New pipeline bodes well for gas industry; Penry pounds drilling regs

The Denver metro area had T-REX, a massive, $1.67 billion freeway and mass transit expansion that sort of eased traffic congestion. Now the natural gas fields of Colorado have REX, or Rockies Express Pipeline, which for a mere $6.7 billion should greatly free up a decade-long capacity logjam that has plagued the local oil and gas industry.

REX pipeline

According to the Grand Junction Daily Sentinel, REX, which now runs from Colorado’s Piceance Basin to western Ohio and kicked into full service this summer, removed what has been a “major obstacle” holding back natural gas production on the Western Slope.

Other parts of the country have also increased pipeline capacity, and major new shale plays have opened up new competition, but for the most part, pipeline capacity has held Colorado back for years, according to industry experts. Now in a bust cycle, increased pipeline capacity will be key to keeping Colorado competitive – particularly given the rising popularity of gas as a cleaner-burning electricity source than coal – once the boom is back on.

Politically speaking, though, it’s been easier for Republicans to blame the recent downturn in natural gas drilling on new environmentally tougher drilling regulations approved by the Democrat-controlled State Legislature and Gov. Bill Ritter than on factors such as the global recession, lack of pipeline capacity and overproduction during the most recent boom.

Take, for example, this exchange at the end of a recent Denver Post Q&A with former GOP gubernatorial candidate Josh Penry, a state senator from Grand Junction and a big backer of the oil and gas industry.

“[DP]: Ritter’s new oil and gas regulations are under fire from Republicans. When the governor’s office sent out a news release with the headline “Gov. Ritter bids farewell to head of state mining agency,” you forwarded it to your friends with the note “Governor bids farewell to mining agency head, and to mining, too.” People got a kick out of it. Is Scott [McInnis] that funny?

“[Penry]: Scott is quick witted. He’s got a great sense of humor. I think you have to if you’re going to be in politics.”

Funny stuff. It remains to be seen whether former six-term Western Slope Congressman McInnis – now a Denver attorney whose firm regularly represents oil and gas interests – will fire off the same zingers now that he’s all but sewn up the GOP nomination to take on Ritter next year. McInnis has promised to start rolling back those pesky (er, “punitive”) drilling regs as soon as possible if elected.

Penry, meanwhile, who bailed out of the governor’s race ostensibly to help unify the party and take down Dems in other key offices, had a few more funnies of his own in the Post interview, calling the party of Cory Gardner and Ryan Frazier the “hip party” and writing off criticism from “left-wing bloggers”: “Those bloggers are also sitting in their underwear in their grandmothers’ basements. They’re making stuff up out of thin air.”

Right, kind of like blaming the natural gas downturn on the new drilling regs when few major new drilling plans have even been tested under the new regs due to the double whammy of global recession and limited pipeline capacity. Now the pipelines have caught up to the last 10 years of drilling frenzy, and it will be interesting to see what happens as the economy rebounds.

As Jim Zadvorny of EnCana Oil & Gas told the Daily Sentinel, “There will always be production in the Rockies. The resource is huge.”

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