Drilling continues to lag in GarCo, Piceance Basin
June 10, 2014
RIFLE — With natural gas activity in the Piceance Basin, which includes Garfield County, continuing to crawl along compared with recent years, it will take a number of factors to see a return to more robust drilling activity, according to a West Slope industry official.
At Thursday's quarterly meeting of the Northwest Colorado Oil and Gas Forum at Colorado Mountain College in Rifle, state and federal officials reported that drilling permit activity was lagging behind last year. While the number of drilling rigs in Colorado had seen a slight uptick, Garfield County had just 10 rigs, down from peak years that saw around five times that number.
David Ludlam, executive director with the West Slope Colorado Oil & Gas Association, said in an interview Friday that a combination of the price of natural gas — the largest factor — regulations and each company's inventory of permits and leases to drill determine where they drill for gas.
"The Piceance Basin is not any higher cost to develop, but it can be geographically challenging," he said. "And just in the last five years or so, we've transformed the Piceance into a lower-cost basin."
“The Piceance Basin is not any higher cost to develop, but it can be geographically challenging. And just in the last five years or so, we’ve transformed the Piceance into a lower-cost basin.”
West Slope Colorado Oil & Gas Association
However, the area doesn't yield valuable crude oil, and with gas prices low, that makes a difference.
"If you have 100,000 net acres, tons of infrastructure in place and permits in hand, it will cost you less to drill," Ludlam said. "But if you can also drill for oil for the same cost, and with that price so much higher than gas, you get more profit for the same amount of capital you invest."
Ludlam also said the regulatory and political climate in Colorado and in Washington, D.C., help determine drilling activity.
"It gets more difficult to get permits to drill on public lands due to the politics involved," he said, complaining that some federal resource management plans that guide energy development on public lands have been in development for five to seven years.
"That leaves companies with leases on those lands in limbo for that long," he said. "And the fact that 65 federal leases could be rescinded [under a White River National Forest plan now under revision] sends a message to the world that other companies see happening."
Ludlam added that companies often include adjacent private lands for development with federal leases, which could also be at risk.
At the oil and gas forum, Dave Andrews, engineering supervisor for the Colorado Oil and Gas Conservation Commission, said gas production has leveled off in the Piceance Basin at 4.4 billion cubic feet a day.
As of June 2, Weld County had seen the most new well permits approved in the state at 591, with Garfield County second at 167. Statewide, 851 permits had been granted for the year so far, compared with 1,882 for all of 2013, Andrews added.
With much less activity in Garfield County, officials have received many fewer complaints. Kirby Wynn, Garfield County oil and gas liaison, said the county's energy advisory board had just one gas-related complaint in the past 12 months. However, he handled close to 50 requests for information and estimated the board listened to an average of two or three comments per monthly meeting on general concerns.
Wynn said he received six phone calls related to industry activity in April and May. Those dealt with general odor and air pollution questions, he said.
Wynn displayed a map showing current drilling rig locations focused between Rulison and Parachute, all but one south of the Colorado River. Eight are operated by WPX Energy, the last major operator to remain active in the county. Wynn also noted the county's 10 rigs are up from seven in January, but still far behind the 21 rigs in the county in one month in 2012.
Wynn also showed annual numbers that peaked at 1,688 wells drilled in the county in 2007.
Rio Blanco County has reported 15 new wells drilled so far this year, compared with 11 at the same time last year. And in Mesa County, where no wells have been drilled so far this year, Piceance Energy plans to bring in a rig this summer and had 37 permits to drill pending before the oil and gas commission. Piceance will drill in the Plateau Valley area over the next few years.