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Wyoming Governor: Low Natural Gas Prices Hurting State

Continued low natural gas prices have further cut into Wyoming's revenues that will require budget cuts of up to 8% in 2013, Wyoming Gov. Matt Mead said last week. Pointing to gas spot prices at Opal, he said prices may be overemphasized, but "the gas prices are not where we would like to see them, and it is affecting our budget."

The governor has asked all state agencies to double the 4% budget cuts requested earlier to 8%. The governor noted that his office plans to cut 10% of its budget to set an example. He said "some agencies will not be cut the full 8%" because reducing services would cut state essentials. Instead, those agencies are only required to cut 5-6%.

In the last state budget, the legislature and governor set aside $150 million as a contingency in case gas prices fell to a pre-set low. That low was never reached but Mead said he will suggest that state lawmakers consider dipping into the emergency funds because of expenses caused by the state's prolonged drought and resulting uptick in wildfires this year.

In response to questions during his briefing about unconventional production's potential to create more boom-and-bust periods tied to U.S. fossil fuel prices, the governor offered a strong endorsement for unconventional drilling using hydraulic fracturing (fracking). He's not bothered by the potential for volatile pricing and said what has happened in the market "is a correction in terms of gas production and storage. Last year we were looking at all-time records in storage, and we don't see that same level this year.

"So in terms of boom-bust, it looks like to me that there are a lot of years ahead of us for the reasonable and responsible production of natural gas and oil. I think fracking is obviously a hot-button issue with folks, and we need to make sure it is done right, but to me it is a 'good news' story allowing us to have [domestic] energy."

Mead also discussed President Obama's re-election. "The voters have spoken -- you can like or dislike the results -- but each individual state has a role to play moving forward, and we in Wyoming plan to do that," said the governor. One of his concerns about the Obama administration is that it doesn't appear to understand the value that U.S. fossil fuel supplies and technologies have for the nation. However, he urged states to work on a bipartisan basis.

"I don't think the current administration has a full appreciation of what the value of affordable American energy is to the economy," said Mead. He noted that in 2011 the state received more federal coal leases after he met with Interior Secretary Ken Salazar.

Even with the help from the Interior Department, Mead said he doesn't think that President Obama "has fully grasped" what he called the "importance of coal to the country. I think coal has to be part of Wyoming's future, and more importantly, it has to be part of America's future." He said coal as a fuel source allows for electricity production at competitive rates. "That is not only good for manufacturing and the jobs attached to that, but it also helps us keep competitive globally when a major cost-driver for industry is energy. We can do that [stay competitive worldwide] with U.S. coal, oil and natural gas. It is a great opportunity to move the country forward, get people back to work and bring manufacturing back."

Asked if Wyoming's fossil fuel extraction industries would "push back" against the Obama administration or find new markets through exports, the governor said, "I think it is a little of all of that. I think it is appropriate for us to continue to seek markets outside the United States." However, exports are "only part of the solution." Another part is to work with federal agencies to avoid "setting standards so high that they effectively close down an industry. It has to be a progressive approach [to be as clean as possible]. You need to work with companies to get to where we need to go [in environmental protection]."

Mead pledged to continue to work with Salazar, the U.S. Environmental Protection Agency and "all of those people in Washington" to suggest that Wyoming can work cooperatively. "There are also going to be things that don't work for Wyoming, and when that happens we will look to litigation, but I am not throwing up my hands and saying that it is all over."

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