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High Prices Fuel Boom in Drilling for Oil, Natural Gas in Pa.

Posted on: Thursday, 12 January 2006, 18:00 CST

By Patricia Sabatini, Pittsburgh Post-Gazette

Jan. 12--Record high prices for oil and natural gas are fueling a relative boom in energy drilling in Pennsylvania.

The state issued a record 6,046 permits for oil and gas wells last year, the Department of Environmental Protection said this week. That was up a hefty 32 percent from the previous peak of 4,567 permits in 2004, and up 60 percent from 3,785 permits in 2003. A decade ago, the state issued roughly 1,200 permits for oil and gas drilling.

"The energy industry has responded to market demands by re-visiting Pennsylvania's oil and gas fields, creating homegrown energy solutions that reduce our need to import fuel," DEP Secretary Kathleen McGinty gushed in a news release.

The activity marks a revival for one of the region's oldest industries. In 1859, Col. Edwin Drake drilled the country's first commercially successful oil well near Titusville in Venango County.

In the short time after that first well and before the Texas oil boom of 1901, Pennsylvania was responsible for about half of the world's oil production. In later years, the state also became an important area for natural gas production.

Today, despite the recent surge, the state's oil and gas production accounts for only a tiny fraction of U.S. production.

Pennsylvania's roughly 16,000 oil wells produced an estimated 3.7 million barrels of oil in 2004. That compares with the average of 5.4 million barrels produced in one day nationwide.

And while most of the drilling activity in the state is for natural gas, the estimated 163 billion cubic feet produced in 2004 was still less than 1 percent of overall U.S. production.

Meanwhile, prices for heating oil and gasoline, which surged to record highs last summer amid rising demand and supply disruptions caused by the hurricanes, edged lower yesterday on the New York Mercantile Exchange after an Energy Department report showed a bigger-than-expected increase in inventories of the refined products.

Heating oil and natural gas prices also were hurt by speculation that above average temperatures in much of the country would squash demand.

Natural gas futures lost about 10 cents to settle at $9.238 per 1,000 cubic feet yesterday. Gas futures hit an all-time high of $15.78 less than a month ago.

Heating oil futures fell by about a penny, hovering around $1.73 a gallon, significantly lower than the record $2.21 a gallon reached Sept. 1, but still about 30 percent higher than this time last year.

Gasoline for February delivery lost about a half-cent, trading in the $1.73 a gallon range, down from a record $2.92 a gallon on Aug. 31. Prices remain about 40 percent higher than year-ago levels.

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Copyright (c) 2006, Pittsburgh Post-Gazette

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Source: Pittsburgh Post-Gazette

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