Lagging nation, Colorado oil, gas production remains below pre-pandemic levels, budget office says

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Colorado oil and gas production has yet to recover to pre-pandemic levels, and hitting that mark may be years away, the state budget office said this month.

State crude oil production in 2023 was 13.8% below 2019 levels even though production has been increasing over the past three years, according to a September forecast from the Governor’s Office of State Planning and Budgeting.

Surging production in the Permian Basin of Texas and New Mexico as crude prices rose above long-term averages helped boost national oil and gas production to a record last year. Through May, that level has risen another 3.5%, and the U.S. Energy Information Association anticipates another record-breaking year.

Meanwhile, most other basins in the nation have lagged, the budget office said.

It’s a similar story for natural gas, with U.S. production fully recovered to pre-pandemic levels while Colorado’s 2023 production was 8.3% below 2019 levels.

“Moving forward, slow statewide crude oil and natural gas production growth is projected, with potential for a full recovery to pre-pandemic levels of production in the latter portion of the forecast period if recent trends hold,” the budget office said.

That would put the Colorado production recovery date somewhere before June 30, 2027.

Here's a breakdown of how much severance tax the state expects to collect in coming years, mostly from the oil and gas industry:

• In the fiscal year that ended in June, the budget office projects severance tax revenue to add $178.1 million to state coffers. That’s down 42% over the previous year’s record collection of $374.7 million as oil prices were relatively steady, natural gas prices fell and companies increased usage of a tax credit.
• In the 2024-2025 fiscal year, that revenue is expected to jump by 15.7% to $251.5 million as the first full fiscal year of a reduced tax credit kicks in and natural gas prices recover.
• Severance tax revenue is expected to grow by 2.6% in fiscal year 2025-2026 while it is projected to fall by 16.9% in fiscal year 2026-2027 as the reduced tax credit sunsets in the 2027 tax year.