Oil reserves in Nebraska? Maybe, but potential alone ignites demand for mineral rights

Listen to this story: 
March 22, 2011 - 7:00pm

As oil prices rise, so does dialogue about finding new oil reserves in the United States.

There's some hope in new drilling technology that is providing access to previously out-of-reach oil in the western United States. The Niobrara shale basin in Wyoming, Colorado and Nebraska shows particular promise.

Horizontal drilling taps oil that's actually closer to the surface.

"Rather than drilling a well where the bottom well location is offset, they actually drill the well down it'll be turned 90 degrees into the zone of interest, generally the casing will be set there, pointed in right direction, it'll be flat, we'll drill horizontal to sea level to a target location," said Bill Sydow, director of the Nebraska Oil and Gas Conservation Commission.

Horizontal drilling has been put to work in Wyoming and Colorado, but no permits have been issued in Nebraska - yet. Sydow and others see great potential in looking for oil this way in the state's panhandle.

Farmer and rancher Charles Anderson owns land in both Nebraska and Wyoming and has oil pumps on either side of the state line. Three oil companies are looking for crude underneath his farmland and one has indicated it intends to employ horizontal drilling.

But Anderson said besides the payments he receives for surface damage, he's not making much money off the drilling.

"As far as getting rich or being a Jed Clampett that's just not going to happen." Anderson said.

Still, expectations are so high for horizontal drilling that mineral rights in Nebraska's panhandle are leasing at record prices.

Sydow said state-owned mineral rights are auctioned off through leases every year and the most recent one was pretty noteworthy.

"The very last lease sale that was held in Nebraska, by virtue of this activity in Colorado and Wyoming, I believe our board of education land and funds had the largest pot of money raised for over 30 years," he said.

Interest is especially strong in Banner County. Its only town, Harrisburg, has a population of around 100 and looks like a prairie museum. There are buildings from the 1800s a welding shop, church, drug store.

The town didn't have too many visitors. Until last year.

"Just to give you an idea of the amount of recording that took place last year - book 127 we started off in page 380 in January of 2010 and now we have book 135 which is close to being full," said Lori Hostettler, the Banner County Clerk.

She said since November the courthouse has had to bring in an extra table, another copy machine and computer to accommodate an influx in oil company workers researching mineral rights in the county.

But the promise in Nebraska's shale basins may not pan out. Just 20 miles of south of Harrisburg is Kimball, Neb. Between the 1950s and 1980s, oil exploration and production made Kimball a boomtown. But Evertson Well Services Inc., which has rigs all over the world, is the only oil company that remains in Kimball.

Bruce Evertson, the company's chief executive office, said the Niobrara basin is too shallow in Nebraska for oil.

"I don't think it's here," he said. "The formation's definitely here, but since I was a kid we drilled through it hundreds of hundreds of times. I never saw anything that looked productive in the Niobrara here."

Evertson said he's looking deeper and drilling vertical wells in the panhandle.

"Now you have a lot of people spending a lot of money in the panhandle of Nebraska thinking I'm wrong, so we're going to see who's right. But I'm hoping they're right because they have leased a lot of minerals and paid a lot of money for them," he said.

Until that's determined, the economic impact is much like the oil exploration itself pure speculation. And the oil companies, who declined to talk for this story, aren't tipping their hand.



blog comments powered by Disqus