Gas production paused in some area wells due to price dip | Western Colorado

Representatives of TEP Rocky Mountain and Laramie Energy said at the May 7 Garfield County Energy Advisory Board meeting that they have shut in some of their wells for price reasons.

“Just for the record the price of natural gas in the Piceance is at historic lows right now. It’s sub-dollar, it’s like 84 cents right now, so as low as Laramie has seen it in our company history,” Laramie official Dwayne Knudson said during the meeting.

Natural gas is priced either per million British thermal units (Btus) or per thousand cubic feet, with the prices typically close to the same based on either measurement. According to the federal Energy Information Administration, the price at a key distribution location, the Henry Hub in Louisiana, was $2.75 per million Btus as of May 6.

“There’s just no demand for western Colorado gas,” John Harpole, president of Mercator Energy, a Littleton-based broker-agent for natural gas producers, explained in an interview about the price differential.

Both Harpole and Knudson pointed to the impact of a mild winter on gas prices. The warmer temperatures reduced the demand for gas for home heating.

“The winter was, we didn’t really have one, so that had a big part to play in that,” Knudson said.

Harpole added, “I think the hard thing to understand is that the closure of the Strait of Hormuz has not affected the (natural gas) price on the U.S.”

Restricted shipping traffic there due to the war between the United States and Iraq has impacted oil supplies and led to large increases in global oil prices and prices at American gasoline stations. But Bob Boswell, chairman and CEO of Laramie Energy, told the Sentinel by email that those high prices actually are a factor behind the low natural gas prices because high oil prices incentivize oil production, boosting production of associated natural gas also produced from oil wells. More gas production can depress natural gas prices.

While TEP has shut in some wells, company representative Shawn Brennan noted that it continues to produce from others in the area, with its Piceance production still totaling about 550 million cubic feet a day.

QB Energy, another local producer, couldn’t be reached for comment for this story.

Summit Midstream, a company that provides oil and gas gathering, transport and processing for producers, said in its recent quarterly earning news release that its Piceance customers currently have about 20 million cubic feet a day of natural gas production shut in due to low regional gas prices.

“Based on current forecasted prices in the region, we expect this production to resume beginning in the third quarter of 2026,” it said in its release.

Brennan said TEP continues to operate one drilling rig, which is currently in Garfield County but will be moved to Rio Blanco County. Knudson said Laramie laid down the rig it was operating in February and probably will resume drilling in the fall, likely in Garfield County.

“We’ll just hopefully weather (the low prices) out and things will pick back up in the fall,” he said.

Natural gas drilling activity in the Piceance Basin peaked in 2008 before slowing significantly due to falling gas prices. That was due to growing natural gas drilling in shale formations in other parts of the country, and growing production of natural gas associated with oil drilling in U.S. basins.

Harpole said part of the problem for western Colorado natural gas is that liquefied natural gas export facilities are too far away. One effect is that the region has seen limited local natural gas exploration and production in the local Mancos shale formation, which the U.S. Geological Survey in 2016 estimated holds 66 trillion cubic feet of undiscovered gas in the Piceance Basin. Most area gas production has been from sandstone formations rather than the Mancos shale.

Harpole said the western Colorado economy is being impacted by opposition from the governors of California, Oregon and Washington to possible liquefied natural gas export facilities in those states.

In 2021, Canada-based Pembina Pipeline Corp. gave up on its proposed Jordan Cove liquefied natural gas export project in Oregon, citing its continued inability to get state-level approvals in Oregon, where the project faced some local opposition. Western Colorado natural gas industry boosters long had hoped the project would be built and provide a possible means of transporting locally produced natural gas to Asian markets.

Boswell told the Sentinel that Laramie believes that demand for LNG exports and from data centers will improve gas prices. But he said that Colorado’s “lack of support for data site incentives and unrealistic considerations that the power will come from unreliable renewable energy make the outlook for development in Colorado low despite the significant gas resources (available) for development in the state.”