Gas prices down, caution goes up for 9 Mile Road paving decision
With the price of natural gas taking a plunge of more than 50 percent over the past few years, the pace of new production has slowed and royalties from existing producers is bound to decline.
That situation, along with uncertainty about coal, has the people who allocate the county's share of federal royalities moving with caution on investment decisions.
A case in point is the handling of how to surface the Nine Mile Canyon Road. The Recreation/Transportation Special Service District knows it could save millions of dollars in long-term maintenance expense by paving with asphalt. But it would also have to commit millions of extra dollars up front by choosing asphalt over chip seal.
"If gas drops off, if coal drops off, we'd be putting this board and the county in jeopardy," commented board member Mike Milovich. "I'd love to have it paved - don't get me wrong - but I don't want to commit $14- or $15 million extra."
Even with the interest payments on an up-front loan factored into the equation, the long-term expense of asphalt paving comes out to be less than that of chip seal surfacing, according to an analysis by Jones & DeMille Engineering.
The reason is that chip seal gets torn up quickly under heavy truck traffic, especially when the heavy drilling rigs are using chains to get through in winter.
The county would have to be patching regularly. However, Bill Barrett Corp. expects to be using the road for its drilling atop the Tavaputs Plateau for about seven years.
Traffic should taper off after that.
There is some time pressure on the RTSSD board. According to Brian Barton of Jones & DeMille, construction contractor W.W. Clyde needs to know by early March which option the county wants to pursue.
The choices range from doing nothing more than regular treatments with lignin sulfonate to suppress dust to chip seal to asphalt.
There's also an in-between solution, mentioned by county commissioner Jae Potter, who attended the board meeting. Potter said it might be possible to start with chip seal and monitor the wear-and-tear for a year.
Then it might be possible to pave those areas that are showing the most deterioration.
As for the price of natural gas, the U.S. Energy Information Office reports that there has been a slight rebound in wellhead prices recently. Still, the price is still in the range of $2.50 per million BTU. Two years ago, it was about $5.
The combination of a warm winter and increased production led to a big unsold inventory of natural gas.