Published: Aug. 20, 2015

Audio Script

CU-Boulder Study – low oil prices, less oil production equals less tax revenue
Aug. 21, 2015ΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύ ΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύΜύ Brian Lewandowski
A new CU-Boulder study on oil and natural gas production in Colorado shows that low prices combined with other factors is having a negative impact on the industry, says Brian Lewandowski, associate director of the Business Research Division at the Leeds School of Business. He says the number of drilling rigs has dropped by half since last year, resulting in less oil and natural gas production.
CUT 1 β€œThe crux of it is that we’ve got steeper depletion curbs and we also have low prices. So low prices have resulted in a lower rig count. (:09) Right now we’re in the 30-rig range. So what that means is invariably production will drop, especially with these steeper depletion curves.” (:19)
That depletion curve Lewandowski is referring to concerns oil wells drilled since around the year 2000 that show a steep decline in production after just one year.
CUT 2 β€œWhat we did is we took a look at the population of wells and production in Colorado from 1970 into early 2015. (:09) And what we found is, starting in about 2000, each successive five years the depletion rate of wells in Colorado has been getting steeper or they’ve been depleting faster - meaning that the greatest volume occurs in year one and we see much less volume in year two and year three and thereafter.” (:32)
And, Lewandowski says, less oil and gas production will have a cascading economic impact since lower production means less severance and property taxes and fewer jobs.
CUT 3 β€œThe Governor’s Office of State Planning and Budgeting and the Colorado Legislative Council they both are forecasting a decrease in severance taxes for fiscal year ’16. And property taxes is one of the largest checks that oil and gas writes when it comes to that public revenue stream. (:17) So what happens when the prices are cut in half? That revenue stream is cut in half. What happens when production also slows, then you are talking about a value of production that is less than half.” (:28)
Lewandowski says unless there is a dramatic uptick in oil prices, don’t expect to see oil at the $90 per barrel range again until 2020. Then, he says, we’ll see drilling slowly come back online as prices increase.
-CU-
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