Crude oil

From the “Things You Hear in the Gas Patch” file:

All this time I thought the gas companies were drilling for natural gas. Recently I met a guy – I’ll call him “Bob”. He drives truck in the gas fields. What does he haul? Crude oil — to a refinery in Denver and pipeline injection points in Rangely and southeastern Utah. And, according to Bob, LOTS of crude oil. They’re pulling out so much crude oil, he claims the truckers could haul 24/7. “People don’t realize just how much crude oil they’re getting out of these wells,” he said.

Call me clueless. I didn’t know crude oil was a by-product of natural gas drilling. Makes sense when you think H2S is a by-product, too. I just never thought about it. Then there was that crude oil dumping (or spill?) near Webster Hill. OBTW, I didn’t notice anything in the Post Independent about the incident. Weird.

I was talking about it to a woman whose husband works in the gas fields. I’ll call her “Jane”. “I feel kind of silly,” I said. “You know, I have not been able to figure out why, when the price of natural gas keeps falling and the demand for natural gas keeps declining, why do they keep drilling? I had no clue the gas companies were getting so much crude oil out of the wells around here.”

“They aren’t taking crude oil out of these wells,” Jane insisted.

So I told her about Bob the crude oil trucker.

She scoffed. “That’s not true. I think he was pulling your leg.”

I don’t think so. But I will admit to some confusion. The thing is, I don’t know Jane well enough to know whether she’s clueless like me and just doesn’t know about the crude oil, or whether she was covering up.

In his recent article, 2012 Natural Gas Price Forecast: Why to Avoid the “Widow Maker”, Jack Barnes (Global Macro Trends Specialist!) explains that the Texas Eagle Ford shale wells “are being drilled for their crude oil-like liquids rather than their gas, at close to $100 a barrel for crude versus about $2.65 for natural gas.”

Okay, so that’s Texas, but it is shale formation. Huh. Maybe the same thing is going on in the Piceance Basin. Maybe Bob wasn’t pulling my leg after all.

Then I got to wondering, what if Jane was covering up?

Are they also covering up the crude oil spill?

Why would the gas companies want to keep it a secret that they’re really drilling for gas just to get at the crude oil?

Are the rules different for gas wells vs oil wells?

Are the gas companies paying taxes on that crude oil?

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