DULCE, N.M. (AP) - The Jicarilla Apache Nation has signed a 20-year right of way agreement with a subsidiary of Williams Partners, providing incentives to expand natural gas operations on the reservation.
Jicarilla president Levi Pesata said Thursday the deal will provide "a stable and significant source of money" for the northern New Mexico tribe.
Provisions of the agreement include recognition that sensitive religious, cultural and pristine sites will be off-limits to development. The company also agreed to provide education and training programs and employment for tribal members.
The deal also gives the Jicarillas a future option to convert the agreement into a joint venture.
(Copyright 2009 by The Associated Press. All Rights Reserved.)
Saturday, February 14, 2009
Friday, February 13, 2009
Spanish Natural Gas Oks Gas Natural
By Robert Hetz and Jonathan Gleave
MADRID, Feb 12 (Reuters) - Spanish competition authority CNC has approved Gas Natural's (GAS.MC: Quote, Profile, Research) 16.7 billion euro ($21.6 billion) bid for utility Union Fenosa (UNF.MC: Quote, Profile, Research) with conditions proposed by the gas company, the regulator said on Thursday.
Gas Natural will not be obliged to sell Fenosa's 50 percent stake in the gas business the power company runs jointly with Italy's ENI (ENI.MI: Quote, Profile, Research), but must guarantee the autonomy of Union Fenosa Gas in supplying third parties in Spain.
Gas Natural said on Tuesday that it would not consent to the sale of the gas business, whose 6.4 billion cubic metres (BCM) of gas would put the company well on its way to achieving targets to boost its own portfolio by 9 BCM in 2012.
The CNC said that Gas Natural must sell 600,000 gas supply points, equal to 9 percent of its total in Spain, dispose of 600,000 small gas clients and sell 2,000 megawatts of installed capacity at combined cycle plants.
The CNC also said Gas Natural is committed to selling its stake in Enagas (ENAG.MC: Quote, Profile, Research) and reduce its links to Cepsa (CEP.MC: Quote, Profile, Research) by standing down from the oil group's board to avoid competition issues with Repsol (REP.MC: Quote, Profile, Research).
"The proposed divestments do not affect the reasoning behind the operation or the model of gas and electricity integration," Gas Natural said in a press note following the announcement.
Gas Natural shares closed down 1.35 percent at 16.79 euros, while Union Fenosa was up 0.63 percent at 17.66. Madrid's IBEX35 share index .IBEX closed down 1.85 percent.
Once the economy ministry has approved the bid conditions, which could happen after Friday's cabinet meeting, Gas Natural will buy the 35 percent of Fenosa still owned by ACS (ACS.MC: Quote, Profile, Research).
The acquisition will take its stake in Fenosa to 50 percent, and trigger a mandatory full bid for the power company at 18.05 euros per share, which Gas Natural has said it hopes to complete in April.
The gas company will meanwhile ask shareholders on March 10 for financial backing for the deal in the form of a 3.5 billion euro rights issue, which core shareholders oil company Repsol (REP.MC: Quote, Profile, Research) and savings bank La Caixa have fully underwritten.
Gas Natural also plans to part-finance the deal from 3 billion euros of asset sales, including any disposals mandated by the CNC.
The asset sale and rights issue should help to reduce Gas Natural's dependence on the 18.5 billion euro credit line it secured for the Fenosa purchase. Its total debt stood at 4.9 billion euros in December 2008.
(Reporting by Jonathan Gleave and Robert Hetz; additional reporting by Paul Day; editing Bernard Orr)
MADRID, Feb 12 (Reuters) - Spanish competition authority CNC has approved Gas Natural's (GAS.MC: Quote, Profile, Research) 16.7 billion euro ($21.6 billion) bid for utility Union Fenosa (UNF.MC: Quote, Profile, Research) with conditions proposed by the gas company, the regulator said on Thursday.
Gas Natural will not be obliged to sell Fenosa's 50 percent stake in the gas business the power company runs jointly with Italy's ENI (ENI.MI: Quote, Profile, Research), but must guarantee the autonomy of Union Fenosa Gas in supplying third parties in Spain.
Gas Natural said on Tuesday that it would not consent to the sale of the gas business, whose 6.4 billion cubic metres (BCM) of gas would put the company well on its way to achieving targets to boost its own portfolio by 9 BCM in 2012.
The CNC said that Gas Natural must sell 600,000 gas supply points, equal to 9 percent of its total in Spain, dispose of 600,000 small gas clients and sell 2,000 megawatts of installed capacity at combined cycle plants.
The CNC also said Gas Natural is committed to selling its stake in Enagas (ENAG.MC: Quote, Profile, Research) and reduce its links to Cepsa (CEP.MC: Quote, Profile, Research) by standing down from the oil group's board to avoid competition issues with Repsol (REP.MC: Quote, Profile, Research).
"The proposed divestments do not affect the reasoning behind the operation or the model of gas and electricity integration," Gas Natural said in a press note following the announcement.
Gas Natural shares closed down 1.35 percent at 16.79 euros, while Union Fenosa was up 0.63 percent at 17.66. Madrid's IBEX35 share index .IBEX closed down 1.85 percent.
Once the economy ministry has approved the bid conditions, which could happen after Friday's cabinet meeting, Gas Natural will buy the 35 percent of Fenosa still owned by ACS (ACS.MC: Quote, Profile, Research).
The acquisition will take its stake in Fenosa to 50 percent, and trigger a mandatory full bid for the power company at 18.05 euros per share, which Gas Natural has said it hopes to complete in April.
The gas company will meanwhile ask shareholders on March 10 for financial backing for the deal in the form of a 3.5 billion euro rights issue, which core shareholders oil company Repsol (REP.MC: Quote, Profile, Research) and savings bank La Caixa have fully underwritten.
Gas Natural also plans to part-finance the deal from 3 billion euros of asset sales, including any disposals mandated by the CNC.
The asset sale and rights issue should help to reduce Gas Natural's dependence on the 18.5 billion euro credit line it secured for the Fenosa purchase. Its total debt stood at 4.9 billion euros in December 2008.
(Reporting by Jonathan Gleave and Robert Hetz; additional reporting by Paul Day; editing Bernard Orr)
Thursday, February 12, 2009
Natural Gas Vehicle Incentives Advocated to Congress
By ELIZABETH SOUDER / The Dallas Morning News
esouder@dallasnews.com
HOUSTON -- Chesapeake Energy Corp. chief executive Aubrey McClendon wants Americans to use more of his product, natural gas.
McClendon is pushing federal lawmakers to offer incentives for natural gas vehicles and to regulate carbon dioxide emissions. Most experts say natural gas, which emits less carbon dioxide than coal, could gain market share if Congress limits greenhouse gas emissions.
“I guess my real dream here is that we begin to transition our transport network away from products that are based on oil and replace that with a fuel that’s made in America,” McClendon said after a speech to the Cambridge Energy Research Associates conference on Wednesday.
He’s pitching natural gas as plentiful, thanks to drilling in four shale fields in the U.S., including the Barnett Shale. Chesapeake is the No. 2 producer of the Barnett Shale field in North Texas.
Those shale fields have boosted production beyond demand in the past year, contributing to a sharp decline in natural gas prices. McClendon said the shale fields are so rich and relatively cheap to produce, they could begin to crowd out production in older, conventional natural gas fields.
If natural gas prices are around $5 per million British thermal units, shale production can be profitable, he said. But prices need to be range of $8 to $9 per million Btu to keep total U.S. production steady, he added.
For now, he said, the industry must cut production to boost prices to a profitable level. He said the decline in the number of working rigs in the U.S. should do it.
“I think we’ll transition into 2010 with a lot peppier gas price than we have today,” McClendon said.
He’s also positioning his product as clean.
“We want to reposition natural gas as the best-known alternative fuel in the United States,” he said, adding: “Not as an alternative to fossil fuels. It will always be hard to get beyond the molecular origin of our fuel.”
So far, McClendon said, President Barack Obama's administration is listening. But the government hasn’t passed new laws to benefit natural gas.
One problem with using more natural gas is that prices are volatile. Texas wholesale power prices follow natural gas prices, and both have put consumers on a roller coaster the past few years.
Most energy executives say price volatility is a killer for both consumers and the industry. No one can predict what their costs or profit will be when prices go up and down.
McClendon, ever the maverick, said he likes volatility. His company has the expertise to protect itself with complicated financial trades, called hedges, giving him an advantage over other natural gas producers.
“It’s a way for us to make additional money,” he said.
Further, he said, natural gas isn’t to blame for high electricity prices in Texas. The problem is the way the Legislature set up the market, he said.
The least efficient power plant operating at any given time sets the electricity price for the entire Texas spot market. That plant is almost always a natural gas plant, so his fuel gets blamed for the problem, McClendon said. New, efficient natural gas plants can generate power as cheaply as some coal plants, he said.
"To price the whole stack of electricity by the least efficient generator is a crazy way to do it," he said.
esouder@dallasnews.com
HOUSTON -- Chesapeake Energy Corp. chief executive Aubrey McClendon wants Americans to use more of his product, natural gas.
McClendon is pushing federal lawmakers to offer incentives for natural gas vehicles and to regulate carbon dioxide emissions. Most experts say natural gas, which emits less carbon dioxide than coal, could gain market share if Congress limits greenhouse gas emissions.
“I guess my real dream here is that we begin to transition our transport network away from products that are based on oil and replace that with a fuel that’s made in America,” McClendon said after a speech to the Cambridge Energy Research Associates conference on Wednesday.
He’s pitching natural gas as plentiful, thanks to drilling in four shale fields in the U.S., including the Barnett Shale. Chesapeake is the No. 2 producer of the Barnett Shale field in North Texas.
Those shale fields have boosted production beyond demand in the past year, contributing to a sharp decline in natural gas prices. McClendon said the shale fields are so rich and relatively cheap to produce, they could begin to crowd out production in older, conventional natural gas fields.
If natural gas prices are around $5 per million British thermal units, shale production can be profitable, he said. But prices need to be range of $8 to $9 per million Btu to keep total U.S. production steady, he added.
For now, he said, the industry must cut production to boost prices to a profitable level. He said the decline in the number of working rigs in the U.S. should do it.
“I think we’ll transition into 2010 with a lot peppier gas price than we have today,” McClendon said.
He’s also positioning his product as clean.
“We want to reposition natural gas as the best-known alternative fuel in the United States,” he said, adding: “Not as an alternative to fossil fuels. It will always be hard to get beyond the molecular origin of our fuel.”
So far, McClendon said, President Barack Obama's administration is listening. But the government hasn’t passed new laws to benefit natural gas.
One problem with using more natural gas is that prices are volatile. Texas wholesale power prices follow natural gas prices, and both have put consumers on a roller coaster the past few years.
Most energy executives say price volatility is a killer for both consumers and the industry. No one can predict what their costs or profit will be when prices go up and down.
McClendon, ever the maverick, said he likes volatility. His company has the expertise to protect itself with complicated financial trades, called hedges, giving him an advantage over other natural gas producers.
“It’s a way for us to make additional money,” he said.
Further, he said, natural gas isn’t to blame for high electricity prices in Texas. The problem is the way the Legislature set up the market, he said.
The least efficient power plant operating at any given time sets the electricity price for the entire Texas spot market. That plant is almost always a natural gas plant, so his fuel gets blamed for the problem, McClendon said. New, efficient natural gas plants can generate power as cheaply as some coal plants, he said.
"To price the whole stack of electricity by the least efficient generator is a crazy way to do it," he said.
Wednesday, February 11, 2009
EIA 2009 Natural Gas Forecast
Adds details on gas consumption, production, price estimates)
NEW YORK, Feb 10 (Reuters) - The U.S. Energy Information Administration on Tuesday again cut its estimate of domestic natural gas production growth in 2009 and further increased the expected decline in demand as economic activity continues to slow.
In its February Short-Term Energy Outlook, EIA forecast U.S. marketed natural gas output this year would rise 0.13 billion cubic feet per day to 58.73 bcf daily, up 0.2 percent from last year but down slightly from a 0.7 percent gain forecast in its previous monthly report.
In 2010, EIA said total U.S. marketed natural gas production was expected to decline 1.1 percent, as producers continue to slow development due to lower gas prices.
EIA said some production curtailments may be necessary later in 2009 to balance an oversupplied market.
EIA also projected domestic gas consumption this year would fall 0.85 bcf per day, or 1.3 percent, to 62.70 bcf per day, more than the 1 percent drop forecast last month.
EIA said expectations for weather-driven consumption growth in the residential and commercial sectors this year were outweighed by the implications of continued economic weakness in the industrial and electric power sectors.
Demand from the industrial sector alone was projected to fall 5.1 percent this year, up from last month's estimate of a 3 percent decline.
EIA expects consumption next year to grow slightly by 0.6 percent, primarily due to gains from the electric power sector, but that estimate too was down from the 0.7 percent gain forecast in its previous short-term outlook.
NEW YORK, Feb 10 (Reuters) - The U.S. Energy Information Administration on Tuesday again cut its estimate of domestic natural gas production growth in 2009 and further increased the expected decline in demand as economic activity continues to slow.
In its February Short-Term Energy Outlook, EIA forecast U.S. marketed natural gas output this year would rise 0.13 billion cubic feet per day to 58.73 bcf daily, up 0.2 percent from last year but down slightly from a 0.7 percent gain forecast in its previous monthly report.
In 2010, EIA said total U.S. marketed natural gas production was expected to decline 1.1 percent, as producers continue to slow development due to lower gas prices.
EIA said some production curtailments may be necessary later in 2009 to balance an oversupplied market.
EIA also projected domestic gas consumption this year would fall 0.85 bcf per day, or 1.3 percent, to 62.70 bcf per day, more than the 1 percent drop forecast last month.
EIA said expectations for weather-driven consumption growth in the residential and commercial sectors this year were outweighed by the implications of continued economic weakness in the industrial and electric power sectors.
Demand from the industrial sector alone was projected to fall 5.1 percent this year, up from last month's estimate of a 3 percent decline.
EIA expects consumption next year to grow slightly by 0.6 percent, primarily due to gains from the electric power sector, but that estimate too was down from the 0.7 percent gain forecast in its previous short-term outlook.
Tuesday, February 10, 2009
Natural Gas Car by Mercedes Benz
Washington--According to Mercedes-Benz, it is thinking of selling a vehicle fueled by natural gas in the United States.
Mercedes, part of Daimler AG, displayed a B-class model that can run on compressed natural gas last week at the Washington Auto Show.
William Craven, general manager of regulatory affairs for Daimler's Washington office, confirmed the company's interest in testing the market for natural-gas-powered vehicles in the United States.
At a green-car conference before the Washington show, Craven and other industry leaders said many options to gasoline-powered vehicles exist, and all need to be used. Most conference participants argued against government choosing a single solution to the problems of over reliance on petroleum and the automobile's role in the threat of climate change.
Johan de Nysschen, president of Audi of America, warned that government pressure on the Big 3 to focus on plug-in hybrids could be the death knell for the companies. He said the companies could end up trying to sell vehicles that don't make economic sense.
Natural gas once was considered a promising alternative fuel but has fallen out of favor in the light-duty segment.
(Source: Automotive News)
Mercedes, part of Daimler AG, displayed a B-class model that can run on compressed natural gas last week at the Washington Auto Show.
William Craven, general manager of regulatory affairs for Daimler's Washington office, confirmed the company's interest in testing the market for natural-gas-powered vehicles in the United States.
At a green-car conference before the Washington show, Craven and other industry leaders said many options to gasoline-powered vehicles exist, and all need to be used. Most conference participants argued against government choosing a single solution to the problems of over reliance on petroleum and the automobile's role in the threat of climate change.
Johan de Nysschen, president of Audi of America, warned that government pressure on the Big 3 to focus on plug-in hybrids could be the death knell for the companies. He said the companies could end up trying to sell vehicles that don't make economic sense.
Natural gas once was considered a promising alternative fuel but has fallen out of favor in the light-duty segment.
(Source: Automotive News)
Monday, February 9, 2009
New Natural Gas Pipeline for Washington State
Saturday, February 7 | 11:21 p.m.
BY MICHAEL ANDERSEN
COLUMBIAN STAFF WRITER
A company that pipes natural gas into Clark County is pushing forward a plan to run a new pipeline up the Columbia Gorge and into the Hockinson area.
The new line would largely run alongside Williams Pipeline’s existing pipe, which starts in Stanfield, Ore., and runs along the north side of the Columbia River, passing north of Washougal to meet Interstate 5 near La Center.
However, the new pipeline would only go as far west as the center of Clark County, not clear to La Center.
Williams suspended fieldwork on the proposal, called the Blue Bridge Pipeline, in November. But on Tuesday, company officials plan to ask county commissioners for permission to begin surveying a possible route through county-run Camp Bonneville.
Williams hasn’t yet resumed fieldwork, Williams spokeswoman Michele Swaner said Friday. But the company may be preparing to do so.
"We are moving ahead on it," Swaner said.
In May and June, she said, the company will hold five public open houses on the proposed line in Clark, Skamania, Klickitat, Benton and Lewis counties.
Specific maps of the new route should be available later in the spring, Swaner said.
The new 30-inch or 36-inch natural gas pipe through the Gorge is supposed to begin service by Fall 2012.
If it does, more natural gas could reach the I-5 corridor, including the Portland area. The area’s only other source is a pipeline running south from Canada, Swaner said.
A new 182-mile pipeline could move up to 500 million cubic feet of natural gas per day, said Lori Volkman, Clark County’s lawyer on the issue.
But if the pipeline is to be built, Volkman said, current plans show that it would need the county’s permission. That’s because the new route would require a 75-foot-wide easement across Camp Bonneville.
Volkman said the current easement is 70 feet wide.
For more information, including a large-scale map of the pipeline route, visit www.bluebridgepipeline.com.
Michael Andersen: 360-735-4508 or michael.andersen@columbian.com.
BY MICHAEL ANDERSEN
COLUMBIAN STAFF WRITER
A company that pipes natural gas into Clark County is pushing forward a plan to run a new pipeline up the Columbia Gorge and into the Hockinson area.
The new line would largely run alongside Williams Pipeline’s existing pipe, which starts in Stanfield, Ore., and runs along the north side of the Columbia River, passing north of Washougal to meet Interstate 5 near La Center.
However, the new pipeline would only go as far west as the center of Clark County, not clear to La Center.
Williams suspended fieldwork on the proposal, called the Blue Bridge Pipeline, in November. But on Tuesday, company officials plan to ask county commissioners for permission to begin surveying a possible route through county-run Camp Bonneville.
Williams hasn’t yet resumed fieldwork, Williams spokeswoman Michele Swaner said Friday. But the company may be preparing to do so.
"We are moving ahead on it," Swaner said.
In May and June, she said, the company will hold five public open houses on the proposed line in Clark, Skamania, Klickitat, Benton and Lewis counties.
Specific maps of the new route should be available later in the spring, Swaner said.
The new 30-inch or 36-inch natural gas pipe through the Gorge is supposed to begin service by Fall 2012.
If it does, more natural gas could reach the I-5 corridor, including the Portland area. The area’s only other source is a pipeline running south from Canada, Swaner said.
A new 182-mile pipeline could move up to 500 million cubic feet of natural gas per day, said Lori Volkman, Clark County’s lawyer on the issue.
But if the pipeline is to be built, Volkman said, current plans show that it would need the county’s permission. That’s because the new route would require a 75-foot-wide easement across Camp Bonneville.
Volkman said the current easement is 70 feet wide.
For more information, including a large-scale map of the pipeline route, visit www.bluebridgepipeline.com.
Michael Andersen: 360-735-4508 or michael.andersen@columbian.com.
Sunday, February 8, 2009
When Natural Gas Prices Down, Some Wells Shut Down
Even as the national economy went into a tailspin, resource-rich towns like Parachute, Colo., were doing fine. Then natural gas prices began to plunge, and the pain began to rise.
By Nicholas Riccardi - Los Angeles Times - www.latimes.com
February 7, 2009
Reporting from Parachute, Colo. -- Robert Knight was about to install wireless transmitters on eight new drilling rigs joining the thousands that dot the ravines and mesas here when he got the startling news: All but one of the rigs were coming down.
Falling natural gas prices had led energy firms to abruptly curtail their work here last month, battering the last sector of the U.S. economy that had prospered despite the recession.
"Boy, it was quick," said Knight, who has a business installing communication equipment and who serves as the town manager. "It was like the difference between night and day."
The sky-high oil and natural gas prices that burdened consumers during much of the decade were a blessing to residents of this tiny town and other energy-rich communities from Alaska to Arkansas. Even as the national economy went into a tailspin in early 2008, home prices in boomtowns like Parachute kept rising and the streets were packed with shiny new pickups.
But prices suddenly began to drop in September -- natural gas is down 50% from its peak and oil has plummeted from a high of $136 per barrel to about $40.
The plunge brought some relief to recession-racked consumers, but has raised anxieties in Parachute, a town of 1,500 that bears the scars of busts that followed previous energy booms.
In better times, "you couldn't find a hotel room, you couldn't find a campground, you couldn't find a place to rent," said Laura Diaz, the town planning clerk. That's changing fast.
"On Christmas Day there were three U-Hauls in my neighborhood," she said. "It is a little frightening for the people who have been here and know the history."
According to the energy service company Baker Hughes, the number of active oil and gas drilling rigs in the U.S. has dropped 13% since its peak in August. Gary Flaharty, the company's director of investor relations, said the decline matches the industry's response to previous price drops.
Energy experts say the state of the economy could prolong this energy downturn. "The boom, absolutely, is over for the moment," said Pete Stark, vice president for industry relations at IHS in Englewood, Colo.
But energy-rich communities still have stronger economies than much of the rest of the nation. The seven states with budget surpluses can thank the energy industry, said Arturo Perez, a budget analyst with the National Conference of State Legislatures. Wyoming posts the nation's lowest unemployment rate, 3.4% -- less than half the national rate.
Nonetheless, the reversal has been striking.
Last summer, New Mexico held a special legislative session to spend a $200-million surplus fueled partly by energy revenue. Now it is scrambling to close a $400-million deficit.
Alaska, which socked away billions in oil revenue over the last decade, warns that unless oil prices rise, it will face a budget deficit.
In Parachute, 200 miles west of Denver, the change has been dramatic. The town straddles I-70 along the Colorado River, in the shadow of massive mesas and buttes.
On the slope of one mesa sits a subdivision of about 5,000 people that relies on Parachute businesses. Built to house expected oil and gas workers in the 1980s, the development emptied out when the energy industry killed oil shale exploration in the Grand Valley in 1982.
It had filled back up by this decade, as high natural gas prices made exploration in the rugged land of the Piceance Basin economically feasible. The streets of Parachute and similar towns were clogged with flatbed trucks hauling drilling equipment. Hotels were booked for months in advance.
The region barely felt the recession that followed the dot-com bust in 2001, the recovery that followed, or the brutal downturn that began in late 2007.
"We've had an economic bubble over us for some time," Knight said. "We've been pretty well sheltered."
Then in December, it all changed. Rumors began circulating about energy companies cutting jobs. "For Rent" notices appeared on homes and in local newspapers. Three hotel projects were put on hold, and the few existing hotels began to post vacancies.
"We were known as the only one-stoplight town that had a traffic congestion issue," Knight said. "Compared to that, it's almost like a ghost town."
At VJ's Outlaw Ribbs, the regular flow of customers slowed to a trickle. Some began stopping in to say goodbye -- they'd been laid off and were heading back to their home states of Texas, Louisiana and elsewhere.
"People we used to see every day, we just don't see anymore," said waitress Lori Ross. She tried to look on the bright side -- when she rented a house last year there were 50 applications per open rental. Now, she said, "there are rentals everywhere."
Last week, Del Dawson, a local real estate agent, did what had been unthinkable in Parachute for several years: He cut the prices on two homes.
Like some other local business leaders, Dawson remains optimistic about the region's long-term prospects. He expects energy firms to redouble their efforts when the price of gas creeps back up -- local expectations are that will happen this summer or spring 2010. And many companies are maintaining a sizable workforce for their already drilled wells.
"We still feel it's a boom," said Hayden Rader, a developer who has two projects underway in Parachute. "People are saying there's not enough work here, but we've still got more than anyone else."
Yet residents are feeling the pain. Amy Beasley and her husband run the Old Mountain Gift & Jewelry store downtown and a neighboring shipping business. Their revenue has fallen this month, and people they know in the energy industry who had talked about an unending boom have abruptly lost their jobs.
A fourth-generation Parachute native, Beasley, 35, has been ambivalent about the industry that keeps the town alive but has industrialized the wild lands where her family homesteaded. She and her husband have discussed whether to close their shops given the severity of the downturn.
"We're going to stick it out and try to weather the storm," she said. "It may slow down for a few years, but it's going to be back. They're never going to leave us alone."
nicholas.riccardi@latimes.com
By Nicholas Riccardi - Los Angeles Times - www.latimes.com
February 7, 2009
Reporting from Parachute, Colo. -- Robert Knight was about to install wireless transmitters on eight new drilling rigs joining the thousands that dot the ravines and mesas here when he got the startling news: All but one of the rigs were coming down.
Falling natural gas prices had led energy firms to abruptly curtail their work here last month, battering the last sector of the U.S. economy that had prospered despite the recession.
"Boy, it was quick," said Knight, who has a business installing communication equipment and who serves as the town manager. "It was like the difference between night and day."
The sky-high oil and natural gas prices that burdened consumers during much of the decade were a blessing to residents of this tiny town and other energy-rich communities from Alaska to Arkansas. Even as the national economy went into a tailspin in early 2008, home prices in boomtowns like Parachute kept rising and the streets were packed with shiny new pickups.
But prices suddenly began to drop in September -- natural gas is down 50% from its peak and oil has plummeted from a high of $136 per barrel to about $40.
The plunge brought some relief to recession-racked consumers, but has raised anxieties in Parachute, a town of 1,500 that bears the scars of busts that followed previous energy booms.
In better times, "you couldn't find a hotel room, you couldn't find a campground, you couldn't find a place to rent," said Laura Diaz, the town planning clerk. That's changing fast.
"On Christmas Day there were three U-Hauls in my neighborhood," she said. "It is a little frightening for the people who have been here and know the history."
According to the energy service company Baker Hughes, the number of active oil and gas drilling rigs in the U.S. has dropped 13% since its peak in August. Gary Flaharty, the company's director of investor relations, said the decline matches the industry's response to previous price drops.
Energy experts say the state of the economy could prolong this energy downturn. "The boom, absolutely, is over for the moment," said Pete Stark, vice president for industry relations at IHS in Englewood, Colo.
But energy-rich communities still have stronger economies than much of the rest of the nation. The seven states with budget surpluses can thank the energy industry, said Arturo Perez, a budget analyst with the National Conference of State Legislatures. Wyoming posts the nation's lowest unemployment rate, 3.4% -- less than half the national rate.
Nonetheless, the reversal has been striking.
Last summer, New Mexico held a special legislative session to spend a $200-million surplus fueled partly by energy revenue. Now it is scrambling to close a $400-million deficit.
Alaska, which socked away billions in oil revenue over the last decade, warns that unless oil prices rise, it will face a budget deficit.
In Parachute, 200 miles west of Denver, the change has been dramatic. The town straddles I-70 along the Colorado River, in the shadow of massive mesas and buttes.
On the slope of one mesa sits a subdivision of about 5,000 people that relies on Parachute businesses. Built to house expected oil and gas workers in the 1980s, the development emptied out when the energy industry killed oil shale exploration in the Grand Valley in 1982.
It had filled back up by this decade, as high natural gas prices made exploration in the rugged land of the Piceance Basin economically feasible. The streets of Parachute and similar towns were clogged with flatbed trucks hauling drilling equipment. Hotels were booked for months in advance.
The region barely felt the recession that followed the dot-com bust in 2001, the recovery that followed, or the brutal downturn that began in late 2007.
"We've had an economic bubble over us for some time," Knight said. "We've been pretty well sheltered."
Then in December, it all changed. Rumors began circulating about energy companies cutting jobs. "For Rent" notices appeared on homes and in local newspapers. Three hotel projects were put on hold, and the few existing hotels began to post vacancies.
"We were known as the only one-stoplight town that had a traffic congestion issue," Knight said. "Compared to that, it's almost like a ghost town."
At VJ's Outlaw Ribbs, the regular flow of customers slowed to a trickle. Some began stopping in to say goodbye -- they'd been laid off and were heading back to their home states of Texas, Louisiana and elsewhere.
"People we used to see every day, we just don't see anymore," said waitress Lori Ross. She tried to look on the bright side -- when she rented a house last year there were 50 applications per open rental. Now, she said, "there are rentals everywhere."
Last week, Del Dawson, a local real estate agent, did what had been unthinkable in Parachute for several years: He cut the prices on two homes.
Like some other local business leaders, Dawson remains optimistic about the region's long-term prospects. He expects energy firms to redouble their efforts when the price of gas creeps back up -- local expectations are that will happen this summer or spring 2010. And many companies are maintaining a sizable workforce for their already drilled wells.
"We still feel it's a boom," said Hayden Rader, a developer who has two projects underway in Parachute. "People are saying there's not enough work here, but we've still got more than anyone else."
Yet residents are feeling the pain. Amy Beasley and her husband run the Old Mountain Gift & Jewelry store downtown and a neighboring shipping business. Their revenue has fallen this month, and people they know in the energy industry who had talked about an unending boom have abruptly lost their jobs.
A fourth-generation Parachute native, Beasley, 35, has been ambivalent about the industry that keeps the town alive but has industrialized the wild lands where her family homesteaded. She and her husband have discussed whether to close their shops given the severity of the downturn.
"We're going to stick it out and try to weather the storm," she said. "It may slow down for a few years, but it's going to be back. They're never going to leave us alone."
nicholas.riccardi@latimes.com
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