Gas-Drilling Permits in Rockies Outstrip Ability to Tap Resource
Thursday, April 28, 2005
PINEDALE, Wyo. -- As energy companies and Bush administration officials have long told the story, lack of access to federal land is the primary roadblock for increased production of natural gas in the United States.
The Independent Petroleum Association of America made this familiar claim in February at a congressional hearing. Similarly, Vice President Cheney said last year that because of unjustified federal limits on drilling, "large parts of the Rocky Mountain West are off-limits."
The lack-of-access story, however, does not square with what is happening on the ground here at the epicenter of what is widely being called the largest boom in gas drilling on federal land ever in the Rocky Mountain West.
In response to White House orders to expedite gas extraction on federal lands, the Bureau of Land Management has issued more gas-drilling permits in the West than the industry has rigs to drill with or workers to operate the rigs, according to government records, industry experts and local officials.
The BLM issued a record number of drilling permits last year, but the gas industry is struggling to keep up, with the number of completed wells flat or declining over the past three years.
"Around here, I don't even hear that argument about access anymore," said Prill Mecham, field manager for the BLM in the Pinedale area, which she said contains more gas in a smaller footprint than anywhere in the West. "The companies are clear where they need to drill, and they have access to all these areas."
Several of the energy companies operating in the Pinedale area -- where there is an estimated 35 trillion cubic feet of natural gas, about 11 times the total amount produced annually on all public land in the United States -- are unreservedly bullish in their reports to shareholders about prospects for high-profit, long-term access to gas. "Ultra's well economics are robust," says a company profile by Ultra Petroleum Corp. of Houston, one of the major operators here.
With a record number of gas-drilling rigs now operating in the West, industry analysts say, energy companies have all but exhausted available drilling equipment in North America. Because delivery on new rigs can take a year or more, the industry is not expected to catch up in the near future to the drilling permits that have already been issued by the federal government.
"Large drilling contractors are operating at full utilization," said Byron Pope, an analyst for Pickering Energy Partners Inc., a Houston-based energy research firm. "Don't expect to see a massive wave of more drilling."
There is also an acute shortage of gas-field workers. Here in Wyoming, which leads the West in gas drilling on public land, an industry-sponsored school was opened last month in Casper to train needed roughnecks. Its director, Charlie Ware, said energy companies have "told us that they need 1,000 new workers a year for the next five years to drill the leases that are out there right now."
In New Mexico, where gas drilling on public lands is also booming, Bob Gallagher, president of the state oil and gas association, agreed that the industry has temporarily run out of capacity: "If we had the availability of equipment and labor as we speak, you would see more crews working, more wells being drilled."
Gallagher and other industry experts say that the federal government must continue to lease more land for drilling because older gas fields are drying up, dependence on foreign supply is increasing and consumer appetite for gas continues to surge.