Gas and Oil Companies Fail to Prepare for Next Energy Crisis

Everyone who can remember the panic last summer when oil and gasoline prices went through the roof may be comforted by the thought that the oil and gas companies are frantically drilling in the search for and development of new supplies, especially after getting all those new leases and other breaks from the Bush Administration.

“Drill baby drill,” was the mantra of the Republican and conservative groups as encouraged by big oil.

But what has actually happened?

TV crew.
In 2008 local TV stations such as WJAC (pictured here) in Johnstown, PA, rushed to cover the drilling boom.

Oil and natural gas drilling has slowed almost to a complete stop.

It is difficult to imagine any other explanation for this than that the companies are avoiding creating any surplus that could tend to keep prices at reasonable levels when demand picks up again.

Back when “drill baby drill” was the chant, independent industry experts tried to point out that it would take years to develop new oil and gas fields if only because there were no unused drill rigs available to do the drilling.

According to a CBS Evening News report (, drill rigs now stand idle and all those new gas fields are still waiting for someone to tap into the resources.

The CBS report also quotes an oil group representative as saying they aren’t drilling because there is no oil.

“‘The leases aren’t being used because there’s probably no oil there,’ said Felmi, the chief economist with the American Petroleum Institute.”

Of course, that raises the question of why they were so anxious to get all those leases.

Government experts say there is a vast amount of oil still to be tapped in the gigantic undrilled areas already under lease.

Drill at home – the Marcellus field

Small drill rig for shallow gas field drilling. This one was actually plugging an old well in preparation for drilling a new one.

One extremely important energy story that has received little national attention was the recent development of a way for gas companies to tap the super giant (60+ million acre) Marcellus natural gas field that runs from West Virginia, through Ohio, most of Pennsylvania, and into New York State.

The Marcellus field was well-known and mapped by geologists but no economical way to tap the field was available until a new fracking and drilling method was developed at Penn State University.

(Fracking is the industry term for fracturing the rock structure at the bottom of the well – this allows the natural gas (or oil) to flow to the well head.)

Here in Central Pennsylvania, it is very obvious that natural gas companies are sitting on leases as drill rigs now sit idle.

Just last year company “land men” were writing checks in the thousands of dollars per acre just for the right to drill – royalties coming from any producing wells would, by state law, be additional and, for a Marcellus field well that averages 7 million cubic feet per day, royalties could easily reach $100,000 per year going to the land owner.

Even the shallow Barnett shale layer wells generate yearly royalties of about $20,000 per well.

This has been a major boon to farmers and ranchers despite the damage the drilling does to fields and pastures.

Last year if you owned any acreage you practically had to push your way through land men to get home. Today you are lucky if you can get one to return your phone call.

It was easy to spot working drill sites all over the region right into early Winter 2008 – and those were just the old shallow field drill rigs! The Marcellus field has barely begun to be drilled, with only a score of producing wells.

Last year the woods and fields resounded to the roar of diesel engines. This spring the fields are quiet except for normal farming activities.

Gas drill rigs sit idle in storage yards and drill crews who were working overtime last year on three shifts are now looking for work.

Gas well drilling crew working on rural Pennsylvania ranch, mid2008.

There is more than anecdotal evidence about this slowdown.

A salesman for a drilling supply company recently told Newsblaze exclusively that drilling in Pennsylvania has come to almost a complete halt. He would be in a position to know since his company supplies repair parts, pipe, and drill heads to the gas companies that do the drilling.

What is the difference?

Will the U.S. demand for natural gas plunge as more homes in the Northeast convert to gas from oil heat? Will gas-fired electric generating plants convert back to coal from natural gas?

(The answer to that is a resounding NO, since it costs little to convert a coal-fired plant to use natural gas, but a great deal to go the other way.)

Could the lack of drilling here be related to the fact that last year natural gas futures hovered around $13 per MMBtu (a standard trading unit based on the energy content of a given quantity of natural gas) and yesterday the price was $3.660 per MMBtu?

It is difficult to find any other explanation for the drastic cutback than that the companies are holding back on developing new reserves while waiting for the price surge that is certain to come with the increase in demand when the economy recovers or the next extra-cold winter in the Northeast.