New hydrocarbon estimates put western Colorado on edge

USGS now says the region has the nation’s second-largest reserves, but a flush market means little will change for now.

 

If you’re standing on one of the many ridges, mesas or mountaintops here in Western Colorado, it’s likely you’re standing on a vast reserve of natural gas.

In early June, the U.S. Geological Survey released a new estimate for reserves of natural gas in what is called Piceance Basin, which lies beneath a huge swath of the region, which includes the region from Grand Junction to Gunnison. The USGS says there’s 66 trillion cubic feet of recoverable reserves—about 40 times more than earlier estimates. That would make it the second-largest reserve in the nation.

And that has some people nervous.

“A fellow walked in who was under contract on a property scheduled to close yesterday and he was kind of in panic mode," says Mike Jackson, a realtor in Paonia, where property values are climbing, but where the loss of coal jobs could mean hardships for the economy to come. "‘Do I stay or do I go?’ It is on the minds of people.” 

Such reactions could be unwarranted. While the USGS data reflect a significant increase in potential natural gas, that doesn’t mean a rush of new leases for drilling or hydraulic fracturing. Those have more to do with market forces than the amount of available gas, says David Noe, a former Colorado Geological Survey geologist and board member of the Western Slope Conservation Center. “What's happened with this report is it's reflecting the success of the industry,” Noe says. “The industry has been so successful at producing oil and gas at this point and it's been done in such a fast way; it really has been a boom.”

Noe says that many leases in Western Colorado were gobbled up in the previous boom — and now the industry has bottomed out. "Now there's too much on the market and the prices go low. The economics of drilling in the ground mean everything to an oil and gas company,” he says.

According to the U.S. Energy Information Administration, the market price for natural gas nationwide is $2.40 per thousand cubic feet. Most industry analysts believe the price needs to be at least $6 for development to break even. What’s more, the USGS numbers merely confirm what the industry already knew.

The new numbers could be significant in the long run, however, says Alex Demas, a spokesman for USGS. They mean Western Colorado has the potential to produce oil and gas for a long time to come. That does not mean that oil and gas development will replace jobs lost from the closure of North Fork Valley coal mines, which provide large salaries to highly skilled workers.

For opponents of fossil fuel development, the new numbers should not be an open invite for more development. Alex Carr Johnson, executive director of the Western Slope Conservation Center, says the economic gap left by coal won’t be filled by more extractive industry.

“The local coal mines have provided a huge amount of wealth here locally for the last 100 to 120 years, and that is (largely) gone. There is a huge appeal to look at the next extractive industry to replace that huge hole in our economy, however the oil and gas industry would provide very short-term gain and short-term economic value and wouldn't be providing that support for generations of families to live here.”

In other words, the new numbers mean there’s more gas underneath us, but they don’t say much more. For people in a valley looking for economic answers, there are few here. 

Paige Blankenbuehler is an editorial fellow at High Country News. She tweets