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Could over-zealous regulators cause natural-gas prices to skyrocket in Colorado? Or are there some other reasons for higher natural-gas rates in the Centennial State?
According to a couple of our state senators, we should worry about regulators who deal with the effects of all those drilling rigs, slurry pits and compressor stations that have sprouted on the Western Slope and High Plains. But if the senators truly cared about keeping gas prices low in Colorado, they would instead oppose the pipelines that export natural gas.
The issue came up last week when the state senate
considered Gov. Bill Ritter's nominees to the Colorado Oil
and Gas Conservation Commission, which regulates
natural-gas drilling. It's a complicated issue here and in
much of the West on account of the split estate,
largely a result of old homesteading laws. The pioneer
homesteader got to farm or ranch the surface, but the
underground mineral rights were kept by the federal
government, which can sell or lease those rights to energy
companies.
Surface owners generally have to accommodate those who need to drill to exercise their property rights below ground; the drillers are supposed to minimize their effects on the surface. The commission tries to make this work for both sides -- obviously a thankless task.
In opposing a nominee, State Sen. Greg Brophy of Wray
said he was concerned that if we don't aggressively
extract the natural resources this state has in such great
abundance,
then we're going to see an increase in
the amount we pay for oil and natural gas.
Sen. Jack
Taylor of Steamboat Springs added that the new nominees to
the commission could produce regulations that raised
heating bills as high as mortgages.
But natural gas prices in Colorado have been rising anyway. The reason is not regulation, but transportation.
Colorado produces much more natural gas than it consumes, and has for years. In 2002, according to the federal Energy Information Administration, Colorado produced 905,203 million cubic feet of natural gas, and consumed only 459,397 million cubic feet. In 2006, production was 1,166,504 and consumption was 449,830.
In other words, consumption has gone down while production has gone up -- so prices should be declining, not rising.
In past years, the excess of production over consumption kept natural gas prices relatively low because there was not enough pipeline capacity to export the surplus to parts of the country where natural gas prices were higher.
That has changed. In 2003, the Kern River pipeline more than doubled its capacity. It runs to California, where natural gas sells for higher prices, from southwestern Wyoming, where it connects with pipelines from Colorado gas fields.
Earlier this year, part of the new Rockies Express natural gas pipeline went into service, with the potential of transporting 1.8 billion cubic feet of natural gas every day from western Colorado to the Midwest.
From a national perspective, this is a good thing,
according to Porter Bennett, who runs Bentek, an energy
industry analyst based in Golden. Natural gas is our
cleanest fossil fuel,
and if it's more affordable and
can replace dirty coal and fuel oil elsewhere in the
country, then we have a cleaner environment.
But while the rest of the country gets lower energy
costs, we end up paying more in Colorado,
since the
expanded pipelines mean that Colorado consumers now have to
compete with consumers in California and Illinois. Or as
Xcel Energy put it last week in an application to raise
electric rates, Increased pipeline capacity out of the
region has largely eliminated the lower-than-average prices
for natural gas that benefited Colorado customers.
If Sens. Brophy and Taylor were truly concerned about affordable natural gas in Colorado, then they should oppose the export pipelines that raise our natural-gas prices, rather than complain about appointees to the Colorado Oil and Natural Gas Conservation Commission.
But they haven't addressed that issue. Who elected them to represent the interests of out-of-state natural gas consumers, rather than Colorado landowners?
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