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Wyoming Officials Slam Biden’s Oil and Gas Moratorium

in Energy/News
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By Ellen Fike, Cowboy State Daily

Officials from across Wyoming didn’t have positive reactions to President Joe Biden’s halt on oil and gas leasing on federal lands Wednesday.

A number of state officials and organizations spoke out against Biden’s decision Wednesday, agreeing it would economically impact Wyoming.

“Today’s executive orders signed by President Biden will endanger our economy in Wyoming and threaten our national security. The negative ramifications that will be felt across the country because of this ban will be real and painful. Energy costs will rise. Domestic energy production will fall. Jobs will be lost,” U.S. Rep. Liz Cheney said in a statement.

Biden issued an executive order Wednesday that will suspend new oil and gas leasing on federal land to allow the administration to conduct a comprehensive review of the federal leasing program and existing fossil fuel leases.

“Let me be clear, the #BidenBan would decimate our economy and energy security, costing nearly $700 billion in GDP by 2030 and destroying nearly a million jobs by 2022,” U.S. Sen. Cynthia Lummis said on Twitter.

U.S. Sen. John Barrasso slammed the decision on the Senate floor Wednesday.

“Despite all of the talk about unity, one of the first things that President Biden has done in office is to directly attack energy-producing states like Wyoming,” he said. “In Wyoming, energy production does a lot more than just keep the lights on. It puts food on the table, and it does it for thousands of families. In Wyoming, we produce coal and oil and natural gas. Uranium, as well, for nuclear power.”

The Petroleum Association of Wyoming predicted the moratorium is the first step to stop the production of fossil fuels on federal lands.

“Today’s announcement is another step in the administration’s plan to eventually shut down all production of natural gas and oil on federal lands,” the Petroleum Association of Wyoming said. “This misguided policy does nothing to reduce the demand or to improve environmental outcomes, but rather increases reliance on foreign sources of energy not beholden to America’s environmental, labor or safety standards while increasing energy costs for consumers.”

Biden, in his first day in the Oval Office, issued an executive order halting new oil and gas leases on federal land for 60 days. Wednesday’s order expands on the original.

“I was taken aback by swift orders executed by the Biden Administration last week after months of rhetoric around bringing unity to our nation,” Wyoming Superintendent of Public Instruction Jillian Balow said. “A federal ban on oil and gas leases will defund schools. Wyoming depends on some $150 million a year in oil and gas federal mineral royalties to fund our K-12 schools.”

Gov. Mark Gordon also noted his displeasure at the order on Tuesday, before it was even official.

“It is a reinvigoration of top-down, Obama-era policies that only served to divide and alienate the very working-class American communities with whom the Biden administration has pledged to unite,” he said. “It is clear President Biden has caved in to a loud segment of the Democratic Party that is pushing to require all policies and decisions to meet a litmus test of climate change, regardless of consequence.”

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Natural Gas Faces Difficulties as Market is Flooded with Cheap Product

in Energy/News
Jonah Field
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By Ike Fredregill, Cowboy State Daily

A victim of its own success, Wyoming’s natural gas industry has faced plummeting prices in recent years, leaving only one operator with active rigs in the state, the Petroleum Association of Wyoming (PAW) reported.

“There are 23 active rigs in the state, and of those only two are natural gas,” said PAW Communications Director Ryan McConnaughey. “There are a lot factors impacting natural gas, but a big one is sustained low prices.”

More than a decade ago, natural gas experienced a surge in popularity with the advent of hydraulic fracturing, or fracking, that boosted production, but a University of Wyoming researcher said the mining process was almost too successful.

“In the last decade, we’ve become so good at getting oil and gas out of the ground through unconventional methods — fracking and horizontal drilling,” said Rob Godby, the director for UW’s Energy Economics and Public Policies Center and an associate professor for the College of Business. “Prices have fallen through the floor. There’s just too much natural gas on the market.”

In 2008, national natural gas prices were around $7 per 1,000 cubic feet (MCF), Godby said. The price as of Wednesday was $1.77 per MCF.

“It’s only gone one direction, which is down,” he said. “The other thing that’s scary about that price is we’re in the middle of winter, and if you’re going to have a coldest month, it’s February.” 

As energy companies switch over to renewable power sources for electricity generation, natural gas and coal have stepped into backup roles to ensure the lights stay on during major winter storms. Previously, natural gas prices spiked to around $150 per MCF during these events, but Godby said those instances are becoming less frequent.

“In real terms, taking inflation into account, we’re essentially at the lowest point in gas sales history,” he said. “Operators are having a very hard time making money with natural gas.”

Permian Basin 

The hydraulic fracturing process is not selective, so when oil operators frack, they often capture natural gas as a free and marketable byproduct, Godby explained.

“People often think of oil and gas drilling as a jelly donut, and operators are trying to get that jelly out,” he said, crediting the analogy to Mark Watson, the Wyoming Oil and Gas Conservation Commission director. “But, it’s really like Tiramisu.”

Operators horizontally drill through layers of rock containing oil and gas, then pressurize the hole with water and other additives, which fractures the rock and releases both oil and gas.

“In the last year or so, the U.S. just became the largest producer of oil, and all that oil growth brings with it a lot of natural gas,” Godby said. “And the most prolific field where this is happening is in the Permian Basin on the eastern half of New Mexico and Western side of Texas.”

Natural gas producers in Wyoming are typically producing only natural gas while competing with oil producers, whose get their natural gas essentially free.

Further complicating the situation, McConnaughey said Wyoming’s tax on natural gas is higher than New Mexico’s.

“Wyoming’s tax rate on energy production is not competitive with our peers,” he said. “It’s typically about 4 percent more than other states, and New Mexico takes 4.5 percent less than Wyoming does.”

Coronavirus

With less extraction comes less revenue for the state, a major challenge when considering mineral revenues paid for more than 50 percent of the state’s budget in 2017, the Wyoming Taxpayer’s Association reported.

Coal’s decline is well documented in Wyoming, but Godby said natural gas is not far behind.

Since 2015, Wyoming’s projected natural gas production declined by 18 percent, and natural gas severance tax payments have dropped 19 percent, UW documents state.

“Our economy has gone from riding a tricycle with coal, natural gas and oil to a bicycle with natural gas and oil, and now,” Godby said, “we’re down to riding a unicycle with oil, which is the most volatile of the three.”

Oil production is projected to increase 14 percent from levels in 2015, bringing the state a 9 percent increase in oil severance tax, but that income might not be reliable, he said.

“Oil production could rise and offset some of the declines,” Godby said. “The problem is oil is still the most difficult commodity to forecast for, and as the transportation industry moves away from fossil fuels in the future, it will become even more volatile.”

China is one of the two largest oil consumers in the world, and the coronavirus epidemic has “slowed their economy to a crawl,” decreasing their energy demand, Godby said.

“This is why gas prices at the pump are so low,” he explained. “Oil prices right now are really low, because demand has dropped.”

Now a Ban on Natural Gas? Berkeley, California Fires “First Shot” in Potential Energy War

in Energy/News
Berkeley bans natural gas
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By Ike Fredregill, Cowboy State Daily

Californians are moving away from natural gas, which could complicate Wyoming’s energy-reliant economy in the future, but experts say it’s too soon to predict an actual impact. In Berkeley, California, city officials banned natural gas connections to new homes to fuel furnaces and appliances starting in 2020 as part of an initiative to reduce the city’s carbon emissions.

Wyoming Petroleum Association President Pete Obermueller said the move could be troubling if it gains momentum, but it’s not alarming at this point.

“Obviously, if it is large scale and mandated and very widespread that would be detrimental,” Obermueller said. “I’m a little bit skeptical anything like that will happen quickly or on a large scale.”

At the University of Wyoming, Charles Mason, a professor of Petroleum and Natural Gas Economics who was raised in Berkeley, said the city’s decision was more symbolic than impactful.

“You could kind of think of it as the first shot in a war,” Mason added.

If the rest of California were to fall in line with Berkeley, Wyoming’s gas industry might not feel a pinch immediately, but could see reduced demands for gas in the future, said Severin Borenstein, faculty director for the Energy Institute at the University of California-Berkley’s Haas School of Business.

“This is not going to happen overnight,” Borenstein said. “Even the Berkeley law, which is way ahead of California, is only on new houses.”

While gas burns cleaner than coal, it still generates greenhouse gasses. 

“Presumably, reducing emissions is the thing that is top of mind (in Berkeley),” Mason said. “Gas is cleaner, but it’s not zero.”

The majority of California’s in-state electricity is generated by natural gas, although it’s closely followed by renewable energy sources such as wind and solar, the California Energy Commission reports.

Gas burned in homes for appliances and heating creates more emissions than all the state’s power plants, California Energy Commission Chairman David Hochschild told the San Francisco Chronicle.

“It’s not that (homes) are more polluting,” Borenstein said. “But, there’s a lot of it. Most buildings in California are heated with the on-site combustion of natural gas.”

In 2018, the city of Berkeley reported 27 percent of its total greenhouse gas emissions in 2016 were generated by the ignition of natural gas within city buildings.

For Mason, the potential reduction of gas-fueled heating sources is notable.

“Heating is a lot bigger deal,” he said. “You could possibly see a measurable impact if this takes root and they convince a big chunk of California to follow suit.”

The gas wells currently operating in Wyoming “are pretty price insensitive” and unlikely to be affected by Berkeley’s decision, Mason said. However, if California or other states start requiring buildings to use non-gas heating sources, he said potentially reduced gas prices could affect Wyoming.

“Where a change in prices will matter is a reduction in new drills,” he explained.

Fewer drills could mean fewer jobs for Wyomingites. The oil and gas industry accounted for 12,600 Wyoming jobs in June, according to the Wyoming Department of Workforce Services.

If those jobs were to disappear, Mason said Wyoming workers would need to adapt.

“It’s not radically different than the situation facing coal miners,” he explained. “They may just have to find something new to do — maybe building wind turbines or working at Walmart.”

While some believe a move away from gas is needed to reduce greenhouse gas emissions, Obermueller said the U.S. relies heavily on the industry for electricity generation, and that’s not likely to change.

“Natural gas is the primary source in America of large scale electricity production,” he said. “The demand for energy is growing by leaps and bounds. There’s no doubt that (natural gas’) share of electricity is rising rapidly.”

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