Oil, Gas Heating Up

A new gold rush is on in northcentral Pennsylvania.

This time, however, the speculators are seeking "black gold" -- slang for oil -- and its subterranean partner, natural gas.

Companies have dispatched agents throughout the region on a mad dash to identify and tie-up drilling rights on thousands of acres. The issue carries with it a host of economic and environmental ramifications that local officials are just beginning to reckon with.

An initial warning siren was sounded from the McKean County community of Kushequa, where natural gas production unleashed a wave of pollution that fouled drinking water supplies.

Most recently, township supervisors in Potter County have complained of road deterioration as heavy drilling rigs make their way to leases they've recently locked up and now seek to explore.

Motels, gas stations, restaurants and taverns are seeing a spike in their receipts that they attribute to the oil and gas contractors.

Two trends are fueling the rush: record prices and new technology that makes oil and gas production more efficient.

Early numbers in Potter County suggest 2008 will be a record year for drilling permits issued by the state. It continues a pattern that started last year, when 67 permits were issued and 49 wells drilled. In 2006, 120 permits were issued and 25 wells were drilled.

McKean County is also a hotbed of activity. Cameron County could be next, as speculators assess the conditions on both private property and state forest land.

A spike in permits has been measured in the New York counties of Cattaraugus and Allegany along the Pennsylvania border.

Oil and gas producers have been coming back to proven fields, where resources were known to exist but were considered too expensive to get out of the ground.

Higher prices have made it profitable for companies to drill exploratory wells at the same time they go after proven reserves.

Much of the oil and gas is held in formations of porous rock, making it difficult to bring to the surface. In the late 1980s when oil was selling for $8 per barrel, companies couldn't afford to invest in exploratory drilling. With oil at $110 per barrel, it's now affordable to search for local oil.

Natural gas prices are also on the rise. The price has climbed from $10 per 1,000 cubic a few years ago to up to $16 now. Natural gas prices are expected to continue to increase due to a decrease in Canadian exports.

Lance T. Shaner, a co-founder of oil speculator Rex Energies, believes it's only a matter of time before companies takes on the challenge of extracting the oil out of the sandstone underground through high-pressure injection. He said that up to 80 percent of the oil in the region is still underground.