Niobrara's Slow Start Not Cause for Worry

- Niobrara's Slow Start Not Cause for Worry

Tuesday, July 19, 2011
Knight Ridder/Tribune Business News
by Trevor Brown, Wyoming Tribune-Eagle, Cheyenne

The Niobrara oil play is off to a slow start, but state and industry officials say that is not unexpected or a reason for concern.

No oil rigs were operating in southeast Wyoming as of last Wednesday. This is down from about six in the area two months ago.

Wyoming Oil and Gas Conservation Commission Supervisor Tom Doll said many oil companies are waiting for updated seismic maps that show the underground Niobrara formation before they commit to expensive drilling operations.

"You want to get as much data as possible so you don't drill a $3 million to $4 million dry hole," he said. "My expectation is (the companies) want to have another tool of using that additional science to have a better opportunity to drill a productive well."

Texas-based Global Geophysical Services spent much of the spring using trucks and other seismic equipment to map areas beneath the surface of 831 square miles of land in Laramie County.

John Robitaille, vice president of the Petroleum Association of Wyoming, said it can take some time before the 3-D seismic maps are analyzed and sold to the oil companies.

"I can tell you it is some pretty technical data that they receive back," he said. "It then needs to be plotted and made into a format that is readable for the various geologists so they can get their plans made and know where they want to drill.

"And, of course, getting everything in place and lining up a rig takes all sorts of time as well."

Robitaille said he expects the activity to pick up in the fourth quarter of this year. In addition, up to three rigs are expected to return to Laramie County later this month.

According to the Oil and Gas Conservation Commission, 21 wells have been drilled to date in southeast Wyoming for the oil play -- 18 in Laramie County, two in Goshen County and one in Platte County.

Doll said although the companies are currently hesitant to drill, they are moving forward with other preparations, including obtaining drilling permits.

The Oil and Gas Conservation Commission issued 73 permits for drilling in Laramie County for the first quarter of 2011 and 60 in the second quarter.

In the second, third and fourth quarters of 2010, a combined 64 permits were issued here. Data from the first quarter of 2010 are not available.

Laramie County planner Gary Kranse said he estimates 1,500 drilling permits will be issued during the next five years here.

Both Doll and Robitaille said the relatively low number of wells that have been drilled so far is not a sign the oil play is a bust -- at least not yet.

"I wouldn't be too concerned because this is a slow-moving play," Robitaille said. "It is still very much in the exploratory phase of knowing where to drill."

A representative for Chesapeake Energy, which has announced a large stake in the oil play, would not comment on the specifics of why there has not been more drilling.

But John Dill, director of corporate development and government affairs for the company, agreed this exploratory phase can take some time before increased activity begins.

"It is also a very complex geology, and Chesapeake is only just beginning the process of exploring this vast, complicated play," Dill said in an email. "What may appear to be slow development of this extraordinary resource is primarily due to its size, complexity and the early stages of this effort."

Doll said there is too little information yet to determine how successful the play will be in the end.

This is because of the low number of commercial wells and rules that allow companies to keep their results confidential for up to six months.

"We just haven't seen enough drilling rigs and enough activity to really know if there is a play yet," he said.

Another reason for the oil play's slowdown could be because of increased activity in North Dakota, Doll said.

He said the Bakken oil play is gearing up to have 170 active drilling rigs and up to 290 by the end of the year. That could leave a shortage of equipment and workers for activity here.

"They claim that they are using many new rigs, so that may not be a problem," Doll said. "But my concern is: Where are you going to get the drillers, roughnecks and (fracking) crews who are trained to do the sophisticated work?"

Kranse added that companies could be taking time to develop the right formula for fracking the Niobrara shale.

Hydraulic fracturing, known as fracking, involves injecting a mixture chemicals and water into the earth to extract oil.

Copyright (c) 2011, Wyoming Tribune-Eagle, Cheyenne

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Officials Plan to Go Slow on O&G Drilling on Public Lands

- Officials Plan to Go Slow on O&G Drilling on Public Lands

Thursday, June 23, 2011
The Columbus Dispatch, Ohio
by Jim Siegel

A bill allowing oil and gas drilling in state parks and some other public lands is on its way to Gov. John Kasich for his signature, but state officials say it will be a year, and likely longer, before anyone starts putting holes in the ground.

"This will be a very deliberate, very measured process. There will be nothing happening fast," said Laura Jones, spokeswoman for the Ohio Department of Natural Resources.

Over Democratic objections, the House voted 57-38 to give final approval to House Bill 133, which would create a new five-member Oil and Gas Drilling Commission -- four gubernatorial appointees and a Natural Resources official -- to oversee drilling on state-owned land and grant leases.

While critics highlight potential hazards, supporters point to the $128million that Pennsylvania got in 2010 from leasing state lands for drilling, and the $178million collected by Michigan -- money they say is sorely needed to make a dent in the nearly $500million in backlogged maintenance projects at Ohio's state parks.

"Nobody ever comes up with another solution for closing the half-billion dollar shortfall the state has on taking care of their properties," said Tom Stewart, executive director of the Ohio Oil and Gas Association. "The park experience is degrading before our very eyes."

Stewart said it "would be wonderful if, within a year's time, we have some discoveries on state-owned property." Jones called that a very optimistic time frame.

No one is certain when the money will start flowing to the state.

Rep. John Adams, R-Sidney, the sponsor of the bill, said that while rules are being written, Natural Resources officials can immediately begin researching titles on land parcels to determine whether there are restrictions.

"The bill has been designed to allow the process to get moving as quickly as possible as the rules are promulgated," Adams said.

While the commission would have broad authority to lease public land where the state fully owns the mineral rights, Jones said much of the land under control of the Department of Natural Resources has some level of restriction that must be worked out. For example, she said, federal funds used to purchase and operate wildlife areas must be taken into account.

"We as the landholder will have an awful lot of say on what lands would not be available, or what restrictions would be on those lands," Jones said.

Eventually, drilling companies will nominate parcels of land for drilling. But Stewart expects that during the first year, the state will do the nominating.

The Ohio Environmental Council, among others, has expressed concern that the bill would give the commission, rather than state agencies that own the land, too much authority to grant drilling leases.

Sen. Teresa Fedor, D-Toledo, said drilling on public lands "remains unnecessary, unwanted and unsafe," echoing concerns about how drilling could impact the natural beauty of parks and about the use of a hydraulic fracturing technique on deep shale that could harm groundwater supplies.

Stewart said there is no evidence of "a direct correlation between groundwater contamination and the act of hydraulic fracturing."

As Ohio drillers plan to ramp up production, millions of barrels of toxic wastewater from natural-gas wells in Pennsylvania are coming into Ohio despite efforts by officials here to keep its injection wells open for Ohio brine.

The brine is a byproduct of hydraulic fracturing, or "fracking." Pennsylvania sewage plants dumped so much of it that it became a threat to drinking water, and state officials ordered plants to stop dumping brine.

Stewart said the Pennsylvania imports are a definite concern for Ohio-based drillers. "My members need someplace to properly dispose of their water."

In other legislative business:

• The House passed House Bill 25, which increases penalties for repeated convictions of cruelty to animals. Rep. Courtney Combs, R-Hamilton, said the current penalties are "no more than a slap on the wrist."
• The House voted 84-12 for House Bill 116, which would require schools to educate students and parents about their anti-bullying policies.
• The Senate moved to abolish or consolidate 85 state boards and commissions through Senate Bill 171, which adopts recommendations of the bipartisan Sunset Review Committee.

Copyright (c) 2011, The Columbus Dispatch, Ohio

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