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Renewed push for oil, gas:?Boom then bust?

April 2, 2012
By Sam Shawver - The Marietta Times (sshawver@mariettatimes.com) , The Marietta Times

As oil and gas companies continue the push to locate and extract natural gas and oil from local Marcellus and Utica shale beds, will it lead this area into an 1800s-style "boom and bust?"

Dave McKain, director of the Oil and Gas Museum in Parkersburg, doesn't think so.

"What's going on today is extremely different than in the past. There's an entirely new technology involved with processes like horizontal drilling-and every hole they drill can cost these big operations millions of dollars," he said.

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John Church, a member of a Southern Ohio Energy Consultants, LLC, landowners group, agreed.

"Look at the money that's allocated for infrastructure and the billions of dollars to develop cracker plants to process the gas," he said. "Companies don't invest that kind of money for temporary operations."

The oil boom of the mid- to late 1800s brought sudden prosperity to many local communities-but it didn't last.

"The first oil wells were here right before the Civil War years," McKain said. "Areas like Duck Creek in Ohio and Burning Springs in West Virginia were part of the early boom in 1859 and 1860."

He said oil companies would find a promising field and drill a well.

"In the early days, finding oil was really a guessing game," McKain said. "If a company hit a big oil-producer they would drill a well, build a huge wooden derrick and set up a 24-hour operation."

He noted there could be 10 derricks in one field and the drilling of each well required about 10 workers.

"The wells might last two or three years, or sometimes they wouldn't pan out and the company would just leave," McKain said.

If a field did produce a lot of oil, communities would often grow up quickly, fueled by a bubble of economic activity from thousands, including prospectors, who followed the well field operations.

"As people moved in, stores and saloons would be built," McKain said. "They were known as boom towns."

According to a brief history of oil and gas production from the Ohio Department of Natural Resources, boom towns, including Macksburg in Washington County, were common in Ohio during the mid- to late 1800s.

"Through the years, this scenario would often be repeated. As oilmen made discoveries, existing towns swelled, new towns sprang up overnight and fortunes were quickly made and lost," the ODNR report said.

The prosperity didn't last.

"The companies were drilling so much back then that the price for oil dropped," McKain explained. "They weren't making a big profit on their product, so they couldn't afford to drill new wells."

A federal tax on barrels of oil only added to the companies' problems.

"By the 1920s there were still oil and gas wells, but there were no more booms," he said.

The current flurry of activity by oil and gas companies is quite different due to advanced hydraulic fracturing techniques.

"This is a quantum leap in the ability to get to the resource," McKain said. "And these companies are investing millions. I think they're in it for the long haul."

Terry Tamburini, executive director of the Southeastern Ohio Port Authority, expects the coming boom to last.

"From what I've heard it's my opinion that the impact of this will last for generations-and probably longer, given the level of investment from oil and gas companies," he said. "These people aren't doing this for a tax write off."

Tamburini said a key to the long-term success of the projected economic upturn will be where the money goes.

"We could blow it all overnight, but that won't happen if we manage it properly," he said.

Tamburini hopes a lesson has been learned over the last 150 years.

"The key to long-term growth will be to take the proceeds and revenue generated from this activity and reinvest it into infrastructure and education," he said.

 
 
 

 

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