The natural gas industry in La Plata County has reason to hope for a recovery with prices rising and plenty of approved drilling permits.
The slowdown in the industry is at least partially responsible for a slowdown in Durango’s economy earlier this year, said Roger Zalneraitis, executive director of the La Plata County Economic Development Alliance.
In January and February, the economy slowed more than expected with job openings, tourism indicators and permits for new construction falling.
In Farmington, the crash in gas prices led to a population decline of 11.5 percent over seven years, according the U.S. Census Bureau. The regional population loss also holds La Plata County back, Zalneraitis said in an email.
During the first seven months of 2017 in the San Juan Basin, the average natural gas price was $2.78 per 1,000 cubic feet. That is up from 2016, when the average price was $2.60 and up from 2015 when the average price was $1.90, according to data provided by the La Plata County Energy Council.
“That’s just unbelievable for a nice bounce, so there is hope,” said Christi Zeller, executive director of the Energy Council.
However, since prices are much lower than they were 10 years ago, the economic impact won’t be as strong, Zalneraitis said.
Oil and gas operators across the state expect higher revenues, profits, wages and employment over the next months, according to a June economic outlook from the Governor’s Office of State Planning and Budgeting.
Higher demand and flat production levels have helped drive the increase in prices, said Maria Sanchez, an analyst with DrillingInfo.
Despite the increase in prices, production for the first five months of the year was lower than the same period last year.
Production dropped because companies abandoned or shut in wells in recent years while prices have been depressed, and they have not been replaced by new wells.
More than 60 wells have been shut in La Plata County this year, likely because their production declined, Zeller said in an email. There were 3,319 active wells in La Plata County as of June 1.
Production declines in La Plata County are likely to continue until prices increase, Sanchez said.
Previously, experts said a natural gas price of $4 per 1,000 cubic feet was needed to trigger more drilling in the basin. But better technology and lower prices for equipment means companies can drill wells when prices are below that benchmark, Zeller said.
High numbers of drilling permits approved in 2015 and 2016 may bode well for the county because companies can wait two years before using a permit, and they can apply for an extension, she said.
In 2015, 106 drilling permits were approved, and in 2016, 96 permits were approved.
“Many companies are poised and ready to go, depending on capital budgets and price,” Zeller said.