Tuesday, January 6, 2009

Boom to Bust: Who's to Blame?

Colorado Governor Bill Ritter's one claim to fame, as he stands at the midpoint of his term, is his over-hyping of what he calls the "new energy economy" -- and the fact that another rising politico, a guy named Barack Obama, stole the phrase from him.

It's more appropriately called the "New Energy Baloney," in my view, since it's largely based on subsidies, mandates and other government interventions in support of niche energy technologies that aren't ready for prime time -- while regulatory and rhetorical war is waged against an "old" energy economy that actually delivers the goods.

But perhaps it's time that Ritter began paying a little more attention to "old energy economy" in Colorado, since his two year effort to undermine it seems to be turning energy boom into bust. Factors beyond one governor's control are involved, no doubt, as the Durango Herald story below points out. But Ritter's anti-energy development attitudes, and the deterrent effect these might be having on the industry, can't be discounted.

The 3 most obvious moves Ritter made against the industry are:

His packing of the state's "greener" oil and gas commission with people who are either hostile or indifferent to (or ignorant about) the industry;

His championing of a ballot measure -- roundly defeated -- that would have jacked-up energy severance taxes;

His efforts to slow or block a balanced and sensible drilling plan for the Roan Plateau (the product of 7 years of careful study and public process by the BLM), and the development of oil shale in Western Colorado, in a pander to eco-extremists who reflexively oppose energy development almost everywhere it's proposed.

Ritter's touting of the "new energy economy" is widely cited as his most notable accomplishment thus-far. But his foolish assault on the "old energy economy," and the toll it is taking on Colorado, is having a much greater real impact -- only in a negative way.

Here's today's story from the Durango Herald:

Legislators get preview of gas debate

by Joe Hanel
Herald Denver Bureau

What killed the golden goose?

The gas and oil industry often bills itself as Colorado's golden goose, but in recent months, drilling rigs have started to leave Colorado. Lawmakers on Monday got a preview of the political mystery that is sure to be one of the hottest debates of the year.

The Legislature doesn't officially begin until Wednesday, but a special committee on job creation has been meeting since last fall. Gas and oil industry representatives visited the committee Monday to argue that new rules of the Colorado Oil and Gas Conservation Commission are chasing away jobs. Legislators will vote on the rules this session.

The debate has raged since Gov. Bill Ritter's administration proposed the changes two years ago. Republicans in general oppose the new regulations, while Democrats defend them.
"I wonder - I hate to say this - why some of the oil and gas companies would want to do business in Colorado," said Rep. Larry Liston, R-Colorado Springs.

Companies indeed are leaving Colorado, according to the latest counts of drilling rigs.
Colorado's rig count declined to 93, according to the latest count Jan. 2 by Baker Hughes, a company that tracks rig data. Colorado has 99 rigs in January 2009, but it had as many as 123 last spring.

However, many other major gas states declined as much or more, including Wyoming, Texas and New Mexico.

Rigs left Colorado even though the industry has unused drilling permits and the new rules haven't taken effect yet, said Harris Sherman, chairman of the Oil and Gas Conservation Commission. "If these rig declines are occurring, they're occurring under the old system, not the new system," Sherman said.

Sherman blames economic reasons for the loss of rigs, not the new regulations.

Jon Harpole or Mercator Energy, who opposes the rules, said companies have quit drilling for four reasons.

The price of gas is too low, the credit markets are frozen, shale gas has opened opportunities in other states and Colorado is about to adopt new rules. Legislators can control only the last factor, he said. Shale gas, in particular, has revolutionized the industry. Companies now have the technology to tap large deposits that they couldn't reach three or four years ago, he said.
"What's happened is phenomenal, and most Americans don't even understand what's happened here," Harpole said.

Montezuma County has a promising deposit of shale gas that could open the county to the industry. States including North Dakota, Louisiana and Arkansas also have large deposits.
"You don't want to be at a regulatory disadvantage to these states, and quite honestly that's where we are now," Harpole said.

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