Company hopes to move forward with gas drilling; Shell plans to come north with testing in northeast N.M.
By Todd Wildermuth, Editor • Tue, May 22, 2012
Shell Oil Company hopes to move ahead soon with one or more new test wells in northeast New Mexico that could eventually lead the company to establish natural gas drilling operations throughout this part of the state, including Colfax County.
A Shell official this month told the Colfax County commission that the company wants to be ready with an adequate supply of natural gas when demand — and prices — for the natural resource rise. Although prices are at a 10-year low, the markets for natural gas are “always evolving,” according to Mike Smith, an enterprise service management adviser for Shell.
Eight counties in northeast New Mexico are referred to by industry officials as the Penn Play, an area that has gained attention to a degree that prompted a few industry representatives to make a presentation at January’s New Mexico Association of Counties Conference. One of the key points made during the presentation was that the companies would want a “uniform regulatory climate” across the multiple counties where they believe a large pool of natural gas may sit among the rock layers some 7,000 to 13,000 feet below the surface.
“(It’s) important to have a good working relationship with the counties and states in which we operate,” Smith said during his May 8 presentation to the county commission.
Colfax County does not have any oil and gas drilling regulations. The county developed a draft ordinance in 2006 that contained language that was objected to by El Paso Energy and Production Company, a Houston-based firm that has been operating natural gas wells on Vermejo Park Ranch for a number of years. The proposed ordinance, which also prompted some legal concerns among county officials, was not adopted.
The commission last month appointed 17 people to a newly created committee that has been tasked with researching the need for and potential issues that could be addressed by an ordinance to govern oil and gas drilling in the county.
Based on results from a few test wells Shell has already done in east-central New Mexico, the company wants to move northward with its testing. However, that process has been “at a standstill,” Smith said, because of a drilling moratorium that has been in place in San Miguel County for the past two years. Smith said the moratorium has produced no regulations developed by the county and is set to expire soon. With the moratorium expiration, Shell is hoping to get approval for a test well in San Miguel County — two counties to the south of Colfax — perhaps as soon as next month, Smith said.
If a test well in San Miguel County shows promising results, Shell would move forward with further testing in the more northern parts of the Penn Play. Good test results could lead to full-fledged exploration wells being set up in 2013, Smith indicated, although he could not say exactly where the initial exploration wells might be located. He said more test wells must be done first to confirm what geologists believe is a good supply of natural gas below the ground.
Smith said that while technological advancements have improved the ability to forecast where are the best places to drill for natural gas, it’s “still a guessing game” that requires actual drilling to determine the true potential of a site.
“We’re not always right” in selecting drilling sites, Smith said.
But when they are, drilling operations can bring economic and other benefits to the local area, he said. Those benefits include Shell leasing property from landowners, making road upgrades, paying taxes and royalties to county and state governments, initiating the company’s “social investment program” in the community (which includes contributing to schools and other local programs and endeavors), and, of course, creating jobs. Smith said each regular exploration well can employ 75 to 100 people.
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