Krompel's farewell message urges caution on county revenue outlook
Declining natural gas prices may come as good news to consumers as temperatures drop below zero, but for Carbon County government the sag in prices isn't a heartwarming prospect.
That was part of a farewell message from Commissioner Bill Krompel, who has retired after 24 years. During his time in office, he has seen the county's budget climb out of a $454,000 deficit to reach a $12.8 million surplus by the end of 2009.
This is due in large part to a surge in natural gas production. Not only do energy producers dominate the list of top property tax payers, but they also contribute millions to county revenue in the form of mineral lease royalties.
Now there are signs that the revenue stream may be slowing, at least for the short term.
Krompel talked to executives of a half-dozen of the largest energy companies about their plans for the coming year. What he found was that the forecast for natural gas production is not bullish for 2011.
"Conoco Phillips' Drunkard's Wash Natural Gas Field, with 450 gas wells in Carbon County and over 15 years of production, is declining in value and production," he noted. In 2008 the company paid $4.7 million in property tax, but by 2010 it paid $3.76 million, a drop of about $1 million in two years.
He added that much of the company's budget for the coming year has been allocated to petroleum production in the Dakotas and Montana because oil prices are at about $90 a barrel. Natural gas prices are low so the company has no plans for expansion in Carbon County for 2011.
Anadarko, with 258 wells in the county has 22 permits for new wells that it does not intend to drill. The former commissioner said that the company told him that gas prices have dropped from a high of $3.50 to $4.00 per 1,000 cubic feet to just $2.10. The prediction is that prices will remain low for about two more years.
Bill Barrett Corp. intends to drill 50 to 70 new wells on its West Tavaputs development. The company has managed to hedge against declining prices, Krompel explained.
Coal has not seen a plunge in prices comparable to gas. However, there are questions of how long existing reserves can be mined.
Officials at the Westridge Mine have estimated that it has three to five years of full production at 3 million tons per year. After that, workers will probably migrate to Lila Canyon Mine in Emery County. While the jobs can be absorbed in new production, the county could lose property tax and mineral lease royalties as mining moves to Emery.
Krompel said he learned that Dugout Mine has reserves to last another 10 to 20 years.
He added that Skyline Mine intends to develop new leases north of Winter Quarters. This should extend the operating life of that mine until 2018.