GRAND JUNCTION, Colo.—The most active driller in Colorado’s gas-rich Piceance Basin says it plans to operate nine or 10 rigs there in 2009, down from 20 it originally expected.
The Williams Companies blamed the cutback on the credit crunch, low natural gas prices and proposed state rules for drillers.
Williams spokeswoman Susan Alvillar said tight credit markets forced the company to stop borrowing to finance drilling and to operate on a cash-flow basis. The Tulsa, Okla.-based company operated about 25 rigs in the Piceance (PEE’-ance) Basin last year.
Alvillar said Williams is spending “quite a bit of money” to hire compliance officers for the new Colorado rules, which aren’t in force yet. The rules would require more precautions for wildlife, public health and the environment.
In a news release Friday, Williams cited “lower energy prices, a slower economy, difficult financial markets” in cutting its capital spending.
The national price of natural gas for March delivery dropped to $4.01 per 1,000 cubic feet Friday. It was more than $11 per 1,000 cubic feet in July.
Gas shipped out of the Rockies fetches less because of transportation and pipeline issues.
“I can’t say any one thing trumps the other,” Alvillar said of Williams’ slowdown in western Colorado.
Colorado’s oil and gas regulations add an element of uncertainty about how long the permitting process will take, Alvillar said. Some rules are still being studied by working groups, she noted.
Under the rules, Williams and other producers would have to consult state health and wildlife officials, but regulators say they don’t expect that will affect permits. They say companies that submit comprehensive drilling plans can reduce their wait time because wells wouldn’t need to be approved individually.
Garfield County Commissioner John Martin said he believes economic factors, and not the new rules, are the primary reason for industry cutbacks.
“Welcome to the new economy,” said Martin, a Republican. “There’s no fun and games anymore. It’s going to be tighten your belt and hold on.”
Part of the Piceance Basin is in Garfield County.
EnCana Oil and Gas (USA), the second-largest player in the basin, has said it would run five rigs this year, down from a dozen in 2008.
If approved by the Legislature, the oil and gas rules would take effect April 1. Drilling permits issued until then would be governed by existing rules. A permit is good for a year.
The rules would implement two 2007 laws requiring that more weight be given to the environment, wildlife and public health and safety when oil and gas development is approved.
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Information from: The Daily Sentinel,
