By Jake Stump
CHARLESTON — More than twice as many gas and oil drilling permits are being issued in West Virginia today than 10 years ago, reflecting a renewed interest in natural resource exploration due to surging gas and oil prices.
As of Wednesday, the state Department of Environmental Protection issued 1,332 drilling permits this year. That’s on par with numbers from 2006 and 2007.
In 1999, only 649 permits were issued within that time frame.
Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia, said sky-high oil and gas prices have contributed to the high drilling activity in the state.
“Drilling activity has held very strong over the last three years,” Burd said. “I don’t believe the industry foresees a downturn in that activity given today’s operating parameters.”
Experts say this trend is a direct result of oil prices, which have lingered around $130 a barrel this week. Two years ago, oil cost about $70 a barrel. Six years ago, the average price for a barrel was $16.
Contractors and drillers see opportunity in West Virginia’s oil and gas fields, a possible solution to the climbing, unstable world market.
The DEP maintains records on more than 40,000 active oil and gas wells. There are about 25,000 inactive wells in the state.
Another draw for West Virginia is the Marcellus Formation, or Marcellus Shale, which runs through western Maryland, southern New York, eastern Ohio and most of Pennsylvania and West Virginia. The formation is a sedimentary bedrock unit that is believed to contain a large source of untapped natural gas reserves.
“The Marcellus Formation seems to be a very hot, active formation that will be drilled in the upcoming months,” Burd said.
The hotspots in West Virginia for drilling appear to be the north-central part of the state and in south. The only area where no drilling takes place is in the Eastern Panhandle, which does not have producing natural gas wells.
In addition to oil, natural gas prices have also skyrocketed in recent years. On Wednesday, natural gas prices were $11.28 per 1,000 cubic feet — double the price from two years ago.
There are, however, downsides to drilling, Burd said. It can cost at least $300,000 just to drill, he said, and more than $1 million in areas along the Marcellus Formation.
Not all wells are winners, either, Burd said.
Natural gas produced in the state is typically shipped to the northeast for utility companies, he said. Oil coming out of West Virginia is usually sent to the south to be refined.
“Appalachian production is very valuable,” Burd said. “The consumption is what’s driving the drilling. There seems to be a thirst for natural gas and oil.”
An initial drilling permit is good for two years, and most drilling has historically taken place during the summer months. But since the boom from a few years ago, more drilling is occurring in the winter.
Here’s how the permitting and drilling process works: Companies hold leases on property. They then acquire geological information on underground formations and determine a well site.
The company then negotiates with the landowner before applying for a drilling permit, which is reviewed by the DEP.
After the drilling, any gas or oil located is transported from the site, usually by massive tanker trucks, to a refinery.
Officials in the industry predict the demand for drilling will continue at a soaring pace until the price drops dramatically or global consumers stop using energy — an unlikely scenario.
“It’s a worldwide commodity sold on the open market,” Burd said. “Let’s face it. The Chinese population is buying cars. They like buying cars. Their economy is just booming, so they have a large demand for energy right now. It’s just that simple. From an oil perspective, it’s traded globally but we haven’t built a refinery in the country for 30 years. It’s Economics 101. As our country continues to prosper and grow, the need for these resources will continue to grow.”
