A cold, hard reality for federal drilling policy?


By Rodney White on January 5, 2010 10:03 AM

Public policy is often driven by economics and political considerations. Sometimes, it can be driven by the weather.

Chris McGill, managing director of policy analysis for the American Gas Association, wrote a recent gas market analysis for AGA's blog in which he pointed out a trend that many market observers may have given little thought to.

"On the supply side, temporary production area well freeze-offs that are not uncommon in the intermountain West during cold periods extended to other areas and probably contributed to the strong withdrawals from storage in mid-December," he pointed out.

"The argument can be made that while a decided shift to more onshore production creates protection from hurricane induced supply disruptions, it also adds sensitivity to extremely cold conditions and that flowing production could be impacted more now than when productive capability was more centered in the gulf region," McGill wrote.

Platts' Gas Daily reported December 31 that traders were receiving notices from suppliers the previous week of freeze-offs in the Four Corners area of the San Juan, which covers portions of Arizona, Colorado, New Mexico and Utah. Frigid conditions can cause a drop in well pressure and freeze any water vapor or condensates in the gas stream, creating an ice plug that stops gas from flowing through the wellhead.

Clearly, this phenomenon has been accounted for. Now the question is whether the policymakers at the US Department of the Interior -- who have the most say on whether to expand offshore drilling -- are aware of this issue and, if so, will they will consider the consequences of relying too much on onshore production?