Rising Gas Prices Pump up Virginia's Oil Industry

Virginia does not have much of an oil industry to speak of. However, with rising oil prices, exploration becomes more economically viable in areas previously overlooked. The reality is that once before - in the early 1980's before the oil industry crashed - there was a great deal of interest in possible production in Virginia. One of my compatriots in the law department for Union Texas Petroleum Company ("UTPC") with some input from yours truly helped draft Virginia's original oil and gas related statutes since at that time there were none. Moreover, UTPC at one point was the largest leaseholder in Virginia. Of course, after the oil crash of the early 1980's oil and gas exploration languished in Virginia - until now. Unfortunately, increased domestic production will NOT solve the USA's oil dependence on the Middle East no matter how much the Chimperator or John McCain pretend otherwise. Here are some highlights from a story in the Virginian Pilot:

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For decades, companies drilling for natural gas here in the remote mountains of southwest Virginia have known that the wells yield another coveted resource: crude oil. Until recently, though, the quantities were considered too small to matter - a nuisance byproduct of gas production that sometimes was released back into the ground. But that was before market prices for crude soared above $130 a barrel. Now, the state's gas industry, which is experiencing its own boom, is welcoming this "nice bonus" - separating crude at wellheads, storing it and later selling it for refining into fuels, said Jerry Grantham, a top officer with the Virginia Oil and Gas Association, a trade group.

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Coal remains the richest fossil fuel mined in Virginia by far. But the energy resource drawing the most attention these days in the state is coal bed methane, a natural gas that looks, acts and smells like conventional gas. Methane is typically found in gaps within untapped coal seams, often at much shallower depths than conventional gas. Its withdrawal, then, is cheaper and helps to safeguard coal mining, as methane is known to easily explode.

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A record amount of natural gas was generated from Virginia wells in 2006, at more than 102 billion cubic feet - enough to power all residential users in the state. This fact, too, was a first in Virginia, according to government and industry officials. About 80 percent of this total output was coal bed methane, worth more than $660 million.

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The skyrocketing trend, ongoing since the late 1990s, continued last year: The Virginia Department of Mines, Minerals and Energy reported last week that 112 billion cubic feet of natural gas were produced in 2007, yet another record. "And there's still a lot of potential out there," said Grantham, who also is vice president of Pine Mountain Oil and Gas Co., based in Abingdon. "We expect the industry to continue growing - more wells and more exploration in the region," he added.