NEWS RELEASE: WSGS Energy Reports Discuss External Impacts to Production

Wyoming State Geological Survey
Feb. 13, 2015

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Chamois Andersen
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WSGS Energy Reports Discuss External Impacts to Production

Wyoming is well known as one of the nation’s top energy producing states, but this notoriety can come at a price with volatility in energy markets, which can affect production and state revenues.

“Wyoming’s energy industry and the amount of oil and gas, coal, and uranium produced each year are impacted by national and world energy markets,” says Tom Drean, director of the Wyoming State Geological Survey (WSGS). “This is especially true going into this year for oil and gas. Comparatively, however, I believe the state is in a good position for the long term as a result of new and improved drilling technologies and emerging resource plays,” he says.

Energy pricing, supply and demand, regulations, and congested railroads, as described in the reports, have affected how much oil and gas, coal, and uranium are produced in the state. The four-page, color reports include production graphics and statewide maps on resource activities and locations. Copies are available to download on the agency’s website. These reports are also provided each year to the Wyoming Legislature.

The oil and gas industry has dealt with pricing swings in the past, and the recent drop in the price of crude oil, by more than 50 percent since a high of $107 last June, “will no doubt have an impact on the industry,” Drean says. “The last time oil traded at comparable prices was in 2009.”

While final numbers are still being calculated, 2014 estimates show Wyoming produced more than 75 million barrels of oil, with nearly half originating from the Powder River Basin. In 2013, the state produced 63 million barrels of oil. “The 2013 production upswing continued through October 2014 when oil prices began to fall,” Drean says. “The full impact has yet to play out,” he says, “as there is often a lag.”

Initial numbers for natural gas show Wyoming produced more than 1.9 trillion cubic feet in 2014, a slight decrease from the 2 trillion cubic feet produced in 2013. “Low prices, natural depletions of the resource, and a significant drop in coalbed natural gas operations in the Powder River Basin have contributed to the state’s production decline,” Drean says. “One area where production was higher was in the Denver Basin, where natural gas associated with horizontal oil wells increased.”

For Wyoming coal, “it is also a mixed bag,” says Drean. "The nation’s demand for affordable energy has propped up the state’s coal industry, which in recent years has been somewhat impacted by low natural gas prices," he says. Many power plants have switched from coal to natural gas because of its lower cost as a fuel for electrical generation.

“Coal remains an important resource for powering the nation, as we have noted with the production numbers,” Drean says. Preliminary numbers by the Mining Safety and Health Administration show Wyoming produced 396 million tons of coal in 2014. This was a 2.3 percent increase over the 388 million tons produced in 2013.

Wyoming’s coal industry, however, is bracing for the potential impacts of Environmental Protection Agency (EPA) carbon regulations, which are intended to decrease carbon dioxide emissions from power plants. Other EPA regulations include new Mercury and Air Toxics Standards, which will also likely impact the state’s coal industry and its coal-fired power plants.

Wyoming coal is considered “clean coal” because of its low sulfur and mercury concentrations, unlike the type of coal mined in the eastern portion of the United States. Wyoming mines often transport their coal directly to power plants in other states that can use it without any cleaning and processing. This makes Wyoming coal a more desirable commodity on the market. “The quality of the state’s coal will continue to have value to markets across the county,” Drean says. Wyoming currently transports coal by railway to 32 states.

Wyoming has not only maintained its No. 1 national ranking in coal production, the state also continues to be at the top in uranium production, along with the largest economic reserves in the country. “These uranium reserves are strongly dependent on price,” says Drean. “Uranium supply shortages, or even the perception of a shortage, can drive prices higher which in turn can lead to more exploration and increased production,” he says.

Over the last few years, however, uranium spot prices have been in decline since reaching record highs in 2007. In 2014, the average spot price for uranium was $33.41. Estimates for 2014 indicate Wyoming produced approximately 3.3 million pounds of yellowcake. “If worldwide demand continues, prices should increase along with Wyoming’s supply of yellowcake,” Drean says. Wyoming currently has 24 uranium mining operations in the planning or permitting phase.

For addition information, including updated production numbers on these energy resources, log on to www.wsgs.wyo.gov/research/energy.

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