Energy Blend: Low prices, regulations, lack of infrastructure lead to downturn of oil and gas activity in Moffat County
October 30, 2017
Moffat County sits atop vast natural gas resources, but the county has seen little to no development in recent years, due, in large part, to low natural gas prices.
The downturn in oil and gas activity has hit the pocketbooks of city and county government hard, as mineral lease and severance tax dollars have steadily declined. The region enjoyed a short-lived boom when prices were higher between 2009 and 2011.
"The lack of oil and gas activity has not been good for our economy," said Moffat County Commissioner Ray Beck.
An estimated 66 trillion cubic feet of natural gas sits beneath Northwest Colorado, according to the U.S. Geological Survey. Whether and when this resource will be recovered is anyone’s guess — officials aren't seeing signs of an uptick this year — but a few factors may have bearing on what role the oil and gas industry plays in Moffat County's economic future.
• Sage grouse regulations approved in 2015 could slow oil and gas development, but a new federal review of the Bureau of Land Management plans could tilt the scales in favor of energy development.
With officials still working behind the scenes to finalize the sage grouse population maps, which will guide implementation of the 2015 plans, it's too soon to know how much the regulations might deter oil and gas development in the area.
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Moffat County Natural Resources Director Jeff Comstock isn't optimistic, however, that the county will see another boom in the future on account of the regulations.
"I'm more skeptical (of that) … than I used to be, because we have a new set of sage grouse regulations in place now that didn't exist before the last boom," Comstock said. "Those regulations will definitely add costs that will deter industry."
A lawsuit filed in May against the U.S. Department of Interior by four Northwest Colorado counties, including Moffat, cited an estimated negative annual impact of $240.5 to $584 million due to the sage grouse plan.
• Additional infrastructure for processing natural gas would ease price pressures.
A lack of access to processing facilities is another key factor in the economics of drilling in Moffat County, according to David Ludlam, executive director of the West Slope Colorado Oil and Gas Association.
"The ability to have access to (gas processing facilities) allows the economics to sustain active drilling in a low-price environment," Ludlam said, which is why there are now 10 active drilling rigs in the Piceance Basin in Garfield County. "There is a very mature midstream sector there that includes gas processing."
For Moffat County to see a spike in activity, prices would have to increase to support the construction of either a pipeline between Meeker and Rifle to reach the facility or a new facility closer to the reserves in Sandwash Basin and the Niobrara formation.
Growing interest in the Jordan Cove Energy Project, a liquified natural gas export terminal in Oregon, could also potentially provide a new link between Northwest Colorado natural gas reserves — via the Ruby Pipeline — and markets along the West Coast and across the Pacific.
• The bottom line: price.
"Until there's a significant improvement in commodity prices that allow for some additional infrastructure to be built, you could continue to see some challenges," Ludlam said. "Infrastructure is a piece of it, price is a piece of it and I think the regulatory overburden is a huge piece of it, because it adds that cost on top of it, so when you have that triangulation of challenges, you have to look at all three of those things."
In the meantime, mostly small private firms are continuing to do exploratory work in the county.
"I think it's a wait-and-see game, but in the meantime, we still have to budget where we're at," Beck said. "We can't budget on hope; it just doesn't work. We have to take care of business as it is and, hopefully, things will turn around."