Commissioner Craig Meis blames industry decline on local politicians
In the famous words of Walt Kelly’s Pogo, “We have met the enemy and he is us.” Or at least so says Mesa County Commissioner Craig Meis, who blames the natural gas drilling bust in Mesa County on “counties that asked Denver to intercede when they had difficulty with some drillers,” according to a recent Daily Sentinel story.
“And they are now suffering because of it,” Meis told the Sentinel.
Meis blames our “local officials (who) gave authority to the legislators and bureaucrats in Denver who ‘don’t know a gas rig from a compressor” for the collapse of the industry in western Colorado. “They inadvertently turned over their authority to the state capital,” Meis said. And because of this, “We’re faced with a self-inflicted bust.”
That’s an interesting statement from someone who repeatedly rejected citizen requests for the county to regulate the gas industry, saying the county didn’t have the authority to do so.
Like the rest of the nation, Mesa County is feeling the effects of the recession. In our case, the economy is made worse because it includes a natural gas bust as well as the decline in other sectors. Ironically, in some cases, like hunting and outfitting, the oil and gas boom may have contributed to an economic decline, even before the national recession hit.
But is this economic downturn a “self-inflicted bust” as Meis maintains? What evidence can he or the energy companies submit that the rig count in western Colorado would have declined significantly less had the new rules not been enacted? Have neighboring states that have not changed their rules seen less decline in the industry than Colorado?
Numbers reported by the Sentinel’s Dennis Webb tell a different story. While drilling permits declined last year to 5,159 from 8,027 in 2008, Colorado approved more permits than neighboring states that have not changed their rules. Wyoming came closest with 5,106, according to the Colorado Oil and Gas Conservation Committee.
Through the end of last year, 1,487 wells were drilled in Colorado, compared to 896 in second-place Wyoming. During the second half of the year, Colorado issued 1,273 permits, compared to Wyoming’s 825, which was second highest.
Rig counts tell a similar story. After a precipitous 56 percent drop from a peak of 124 rigs operating in Colorado in November 2008, only 55 rigs were active by April 1, 2009. This was before the new regulations took effect on April 3, 2009.
Since the new rules went into effect, only three additional rigs have gone out of service in Colorado. Except for New Mexico, this is fewer than in neighboring gas-producing states that have not changed their drilling regulations.
Drilling has been slowing down in the Rocky Mountain region since 2008, but there is little evidence that the decline in Colorado was caused by the new rules. The recession, a worldwide glut of natural gas, inadequate pipeline capacity and new gas discoveries closer to Eastern markets are all factors considered by energy experts in determining the cause of the drilling decline.
Between June 2008 and April 2009, the average wellhead price for natural gas fell 68 percent from $10.82 per mcf to $3.43 per mcf. Price obviously was another factor in decisions to reduce exploration and production.
Nevertheless, industry representatives and their supporters have repeated a series of discredited myths to undermine support for the drilling regulations by attempting to link them to economic decline in the gas patch.
As identified by Oil and Gas Commission member Rich Alward, these myths are (1) that uncertainty about new drilling rules is driving the industry from the state, (2) that drilling is slowing down faster in Colorado than in other states, (3) that Colorado’s new rules are an unreasonably expensive “tax” on the industry and (4) delaying implementation of the rules is in the best interest of the people of Colorado.
Until Meis can show some hard numbers to prove that these assertions are not myths, his claims cannot be taken seriously. With all signs pointing to a prolonged lull in gas drilling on the Western Slope, the county would benefit more from developing a diverse economy less subject to boom and bust than trying to force the return of drilling on a large scale.
Diversification was the lesson learned from the last bust. It appears we may need to learn it again after this one.