I have been sitting at my desk, staring out the window, trying to think about how I can craft a newsletter update for the NW that people would want to read. It is hard for me to believe all that has happened since the beginning of the year. I have wondered several times along the way when we might get back to some sort of normalcy. We have had schools shut down, most folks working from home, and our local economies almost brought to a halt.
To start this update, I want to point to a little bit of positivity. While working from home, I know my family and I were able to spend a lot more quality time together. We didn’t have to run to soccer or baseball or any other extracurricular activity, and the pace at which we live out our daily lives slowed down to a point we were able to find enjoyment in the little things. If you go to any retailer in the Farmington area, you will find the shelves empty when it comes to outdoor recreation items. Folks are out on the lakes, trails, and rivers. You see families out walking in the neighborhoods, and most of the entertainment has shifted to getting outdoors. I, for one, hope that this shift has long-lasting effects in the area as people are outside enjoying the natural resources we have in the four corners area and getting a little exercise at the same time.
Now to shift over to an update for the oil & gas industry in the Northwest region, where things are not as uplifting. For the San Juan Basin, we currently have zero drilling rigs working. The lack of drilling rigs operating in the basin isn’t surprising given the commodity pricing we have had this year. Not only did we see the crude oil price crash due to the OPEC and demand situation, but all commodities prices have been low. For two months in a row, the San Juan Index for natural gas has been $1.50/mcf. This price does not support any drilling activity and, in fact, doesn’t support the production operations of some of the existing wells in the basin. Many operators are shutting in wells and awaiting higher prices. The lack of activity is trickling down to the service side and resulting in layoffs across the board. One can hope that a drop in associated gas production from oil wells will have a positive impact on the gas price in the near future. The cure for low prices is low prices.
Last but certainly not least, IPANM has engaged with the state regulators on multiple fronts. The first piece to talk about is methane regulation by the NMED and NMOCD. Both agencies are moving forward with developing methane reduction strategies for the state and have indicated they would have draft rules out this fall or by the end of the year. The Methane Advisory Panel (MAP) assembled one last time to participate in the virtual town hall meeting to give the public an update on the process. The MAP virtual town hall was held on May 19th and included presentations from industry representatives and NGOs. Now shifting gears to regulations specific to the NW, we have joined forces with NMOGA to comment on the BLM RMPa for San Juan. IPANM lead the effort in assembling a workgroup and raising funds to hire Holland and Hart to draft the comments as well as an outside air quality consultant. I certainly want to thank Jim Winchester for spearheading the effort and thank everyone who contributed to the process both from the financial side and participating in the workgroup. Dave Brown, with DJR, took the lead for IPANM, and I want to thank him for his heavy lifting to ensure we provide concise and construction comments to the BLM. The last topic of interest is related to the relief of regulations on shut-in wells. IPANM maintains an open dialogue with the NMOCD and SLO as well as the governs office. The NMOCD published guidance on the relief for operators with shut-in wells, and it basically utilizes the existing Agreed Compliance Order (ACO) vehicle to allow the operator to stay in compliance with the number of shut-in accumulated during the low price environment. It wasn’t the blanket relief that a lot of operators were seeking, but it does provide a mechanism of relief for the time being.
