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January 25, 2013
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Gas industry continues its decline as prices stay low

GLENWOOD SPRINGS, Colorado - According to statistics kept by county and state officials, the slump in the oil and gas industry in Garfield County showed signs of revival in 2012, however minute those signs might have been.

The conventional wisdom is that the oil and gas industry in Colorado, and in Garfield County specifically, has been laid low by the combination of low prices and excess supplies of natural gas, coupled with the effects of more than four years of a national and international recession.

"As has been the case in the recent past, the price environment in 2012 was challenging," said Doug Hock, spokesman for Encana Oil and Gas (USA), a major operator in the gas fields of Garfield County.

As of Jan. 15, the price of natural gas was $3.40 per MMBTU (million British thermal units), the standard for depicting volumes of natural gas. That price remains far below the peak of roughly $14 per MMBTU in effect in early 2008.

In the view of Garfield County's oil and gas liaison, Kirby Wynn, things have not been looking up for the industry.

"During 2012, operators drilled 492 oil and gas wells in Garfield County, which represents an approximately 45 percent decrease from levels seen in both 2010 and 2011," he wrote in an email to the Post Independent. "This significant reduction in drilling activity is directly related to depressed prices for natural gas. At the close of 2012, Encana and WPX Energy were the only operators with ongoing drilling activity in our area."

The 2012 statistics for drilling might seem to bear out a negative view of the industry's prospects, at least on the Western Slope, as the county currently had 10 or fewer drilling rigs in operation at the end of the year, according to industry reports.

Five of those rigs are owned by the WPX drilling company, according to the industry website, Community Counts (communitycountscolorado.com).

Encana, according to Hock, also had five rigs in the county at the end of 2012, down from eight when the year began.

Hock said the company also had nine workover rigs operating in Garfield County in 2012. Workover rigs, generally speaking, return to a well pad periodically after the initial drilling is completed, often to perform operations to free up trapped natural gas.

According to Wynn, Garfield County had roughly 20 drilling rigs operating at the end of 2011.

At the same time that the rig count has dwindled, Garfield County continues to experience an annual decline in the number of drilling permits approved by the Colorado Oil and Gas Conservation Commission, which oversees the oil and gas industry in the state.

According to COGCC data, the number of permits approved for Garfield County in 2012, a total of 1,034, was the lowest number since 2004, or prior to the boom years of 2007 and 2008 (see graphic).

But despite those seemingly negative numbers and report, Garfield County passed a milestone of sorts in 2012 - for the first time, the number of active gas wells, meaning wells that have been drilled and are producing gas, in this county reached 10,000 by the end of last year.

According to the Jan. 7, 2013, report posted on the COGCC website, Garfield County has about three times the number of active wells as exist in Rio Blanco County, to the north, and more than half as many as Weld County, located in northern Colorado.

The number of employees working directly in the oil and gas industry in Garfield County also has declined, but it appears to be on the upswing, according to the state's Department of Local Affairs.

Employment numbers are tracked by DOLA and are used to calculate how much a county is to get each year as its share of severance tax revenues and federal mineral leasing income. The numbers, posted on the DOLA website, go back to 2009.

In Garfield County, according to DOLA's figures, there were 1,580 workers employed directly in the industry in 2009.

By 2010, that number had shrunk to 536, its lowest ebb.

In 2011, according to DOLA, local oil and gas operators employed 750 workers directly, and in 2012 the number of employees grew to 1,047 - still well below the 2009 numbers.

In the case of Encana, Hock reported, the company had about 200 people working at its new headquarters building in Parachute in 2012, and an additional 55 in the company's Rangely office.

"In addition, on any given day, we have approximately 1,000 third party contractors doing work for us in the field," Hock wrote in an email. "This would include rig workers, truck drivers hauling water, and completions crews."

jcolson@postindependent.com


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The Post Independent Updated Jan 25, 2013 01:49AM Published Jan 25, 2013 01:35AM Copyright 2013 The Post Independent. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.