Big oil beefs up across West in search for gas

Gargi Chakrabarty, Rocky Mountain News

Published May 6, 2006 at midnight

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Big oil companies are flexing their muscle once again in the Rocky Mountains, buoyed by the Bush administration's efforts to open the West to more oil and natural gas drilling.

This time, the companies have set their sights on conventional natural gas instead of oil shale, which failed many of them decades ago.

The construction of pipelines, which carry natural gas from the Rockies to far-flung markets in the Midwest and on the East Coast where the commodity fetches higher prices, also is propelling the jump in activity.

"It is nice to see that oil majors are back," said Jim Anderson, an editorial manager at IHS Energy, one of the world's largest energy information providers, "after everybody had left town to find natural gas in the Gulf of Mexico."

"It is natural gas in the Rockies, and there is plenty here, that brought them back," Anderson said.

IHS Energy bought Cambridge Energy Research Associates in 2004 - the consulting firm founded by Pulitzer Prize-winning author Daniel Yergin. The company is owned by Arapahoe County-based IHS Inc.

Anderson said companies such as Exxon Mobil, Shell, Chevron and BP are spending hundreds of millions - in some cases billions - of dollars to explore new oil and gas fields and develop more efficient ways to extract the resource.

Exxon Mobil, which had quit Colorado after oil shale prices collapsed in the early 1980s, has chalked up plans to drill 75 to 100 new wells in Rio Blanco County this year.

The company says it is sitting on 35 trillion cubic feet of natural gas in the Piceance Basin, enough to fuel the nation for nearly two years.

Exxon doesn't disclose its planned investment in the Rockies. But Rio Blanco County officials say the company plans to build a gas processing plant near Meeker that will employ 450 workers at the peak of construction.

Meanwhile, Chevron is testing wells on 100,000 acres north of Debeque near Grand Junction to see if it wants to develop that field.

Chevron has been in Colorado for more than 75 years and owns the Rangely oil field, which continues to produce oil.

BP is set to pour nearly $3 billion into Wyoming and millions more into Colorado. BP is Colorado's largest gas producer.

Shell has plans to drill more wells in Wyoming's Pinedale area, where it owns about 20,000 acres.

"We don't make investment decisions based on temporary price aberrations," said Jack Rigg, BP's regional manager of government affairs. "We look at if we have a resource and access to the resource.

"Obviously cost is a factor, and also the ability to transport what you produce is very important."

The unprecedented boom in drilling has spawned critics, who are concerned about damage to the environment and what they see as the industry's modest contribution to the local economies.

In fiscal year 2005, the state land board received $41.7 million, up from $25.8 million in fiscal 2003, from mineral royalties and rents on state-owned land.

Counties collected $227 million in property taxes from mineral properties in 2005, compared with $134 million in 2004.

Pete Morton, an economist with the Wilderness Society, said most Western economies, including Colorado's, are not "resource dependent."

Instead, the economies have diversified based on recreation, tourism and the service sector.

"Hunting, fishing, recreation and retirement income are more important to our economy than the oil and gas industry, which accounts for less than 1 percent of the total personal income in Colorado," Morton said.

Tapping the Rockies

Big oil is stepping up investment in oil and gas in the Rocky Mountain region.

•Exxon Mobil: Drilling 75 to 100 wells this year in Rio Blanco County. Also building a natural gas processing plant near Meeker that will employ 450 workers at the peak of construction.

•BP: Investing nearly $3 billion in Wyoming to produce more natural gas and millions more to drill wells in southwestern Colorado's San Juan basin as well as the Wattenberg field adjacent to Denver International Airport.

•Chevron: Testing wells to decide whether to develop 100,000 acres for oil and gas drilling north of Debeque nearGrand Junction. Investing in existing oil and gas fields in western Colorado near Rangely, in La Plata County, in Utah and in Wyoming.

•Shell: Drilling wells in Wyoming's Pinedale area, where it owns about 100 wells spread over 20,000 acres. Also partnering with other companies to produce natural gas in North Dakota's Williston Basin.

chakrabartyg@RockyMountainNews.com or 303-892-2976

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