Tuesday, October 7, 2008

Outdated Regulations Slow Oil, Gas Drilling In Tennessee

(BUSINESS WIRE)--High crude oil and natural gas prices, new drilling technology and the state's Chattanooga Shale could combine to turn Tennessee into a significant oil and gas producing state, if enforcement of outdated regulations doesn't slow or even stop oil and gas exploration, said one industry official.

"We are currently producing crude oil and natural gas in 11 Tennessee counties, and there is potential for oil and gas producing from more than half of the state's counties," explained Scott Gilbert, President, Tennessee Oil & Gas Association (TOGA).

"Horizontal drilling in the Chattanooga Shale is a major factor in the growth of oil and gas development through a good portion of the state," said Scott. "And high crude oil and natural gas prices is another contributing factor.

"This could all come to a halt unless we can convince the state's Oil & Gas Board to make the kind of changes needed in the state's oil and gas regulations to stimulate oil and gas development rather than hold it back," he added.

Scott noted that many of the oil and gas regulations were written 30 or more years ago, when oil was less than $10 a barrel and natural gas was just flared into the atmosphere. Today oil prices are nearly $100 and natural gas is selling for $8 or more an mcf.

"Thirty years ago, if a well didn't flow oil when it was drilled in, it was considered a dry hole. Fifty years ago, all too often dry holes were not plugged and were just open. Thus, the regulation that require either producing or plugging all wells.

"With today's technology, we can turn many old wells that appear to be dry into a substantial oil or gas producer. But if the state forces old wells to be plugged, they can seldom, if ever be reopened," Gilbert noted.

"In addition, it often takes months or even years to drill enough gas wells to justify a pipeline. If we are forced, by the Water Pollution Control Division, to plug a well within six months, there would be very few wells drilled for gas, and certainly no wildcat wells where the operator may have to wait for many years for a pipeline," he added.

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