Western Wyoming’s once-booming gas industry approaches economic and regulatory crossroads

In western Wyoming, gas industry faces crossroads

PINEDALE, Wyo. — Drilling rigs on the horizon underscore that cattle ranching and tourism no longer drive the economy in this picturesque town at the foot of the Wind River Range.

But the future of the natural gas industry in the Pinedale, Wyo., area — scene of a decade of intense drilling into two of the nation’s richest gas fields — has become less certain because of the recession and the Obama administration’s intention to make some unspecified changes to Bush-era drilling policies.

Environmentalists have long argued that the frenetic drilling pace should be slowed in the heart of prime habitat for antelope, mule deer and sage grouse.

Industry officials, however, say they worry that tighter federal leasing rules could discourage drilling on Wyoming’s public lands in favor of less-regulated private land in the East and South when the economy picks up again.

“It’s certainly a concern,” said Bruce Hinchey, director of the Petroleum Association of Wyoming, an oil and gas lobbying group. “We’ve seen companies take their dollars and put them elsewhere because they had permits in hand and were able to drill and explore and develop.”

First, the recession sapped gas demand and prices, slowing drilling significantly compared to its peak in 2008.

Then Interior Secretary Ken Salazar announced in January that he will order changes to how public lands are leased for oil and gas development. He said leases need more scrutiny and the public should be more involved in the process.

If the changes restrict more drilling, as anticipated, Sublette County, a Connecticut-sized sagebrush expanse flanked by snowcapped mountains and veined with world-class trout streams, is likely to feel the impact.

Much of the community welcomed the drilling frenzy and economic boom that occurred during the Bush era.

“It’s a helluva good thing,” Sublette County Commissioner John Linn said. “My kids have jobs here.”

But not everyone thinks the rapid development has been done wisely.

“Great things have come from the gas development, but there’s also concerns,” said Pinedale Mayor Stephen Smith.

One concern is how the 2005 Energy Policy Act waived environmental review for new oil and gas drilling under a handful of exceptions called categorical exclusions. In places where drilling has occurred within the past five years, for example, the U.S. Bureau of Land Management doesn’t have to do additional environmental review for more wells in the same area.

The BLM, which oversees oil and gas leasing over much of the interior West, has applied categorical exclusions for nearly every new gas well in the Pinedale area over the past few years. Since 2007, the agency used categorical exclusions 1,329 times in approving 1,521 drilling permits for the Jonah Field and Pinedale Anticline, a rate of more than 87 percent.

The BLM’s Pinedale Field Office has approved more categorical exclusions than any other BLM field office in the U.S., according to a 2009 Government Accountability Office report, which criticized the bureau for frequently applying the law incorrectly.

The number of gas wells in the Pinedale Anticline, the nation’s third richest gas field in proven reserves, and the Jonah Field, the eighth richest, has increased from about 200 to more than 2,600 in the past decade, according to the BLM.

Since 2000, the population of Sublette County has grown more than 40 percent to around 8,500 people, and the county has been flush with tax revenue, enabling impressive projects such as the 2008 opening of a $19 million public aquatic center.

County Commissioner Linn said the growth fueled by the gas industry helped his son and daughter get good jobs near home, which in years past would have been a challenge.

Mayor Smith, who describes himself as “neither for or against industry,” told a U.S. House committee last year that use of categorical exclusions has been excessive.

“The previous administration sort of waved a wand on categorical exclusions and said just move forward,” he said.

Over time, allowing new drilling without fresh review results in more cumulative environmental harm than originally anticipated, said Linda Baker, an environmentalist in Pinedale.

“The people of Sublette County, Wyoming, are collateral damage and the largest mule deer, pronghorn and sage grouse herds and flocks in the state and nation are declining as a result,” Baker said.

Air pollution from drilling rigs and other equipment, meanwhile, has created a peculiar problem for such a remote and sparsely populated area: smog, which for five years now has smudged what used to be a crystal-clear view. The murk also is unusual because it happens not in the heat of summer but during the winter, when temperature inversions and sunlight reflected from snow on the ground turn air pollution into ozone, a precursor to smog.

But the industry argues that environmentalists overstate the harm. They point out that many wells approved under categorical exclusions, especially on the Pinedale Anticline, are being added to existing well pads and therefore cause minimal new disturbance.

New environmental review under those circumstances doesn’t really establish anything new and only slows down approval of drilling, said Darci Sinclair, Denver-based spokeswoman for Shell Oil Co., one of the Anticline’s major operators.

“If they had to go back and do the original environmental analysis for every well on the same pad, it would be redundant,” she said.

As for the smog, industry officials say they’ve installed pollution-control equipment, switched from drilling rigs that run on diesel to ones powered by natural gas and taken other steps to reduce emissions.

Just how Salazar intends to change leasing practices hasn’t been announced, with officials saying they’re still hashing out the details.

Gas prices are down about 40 percent from their 2008 peak because of huge reserves across the country and soft demand during the recession. The number of active drilling rigs in the Pinedale area is down to about 24 from 60 in 2008.