Sun archives Oil firms hoping to tap Nevada (8-10-2005)

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Buried beneath Nevada's desert are rich reserves of gold, copper and other natural resources. But when it comes to oil, the state is a lightweight.

Nevada is one of the lowest oil-producing states in the country. Extraction has plunged over the past few decades.

And yet, energy companies are showing more interest in the Silver State. An increasingly popular and controversial drilling technique that can pump oil from once-impenetrable places has nudged some companies to reconsider Nevada.

“It’s worth another look now,” Nevada state geologist Jim Faulds said.

Hydraulic fracturing, or fracking, involves companies blasting water, sand and chemicals thousands of feet underground to break up rock formations, letting oil and gas flow more easily though them. The method has been around since the 1940s, but the technology has improved drastically and is in the spotlight as politicians try to wean the country off foreign oil. It also has been credited for America’s surging natural gas production in recent years.

But fracking has raised environmental concerns, including accusations that it contaminates groundwater. A draft report last year from the U.S. Environmental Protection Agency linked chemicals in Wyoming groundwater to hydrofracking. Environmentalists protested when New York Gov. Andrew Cuomo considered allowing fracking in several counties.

In Nevada, at least two companies hope to use the technique to find oil.

State wells spat out roughly 427,000 barrels of oil in 2010, just 0.02 percent of the total oil production in the United States. About 87 percent of the state’s oil came from Nye County, and the rest came from neighboring Eureka County, according to the Nevada Bureau of Mines and Geology.

State regulators typically issue three or four permits each year for oil and gas drilling, but this year, they issued 13 by late September. With fracking growing more popular throughout the country, some companies have started to turn their attention to Nevada, said Alan Coyner, administrator of the state’s Division of Minerals.

No company has used hydraulic fracturing in Nevada, but some now want that option in their permits, he said.

Oil and gas producer Noble Energy plans to explore for crude oil on 350,000 acres it is leasing in northeast Nevada. The company, which gave the project a 55 percent chance of success, aims to start production in 2014.

Noble has not received a drilling permit but likely will seek permission for hydraulic fracturing, Coyner said.

In a statement that did not address fracking, Noble business unit manager Jeff Schwarz said the Houston-based company plans to start drilling exploratory wells in Nevada next year.

Ireland-based U.S. Oil and Gas also is looking for a mother lode in Nevada, though it’s unclear whether the company will use fracking to try. The company says it has about 22,000 acres it can explore in Nye County through its Houston-based subsidiary, Major Oil International.

It drilled a well 8,550 feet deep in May and began testing it in September. Of the 30 zones tested, 26 had traces of oil and two zones brought oil to the surface, but a "consistent natural flow could not be achieved," the company said last month.

Nevada’s oil hot spot is Nye County’s Railroad Valley. Shell Oil Co. drilled Nevada’s first producing oil well there in 1954, and the state’s best oil field ever — Grant Canyon Field — was discovered there in 1983. For some time, a Grant Canyon well produced up to 4,300 barrels a day, the most of any onshore well in the continental United States, according to the U.S. Bureau of Land Management.

Oil production peaked in Nevada in 1990 with about 4 million barrels and dropped to about 700,000 barrels in 1999. Annual production has stayed in the 400,000 range in recent years. Nevada oil typically is used in products such as diesel fuel, kerosene and stove oil, according to the Bureau of Mines and Geology.

Ever since the high-volume Grant Canyon well turned to water, companies have had little success finding oil in Nevada, Coyner said. Nevada ranks 26th among the country’s 31 oil-producing states.

“We really need a new discovery in Nevada to reinvigorate people,” he said.

Andromeda Oil is trying to help the cause. The company received five drilling permits this year and is exploring an oil field about 20 miles south of Carlin, said Lowell Price, the Division of Minerals’ oil, gas and geothermal program manager. Andromeda drilled a well there early this year and struck oil, prompting it to drill in other parts of the field, he said.

The company's goal is to explore the Chainman and Pilot shales, formations in eastern Nevada that might hold vast troves of oil and gas, co-owner Justin Rammell said. The company plans to use fracking. It gives energy companies “a degree of certainty they didn’t have before,” Rammell said.

If Chainman wells spout oil, speculators likely will stream into Nevada. “It will turn into North Dakota out there,” Rammell said.

But finding a way to access the black gold comes first.

“You can’t get the resources without fracking,” he said.