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Natural-gas prices slide for San Juan Basin

‘Bottom line is it’s lost revenue to the county’

The price for San Juan Basin natural gas has halved in the past year, a foreboding sign for property taxpayers and La Plata County coffers.

San Juan Basin natural gas is fetching only $2.27 per thousand cubic feet at the Ignacio-Blanco Hub, according to a chart with data gathered by Finney Land Co. and produced by Allen & Associates. That’s down from $4.57 a year ago.

The chart caught the attention of county commissioners.

“Here’s some depressing news...Natural gas price for La Plata County natural gas is down 50 percent from May 2014,” Commissioner Julie Westendorff wrote in a Twitter message late Tuesday.

The price for San Juan Basin natural gas has fallen in each month this year, down from $3.03 per thousand cubic feet, or mcf, in January.

La Plata County will feel the effects of the latest drop in production in two years.

“Obviously, we’re very worried about it and concerned about it,” said Commissioner Brad Blake. “We’re not quite certain where it will settle out. It could affect us by $3.5 million to $5 million, and that’s a big concern.”

County officials are discussing whether to raise property taxes. They’re moving toward commissioning a poll to gauge constituents on the issue.

“The bottom line is it’s lost revenue to the county,” Blake said. “We hate to be sky-is-falling, but it really does impact the county a lot.”

In an interview with the Herald, Westendorff said the revenue drop will affect other taxing entities, from Upper Pine River Fire Protection District to Durango School District 9-R.

“This isn’t good,” she said. “We had hoped that we’d seen the bottom of the drop in our tax revenues from natural gas already. Now, not so confident that that’s the case.”

Local taxpayers may also be asked to fund wastewater-treatment plant upgrades and a major overhaul of Durango-La Plata County Airport.

As the amount of property taxes paid by natural-gas producers drops, taxes tend to increase for other taxpayers.

Christi Zeller, executive director of the La Plata County Energy Council, pointed to her own taxes. The tax bill on her home has risen from $510 in 2004 to $840 in 2014.

For a commercial building, 619 Main Ave., the former home of Francisco’s Restaurante y Cantina, taxes rose from $19,870 to $28,160 during the same period.

“The shift is towards the property taxpayer,” Zeller said.

As prices fall, so do royalties paid to local landowners. More than 6,000 La Plata County residents receive royalties from natural-gas and oil wells. Zeller said her mother, who owns land with a natural-gas well, saw an $860 royalty check last month, down from about $1,600 a year ago.

Nationally, natural-gas prices are slumping from a supply glut. New drilling in emerging basins has increased U.S. production to record levels. In February, natural-gas withdrawals reached 92 billion cubic feet a day, up from 85 billion cubic feet a day in February 2014, according to the federal Energy Information Administration.

Drillers have reacted by pulling back on plans for new wells, but production has yet to reflect declining rig counts.

cslothower@durangoherald.com



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