tag:blogger.com,1999:blog-6901587667392344560.post2461055921166301312..comments2010-02-22T20:51:20.203-07:00Arihttp://www.blogger.com/profile/17740793237376032860noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6901587667392344560.post-65577805584727462782010-02-22T20:51:20.203-07:002010-02-22T20:51:20.203-07:00No, Mike is wrong: the rig count decrease is due to a number of factors, and not just the price of natural gas. I haven't kept very much track of the actual count of working rigs - but keep in mind that the Baker Hughes count is considered to be the professional and accurate count of work being done in the Patch. What I am aware of, because of the impact it has on the economy in the Four Corners, and on many of my clients, and many of my friends and neighbors, is that the number of rigs drilling new wells has dropped significantly due to a number of reasons, some of which have been growing steadily worse over the past several years. Not only state regulations but local regulations have driven up the cost, caused delays, and reduced the availability of workers, access, and rigs. No one of these factors can be said or shown to have accounted for the decline: it is the total cumulative effect. I have personally seen wells, already permitted by state (and often, federal) agencies delayed for months and months due to the vindictive actions of county officials (both elected and unelected), delayed more months by attempts to prevent the drilling by various special interest groups (including but not limited to environists), and delayed still further by unjustified, arbitary acts of state, federal, and local officials where new interpretations of the laws and regulations (themselves constantly changing) have required obtaining additional permits and clearances, preparation of studies, conduct of field research, and other actions in a vast network of petty bureaucracy, each taking its toll in dollars spent, manhours consumed, and further delays. In many cases, these delays have caused companies to find projects delayed while gas prices dropped, thus leading to withdrawal of investments and reallocation of their resources to out-of-state where the delays and costs are less onerous. An example is the recent BPAmoco moratorium on new wells for the next six months in LaPlata County; another is the delays caused to drilling in both Archuleta County and Montezuma County by major cost increases and delays in obtaining temporary CDOT access permits; yet another is the denial of permits for various necessary support operations (such as pipeline construction) which has meant that wells drilled cannot produce anything because gas can't be transported to market. When you add the tremendous uncertainty created by new laws concerning produced water and water rights and permitting; a clear and unmistakable anti-industry bias in both the Executive and Legislative branches, and a steady drumbeat condemning the oil and gas industry as evil, is it any wonder that the owners of drilling rigs seek other and more hospitable climes?Nathannoreply@blogger.comtag:blogger.com,1999:blog-6901587667392344560.post-1803441434893076772010-02-11T11:27:09.149-07:002010-02-11T11:27:09.149-07:00As an investor I'm sure that the rig count decrease is mostly because of the price of natural gas. It has stayed in the low $3 area even during an unusually cold winter. No one wants to operate a rig when you are barely above break even (~2 - 2.75 depending on the area). Inept moves by the state government aren't helping but these will only become a factor when it is worth drilling again.Mike Spaldinghttp://www.blogger.com/profile/10344895888319632284noreply@blogger.com