Experts see no quick fix for economy
Drop in drilling to keep ’09 in sluggish state, officials say
The western Colorado economy will be sluggish at best through most of 2009 while it struggles through a large drop in drilling, energy industry and county officials said Friday.
Drill rigs in the Piceance Basin have fallen 60 percent, from 102 in September to 41 now, said Carter Mathies, an industry executive who spoke during a county-sponsored energy update Friday. The regional economy, Mathies said, has yet to hit bottom.
“I believe we’ve got a little bit more attrition to go” in terms of the rig count, Mathies said. “Our industry is in survival mode today.”
Industry investment is likely to drop in 2009 by $2.5 billion from 2008 levels as new well-drilling activity crawls through its slowdown, he said.
The county’s update follows on the heels of an announcement this week that Williams, the most active player in the Piceance Basin, is planning to keep an average of 10 drill rigs working there.
The company had planned as late as the end of last year to maintain 20 rigs in the basin.
EnCana, the second-most active company in the basin, is anticipating running five rigs there.
The industry rule of thumb is that it takes 50 people to run a rig during the drilling phase. Well completion can require significantly more people.
The industry will remain in western Colorado, but the number of employers will likely shrink because of “some consolidation if not attrition,” he said.
The clamps have closed on the drilling industry in general because of the constrictions in the credit market and a worldwide slowdown in demand because of the global recession. The Intermountain West states also are at a handicap because of the lack of pipeline capacity from the sparsely populated areas where drilling has been occurring to the populous markets to the east and west, Mathies said.
Western Colorado is at a greater handicap because of the pending changes to rules governing drilling in the state, said Mathies, a Grand Junction resident and executive with Arista Midstream Services.
The rules, which go into full effect in April, have forced companies to increase staff dedicated to compliance, companies have said.
The most significant difficulty posed by the pending rules is the lack of certainty that they can be granted permission to drill if they meet all the requirements, Mathies said.
Drilling is in decline across the country in the wake of economic upheaval, but the drop has been most precipitous in the Uinta and Piceance basins, he said.
Mesa County held the line in budgeting to hold constant its number of employees and reduce expenditures by 3 percent, Commissioner Craig Meis said.
Spending is to be directed at one-time, capital projects instead of on recurring projects, Meis said.