‘Uncertainty’ is a factor preventing gas producers from stepping up drilling despite high prices, industry group says

By Center Square

(The Center Square) – Natural gas drilling is very profitable these days as market prices rise, but US producers aren’t ramping up production.

Instead, they’re using their extra profits to pay down debt, buy back stock and boost dividends, the Wall Street Journal recently reported. reported.

Ryan McConnaughey, vice president of the Petroleum Association of Wyoming, told The Center Square that one of the reasons drilling hasn’t increased is because of “uncertainty” about production on federal lands. .

“There are a lot of things that come into play when it comes to accelerating drilling, especially in Wyoming,” he said. “One of the things, obviously, is the uncertainty of what’s happening on federal lands and how companies can ensure that when they invest in federal production, they can continue to do so.”

The United States Bureau of Land Management (BLM) has issued notices for resumption of lease sales last month after the Biden administration’s moratorium on lease sales was lifted struck by a federal judge.

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But the acreage available for lease is 80% less than the federal government initially assessed for potential lease, and the agency has also increased the royalties oil and gas developers will have to pay.

The industry, like many other industries across the country, is also experiencing labor shortages and supply chain issues, especially for steel pipe, according to McConnaughey.

“I think there are a myriad of factors that are hindering this full recovery in the oil and gas industry,” he said, adding that it takes time to ramp up drilling.

“It’s definitely not something you can turn on the tap and it will come,” McConnaughey said. “Even with leases in hand, it can still take more than a decade to produce oil and gas. I think that’s something we tried to educate people about. When leasing is federally delayed, it just means we have much larger long-term supply gaps.

Even though oil and gas prices are up right now, companies are making decisions based on long-term prices, McConnaughey said.

“That’s the best way to determine if it’s a good investment,” he said. “Obviously there will be ups and downs in the market that they cannot control. But making sure there’s a positive mid to long term outlook is really best practice.

Some industry members have said the federal government’s long-term goal is to wipe out the oil and gas industry, McConnaughey noted.

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“There is this concern after hearing the rhetoric from people in the Biden administration,” he said. “But there will always be a need (for) petroleum products in the future.”

The choice is whether production takes place in the United States or other countries, McConnaughey said.

“We have to take the Biden administration at its word when it says it wants to shut down industry on federal lands,” he said. “Obviously they can’t do that very easily on public and private land.”

In Wyoming, 90% of the natural gas and 50% of the oil produced comes from federal lands, according to McConnaughey.

“Any sort of shutdown on federal lands would be a disaster here in Wyoming,” he said. “Our argument has always been that we should produce it domestically where it helps our people and where we can make sure it’s done in a safe and sustainable way.”

The Center Square is a 501(c)(3) nonprofit organization focused on state and local government and economic reporting.

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