Even as the world increasingly shifts to renewable energy provided by the sun and wind, two companies — SG Interests and Gunnison Energy — scramble to sink their drill bits into the North Fork Valley of western Colorado.
Why are these companies in a hurry? Perhaps as soon as a decade from now, natural gas will cease to be a bridge fuel. Long-term structural decline is going to make developing new wells not just risky but economically disastrous.
Battery backup, long thought to be a far-off proposition, has become a reality, and the shift has happened so rapidly it is almost beyond our ability to grasp. Yet we have adapted to sudden change before.
One example is the famous photograph of a New York City street in 1903. It shows horse-drawn wagons on streets dotted with horse poop, then a major health concern. A decade later, a photo taken in the same spot shows the street clogged with motorcars — and there's no horse poop in sight.
That same seismic shift is occurring with natural gas. In 2015, a writer for Forbes predicted that California's energy grid needed more gas-fired power plants to back up undependable renewables. The combination of renewables linked to natural gas was dogma until 2018.
But last November, in a harbinger of major change to come, the California Public Utilities Commission forced Pacific Gas and Electric to decommission two large and aging gas plants. Their replacement would be renewables backed by batteries produced by the solar-energy panel installer and electric-car builder, Tesla. One of the plants to be replaced is 238 megawatts; the other 300 megawatts, enough to power 538,000 homes.
Another indicator was what has happened to the stock price of GE. It got slashed in half in part because in 2016, GE bought Alstom, a French firm specializing in natural gas turbines. GE closed its books on this purchase only to reveal that the French firm, which had been booming, was contracting. At the same time, GE's main competitor Siemens, was forced to explain to its investors that the natural gas business was shrinking. Siemens then began laying off employees and closing factories.
The downturn in demand for gas turbines coincides with a drop in the price of solar panels. During 2015 and 2016, the price of solar panels dropped by 90 percent from where they'd been just 10 years ago. In just one decade, renewables undercut natural gas.
California, the leader in this massive energy shift, promoted renewables long before the rest of the country. California can now boast that 49 percent of its electricity comes from wind, solar, hydro or biomass.
Yet here in the North Fork of western Colorado, which sits on the edge of the Piceance Basin, Gunnison Energy and SG Interests ignore the changing market while working hard to snag gas leases on public land. They are following the lead of investors such as Philip Anschutz. His company Caerus has been a major buyer of other gas firms, assimilating companies the size of SG Interests and Gunnison Energy, and building on assets formerly owned by Encana. It seems likely that leases bought and developed by the two companies in the North Fork area might be acquired just so they could sell out to a bigger firm such as Caerus.
It's a speculator's game, bidding for leases and exploring for natural gas that requires shipping to markets far away from western Colorado.
The Rockies Express Pipeline, completed in 2013 at a cost of $6.8 billion, sends natural gas from our area to Ohio and Pennsylvania. Yet in 2016, 25 percent of the pipeline was sold for the paltry sum of $440 million. That's because the Eastern market is fully served by those same two states of Ohio and Pennsylvania. The Rockies Express has become the equivalent of selling ice to Eskimos, and now some say the pipeline should be reversed — sending eastern natural gas West. Meanwhile, a shipping terminal at Jordan Cove in Oregon remains uncertain.
SG Interests and Gunnison Energy might make themselves a killing selling out, but for those who live in the Paonia area, their speculation threatens the area's economy, which is increasingly focused on clean water and natural beauty.
Wall Street workers have a warning about speculators: "Don't jump in front of a steam roller to pick up pennies." I think that works for the North Fork Valley and Delta County too. There's no need to jeopardize this area's future for pocket change.
David Marston is a former stock trader who grew up in Paonia. He owns commercial real estate there and lives in New York City.