That was one of the findings of a report commissioned by the county as it attempts to sight the end of a natural-gas boom that has helped fuel the nation and kept residential property-tax rates here among the lowest in Colorado.

Coal-bed methane production began in earnest here in the early '90s and peaked in 2003. Companies hoped to forestall a decline by drilling more wells but still saw a drop of more than 5 percent in 2007, according to data from the state .

The forecast report, produced by Fort Worth, Texas-based Cawley, Gillespie & Associates, predicts that companies will see their revenue from gas production fall 46 percent, from $1.6 billion in 2008 to $864 million in 2018. By 2021, their revenue is seen shrinking to $571 million.

The report does not take into account fluctuations in market price, technological advances or changes in regulations. But county officials say it still will be useful in planning for the inevitable - albeit far-off - day when the wells peter out.

"Knowing the size of the pool of available resources is an important first sep in analyzing the situation," County Manager Shawn Nau said.

Slow decline

According to the report, the county's coal-bed methane wells are declining at an average rate of 12 percent per year. Conventional gas wells, which account for a far smaller portion of gas production, are declining about 7 percent a year.

The report says there are 1,022 proved undeveloped locations to be drilled in the Fruitland coal reservoir in La Plata County based on current spacing requirements. Today, there are about 1,700 coal-bed methane wells in the county.

Even with new wells, the report foresees gross gas production declining 65 percent from 2008 to 2021, from about 403 billion cubic feet to 140 billion cubic feet.

County officials say the news could be worse.

"It looks to me like we're in a slow decline," County Assessor Craig Larson said. "You don't want to have a precipitous drop."

Data for the report was supplied by the assessor's office. Revenue predictions assume a price of $6 per thousand MBtu, which is about the average index price for 2007.

The county commissioned a similar report from the same firm in 2003. Neither report released data on individual well production, which is considered proprietary information.

Commissioners will receive a presentation about the report's findings July 8. Commissioners requested the presentation as they begin working on the budget for 2009.

The 2003 report forecast gas production in 2007 would be 386 billion cubic feet, but actual production that year was higher, about 393 billion cubic feet not including conventional gas production.

"He's not too far off," Larson said, referring to the report's author. "We're doing a little bit better than what he had estimated."

Larson attributed this to more new wells coming online than anticipated and improvements in technology that allow companies to extract gas more efficiently.

The role of price

The price of natural gas is a significant unknown in the equation. The county's netback price - which is the price of gas minus certain expenses producers are allowed to subtract, such as processing and transportation - in recent years has varied from $1.88 per MCF in 2003 to $4.66 in 2006. This year, the average netback price is $4.01.

The price is influenced by a wide array of factors, including weather and supply.

"If you don't have a cold year, you don't need gas," Larson said.

A new pipeline that heads east out of northern Colorado also is expected to play a part.

"The San Juan (Basin) will more become its own supplier," Larson said. "We won't have to worry about it coming in from the Piceance Basin to our southern markets."

The cheap price of gas earlier in the decade made it attractive for electricity generation. But when various new plants in Texas started using it, the price quickly escalated, discouraging more plants and easing demand.

In 2008, natural-gas prices are on the rise again. In June, Atmos Energy, which secures its supplies of natural gas from producers months in advance, increased the price it charges customers by 25 percent.

Kevin Kerrigan, a spokesman for the company, said that normally the price it pays for gas declines after winter, but this year has been an exception. The market price of natural gas in June was 72 percent higher than the same month a year before, he said. This winter could be worse.

"It is not forecasted to come down," he said.

Atmos shops around for its gas, which may or may not come from the San Juan Basin.

High natural-gas prices may drive up residents' energy bills, but it helps keep their property taxes low.

In 2006, gas and oil represented 66 percent of the county's property-tax revenue. In 2007, that dropped to 56 percent and it is predicted to be about the same in 2008. Property taxes are based on the previous year's production.

The eventual decline in revenue will not affect all county residents equally, because the mill levy varies depending on the tax districts residents fall in. Larson said Ignacio property owners pay just 19 mills, while in Bayfield they pay 34 mills, and in Durango they pay 25 mills.

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