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The U.S. Geological Survey (USGS) recently released a significant assessment identifying undiscovered, technically recoverable oil and gas resources in the Mowry Composite Total Petroleum System, which includes the Niobrara Formation, spanning southwest Wyoming, northeast Colorado, and parts of Utah. This report, published on May 21, 2025, estimates 473 million barrels of oil and 27 trillion cubic feet of natural gas, offering a promising outlook for energy development in the region. For oil and gas investors, this assessment highlights the potential of the Southwestern Wyoming Geologic Province, but a closer look at Wyoming and Colorado’s production trends and regulatory environments suggests Wyoming may be the more attractive investment destination.
USGS Assessment: A New Frontier for Energy Resources
The USGS assessment focuses on the Mowry Composite Total Petroleum System, which encompasses the Dakota Sandstone, Muddy Sandstone, Mowry Shale, and Frontier Formation. These formations, deposited in a prehistoric shallow ocean, have been producing since the 1950s, yielding approximately 90 million barrels of oil (equivalent to four days of U.S. consumption) and 7.3 trillion cubic feet of natural gas (three months of U.S. consumption). The new estimate of 473 million barrels of undiscovered oil and 27 trillion cubic feet of gas underscores the region’s untapped potential, particularly in the Niobrara Formation, known for its organic-rich shale and fractured carbonate reservoirs.
The Niobrara Formation, part of this system, has been a key contributor to oil and gas production, especially in the Denver-Julesburg (DJ) Basin and Southwestern Wyoming Province. Its low porosity and permeability require advanced extraction techniques like hydraulic fracturing, but technological advancements have made these resources increasingly viable. The USGS report, an update from a 2005 assessment, provides critical data for policymakers, land managers, and private-sector explorers planning future development.
Oil Production in Wyoming and Colorado
Wyoming: In 2023, Wyoming ranked eighth nationally in crude oil production, producing 96.8 million barrels, up from 90.8 million in 2022. The state holds 978 million barrels of proven oil reserves, accounting for 2.4% of U.S. total reserves, and 15,005 billion cubic feet of proven natural gas reserves (2.5% of U.S. total). Key producing counties include Converse (39.1%), Campbell (23.5%), and Laramie (9.8%). Historic fields like Salt Creek, which has produced over 740 million barrels since 1889, and modern developments in the Powder River Basin highlight Wyoming’s enduring role in U.S. energy production.
Colorado: Colorado has seen significant oil production growth, particularly in the DJ Basin’s Wattenberg field, driven by the Niobrara and Codell formations. In 2012, the state produced over 48 million barrels of oil, a 24% increase from 2011 and the highest since 1961. While more recent production figures are not provided here, Colorado’s output has continued to rise, with Weld County being a major contributor. However, production growth has been tempered by increasing regulatory restrictions.
Colorado’s Anti-Oil Regulations: A Barrier to Investment
Colorado’s regulatory environment has become a significant hurdle for oil and gas investors. Since 2019, the state has implemented stringent policies under Senate Bill 19-181, which prioritizes public health, safety, and environmental protection over unrestricted energy development. Key regulations include:
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Increased Setback Requirements: Wells must be located at least 2,000 feet from homes, schools, and other sensitive areas, limiting drilling locations in densely populated areas like Weld County.
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Air Quality and Emissions Controls: The Colorado Air Quality Control Commission has imposed strict methane emissions standards and continuous monitoring requirements, increasing compliance costs.
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Permitting Delays: The Colorado Oil and Gas Conservation Commission (COGCC) now requires extensive environmental impact assessments, leading to longer permitting timelines.
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Local Control: Municipalities have gained authority to impose stricter regulations, creating a patchwork of rules that complicate operations.
These measures have raised operational costs and reduced the pace of new drilling. For example, operators in the DJ Basin face challenges expanding in high-potential areas due to setback rules and community opposition. While Colorado’s Niobrara resources remain attractive, the regulatory burden has driven some companies to shift focus to more permissive states.
Why Wyoming is a Better Bet for Oil and Gas Investors
Wyoming, by contrast, offers a more favorable environment for oil and gas investment, making it an appealing choice for capitalizing on the USGS-assessed resources. Here’s why:
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Pro-Energy Policies: Wyoming maintains a business-friendly regulatory framework, with streamlined permitting processes and fewer environmental restrictions compared to Colorado. The Wyoming Oil and Gas Conservation Commission prioritizes efficient development while ensuring responsible practices, reducing delays and costs for operators.
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Vast Public Lands: The Southwestern Wyoming Province, where the Niobrara and Mowry systems are located, includes extensive public lands managed by the Bureau of Land Management (BLM). The USGS assessment informs BLM’s resource management plans, facilitating leasing opportunities. Wyoming’s history of supporting energy development on public lands contrasts with Colorado’s increasing restrictions.
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Proven Production and Infrastructure: Wyoming’s long history of oil and gas production, from legacy fields like Salt Creek to modern shale plays, is supported by robust infrastructure, including pipelines and processing facilities like the LaBarge-Shute Creek plant. This reduces logistical challenges for new projects.
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Lower Regulatory Risk: Unlike Colorado, Wyoming has not faced significant anti-oil activism or legislative pushes to curb production. The state’s economy is closely tied to energy, fostering a stable political climate for investment. Investors can operate with greater certainty, avoiding the regulatory uncertainty plaguing Colorado.
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Emerging Opportunities in the Niobrara: The USGS assessment highlights the Niobrara’s potential in southwest Wyoming, where exploration is less mature than in Colorado’s DJ Basin. Early movers can secure prime acreage and leverage Wyoming’s lower costs and permissive regulations to maximize returns.
Investment Considerations
Investing in Wyoming’s oil and gas sector, particularly in the Niobrara Formation, offers several advantages:
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High Resource Potential: The USGS’s estimate of 473 million barrels of oil and 27 trillion cubic feet of gas provides a strong resource base for long-term development.
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Cost Efficiency: Lower regulatory compliance costs and faster permitting in Wyoming reduce upfront capital requirements compared to Colorado.
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Market Access: Wyoming’s established pipeline networks ensure reliable access to domestic and export markets, enhancing project economics.
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Technological Advancements: Advances in hydraulic fracturing and horizontal drilling make the Niobrara’s low-permeability reservoirs increasingly economic, particularly in Wyoming’s less-explored areas.
However, investors should consider risks, including commodity price volatility, environmental concerns, and potential federal policy changes affecting public lands. While Wyoming is more permissive than Colorado, national trends toward stricter emissions standards could impact future operations.
Conclusion
The USGS’s 2025 assessment of undiscovered oil and gas resources in the Niobrara Formation and broader Mowry Composite Total Petroleum System signals significant opportunities in southwest Wyoming and northeast Colorado. While both states boast substantial production—Wyoming with 96.8 million barrels and Colorado with over 48 million barrels annually in recent data—Wyoming emerges as the more attractive destination for oil and gas investors. Colorado’s stringent regulations, including setback rules and emissions controls, increase costs and uncertainty, while Wyoming’s pro-energy policies, vast public lands, and robust infrastructure create a more favorable investment climate. For those looking to capitalize on the Niobrara’s potential, Wyoming offers a compelling blend of resource richness and operational ease, positioning it as a top choice in the Rocky Mountain energy landscape.
At Sandstone, we understand what the oil and gas operators have to endure, and we wrote programs to help get permits through the complicated Colorado regulatory system. The only way the Trump Administration is going to get “Drill Baby Drill’ is to get regulations cut, and get control of California’s war on oil and gas. California imports 70% of its oil, and it is from foreign countries that do not like the United States. This is, by definition, a major national security issue. I for one am grateful for states like Wyoming and Texas that are pro-business and are striving to hit the Energy Dominant marks set forth by the Trump Administration.
Sources: USGS, U.S. Department of the Interior, Wyoming Oil and Gas Conservation Commission, Colorado Oil and Gas Conservation Commission, Hart Energy
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