Boom and Busts Alive and Well
According to Kirby Wynn, Garfield County’s oil and gas liaison, persistently low natural gas prices—the result of excess supplies and the remnants of the economic downturn—are to blame for the drilling slowdown on Colorado’s West Slope.
“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. This significant reduction in drilling activity is directly related to depressed prices for natural gas.”
Excerpt from Kirby Wynn’s email. Colson, John. “Gas industry continues its decline as prices stay low.” The Glenwood Springs Post-Independent. 25 January 2013.
Oil and natural gas companies are responding to market-based pressures by shifting their focus away from natural gas towards more profitable areas with crude oil underfoot, such as the Bakken oil field in North Dakota. Unlike natural gas prices, crude oil prices remain high.
These market realities haven’t prevented some industry pundits and politicians from blaming the natural gas slowdown on common sense rules in place to protect clean air, fresh water, and healthy communities.
Even the oil and gas industry itself isn’t shy to admit—at least internally—that economics are responsible for the natural gas drilling slump. In its second quarter report to investors, the Bill Barrett Corporation explained:
“The second quarter [of 2012] was again challenging due to low commodity prices, with May regional natural gas prices hitting a low not seen since September 2008… In this environment, we continue to focus on building the oil component of our portfolio.”
As areas of the country with oil reserves boom—for example, the Bakken formation in North Dakota and the Niobrara in eastern Colorado—the drilling downturn in the natural gas fields of western Colorado is another reminder of the boom-and-bust cycles associated with oil and natural gas extraction.
Oil and gas companies and their drilling operations bring activity today, but skip town tomorrow because of volatile prices, leaving behind long-term negative impacts. Communities that invest in a diverse economy and protect clean air, fresh water and open spaces will be prepared when oil and gas companie