Wyoming natural gas production declined in 2009, 1st time since 1997

Wyoming gas production dips, 1st time since 1997

CHEYENNE, Wyo. — Natural gas production in the Rocky Mountain region’s top gas-producing state declined in 2009 for the first time since 1997, helping push Wyoming into recession along with the rest of the country.

Last year wasn’t all doom and gloom for gas, since it was the second-biggest year for Wyoming gas volume on record.

But the state leans heavily on its gas industry and the decline had a ripple effect. State revenue is down. Unemployment is up — almost double the rate this time last year. And communities in gas-rich areas are struggling.

Reduced demand put the dent in gas production, 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.”

Wyoming’s annual natural gas production increased steadily from 1998 through 2008, nearly doubling in that time and bestowing the state with billion-dollar budget surpluses.

Last year, the state produced about 2.1 trillion cubic feet of natural gas, down about 9 percent from 2008’s record 2.3 trillion cubic feet, according to the Wyoming Oil and Gas Conservation Commission.

Contributing to and compounding the problem of falling production, gas 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.

But fewer wells are being drilled. The Wyoming office of the U.S. Bureau of Land Management reports that it processed 2,162 oil and gas drilling permits last year, down from 3,681 in 2008 and the lowest number since 2003.

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.

Meanwhile, 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.