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Last Updated on Friday, 17 February 2012 12:10

Written by Dennis Sun

A couple of weeks ago you read in this column about how natural gas, or more importantly, the price of natural gas, affects all of us in Wyoming. When you look into natural gas and its pricing, it’s kind of like putting your arms around the health care issue – it really is complex.
    President Obama said in his State of the Union address that America has 100 years of natural gas left. From what I hear, that’s like hearing a politician give the unemployment figures – it’s always fudged a little to the positive side.  
    The report I read says, “The U.S. does not have 100 years of natural gas supply. There is a difference between resources and reserves that many outside the energy industry fail to grasp. A resource refers to the gas or oil in-place that can be produced, while a reserve must be commercially produced. The Potential Gas Committee (PGC) is the standard for resource assessments, and three categories of technically recoverable resources are identified: probable, possible and speculative. The President and others have taken the PGC total of all three categories and divided by the 2010 annual consumption, this results in 90 years, not 100 years of gas.”
    But even the 90-year estimate is wrong, states the report, because when you add the reserves and resources, and add some more because we’re always finding more, it actually comes out to around 23 to 25 years of natural gas that we have remaining. That not many years left, is it?  
    Supply and demand drive the natural gas prices, and in the last few years many large fields of shale natural gas have been discovered: Eagle Ford in Texas, Haynesville in Louisiana and Texas, Fayetteville in Arkansas, Antrim in Michigan, Indiana and Ohio, Barnett in Texas, Woodford in Oklahoma, Marcellus in Pennsylvania and West Virginia and, of course, our neighbor, the Bakken in North Dakota. The Haynesville shale play is the most responsible for the current oversupply, with its average well producing 3.3 million cubic feet per day. We do have some good gas fields here in Wyoming, but so far they are not as large as some of these.
        Natural gas is a very large revenue source for Wyoming, but for every dollar it drops, Wyoming loses around $120 million in revenue. So, nationally, and in Wyoming, when the price drops as it has in the last year, companies stop drilling for gas and look to $100 a barrel oil. Hopefully the drilling rigs will stay in Wyoming to stop an even bigger drain of dollars.  
    The warmer-than-usual weather the U.S. has experienced this winter hasn’t helped the oversupply, either. Reports show nationally that we have experienced close to 70 warmer-than-usual days so far this winter.
    Some say it will be two to five years before higher natural gas prices return, which is great for heating our offices, homes and schools and keeping fertilizer prices affordable, but the trade-off is hard on our state. Today’s Wyoming natural gas price of $2.47 is not expected to last – it is expected to drop even farther, so our elected officials will have to cut even more from the state budget. A leaner state government may be the good to come out of this issue.
    Dennis

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Last Updated on Friday, 17 February 2012 12:10

Written by Dennis Sun

Until recently, we all have taken our U.S. Post Office (USPO) for granted, as we could all depend on the Post Office to get us our mail six days a week. No matter what kind of weather we were up against, we just knew it would be there in the mailbox.
    Well, things in the USPO are not for the better, in my mind. First off, they are going broke and lost close to $10 billion last year and $8.5 billion in 2010. Congress doesn’t allow the USPO to lose money, but it can borrow up to $15 billion from the U.S. Treasury. This ad hoc way of funding is similar to the old way we used to fund Amtrak – a stopgap, but it really hinders the USPO from long-term planning.  
    In 2010, the USPO hired three big-name consulting firms to come up with ways to save money or operate in the black. The study identified 50 ways the USPO could improve their bottom line, and then the USPO identified five general areas to work on: pricing, workforce, service employees, retirement benefits and new service.
    Among the bigger changes is to slow down the delivery of mail, cancel Saturday services, look into closing 15,000 post offices nationally, reduce the number of post offices where they sort the mail and eliminate up to 220,000 jobs by 2020. Now remember, the way it’s set up, our USPO is expected to finance itself. It can’t set postal rates or choose it own hours or even determine its own policies – only Congress can do those actions.  
    So, in reality, some say the government needs to subsidize our post offices as they do a lot of other entities, but this may be bad timing to think about doing that. Some say we need to get Congress out of managing the post offices, and that they should be run as a for-profit business, and others say the U.S. should privatize its mail delivery. A number of other countries do subsidize their mail delivery, as it does affect everyone, but whatever plan of attack you use to improve post offices, it still has to be managed like a for-profit business.
    They have to keep mailing costs at levels where everyone will be able to use the post office. There most likely are some post offices they could close, but they need to be aware of how vital some of these post offices are to small rural communities. I’ve heard that the rural post offices only account for one percent of the national post office budget, so what is the big deal? There are three groups of employees in the post office, clerks, sorters and carriers, and strong unions back them, so that could be a big problem. The post office is consolidating post offices where they sort mail, so our mail will be slower, and it already is. At the Roundup we’ve noticed some weekly periodicals that we usually receive on Monday we may now get on Thursday. The good news is that nothing will happen until after elections.
    Dennis

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Last Updated on Friday, 17 February 2012 12:10

Written by Dennis Sun

Our State Legislature will start up in a couple weeks for the 2012 Budget Session, but the Joint Appropriations Committee (JAC) has been busy for many days.
       First off, every citizen in the state should always say a big thank you to members of this committee, as no one elected to the State Legislature works harder than its members, and they always make hard decisions. I always thought that the ability to say “no” is a great gift for members of this committee. As a committee they are fair-minded and truly have the state’s interest at heart. Remember, Wyoming is one of the nation’s best-managed states and it has a balanced budget – something that not many states have these days.
    We have been fortunate as a state to have all of our resources, especially energy, but the price of natural gas is currently down and that energy source is a large part of Wyoming’s budget. The truth is, America’s natural gas industry has been too good at what they do: finding natural gas.
    America’s economy is trying to turn around for better days, and the need for natural gas is somewhat lessened, so the price has dropped because supply and demand rules, and that is the way it should be. The 2013-2014 budget was first developed on natural gas prices of $4.10 per thousand cubic feet (mcf) last October, and in reality it is around $2.35 today at the Opal/ Kern River Hub, which is a good indicator of state prices. That difference is huge in terms of revenue for Wyoming.
    Realizing this bad news, Governor Mead cut $64 million from his original 2013-2014 budget of $3.4 billion in late January. Everyone who is in state government has known for some time that projected revenues would be down, so they all knew spending would have to drop somewhere, and there lie the hard decisions. The good news is that Wyoming is growing, and sales and use taxes coming in for 2011 are 10.5 percent better than 2010, which is an increase of $36 million.
    The legislature now has 20 days to approve the state budget, and of course the Governor has to sign it, so it will get debated some more. Everyone knows the price of natural gas will rise eventually, but how long it will stay low, no one knows, so the JAC has cut several million dollars in contractual services from certain places in the budget, but they voted to hold most of the state agencies’ standard budgets close to the same level as the current biennium.
    Many people, myself included, who have seen our state government grow so much in the past eight to 10 years welcome these cuts to our state agencies. It is not a popular move, but a necessary one, as America may suffer because of the spending in Europe and other places, and Wyoming may suffer because of our national out-of-control spending. It is easier to cut agencies now to a reasonable level than later when we’d have to use the meat cleaver. We applaud the JAC and Governor’s work.
    Dennis

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Last Updated on Friday, 17 February 2012 12:09

Written by Dennis Sun

We’ve come to that time of year that, whenever a couple of producers get together, the conversation turns to the weather. That is, unless one of them has Dish TV.
    In some areas of Wyoming Dish hasn’t carried local networks for the last month and, this being the end of football season (my wife would say it never ends), that is not going over well with some. However, productivity has really shot up around the state on Saturdays and Sundays.
    The main topics with most are livestock prices, the weather, Dish TV and those we always talk about – the high cost of fuel and feed and simply doing business, from tires to seed to fertilizer and on and on. Same ol’, same ol’ story, isn’t it?
    If you listen to the weather guy Don Day every morning you can get a pretty good education on the weather and understand what’s happening, or what should happen. I think I’ve heard Don Day say he only has to be right 50 percent of the time. He is better than that, but it is job security for the forecasters. We know so much more about the weather now, and to find out the temperatures and wind velocity at any place in the state all we have to do is go to the computer.
    We all know last year’s harsh winter was caused by a strong La Nina condition along the equator in the Pacific Ocean. Last year the equatorial sea surface temperatures were nearly three degrees Celsius below normal, and that’s what they say caused all of the snow in the northern states that led to the record flooding we’ll not forget for some time.
    This year they say the average temperature is only 1.5 degrees Celsius below normal, a difference of only 1.5 degrees from last year, but just look at the differences between the two. I know the area in the Pacific we’re talking about is huge, but it is still only 1.5 degrees difference. The difference in the cost of managing snow amounts last year at this time compared to this year must be millions of dollars.  
    Then figure in the cost of the drought of the Corn Belt and southwestern states last year and it’s mind-boggling. They say this winter will be similar to last year, but not to the extremes we had then, and so far the prediction has proven true. They do say the Northern Rockies should see more snow in the spring and it should stay dry in the western Corn Belt. Eastern South Dakota has not had much of any precipitation at all this winter – in fact, they are on the U.S. Drought Map at the present time because of those conditions.
    When you look at the temperature tomorrow morning, see how small 1.5 degrees is and think how much money it has cost us. The good part is that all the snow and spring runoff last spring helped raise a big hay crop, which is something we all needed. I know the flooding didn’t help, but we always need hay, corn and plenty of green grass.           
    Dennis