New York Times July 22, 2001

Supplies Lag Despite New Natural Gas Wells

By DOUGLAS JEHL

LAREDO, Tex., July 19 — Over the last six months, Mark Papa's company has drilled more natural gas wells than anyone else in the United States — about one a day — and many have been here in the dry plains of South Texas, a dominant source of the country's fastest-growing fuel.

The drilling is part of an extraordinary boom, driven by high prices and a surging domestic appetite, that is on track to include the drilling of about 18,000 gas wells this year, a 60 percent increase over 1999 and more than in any year since 1982, near the height of the energy crisis.

But for the country and for people like Mr. Papa, there remains a significant problem. For all the new drilling, gas production is only barely creeping up, and not nearly enough to meet the increasing demand.

"We're kind of on a losing streak," Mr. Papa said, speaking not only for his company, EOG Resources, but for an industry that is having trouble keeping pace with the growing hunger for natural gas. The Energy Department projects a 45 percent increase in gas consumption by 2015, but in the last year, production is up not much more than 2 percent.

To address the demand, the Energy Department says, the number of gas wells drilled each year must multiply further, to more than 30,000, and even then, supplies will continue to lag, so that imports from Canada, Mexico and other countries will become an ever more vital part of the country's energy future.

Such projections also suggest further increases in natural gas prices, which are only now beginning to fall from recent record peaks. But more than anything else, they make clear that a future more heavily dependent on natural gas, seen as the cleanest and most environmentally friendly of the fossil fuels, will also require an enormous increase in drilling, a factor that is part of the increasing pressure on opening new public lands to energy exploration.

"We're clearly looking at punching lots of new holes," said Dan Reicher, a former assistant secretary of energy now affiliated with the World Resources Institute. "The question is whether we can do it in an environmentally sensitive way, that the public can support."

In recent weeks, Congress has raised new obstacles to energy exploration, with votes blocking new drilling on land designated as national monuments and requiring the Bush administration to scale back a major offshore project in the eastern Gulf of Mexico, near Florida.

But the demand for natural gas in particular continues to surge, even as prices drop from what were record highs just a few months ago, and suppliers are struggling to keep pace, even as they find that the number of wells drilled translates into less and less natural gas than ever before.

"It's like a treadmill," said R. Skip Horvath, president of the Natural Gas Supply Association, the industry's lobbying arm in Washington. "You have to race faster and faster just to keep up."

One big reason for the decline, Mr. Horvath and other industry officials say, is that federal restrictions to public lands make it more and more difficult for energy companies to gain access to the richest of energy reserves, like those in parts of public lands in the Rocky Mountains still off limits to energy exploration. Mr. Horvath's group and others in the industry have pointed to the figures in arguing for the need to gain broader access to potential drilling sites, onshore and offshore, something that the Bush administration has endorsed, although it has not spelled out its precise plans.

The biggest reason that gas production is lagging so far behind drilling, industry officials say, is that most of the gas fields now open are old, with returns that diminish steadily, year after year. Over all, just to maintain current production, the industry must increase production per well by about 23 percent a year, a rate that is the driving force behind the increase in drilling.

One part of the country where gas production has been booming is the Rockies, including parts of Colorado, Montana, New Mexico, Utah and Wyoming, which the industry sees as the heart of the next wave of natural gas production. The fuel currently provides about one-fourth of the country's power, and with nearly all new power plants now planning to be fired by natural gas, projections by the Energy Department say that percentage will sharply increase.

But recent Congressional moves barring drilling in gas-rich parts of the Gulf of Mexico and in national monuments have unnerved the industry, which had seen the offshore reserves, in particular, as vital to increasing production.

It is in the gulf, more than anywhere else, that the rate of production per well is declining most sharply each year, at a rate of as much as 40 percent, adding to the industry's hunger to gain access to more drilling sites.

Over all, wells that are less than three years old now account for some 60 percent of the country's natural gas production, a factor that has led to the industry's voracious appetite for new drilling, particularly in places that have for so long been off limits, like vast tracts of public lands in the Rockies.

But despite the efforts of the Bush administration, which has vowed to increase domestic energy supplies, the current political dynamic seems to be pushing toward less drilling, not more. That has frustrated people like Mr. Papa who have seen the most lucrative lands walled off at a time when domestic demand is increasing.

In places like Laredo and Trinidad, Colo., a backlash against the drilling is beginning to make itself felt. In Trinidad, the Las Animas County seat, along the New Mexico-Colorado border, Mark Sexton's company, Evergreen Resources, is by far the biggest natural gas operator, but he is feeling the pinch from local regulations meant to rein in drilling even more vigorously than is spelled out under federal law.

"We need to drill more wells more quickly to produce more gas," Mr. Sexton said, making clear his discontent with the new regulations.

In Texas, where EOG Resources is a leader in terms of gas wells drilled, Mr. Papa, the president and chief executive officer, said he found it frustrating that so much new drilling was resulting in so little new gas. "We need to end the losing streak," he said.

http://www.nytimes.com/2001/07/22/national/22GAS.html?todaysheadlines

-- robert waldrop (rmwj@soonernet.com), July 22, 2001

Answers

Those statistics on incrfeased demand are scary. Makes me want to consider buying a corn stove for those cold winters.

-- John Littmann (johntl@mtn.org), July 22, 2001.

peoaple simply do not anticipate. They never react to a crisis until it clobbers them over the head.

-- Uncle Fred (dogboy45@bigfoot.com), July 22, 2001.