{"id":41839,"date":"2022-03-05T03:49:28","date_gmt":"2022-03-05T10:49:28","guid":{"rendered":"https:\/\/dh.durangoherald.com\/tj\/kinder-morgan-co%e2%82%82-production-drops-and-cuts-into-montezuma-county-revenue\/"},"modified":"2026-03-31T03:03:51","modified_gmt":"2026-03-31T09:03:51","slug":"kinder-morgan-co%e2%82%82-production-drops-and-cuts-into-montezuma-county-revenue","status":"publish","type":"post","link":"https:\/\/dh.durangoherald.com\/tj\/kinder-morgan-co%e2%82%82-production-drops-and-cuts-into-montezuma-county-revenue\/","title":{"rendered":"Kinder Morgan CO\u2082 production drops and cuts into Montezuma County revenue"},"content":{"rendered":"

\"Kinder
Kinder Morgan expanded operations in 2015 in Montezuma County to keep up with demand. Jerry McBride\/Durango Herald<\/span>du1-i-syn<\/span><\/figcaption><\/figure>\n<\/p>\n

Kinder Morgan Inc. CO\u2082 production in Montezuma County dropped 36% in 2021 as oil prices fell and the pandemic tightened demand, the company said.<\/p>\n

As a result, the 2021 assessed property value of the gas measured at the wellhead fell 40% to $181 million, down from $305 million in 2020, according to the county Assessor\u2019s Office.<\/p>\n

\u201cThere was just not enough demand for CO\u2082 because of the downturn in oil production,\u201d which is tied to the CO\u2082 market, said Assessor Leslie Bugg.<\/p>\n

The bust countered a boom in 2019, when Kinder Morgan CO\u2082 was valued at $301 million, up from $262 million in 2018.<\/p>\n

Kinder Morgan\u2019s CO\u2082 production relies on the oil and gas market.<\/p>\n

The company pipes CO\u2082 to Permian Basin oil fields it owns in West Texas and to third parties for enhanced oil recovery projects. The CO\u2082 is pumped into depleted oil wells to pressurize them and recover crude oil.<\/p>\n

Kinder Morgan CO\u2082 and Energy Transition Venture President Jesse Arenivas said pandemic shutdowns caused a drop in demand for oil, which consequently slowed CO\u2082 operations in Montezuma County.<\/p>\n

\u201cThe global pandemic led to lower commodity prices and resulted in less demand for CO\u2082,\u201d Arenivas stated in an email to The Journal<\/em>. He adding that 2022 has shown recovery.<\/p>\n

\u201cYear-to-date CO\u2082 daily production is 14% higher than the full year 2021 daily average,\u201d he said.<\/p>\n

Budget shortfall covered by American Recovery Act<\/div>\n

The drop in assessed value from 2020 to 2021 was the largest in recent memory, said Montezuma County Administrator Shak Powers, and it created a $2 million shortfall for the county budget, which relies heavily on Kinder Morgan property taxes for government revenue.<\/p>\n

In 2021, 46% of total county revenues came from the oil and gas sector, which is dominated by production of CO\u2082 gas pulled from wells in the McElmo Dome and Doe Canyon fields. In 2020, 56% of county revenues came from oil and gas, mostly CO\u2082.<\/p>\n

\"A
A Kinder Morgan drill rig near Pleasant View goes up amid farmland. (Jim Mimiaga\/The Journal)<\/span>du1-i-syn<\/span><\/figcaption><\/figure>\n<\/p>

In an Feb. 9 email to county officials, Kinder Morgan reported that no new wells were planned for 2022 in Montezuma County, and one well on Canyons of the Ancients National Monument would be plugged and abandoned.<\/p>\n

Demand for CO\u2082 has risen along with increased oil prices, according to the email; however, production is 20% to 25% below prepandemic levels.<\/p>\n

Powers said the $2 million budget shortfall from the drop in Kinder Morgan production was covered by pandemic recovery funds from the federal American Rescue Plan and the state.<\/p>\n

No cuts in county services were required this year, thanks to the federal recovery funds, he said, but longterm, the county is thinking about ways to replace Kinder Morgan tax revenues.<\/p>\n

\u201cAt some point, it will be gone. We need to think about down the road, diversify the economy and revenue sources now so we can keep the same level of services into the future,\u201d he said. The county is hiring an economic development director for that purpose.<\/p>\n

\"A
A CO\u2082 pipeline connects to Kinder Morgan compression facility about 25 miles north of Cortez. (Journal file photo)<\/span>du1-i-syn<\/span><\/figcaption><\/figure>\n<\/p>

The county does not have a sales tax, and is considering asking the voters to approve a small one to stabilize the budget against downturns.<\/p>\n

With a sales tax, tourists \u201cwho use our roads and emergency services\u201d would help cover increasing costs, Powers said.<\/p>\n

The oil and gas industry\u2019s cycle of boom and bust cycle is an ongoing challenge for communities that rely on it. The growing trend toward alternative energy also is hurting the industry, analysts say.<\/p>\n

Low demand for oil during the pandemic and pressure to transition to renewable energy sources impacted investment in the fossil fuel market in 2020 and 2021.<\/p>\n

\u201cThe lack of investment resulted in lower demand for Southwest Colorado produced CO\u2082,\u201d Arenivas said. \u201cAs commodity prices improve, we are experiencing increased demand for CO\u2082.\u201d<\/p>\n

The Russian invasion of Ukraine also will affect the oil market, Arenivas said.<\/p>\n

\u201cIn the short run, supply disruptions associated with the Ukrainian conflict will impact commodity prices, resulting in higher activity and increased demand for both products,\u201d he said.<\/p>\n

Using enhanced oil recovery technology, Kinder Morgan says it can produce more than 50,000 barrels of oil per day from its Texas oil fields.<\/p>\n

According to its website, the 203,000-acre McElmo Dome in Montezuma County is one of the largest known pure CO\u2082 source fields in the world, with over about 5 trillion cubic feet of recoverable CO\u2082 to be produced.<\/p>\n

\u201cKinder Morgan CO\u2082 is capable of producing and transporting approximately 1.5 billion cubic feet per day of CO\u2082, making us the largest transporter of CO\u2082 in North America,\u201d the website states.<\/p>\n

The McElmo Dome has been in production since 1983.<\/p>\n

Point-counter point<\/div>\n

Kathleen Sgamma, president of Western Energy Alliance, believes oil and gas production has taken a hit in the Four Corners because producers have less access to capital and leases.<\/p>\n

She blames \u201cshareholder activism and the Biden administration for pressuring financial divestment from fossil fuels.\u201d<\/p>\n

Lenders see it as a political risk to invest if the government does not want fossil fuels, she said.<\/p>\n

Sgamma said the Biden strategy to limit leases and capital for oil and gas will push it over overseas and make the U.S. less energy independent.<\/p>\n

\u201cThere is no alternative energy equal to what oil and gas can do. The debanking and decapitalization of the industry is a reaction to climate change, but all that will happen is production will shift to Russia and OPEC and create emissions anyway with no affect on climate change,\u201d she said.<\/p>\n

Sgamma added that by importing oil, the U.S. is spending energy dollars to \u201cfund Russian aggression and tanks.\u201d<\/p>\n

Michael Eisenfeld, Energy and Climate Program Manager for San Juan Citizen\u2019s Alliance, counters that renewable energy can effectively replace fossil fuels, and create energy independence with the advantage of less pollution.<\/p>\n

\u201cOil and gas has a lot of explaining to do on the pollution problem, and more and more it seems they try to play the victim,\u201d he said. \u201cRenewable energy is becoming a global phenomenon and plays a critical role in redefining the energy economy.\u201d<\/p>\n

For example, he said this year the coal-fired San Juan Generating Station, which contributes to a brown haze of pollution over the Four Corners, will shut down and is set to be replaced with solar power tied to the exiting energy distribution infrastructure.<\/p>\n

The proposed Four Corner Solar Center is a 1,400 megawatt solar and battery storage facility with locations near the San Juan Generating station, at Shiprock, and on disturbed coal mine land.<\/p>\n

\u201cWe are seeing big investment in renewable energy between here and Albuquerque,\u201d Eisenfeld said. \u201cThat it will cause rolling blackout is hysteria brought on by the fossil fuel industry.\u201d<\/p>\n

The solar power that will replace the San Juan Generating station will fill up brownfields, generate clean energy, increase property taxes and reduce pollution, he said. The deal also provides funding for local schools.<\/p>\n

Eisenfeld sees energy sources as an investment portfolio.<\/p>\n

\u201cI am a realist. Any financial adviser will tell you to have a diverse portfolio, and renewable energy should be part of that,\u201d he said.<\/p>\n

Meanwhile, the fossil fuel industry will continue.<\/p>\n

\u201cThere are 40,000 oil and gas wells in the Four Corners area, and stockpiled permits, so I\u2019m not sure lack of access is an issue,\u201d he said.<\/p>\n

jmimiaga@the-journal.com<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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