Tuesday, February 13, 2007
On this day:

Hooray for Big Gas!

This sounds like it could be a pretty big deal:

(B'ham News) Energy companies are scrambling for drilling rights in St. Clair County, where geologists have discovered a natural gas formation with the potential to rival any in the country.

Drillers have bought gas rights on 500,000 acres in and around St. Clair during the past two years, paying up to $500 an acre plus a share of potential revenues. They now want state permission to begin widespread production on 40 square miles in and around Ashville, according to Alabama Oil and Gas Board records. The new find's proposed name is the Big Canoe Creek Field.

Geologists compare the area's potential to that of a legendary Texas natural gas field called the Barnett Shale, which has grown to 5,000 square miles and produces more energy than any other onshore gas field in the country. Shale formations in St. Clair County run 9,000 feet thick, dwarfing the 1,500-foot shales in Texas. Thicker shale means more gas per square mile.

"There are many billions of cubic feet of natural gas per square mile in St. Clair County," said Phillip Meadows, an independent geologist based in Hartselle who performed the original analysis of the area. "Once production methods are figured out, we are talking about wells that could easily be in operation for more than 100 years."

Figuring out exactly what production methods are most suitable will undoubtedly be an expensive undertaking. Thus, the industry's interest has spiked only as natural gas prices have spiked:

The finds in St. Clair are part of a larger energy-rich geologic formation that runs north through Etowah County and into northern Georgia, said Meadows, who began studying the area in the late 1980s. The formation has been ignored until recent spikes in natural gas prices that have made it economical feasible to begin production.

The holdup has been the shale rock. The natural gas is compressed into it, and getting it out requires more expensive production techniques than are used to access gas that's not so tightly bunched.

But things are rolling again after price spikes in 2005 that sent natural gas to an all-time high of $15 per million British thermal units.
Similar forces are at work in other energy markets. As worldwide demand has soared, energy prices have soared with it. As an economic matter, that's not necessarily "good" nor "bad." It just is.

Predictably, though, this situation has created a flurry of activity among a class of people that is uniquely unqualified to actually solve it, namely politicians. They are holding hearings, pushing pencils, and heating up the political climate with calls for greater regulation, increased handouts, and new taxes on "windfall" profits. Those who peddle nice-looking charts promising "new solutions" to our energy needs are rewarded with heaps of government money, while those who are actually solving the problems are bombarded with threats and accusations.

The latest discovery here in Alabama provides yet more proof that energy producers are responding to higher prices in precisely the way we would expect them to respond - by developing new technologies and investing large sums of money so that they can stay ahead of the competition and bring new energy supplies to the market as quickly as possible. Their principal desires aren't necessarily "to be liked" or even "to be nice." They seek only to provide value to their stakeholders. They are thus doing more to address the world's energy needs than any number of well-intentioned politicians and bureaucrats could ever do.