How the Oil & Gas Industry Turned Colorado From Blue to Red

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The left-leaning Bell Policy Center had released an economic study claiming Amendment 66 — an education funding initiative that would have raised about a billion dollars a year by way of a tax increase — would be neutral for the state’s economy over the long-term. In addition, Colorado State University had also released research predicting a neutral economic long-term impact if 66 passed.

But not so with the Leeds School, whose research seemed to reach the opposite conclusion. Actually, Leeds simply broke its analysis into two reports. First, it created a report focused only on the very negative economic consequences of the tax increase. Then it created a second report that showed if the money decreased incarceration rates, dropout rates and created other educational positives, the tax hike could actually be neutral to slightly positive economically in the long term. The other reports simply chose to put all this information into one document declaring the amendment’s impact as neutral. Needless to say, critics of 66 only used the first negative report from Leeds for their purposes. The business school’s two-report logic, intended or not, certainly helped to defeat Amendment 66 at the polls.

To do its Amendment 66 analysis, Leeds used an economic modeling tool known as REMI, which was created by Regional Economic Models, Inc., hence the name. It was REMI that created findings that synced perfectly with the talking points bombarding the electorate by way of TV commercials paid for by the “Vote NO on 66” folks.

“Folks” is perhaps the wrong word here. “Vote NO on 66” was basically, albeit indirectly, funded by the Independence Institute, a conservative think tank in Golden, Colorado, associated with some of the nation’s most conservative organizations. When it comes to education, the Independence Institute’s positions seem to generally align with the Koch Bothers, the Walton Family trusts and some of Colorado’s wealthiest and largest Republican donors such as billionaire oil man Alex Cranberg and C. Edward McVaney, co-founder of software company J.D. Edwards. Cranberg founded the Alliance for Choice in Education (ACE) and McVaney is on the ACE board of Trustees. ACE is an organization many associate with the school voucher movement.

Still, at the time, we at BW assumed the “Vote No on 66” and negative REMI report similarities were a simple case of action/reaction. Who wouldn’t seize upon economic analysis from a respected business school if it just so happened to support your political position?

But then came the state’s fracking debate. Local communities, along with Boulder County, started passing moratoriums and outright bans on drilling and fracking. First there was Longmont, then Boulder, Fort Collins, Lafayette and Broomfield. It was clear that the oil and gas industry was losing the battle for hearts and minds along the Front Range.

So much so that those who opposed fracking and/ or supported community control over oil and gas extraction successfully gathered more than a quarterof-a-million signatures, enough to potentially place two statewide initiatives on the November 2014 ballot. Initiative 88 would have called for a 2,000-foot setback for oil and gas wells from dwellings. Initiative 89 would have given communities the right to regulate the industry within their city limits, including an outright ban if so desired.

The oil and gas industry did not take this citizen revolt lightly. It fought back with its only real weapon — money, and thereby political clout.

The industry waged its war by creating incredibly well-funded oil and gas front groups like Coloradans for Responsible Energy Development (CRED) and Vital for Colorado (Vital). CRED was founded and is primarily funded by the two largest oil and gas companies operating in our state, Anadarko Petroleum and Noble Energy. CRED is also the group we have to thank for the endless bombardment of “fracking is good for you” TV commercials, which represent the largest single ad spend in state history. CRED is also the industry front group that paid for an entire section in The Denver Post, calling it the “energy and environment” section, which like the TV ads, was used to extol the virtues of fracking page after page, week after week. CRED clearly has money and lots of it.

More than one observer noted that media criticism of the oil and gas industry all but disappeared once the millions in ad dollars started flowing the media’s way. But that’s a story for another day.

But such tactics can only get you so far. In the end, what good are TV commercials, newspaper sections and industry front groups if they don’t have seemingly credible, third party, positive facts, figures and analysis to spout in support of the claims being made?

And then it happened again.

Right in the middle of the fracking debate, the Leeds School of Business started producing the economic analysis that seemed to perfectly fit the CRED and Vital and Gov. John Hickenlooper claims that the bans and setbacks and moratoriums were far too risky to the Colorado economy to be justified.

Leeds was producing REMI report after REMI report that the industry and its front groups wielded like a sword against their anti-fracking critics.

It all might have been explained away as a chicken and egg thing—Leeds produces its analysis, the oil and gas industry sees it, likes what it says and starts spouting its statistics—but for the fact that the second the reports were released for public consumption they could be found on the websites of CRED and Vital and other pro-oil front groups. It was clearly a coordinated effort. Similarly, politicians like Gov. Hickenlooper who support and are supported by the oil and gas industry were instantly quoting the reports as if they had been briefed (or even rehearsed) on the contents before the rest of us had even had a chance to view them.

It all seemed too organized, too fortuitous to be ignored.

REMI Comes to CU 

In July of 2013, just months before Amendment 66 would go before voters, the Leeds School of Business was approached with an unusual proposition.

The for-public-consumption version of the story that ran in The Denver Post and the various business papers said a recently formed organization calling itself the Common Sense Policy Roundtable (CSPR) had joined forces along with a couple of well established Denver area economic development groups—Metro Denver Economic Development Corporation and Denver South Economic Development Partnership—in order to make a significant purchase.

The story continued that the three groups pooled their money and bought the exclusive licensing rights to the Front Range for an economic modeling system called REMI, which was reportedly valued at over $800,000 for a five-year period. REMI was loaded with Colorado economic data and touted as being capable of analyzing potential economic impacts of things like ballot measures, oil industry importance to the economy, water issues, PERA, etc.

The story was that after the exclusive license was secured, the three groups approached the Leeds School of Business and then contracted the school to run the REMI analysis for them on a third-party basis. In exchange, the Leeds School would get free access to REMI, $110,000 a year for producing reports and another $38,000 a year to keep REMI updated.

The Leeds School then assigned the REMI project to the research team of Brian Lewandowski and Richard Wobbekind of the Business Research Division of the Leeds School.

In a recent interview with BW, Wobbekind, whose full title is executive director of the Business Research Division and senior associate dean of the Leeds School of Business, described the importance of the involvement of the two well-established economic development groups in the REMI project. He described how representatives from all three groups had sold the idea to the Leeds School. He said he knew that CSPR considered itself a “conservative think tank,” but claimed he wasn’t familiar with them. He said he knew and respected the other organizations and indicated that this familiarity was enough to make him feel comfortable with the REMI partnership. He even went so far as to say the Leeds School would not have agreed to the deal if it had only been CSPR proposing it. As we will see, that is an interesting observation.

But like I said, the earlier description of events was the for-public-consumption version that was fed to the press and reported in lockstep without ever checking the facts.

What Wobbekind apparently didn’t know, or has forgotten, was that the exclusive licensing for REMI had, in fact (according to information in the CORA docs), only been purchased by and is still owned by CSPR alone. An examination of CSPR’s 2013 Form 990 return shows a $224,411 expenditure for REMI which again seems to confirm that the tool was licensed by CSPR alone based on that dollar amount and the press reports of the tool’s cost.

Furthermore, the contract that assigned CU the rights to run REMI for CSPR is only between CSPR and the CU Board of Regents. There are no other signatories.

The contract does state that the data produced by REMI will be of interest to certain third parties, and partially funded by third parties, including chambers of commerce and others. It goes on to add, “These third parties along with CSPR and the Leeds School will review and approve projects and otherwise manage the REMI Program.”

Bear with me—there is a point to this level of contractual exactitude.