Natural Gas producers are concerned about the future

Sep 20, 2013

Stephanie Joyce
Stephanie Joyce

More than 500 industry people gathered in Jackson this week for the 17th Annual Wyoming Oil and Gas Fair. Wyoming Public Radio’s energy and natural resources reporter, Stephanie Joyce was there, and she joins us now to talk about the event.

BOB BECK: So, what are the biggest issues on the mind of Wyoming’s oil and gas industry right now?

STEPHANIE JOYCE: Well, taking a look at the very big picture, I think one of the takeaways from this event is that the oil and gas industry feels it’s under attack – the event kicked off on Thursday with a keynote address by former vice president Dick Cheney, and he didn’t mince words. He said there’s a “war on fossil fuels” – and while he was referring specifically to the Obama administration in that case, the rest of his speech made it clear that he thinks the opposition is more pervasive. And Cheney wasn’t the only one at the conference to employ the war analogy. Governor Mead spoke right after the vice president, and he actually spent most of his time talking about coal – or more specifically, the war on coal. He did acknowledge that it was a little strange to be talking about coal at an oil and gas conference, but his point was that the industry needs to be paying attention, because – his words – they’ll be next.

So, there’s a definite sense among folks here that the oil and gas industry has a lot battles ahead, and that it needs to get ready.

BECK:  And what kind of strategies are they proposing to do that?

JOYCE: Well, the specific strategies are all over the map, but it seems like underpinning them all is a call for better communication – particularly about issues that have been a thorn in the side of the industry, like fracking and water use. There were at least three presentations yesterday dedicated specifically to reshaping the stories around those issues. One in particular that I found interesting was by John Harpole, with the Colorado-based natural gas brokerage Mercator Energy. His firm recently wrote a study about the economic benefits of fracking for people in lower incomes brackets – and it got picked up by the Wall Street Journal. So, he presented that as a case-study in changing the message about fracking, and then tried to coach the attendees through the process of building a positive message. He’s how he summed up his presentation:

JOHN HARPOLE: And I share this you guys not because it’s about me, but because one little effort can go viral, and we can open up the discussion about hydraulic fracturing beyond where we’ve had it before.

JOYCE:  And that desire to reshape the public message was echoed by several other presenters -- Ken Knox with Noble Energy talked about the water issues surrounding fracking and how to reframe some of those; Stephanie White with HDR Engineering talked about how companies can start shaping public opinion about their projects during the review process – and about they need to be doing a better job anticipating concerns, and developing strategies for addressing them.

And Bob, I can imagine you thinking that this is all pretty basic, kind of no-brainer, but judging by the audience reactions, this is something of a new conversation in the industry.

BECK: What were some of the other big issues that came up at the meeting?

JOYCE: Well, the other big topic at the meeting can be broadly summed up as the future economic prospects for the state’s oil and gas. Currently, Wyoming ranks third in natural gas production in the U.S. – and right now, most of that ends up being shipped around the country to states with energy deficits, like California and New York. But fracking and other unconventional recovery techniques are unlocking natural gas resources much closer to some of those markets, so demand for natural gas from Wyoming – and other Rocky Mtn states -- is plummeting. That’s been reflected in the price of natural gas over the last couple of years -- and it’s not a situation that anyone expects to get better anytime soon.

So, everyone I’ve heard from here at the conference is looking to natural gas exports as the way forward. As Porter Bennett with the consulting firm Ponderosa Advisors put it: there’s simply no way for us to consume domestically the amount of natural gas that we’re projected to be producing by 2020. And this is a little wonky, but here’s how he explains why that is:

PORTER BENNETT:  It’s been driven by production in liquids or oil-based regions. Why is that important? Because the price of gas is largely irrelevant to the decision to drill in those regions. It’s the price of oil that’s determining that. So, as long as the areas that are oily and liquids prone produce as much gas as they are – the gas volumes are going to stay up, even though the rig count in dry gas areas declines.

JOYCE:  So, he’s saying that so long as the oil is valuable, drilling is going to happen in natural gas-rich areas regardless of the price of the gas. But of course, the industry – and the state – don’t just want that gas to go to waste. So they’re going to be looking for markets overseas, primarily in Asia. We’ve been hearing a lot about coal export terminals in the Northwest, but I think we’ll hear a lot more discussion of natural gas export terminals in the near future.

BECK: And what about the future of oil in Wyoming – was that discussed?

JOYCE: That was definitely discussed – amid all the talk about the somewhat dismal prospects for natural gas, quite a few people were saying the state’s oil future is bright. Oil production in Wyoming had been declining since the 80s, but last year there was a bit of a bump, and in a presentation, Nick Scoville, Anadarko’s Powder River Basin manager, said his company sees a lot potential for growth in oil. He said they’ve currently got 30 rigs active in the Basin, and that the oil side of their business makes up almost half of their revenue.

So, this is definitely a time of transition for the industry. As we’ve all heard, fracking really changed the game – but that’s not the only change ahead. If the industry analysts who spoke at the meeting are right, fossil fuels aren’t going away any time soon – and in fact, we might be about to see a lot more development of them, both here in Wyoming, and nationwide.

BOB: WPR’s Energy &Natural Resources reporter Stephanie Joyce was in Jackson this week at the Wyoming Oil and Gas Fair.