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| | Tue Jul 23, 2002
Interest lit by oil fire
Publisher: The Knoxville News-Sentinel Co.
Author: Bill Brewer
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| | Interest lit by oil fire
Big firms had written state off as unproductive
By Bill Brewer, News-Sentinel business writer
July 23, 2002
Fire from a blown-out Morgan County well may be an environmental nightmare, but it's also sending smoke signals to speculators who don't believe there's oil in Tennessee's hills.
Highland Drilling Co. of Kingston, which owns the burning drilling rig in a remote area on the Cumberland Plateau, is one of about 25 companies exploring for oil and natural gas in a dozen East Tennessee counties, according to the state Division of Geology.
No oil or gas activity is recorded west of the Cumberland Plateau.
While the 167 drilling permits issued last year is down from 205 in 2000, the number of completed wells and the amount of petroleum they produced increased, according to the division's annual report "Oil and Gas Activity in Tennessee During 2001."
The permits are still up from 124 issued four years ago, which was up from 86 permits in 1996.
"We've been hanging in there. Production hasn't been declining," said Ron Zurawski, state geologist and director of the Tennessee Division of Geology.
East Tennessee wells generated 386,428 barrels of oil last year worth $8.5 million, a 12 percent increase over the 346,332 barrels produced in 2000, the report stated.
Overton County led in production with 160,412 barrels followed by Scott County, 48,683 barrels, and Morgan County, 45,147 barrels. Each barrel is equivalent to 42 gallons.
Tennessee will never be mistaken for oil-rich states like Texas, Louisiana or Alaska, experts say.
Zurawski said Tennessee ranks about 23rd nationally in oil production value and natural gas production value.
But most agree that a wildcatter willing to gamble the costs of an oilrig, drilling team and some geology surveys can make money here.
Dr. Robert D. Hatcher Jr., University of Tennessee Distinguished Scientist in structural geology and tectonics, has watched exploration activity pick up in recent years.
He mentioned a Hancock County natural gas field being developed by Knoxville company Tengasco and a discovery west of Lake City in Anderson County by John Henry Oil Co. of Slidell, La.
Hatcher, who for 35 years has been studying rock formations that seal the region's petroleum reserves, said Morgan County has been giving up oil and natural gas for decades.
Hatcher describes the Morgan County oil well fire as a tragic anomaly but said it's a situation that could yield increased drilling activity when word gets out how much oil is burning.
The well could have tapped between 80,000 and 240,000 barrels of oil, the Tennessee Oil and Gas Association estimated.
Hatcher, who has served on Tengasco's board of directors, said reports have inaccurately described East Tennessee's oil and gas reserves as "mature" or unproductive.
"This whole area had been written off by major oil companies as unproductive," Hatcher said.
He cited as an example Tengasco's Swan Creek natural gas field near Sneedville. He said Amoco, Arco and other companies had leased the area to drill but gave up.
In 2001, Hancock County produced 979.4 million cubic feet of natural gas and led the state in gas production, according to the Geology Division's 2001 report. It was followed by Claiborne County with 351.5 million cubic feet and Morgan County at 280.1 million cubic feet.
A typical house uses 200,000 cubic feet of natural gas a year, Zurawski said.
While Tennessee's contribution to the nation's oil and gas reserves is "pretty small," as Zurawski calls it, production still makes money for the few small independent exploration companies, the state and the counties where oil and gas is found.
The state's first oil well was drilled in 1864 and the record for production was set in 1982, when more than $35 million in production was sold, according to Geology Division records. The U.S. average price per barrel then was $30.93.
Production value was just over $15 million last year, Zurawski said, noting that the 3 percent oil severance tax raised $255,000 and the same natural gas severance tax raised $220,000 for the state, with a third of that going to the county where the fuel originated.
"It's not huge, but it is significant," Zurawski said.
Bill Brewer may be reached at 865-342-6319 or brewerb@knews.com.
Copyright 2002 The Knoxville News-Sentinel Co. |
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