce City north of Denver. Several petroleum product pipelines from Wyoming, Texas, and Oklahoma help supply the Colorado market. The Denver/Boulder and Ft. Collins areas use oxygenated motor gasoline; the rest of the State uses conventional motor gasoline. Although the Denver metropolitan area was the first area in the Nation to require the use of motor gasoline blended with ethanol to reduce carbon monoxide emissions, the State is relatively new to large-scale ethanol production. Colorado produces ethanol mostly from corn at small facilities in the northeastern part of the State. Colorado’s smallest ethanol production plant is co-located with the Coors brewery in Golden and uses waste beer to produce ethanol for fuel consumption. Using waste beer to produce ethanol lowers the emissions of volatile organic compounds from the Coors brewery significantly.

Although its proven crude oil reserves account for only about 1 percent of the U.S. total, Colorado has enormous deposits of oil shale rock, known as marlstone, which can be converted into crude oil through destructive distillation. The Green River Formation, a group of basins in Colorado, Wyoming, and Utah, holds the largest known oil shale deposits in the world. Colorado’s oil shale deposits, concentrated in the Piceance Basin in the western part of the State, hold an estimated 1 trillion barrels of oil — as much oil as the entire world’s proven oil reserves. Although this natural resource holds tremendous promise, oil shale development remains speculative and faces several major obstacles involving technological feasibility, economic viability, resource ownership, and environmental considerations. While pilot oil shale projects have been undertaken in the area, there are no plans for the construction of commercial oil shale production facilities in Colorado.

Natural Gas

Colorado is a top natural gas-producing State. Conventional and unconventional output from several Colorado basins typically accounts for more than 5 percent of U.S. natural gas production. Coalbed methane (unconventional natural gas produced from coal seams) accounts for over forty percent of Colorado's natural gas production, and almost thirty percent of all coalbed methane produced in the United States. Coalbed methane production is active in the San Juan and Raton Basins, and further development is possible in northwest Colorado’s Piceance Basin, which holds the second-largest proved reserves in the Nation.

Natural gas consumption by the electric power sector has been increasing since 2003, with a dramatic increase in 2007 putting the sector second only to the residential as the leading natural gas-consuming sector in Colorado. About three-fourths of Colorado households use natural gas as their primary energy source for home heating, one of the highest shares in the Nation.

Colorado uses only about two-fifths of its natural gas production. The remainder is transported to markets in the West and Midwest. Colorado is part of the transportation corridor for shipping gas from the Rocky Mountain supply region to the Midwest and West markets. Colorado’s natural gas production is growing, and construction of a new pipeline was recently completed to help move the rapidly increasing output to the Midwest. The new system, known as the Rockies Express Pipeline, originates in the Piceance Basin and extends from Colorado to Audrain County, Missouri with completion of an extension to Clarington, Ohio targeted for the fall of 2009.

Coal, Electricity, and Renewables

Coal- and natural gas-fired power plants dominate electricity generation in Colorado. Coal-fired plants account for over seven-tenths of the State’s generation and natural gas-fired plants account for close to one-fourth. Colorado produces coal from both underground and surface mines, primarily in its western basins, and large quantities of coal are shipped into and out of the State by rail. Colorado uses about one-fourth of its coal output and transports the remainder to markets throughout the United States. Colorado also brings in coal, primarily from Wyoming, to supplement local production.

Hydroelectric and wind power facilities account for most of the State’s renewable electricity generation. However, much of Colorado’s substantial renewable energy potential remains to be developed, and the State currently ranks relatively low in renewable energy generation. In August 2009, a proposal was made for a biomass plant to be located in Vail that would use the thousands of trees that were recently killed by pine beetles to create a new sustainable source of energy. The proposed plant would reduce carbon emissions and forest fires in addition to creating a reliable source of energy that is likely to last at least ten years. A feasibility study is planned to look at environmental issues and the ability to obtain a sustainable supply of trees. In March 2007, a new renewable portfolio standard was adopted by Colorado that requires large investor-owned utilities to produce 20 percent of their energy from renewable sources by 2020.

Less than one-fifth of Colorado households use electricity as their main energy source for home heating.