The Colorado Oil and Gas Conservation Commission approved 4,363 drilling permits in 2005 – an all-time high for the state and a 50 percent increase from the previous year.
With gas prices expected to remain high, the commission expects the number of approvals to rise another 10 percent this year, said Brian Macke, the commission’s director.
“We think the trend will continue, given tight supplies and increasing demand,” Macke said.
After a recent decline, natural-gas prices are still up almost 8 percent in the last 12 months to $8.94 per million British thermal units.
There were 28,944 active wells in Colorado at the end of 2005. That number is expected to increase to 31,000 wells producing by the end of 2006.
The biggest surge in drilling permits came out of Garfield County, home to the lucrative Piceance Basin in western Colorado.
In 2005, the commission approved 1,508 permits to drill in Garfield County, or about 34 percent of all permits issued in Colorado. The number of permits for 2005 reflects a doubling in activity from the previous year.
One of the major producers in the basin, EnCana Corp., expects to boost gas production 20 percent this year to about 360 million cubic feet, said Doug Hock, a company spokesman.
“The strong demand for natural gas coupled with EnCana’s land position in the gas-rich Piceance Basin will continue high levels of activity in 2006,” Hock said.
A cubic foot is a standard measure of gas, and 6,000 cubic feet of gas is the equivalent of one barrel of oil.
Despite the overall rise in gas prices, there are still obstacles facing energy companies drilling new wells in Colorado, such as the shortage of rigs.
In October, there were 80 active rigs in the state.
Dan Larson, a Durango-based spokesman for BP American Production Co., said the company plans to drill about 50 wells in the San Juan basin in southern Colorado this year – about the same as in 2005.
If the company could secure a second rig, it might be able to drill 25 more wells, he said.
“We are very hopeful we can have a second rig in place by the middle of the year,” Larson said.
The drastic increase in permit applications filed at the commission has led to a backlog of about 757 applications, compared with a backlog of 283 permits in 2004.
To resolve the backlog, the commission has asked the state legislature for $848,689 to fund nine full-time positions, including two employees to help with the permitting process.
Staff writer Kim McGuire can be reached at 303-820-1240 or kmcguire@denverpost.com.
