Colo. oil, gas group sees slow recovery ahead
DENVER – Regulatory certainty and “a welcoming social and economic environment” will be crucial as Colorado’s oil and gas industry emerges from the recession and faces competition from big gas fields back East, said the new president of a state trade group.
Tisha Conoly Schuller, named president of the Colorado Oil and Gas Association in December, is taking over as the state’s natural gas industry shows signs of rebounding.
The number of drilling permits dropped last year after hitting a record 8,027 in 2008. But Colorado led its energy-producing neighbors with 5,159 permits last year.
Wyoming issued 5,106 permits, New Mexico issued fewer than 2,500 and Utah approved 1,167 permits, according to the Colorado Oil and Gas Conservation Commission, the main regulatory body.
State regulators said 1,487 new wells were drilled in Colorado last year, compared with 896 in Wyoming and 597 in North Dakota.
Schuller said activity in Colorado is slowly picking up. The Rockies Express pipeline, which runs from Wyoming to Ohio, has helped close the gap between the price producers get for gas in the Rockies and other parts of the country. El Paso Corp.’s $3 billion Ruby pipeline, which would run to the West Coast, will be another boost, she said in an interview with The Associated Press last week.
In the past, a lack of pipeline capacity in the region held down prices.
“There’s a price for transportation. We’re farther from population centers, but being able to get the gas out isn’t a problem any more,” said Schuller, a geologist and former vice president with Tetra Tech, an environmental consulting and engineering firm.
Still, Schuller said Colorado’s gas production hasn’t bounced back as quickly as in other parts of the country. Competition from massive gas shale fields in the East likely means the state will lag behind for a while, she said.
“The shale plays are a target for investment,” Schuller said. “In the next couple years, we don’t expect to see a boom in Colorado like we saw in 2008.”
That’s why regulatory certainty and “a welcoming social and economic environment” are important to keeping Colorado’s industry on track, she said.
“We have a world-class gas resource in Colorado. We have good infrastructure and transportation in place,” Schuller said. “So, our objective is really to be creating the social support and understanding of the importance of the industry.”
Industry officials have blamed Colorado’s new oil and gas regulations for hindering energy development. Some say the rules, which took effect last April, have discouraged investment in Colorado.
Low natural gas prices, the recession and a large supply of gas are the real culprits, regulators and proponents of the changes say.
The Colorado Oil and Gas Association filed a lawsuit last year to try to overturn the regulations. The rules implemented 2007 laws intended to give more consideration to wildlife, environmental and health and safety concerns when approving energy development.
Schuller played down her group’s opposition to the rules. “The emphasis of COGA and our industry is on implementing the rules effectively now and creating a good working relationship with the state,” she said.
State agencies are working with the trade group, asking its members for ideas to improve the regulatory process and inviting them to meetings, Schuller said.
“It’s a new day in terms of collaboration and focusing on how we’re going to move forward on making Colorado a competitive, successful natural gas environment,” she added.
Schuller said all Coloradans have a stake in seeing the gas industry thrive. Oil and gas companies contribute hundreds of millions of dollars in taxes and the industry’s downturn shows in the state budget.
The state economic forecast in December said severance tax revenue for fiscal 2009-2010 is projected to be $85.4 million, down 74.6 percent from the previous fiscal year.
Revenue from severance taxes, which are paid on nonrenewable resources, property taxes and federal mineral royalties goes to schools, state agencies and local governments, Schuller said.
“There’s not a person in this state that these revenues don’t touch,” she said.