Developer Carlo Ferreira and his partners rolled out their grand vision for the Aurora Highlands in March — a master-planned community with 60,000 residents in 23,000 homes across 5,000 acres south of Denver International Airport.

The undeveloped land is dotted with older oil and gas wells and is a prime candidate for more drilling. Ferreira has worked with energy companies to minimize impacts on his communities in Texas. But when gas leaking from a well fueled a blast in late April that destroyed a home and killed two people in Firestone, 50 miles to the north of Aurora Highlands, the issue took on a new urgency for the developer.

“I can’t gamble all this capital and not know where somebody would drill,” said Ferreira. Now he’s pushing for a plan that provides a greater degree of separation between homes and oil and gas operations, something he says he needs to go forward.

So far, the two major drillers in the area aren’t going for it.

A ConocoPhillips representative said a surface-use agreement the company reached with developers in the area in 2015 took residential development plans into account. “We have an agreement that is a good model for how housing and mineral developments can work,” said Nick McKenna, central Rockies asset manager for ConocoPhillips.

As drilling pushes closer to developed areas, disputes between communities and producers have flared up in places like Broomfield and Erie. As the metro area spreads into resource-rich areas of the Denver-Julesburg Basin, more conflict could arise to the east, unless ways are found to coordinate competing uses.

“What’s happening in Boulder County and Broomfield as it relates to oil and gas regulations and proposed drilling sites, on top of what happened in Firestone, is evidence that people don’t feel safe living near drilling sites,” Ferreira said.

Backers of Aurora Highlands have sunk more than $250,000 into an alternative or “preferred” drilling plan that aligns well pads in the area in a north-south corridor, close to existing transportation pipelines, on land they provide.

The new plan would take three pads located in the middle of the community, as well as four to the north, and locate them within an industrial zone that is also designated as a noise corridor for the planes coming in and out of DIA.

As a lure, the plan includes a $70 million extension of Powhatan Road from Interstate 70 to the airport boundary. The new road would make it easier for crews and emergency responders to reach the pads.

A berm, the new road and a utility corridor would create a buffer between the well pads and the surrounding community. And buyers would know exactly what they are getting in advance, making properties easier to sell.

The last mile

Producers active in the area have looked at the plan and discussed its details with Aurora Highlands. But so far they aren’t willing to adopt it, citing technical problems that they say leaves the existing surface-use agreement the preferred option.

Relocating the well pads along a single corridor would require ConocoPhillips and Extraction Resources, the other big producer active in the area, to drill some of their wells with horizontal laterals or bores that run 3 miles instead of 2.

The two sides are at an impasse on whether longer laterals, although more cost-effective to drill, would prove productive enough.

“If we are able to convince them to do that, they could reduce their footprint. It would allow for the development of the Aurora Highlands,” said Michael Ratway, a petroleum engineer and consultant working with several community developers in the area, including Ferreira.

Ratway said going with longer laterals requires fewer wells to be drilled, which he estimates would save ConocoPhillips at least $25 million over its current plan. And removing well pads from residential zones could help eliminate community opposition.

“Aurora Highlands could complete development as envisioned. The Colorado Oil and Gas Conservation Commission would welcome it, the city of Aurora would welcome it and the bottom line would improve for ConocoPhillips,” Ratway said.

Houston-based ConocoPhillips has accumulated 104,000 acres in the southern D-J Basin and drilled 36 horizontal wells over the past six years and expects to move forward with a larger drilling plan.

But the company’s research indicates that this part of the basin can’t economically support laterals beyond 2 miles, McKenna said.

The output in that area is oilier with less associated gas than the reserves to the north in Weld County. The lower ratio of gas means that there is less drive in the reservoir to move hydrocarbons to the surface.

“The question is the production from the third mile,” McKenna said. “Getting production under a lower energy reservoir from that third mile is difficult to achieve. They haven’t proved their feasibility.”

But Ratway counters that his engineering analysis shows 3-mile laterals can work in that part of the D-J Basin and that ConocoPhillips has drilled that far in other basins.

“If the engineering points to the ability to do it here, why don’t we do it? Improve your bottom line and reduce the impact that you are going to have in the city of Aurora,” he said.

Make or break

Ferreira said the relocation of the well pads could prove make or break for Aurora Highlands, given the growing resistance among buyers to living next door to active oil and gas operations.

Aurora’s Planning Department hasn’t seen the proposed drilling plan and can’t comment on it, but the city is studying an extension of Powhaton’s right of way as part of its Northeast Area Transportation Study, said spokeswoman Julie Patterson.

“The developer needs authorization from the mineral rights owners because they have surface use agreements already in place on the site,” she said.

But Aurora Highlands represents a much more ambitious development than the one initially proposed, one that backers argue is sorely needed given the severe shortfall of new homes and the importance of locating residences near the jobs what will come into that part of the metro area.

Ratway said keeping the well pads in the middle of Aurora Highlands would eliminate 140 developable acres in the center of the community.

“It splits the community in half. It would put a spear through the heart of the project and they know it,” Ratway said.

Brian Cain, a spokesman for Extraction Resources, said the company favors a collaborative approach when it works with surrounding communities, including Aurora Highlands.

But he adds that communication has to be two-way and requires an understanding that a one-size-fits-all approach to siting oil and gas facilities won’t work.

“Development pads cannot be sited without consideration of subsurface geological requirements and drilling and technological constraints,” he said.

Ferreira, who is based out of Las Vegas and has built homes throughout the Southwest, said he hopes to have model homes up by next spring and that state oil and gas regulators will side with his drilling plan versus the one now in place.

He says he sought what is known as a comprehensive drilling plan in his Shadow Creek Ranch community near Houston to balance surface uses and resource development and prevent surprises. He argues the time has come for Colorado to deploy such plans and head off the nasty fights becoming more common along the northern Front Range.

If comprehensive agreements can’t be reached to balance surface uses and mineral rights in advance, it could stunt the development of the Aerotropolis region around DIA and Aurora’s ability to grow, Ratway warns.