EARTHWORKS

Drilling industry executive admits that oversupply, not regulations, responsible for decreased drilling

Alan Septoff's avatar
By Alan Septoff

November 5, 2009

The drilling industry claims, over and over, that rules that better protect landowners, public health and the environment reduce the industry's willingness to drill.

It's a canard, of course.

Like many extraction industries, gas drilling follows a boom-bust cycle. Natural gas prices rise, resulting in new investment, exploration and drilling (the boom). The increased drilling produces increased supply. The increased supply results in decreased prices, which results in decreased investment/exploration/drilling (the bust). Decreased drilling results in decreased supply -- which eventually completes the cycle by causing prices to rise and setting off the next boom.

This is no secret. The boom-bust cycle has been associated with extractive industries for as long as there has been extractive industries and market economies. What's new is that yesterday, for the first time in recent memory, an executive of a major energy drilling company has admitted it.

In what we can only hope is a trend, Don McClure, the chair of the Colorado Oil & Gas Association (COGA) has continued a string of commonsensical COGA actions by publicly blaming the recent drop in the number of drilling rigs across the United States on "low gas prices and a glut of gas in storage". That is: regulations are NOT to blame.

Mr. McClure is also an executive with Encana, the largest natural gas producer in North America. COGA is strongly opposed to the stronger Colorado landowner protections signed into law by Governor Ritter in 2007 .

Tagged with: regulation, encana, drilling, colorado, coga, boom-bust

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