By Ike Fredregill, Cowboy State Daily
A cleaner energy product could provide the ladder needed by Wyoming’s natural gas industry to climb out of a hole dug by years of low prices, high regulatory fees, and finally, the pandemic, an industry leader said.
“The challenges for natural gas producers have been growing for a number of years,” said Paul Ulrich, vice president of government and regulatory affairs at Jonah Energy LLC. “And, what we are facing today is clearly a perfect storm.”
With only two natural gas rigs operating in the state, Ulrich said Wyoming hasn’t seen natural gas rig counts this low since the 1940s.
Before the coronavirus pandemic, the U.S. natural gas market was flooded with cheap product. Oil producers in the Permian Basin, an oil field covering parts of Texas and New Mexico, drew up an abundance of natural gas as a byproduct of oil drilling.
“There was a glut of natural gas on the market,” Ulrich explained. “The price differential (to extract natural gas in Wyoming) puts us at a disadvantage in the marketplace.”
In Wyoming, natural gas producers drill for gas and pull up a small portion of oil as a byproduct, Ulrich explained.
Because Wyoming’s producers focus on natural gas production, their operating costs are higher, making it difficult to compete against oil producers, he said.
But when oil production slowed to a crawl in the U.S. as a result of a price war between Russia and the Organization of Petroleum Exporting Countries (OPEC) earlier this year, Ulrich said an opportunity opened for natural gas producers.
“I strongly believe that if we as a state collectively make smart and major decisions that remove financial and regulatory hurdles, we have the opportunity to not only stabilize, but grow the industry back to pre-2019 production rates,” he said.
A key factor in regrowing Wyoming’s natural gas sector would be the willingness of producers to adapt to cleaner energy demands.
“The market is extremely interested in consuming more responsibly produced energy,” Ulrich said.
Taking part in a program designed to encourage the responsible production of natural gas, Ulrich said Jonah Energy qualified its product as low emissions and also reduced surface disturbances by working with state agencies and researchers on best practices.
The company earned a gold TrustWell rating, a score developed by the Independent Energy Standards Inc. to rank natural gas producers based on responsibility metrics across a range of risks and impacts. Jonah is also the first producer in the nation to receive TrustWell’s Verified Attribute for Low-Methane.
“From our standpoint, the whims of the market are one thing,” Ulrich said. “But if we can provide a cleaner source of natural gas, a more responsibly produced natural gas, we believe there’s a place in the market for it.”
Jonah is exploring options for opening another rig in July, which could bring the state’s count up to three, he added.
As the Wyoming Energy Authority’s vice chairman, Ulrich said he was working with the state to help position Wyoming once again as a competitive market for natural gas producers.
“The authority is envisioned as a one-stop shop for developers, who want more information and help finding opportunities in Wyoming,” he explained. “Natural gas is a tremendous feed stock for a myriad of manufacturing processes, and could be a tremendous opportunity to diversify our economy.”
Both the Legislature and Governor Mark Gordon’s office have been supportive of the industry, he said, but the state has some work to do before natural gas can return to its former glory.
“Our best path forward — as a state and energy producers — is working together toward a shared goal,” Ulrich said. “The most important thing we can do as a state is remove any and all barriers to capital investment as well encourage and incentivize Wyoming operators, whether drilling for natural gas or oil.”