Both large and small energy companies have spent the last few years fending off new US government regulation, and the associated “Red Tape” that slows resources development.
Nevertheless, the data show that the pace of drilling is at 18-yr + high. Nat Gas drilling declined, as the price of Nat Gas fell and is staying low, but high Crude Oil prices, and the widening price gap between Crude Oil and Nat Gas fueled enough Oil drilling take up any slack.
As I reported recently there were 1,882 rigs drilling wells around the USA last week, + 21% from last year and up more than 50% from the beginning of Y 2010. There are now more rigs drilling for Crude Oil than at any time since Y 1987
The numbers tell me that when prices are aligned, changes in policy or regulation do not stand in the way of new drillings, short of a “moratorium, regulations do not effect the search for energy in the USA.
The Marcellus Shale Coalition, a group representing the New York/Pennsylvania/Ohio Nat Gas industry, has cautioned that new rules covering the release of wastewater into streams would be negative for growth on the formation.
From my POV the rules and regulations that, while making things tougher on the industry even to the point of limiting jobs growth, protect our Good Earth are not only called for but responsible and ultimately beneficial to all.
That said and the regulations in place Nat Gas drilling is expanding in the Marcellus Shale and Pennsylvania ranks among the fastest-growing states for drilling on the formation, according to a Baker Hughes report (NYSE:BHI), one of the largest Oil service companies in the World.
It is interesting to note that instead of slowing development, the new rules are driving innovation, and have led to greater recycling of wastewater, and the drillers have stopped discharging wastewater into neighboring streams. Further, that the Marcellus Shale Coalition supports some of other changes the state has put in place over the last year.
The American Petroleum Institute (API), recently said that while federal policy has stifled some drilling, much of the new activity is on private, state-regulated land in Texas, North Dakota and Pennsylvania. In Wyoming, where much of the drilling is on federal land, drillers argue that federal policy is hurting growth.
The API says that the new rules passed in the states have not been overly burdensome, and energy companies are supporting some new state regulations, including rules requiring disclosure of chemicals used in hydraulic fracturing.
Even as drillers fight some major state regulatory changes over the past few years, growth in those states continue to be Strong in spite of predictions that it would slow appreciably
In Y 2009 Colorado rewrote some of its drilling rules under Govenor Bill Ritter prompting the Colorado Oil and Gas Association filed a lawsuit to invalidate the changes stating they would force activity out of the state.
Instead, Colorado drilling has increased 31% in the last year, outpacing the Nation in that period, the Baker Hughes rig count shows.
Overall, drilling in the State of Colorado has recovered to about 66% of what it was in June 2008, before the recession hammered drilling activity across the USA.
The Colorado Oil and Gas Association dropped its lawsuit earlier this year.
In New Mexico, the industry has continued to fight a Y 2008 rule aimed at stopping water contamination in waste water reservoirs.
When then Governor Bill Richardson championed the rule, drillers warned that compliance would be expensive.
The current Governor, Susana Martinez continues to have concerns about the rule, saying recently that the it drives jobs out of the state.
But in the months after the rule was applied, drilling in New Mexico increased until the recession came on, and now the rig count is a bit higher than it was 3 yrs ago, when the rule took effect.
John Bemis, New Mexico’s Secretary of Energy, Minerals and Natural Resources, said the Y 2008 rule has slowed Nat Gas drilling in parts of the state, but that new Oil drilling in other areas has compensated for the slow down plus.
Across the USA, drilling rebounded to more than 90% of where it was before the recession. According to the Baker Hughes report, a lot of the growth is taking place in Texas and North Dakota, where drillers are tapping into 2 Shale Oil formations using horizontal drilling techniques coupled with hydraulic fracturing, an approach similar to the one drillers have used to access the Nat Gas in the Marcellus Shale formation.
So, a combination of innovative technology, timing and recourse price is making these among the Country’s “Hot Spots”, said an analyst who wrote a report released last week detailing the drilling trend.
It notes that, “Energy companies have developed techniques to extract more oil from deep shale formations than had previously been possible. When the price of oil tripled after the recession, using that technology became viable despite its higher costs.”
The report said drilling has increased 4-fold in North Dakota over the past 2yrs, primarily into the formation called the Bakken Shale, and has doubled in Pennsylvania, and so there’s little evidence that policy changes have slowed growth in the Oil Patch.
The Oil and Gas industry has the flexibility it needs to respond to regulation and market signals in a positive way. Stay tuned…
