Tuesday, January 17, 2012

New York's 2011 Drilling Report: Permits Down, Spuds Down, Completions Down

Media-driven perception:  The NYS DEC Minerals Division is so over-worked and under-staffed, it is in absolutely no position to handle industry's offered shale gas boom, even if the permitting chokehold were ever to be relaxed.

Actual statistics:  Leaving aside the bureaucratic labors imposed by the fracking-related SGEIS (which are undoubtedly substantial), the DEC's drilling-related workload — whether paper permits issued, or actual active drilling sites in need of inspection and monitoring — has dropped between 58 and 66 percent since 2008. 

In fact, in 2008 — New York's busiest year in the modern era of oil and gas — the DEC processed 2.9 times as many drilling permits as it did last year, saw about 2.4 times as many "spuds" (or well starts), and recorded about 2.7 times as many well completions.

Those are the numbers.  Those are the facts.  How do we know? 

We know because — unlike virtually the entire posse of paid mainstream journalists — we've simply run the government data in person and directly, right off the DEC's web site, without waiting around for completely unreliable anti-drilling activists to first pre-process, pre-spin, and pre-bless all possible news stories. 

It's not hard to do.  Running the data for yourself is also a much better plan (and a much more timely plan) than waiting for the DEC Minerals Division to issue its annual reports.  Those reports are usually more than a year out of date by the time they're posted.  In fact, that's the situation right now with regard to the annual report for 2010:  It still has not been released, though the data cover significant economic and environmental activity from more than a year ago (most of which is entirely old news by now).

But never mind 2010.  Here are the 2011 numbers, and here are the 2011 facts:

Online records covering oil, gas, and other wells show the number of newly spudded wells last year dropped 25 percent compared to 2010, and 58 percent compared to 2008.  This is counting all oil and gas wells — but also including non-fossil-fuel-producing wells such as stratigraphic, brine, storage, and geothermal.  The state's database shows the number of wells started dropped from 543 in 2008 (the last year of a very high, three-year run), to 300 in 2009, 301 in 2010, and 226 in 2011.

Looking at the numbers of wells permitted — some of which have not been drilled, may never be drilled, or were not drilled in the same calendar year — approved applications from industry dropped
46 percent compared to 2010, and 66 percent compared to 2008.  That's a drop from 738 in 2008 (the highest of three very active years), to 552 in 2009, 470 in 2010, and 254 in 2011.

Examining all wells completed — some of which may have been permitted or spudded in prior years — the decline in activity is similar:  Down 39 percent compared to 2010, and 63 percent compared to 2008.  Again, that's a drop from 539 in 2008, to 283 in 2009, to 327 in 2010, and 199 in 2011.

By pretty much any measure, the numbers from 2011 indicate NY just managed to basically equal the pre-shale gas year of 2004.

[Note that these numbers are based on the online records for all 4,486 wells permitted in New York State since 1-1-2000, as those records electronically existed on 1-16-2012.  Drilling permits applied for, but never granted, were not covered.  In addition to database errors, of which there appear to be a few, it is also likely that there will be a few 2011 records which had not yet been entered into the database as of 1-16-2012.]

So what does it all mean? 

The time period from 2008 to 2011 covers nearly four full calendar years of New York's hotly contested shale gas freeze.  But, technically speaking, the drop in wells permitted, spudded, or completed since 2008 is not directly due to the state's Marcellus moratorium serving to freeze out a large number of previously existing projects.  That's because none of the New York drilling records (before or since 2008) has ever included a permitted, full-on, full-horizontal, full-fracture shale gas well.  Before February 15, 2008, industry had not yet ever proposed such a project in New York.  And no such permits have been granted since, due to a sequence of administrative moratoriums, which are now supposedly on track to be lifted in 2012.

In Pennsylvania, the first such well was drilled and fracked without publicity as early as October 2004. Since then, the Keystone State's EKG of oil and gas activity has gone virtually off the charts, driven largely by the boom in developing horizontal wells in the Marcellus shale formation.  A number of additional gas-bearing eastern states — namely Ohio, West Virginia, and Michigan — have since found ways of following PA's lead, without getting bogged down in much political controversy.

But not New York.

New York has instead witnessed a drilling decline which appears indirectly related to its own self-inflicted moratorium, acting in conjunction with dramatically increased investment focus on unconventional shale gas, shale gas liquids, or shale oil — to the exclusion of more conventional source rocks.

The glut-depressed value of pure methane — which has now plunged through the $3 level, and threatens to sink past 10-year lows — has also become a key factor in the demise of even such limited drilling as was previously hosted by New York.  Given the inevitable price squeeze, NY's still-drillable, conventional reserves are now viewed by industry as uncompetitive with unconventional prospects — especially those that are heavy in natgas liquids or oil, such as in SWPA, and in eastern OH. 

Even assuming NY tentatively manages to undo its shale gas permitting ban, the resource owners (namely, the landowners) could very well find themselves the victims of bad timing — not ready at the dawn of the shale gas revolution, and now totally underwhelmed by industry disinterest, given the current economics.

Ohhh, if only NYS was ready in 2008! 

I wonder — what was the cumulative economic impact of New York's State of Regulatory Unreadiness?

1 comment:

Pest control Portland said...

I say your blog is awesome! Happy New Year!