Wyoming BLM reports sharp decline in oil, gas drilling permits

Wyoming gas, oil drilling permits decline

CHEYENNE, Wyo. — The U.S. Bureau of Land Management processed fewer oil and gas drilling permits in Wyoming last year than in any year since 2003, the agency’s Wyoming office reports.

The BLM’s Wyoming office says it processed 2,162 oil and gas drilling permits last year, down from 3,681 in 2008.

Wyoming produces far more gas than oil. The state’s gas production has been increasing steadily since 1997 and the industry has become a major part of Wyoming’s economy.

Wyoming has produced about 2.1 trillion cubic feet of natural gas through September, according to the Wyoming Oil and Gas Conservation Commission. Final 2009 figures weren’t yet available, but production was nearing 2008’s record 2.3 trillion cubic feet, despite the slowdown in drilling.

The state’s gas-rich areas have been struggling with job losses. Meanwhile, statewide unemployment is up — almost double the rate this time last year.

Reduced demand for gas has hurt the industry, said Rob Godby, a University of Wyoming economics professor.

“Industrial demand for natural gas is way down due to the recession,” Godby said Thursday. “For that reason, a lot of gas has been going into storage.”

Low gas prices are a major source of the industry’s malaise. Prices that topped $8 per thousand cubic feet in 2008 fell to not much higher than $2 per mcf last year.

Prices since have recovered to around $5.25 per mcf. But with gas providing an ever-growing share of state government revenue — about 60 percent of severance taxes in a minerals-rich state — state economists have had to keep revising their projections downward.

Each $1 change in the price for Wyoming gas equals $270 million more — or less — annual state income.

Gas producers need to keep drilling new wells for the state to keep producing more or even the same amount of gas, said Bruce Hinchey, president of the Petroleum Association of Wyoming.

“When a well comes on, that’s usually about the best it’s ever going to do. Then it’s going to be in a continual decline until it depletes out,” Hinchey said.

Especially because drilling is much more labor-intensive than maintaining an existing well, less drilling means fewer jobs. The state’s energy industry shed 20,000 jobs last year, many of them in the gas fields.

Those cuts contributed significantly to Wyoming’s unemployment rate, which increased from 3.7 percent a year ago to 7.2 percent last fall. The rate since has improved to 7 percent.

Less drilling and fewer jobs have taken a heavy economic toll in gas-rich areas. Year-to-year sales tax revenue, Godby said, is down 30 to 40 percent in some places.

If there’s any good news in all of this, low gas prices have been good for home heating costs in a cold winter. Economists expect large inventories of gas to help keep prices under control.