STAYING POWER: WHY THEY'RE STILL DRILLING FOR NATURAL GAS WHEN IT REMAINS SO CHEAP.

• Author: Best, Allen
• Position: ENERGY REPORT

Clouds of steam once billowed from the 928-megawatt Cherokee Station, which sits along the South Platte River north of downtown Denver. Invisible were the mercury, nitrogen oxide and sulfur dioxide, the latter two contributing to smog, a major motivation for replacing the aging coal-burning units. Colorado was failing federal air quality standards for ozone. The oldest of the units predated arrival of the Denver Broncos in 1960 by three years.

In August, the plant burned the last of its coal and became fueled entirely by natural gas, which produces much less of these pollutants and only about half as much carbon dioxide, another greenhouse gas.

Colorado's Clean Air-Clean Jobs Act of 2010 gave Xcel Energy the framework for the transition. Even then, it was understood that Colorado had lots of natural gas in the Wattenberg Field between Denver and Greeley, the San Juan Basin south of Durango, and in the Piceance Basin of northwest Colorado.

Coal companies angrily resisted the switch. The Colorado Mining Association predicted "dramatically higher electricity rates." No, not really, responded the Colorado Oil and Gas Association. It said this was the cheapest way to improve Colorado's air quality.

Even then, innovation had dramatically reduced natural gas prices. "We were pretty confident that the supply chain was long, and not just because of Colorado but because of what was happening around the country," says former Gov. Bill Ritter Jr., now director of the Center of the New Energy Economy, a department of Colorado State University.

What surprises Ritter has been just how low prices have been for natural gas: In 2008, natural gas was getting $1 3.50 per thousand Btu (also called mcf), a measure of heat. Those high prices had trucks pounding county roads around Rifle and Meeker as up to 100 rigs poked the subterranean of the Piceance Basin. Modeling studies conducted by Ritter's administration in 2010 predicted gas prices of $5 or $6 going forward. In fact, prices have been almost entirely $3 or below. The average impact to Xcel customers of burning the cleaner fuel, Ritter says, has been about 5 cents a month.

How has this happened? Drilling has become radically more efficient, deeply slashing costs of extraction. In the Denver-Julesburg Basin, in which the Wattenberg Field is located, oil and gas production working in the all-important Niobrara formation increased 12-fold per rig per well from 2011 to 2017, according to RBN Energy, a...