It’s good to know your neighbors, at least that’s the approach La Plata County is taking with oil and gas companies operating in Southwest Colorado.
La Plata County commissioners on Tuesday approved sending a letter to the top oil and gas operators in the region, asking for annual meetings to better open the line of dialogue between the companies and county officials.
Commissioner Gwen Lachelt said that, historically, the county has had strong relations with the oil and gas companies. But in recent years, the industry has changed significantly, with some of the biggest operators selling their assets to newer and sometimes smaller companies.
Indeed, there have been a number of moving parts with oil and gas in the county recently.
In 2016, ConocoPhillips sold its stake in the region, which consisted of about 10,000 wells, contributing nearly 75 percent of Colorado’s entire natural gas production, for $3 billion to Hilcorp San Juan LP.
Two years later, Williams Partners LP sold its stake in the San Juan Basin, which spans La Plata County and northern New Mexico, to Harvest Midstream for $1.123 billion.
And perhaps the biggest shift came in August 2018 when BP American Production Co. announced it intends to pull out of the San Juan Basin, marking the end of an era of one of the longest-standing economic mainstays in La Plata County.
The shifts all highlight the larger downturn of natural gas production in the San Juan Basin, which at one time was the leading producer of natural gas in the country.
But outside forces, both globally and within the U.S., have caused production to wane since the mid-2000s.
Richard Butler, a member of the volunteer La Plata County Long-term Finance Committee, which consists of representatives in the oil and gas industry, said earlier this year one of the main reasons for the downturn in the region is other production areas in Texas and North Dakota are able to extract, at a cheaper cost, both oil and natural gas at staggering rates.
As a result, natural gas supplies are up, and the price for it has fallen dramatically, Butler said.
“We’re going to continue to see natural gas production exceed demand ... by 2 to 3% a year,” he said. “That’s one reason why we don’t have as (much production) as we did 10 years ago.”
In La Plata County, natural gas production has fallen about 30% from 2010 to 2018. The newer companies that have swooped in to buy assets in the San Juan Basin, however, believe there is still potential for profit.
“When we make a decision to expand, we spend capital to increase production, improve infrastructure and extend the economic life of the asset,” Greg Lalicker, president and chief operating officer of Hilcorp, said at the time of the sale.
Commissioner Julie Westendorff said it is important to keep open the line of communication with the companies, especially when emergency situations occur.
“I don’t want to have a vacuum just because some of these assets have been sold to other companies,” she said.
Letters asking for an annual meeting with the county were sent to BP, Catamount Energy Partners, Hilcorp Energy, Enduring Resources and Logos Operating.
“We just haven’t had a lot of outreach with them,” Courtney Roseberry, La Plata County’s natural resource planner, told commissioners. “And we want to get to know the newer operators.”
Roseberry said the effort will also help the county relay new state regulations, especially Senate Bill 181, a sweeping change to regulation in the state, when the time comes. County officials said they will also meet separately with the Southern Ute Indian Tribe’s Red Willow Production Co.