An organization formed to develop international markets for the Rockies’ abundant natural gas is forging ahead despite low prices and setbacks in building an export terminal on the Oregon coast that would connect the region to overseas buyers.
The Western States and Tribal Nations Natural Gas Initiative just named its first board of directors. It will soon release a report looking at how much greenhouse-gas emissions could be reduced if natural gas produced in the Rockies replaced coal-fired electricity in other countries.
Andrew Browning, Western States’ president, and Duane Zavadil, a board member and formerly an executive with the Bill Barrett Corp., acknowledge that the headwinds facing the group are strong. Natural gas prices remain low. Demand for oil and gas that plunged when the pandemic hit has risen, but is not expected to reach 2019 levels until 2029, according to the U.S. Energy Information Administration.
There’s the growing opposition to drilling from those who favor renewable energy and fear the worsening impacts of climate change. Methane, the main component of natural gas, is more than 80 times more powerful in the near term than carbon dioxide is at trapping heat.
Another challenge: the embattled Jordan Cove liquified natural gas export terminal, proposed in Coos Bay, Ore., remains in limbo after federal regulators said it can’t move forward without a clean water permit from the state. The Associated Press reported the Federal Energy Regulatory Commission rejected an appeal in January from energy company Pembina Pipeline Corp., which had challenged Oregon’s denial of the permit.
But Browning, a Denver-based partner with HBW Resources, a consulting and advocacy firm, is bullish on LNG — natural gas cooled to its liquid form so it can be shipped more easily.
“I think that while the current market conditions are tough, LNG producers who get a toehold on the North American West Coast are moving forward. I think the fundamentals for future growth are sound, even in this tough economic environment,” said Browning, an appointee to the Department of Energy during the Clinton administration.
The country’s LNG exports are at record levels and the market is strong, said Bernadette Johnson, vice president of strategic analytics at Enverus in Denver.
“I think the tricky part is where you’re at. If you’re in Colorado, you’re just geographically disadvantaged,” Johnson said.
The Rockies are competing with other gas-producing parts of the country that are closer to markets, Johnson added. As for building export terminals on the West Coast, it’s a “tricky environment,” she said..
Opponents of Jordan Cove include area landowners and environmentalists. A recent story by The Oregonian detailed the difficulties that Pembina has had getting state approval of the permits it needs.
Construction of the Jordan Cove LNG export terminal in Oregon has been seen as a way to open up markets for the vast natural gas reserves in Colorado, Utah and surrounding states. That goal was the genesis of the Western States and Tribal Nations initiative. Browning said the organization took form after work by the West Slope Colorado Oil and Gas Conservation Association and a conference by the Utah governor’s energy office.
In 2018, the Colorado Energy Office and the Utah Governor’s Office of Energy Development commissioned a report on natural gas markets for Western states and tribes. It focused on the Piceance Basin in western Colorado and Utah’s Uintah Basin. Among the report’s recommendations was starting a nonprofit organization to promote the region.
The state of Colorado withdrew from the group after Gov. Jared Polis took office. The Polis administration’s energy priorities include a transition to a 100% renewable energy future, zero-emission vehicles and addressing climate change, spokeswoman Heatheryn Higgins said in an email.
Four Colorado counties are still members: Garfield, Rio Blanco, Moffat and Mesa. New Mexico and Utah state officials, the state of Baja California, Mexico, and the Wyoming Energy Authority, a trade group, signed up.
“We don’t have as much strength as a coalition without the state,” said Garfield County Tom Jankovsky.
But Jankovsky said it’s important for his county and others in northwest Colorado to participate because they have a bigger voice as members of a coalition. He wants to see Colorado gas producers get in on the demand for LNG in Asian countries and elsewhere that, according to Bloomberg, has sent prices soaring.
“The big thing is if we can get natural gas exported, we believe it will drive up the price of natural gas,” Jankovsky said.
Higher natural gas prices would help spur production in the Rockies, which hold 502 trillion cubic feet of gas, according to a 2019 report by the Potential Gas Committee, which includes industry representatives and gets input from state and federal experts.
A trillion cubic feet of natural gas is enough to heat 15 million homes for one year, according to the U.S. Energy Department.
Despite the wealth of natural gas in northwest Colorado, the San Juan Basin in southwest Colorado and northern New Mexico and throughout the Rockies, low prices coupled with transportation costs have resulted in declining development in spots without the draw of oil.
Rising oil prices have spurred more activity in the Permian Basin in West Texas and southeast New Mexico. Drilling rigs are up slightly in the Denver-Julesburg Basin along Colorado’s Front Range.
However, natural gas prices remain low, roughly $2.80 per million BTU. The price was at least three times higher during a boom on the West Slope in the early to mid-2000s.
Much of the natural gas in northwestern Colorado is under federally managed lands, which means the moratorium by President Joe Biden’s administration on new leasing on public lands would apply. Jankovsky said more than 90% of the public lands in Garfield County are leased.
Browning said the industry anticipated that Biden would look at developing energy policies “through the prism of climate change.” That’s why the coalition has contracted with the authors of a 2018 report that said replacing coal to generate electricity with LNG exports from western Canada could significantly reduce greenhouse-gas emissions in other countries.
Browning said the coalition has asked some of the authors, which included John Hopkins University and the Massachusetts Institute of Technology, to expand the study to consider effects of displacing coal-fired electricity in other countries with natural gas from the Rockies.
The coalition has proposed working with New Mexico and college officials to retrain employees of coal plants and mines to apply technology to reduce methane emissions from natural gas. Colorado has some of the country’s strongest methane regulations. The Biden administration is looking at reinstating federal methane regulations rolled back by the Trump administration.
Coalition board member Zavadil said, given the growing worry about climate change and companies and investors concentrating more on environmental and social issues, he believes “the price of admission” to the LNG markets will be strict standards for methane emissions. He said he’s confident that producers in the Rockies can deliver.
“The best way to address climate change is to allow our producers to produce under the most effective standards and protocols available, allow them to export and displace much dirtier fuels that are being used elsewhere,” Browning said.
The best way to deal with climate change is to move from fossil fuels to renewable energy sources, said Pete Kolbenschlag, a Paonia resident and consultant to community groups that have campaigned for limiting oil and gas development.
“Expanding fossil fuel infrastructure is doubling-down on the past we need to quickly leave behind,” Kolbenschlag said in an email. “While LNG will play some role in nations moving past coal, it is highly unlikely that all the projects being boosted by booster-groups will make it across the finish line, or be successful if they do.”
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