I-Team: Oil Discovered in Nevada (Part 1)

By George Knapp , Matt Adams

Published 10/26 2012 12:40PM

Updated 11/16 2012 08:00AM

Copyright 2017 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

UPDATE Nov. 15 -- U.S. Oil & Gas issued a statement confirming that its test drilling found two underground areas that contain oil. However, the company had hope to find more areas with oil so the news is a disappointment to investors. The company CEO says a new round of testing will begin this month. Read the company statement.

HOT CREEK VALLEY, Nev. -- The discovery of underground riches is nothing new in Nevada. Gold and silver deposits put Nevada on the map, but a small company from Ireland recently pinpointed a different kind of subterranean treasure -- oil.

A drilling rig struck oil several months ago in Hot Creek Valley in central Nevada, east of Tonopah. The company has tried to keep a lid on the news until it can figure out how big the oil field might be. The I-Team has been visiting the drilling site since last spring.

If the numbers are even half of what some are predicting, it could be a game changer for Nevada's economy. In the past, oil has been found in the Silver State. For more than 15 years, the I-Team has reported on experts who believe there is an ocean of petroleum somewhere under Nevada.

According to the company that made the discovery, the rampant speculation is premature. They really don't know how much oil there is, though they're working hard to find out.

Hot Creek Valley is a 183 mile stretch of mountains and scrub brush, home to more cows than people, but if you cut through a semi-mysterious military facility and follow the signs, you'll find a small operation that could be the start of something really big.

Like the bovines, most Nevadans have no idea of the potential riches in the ground below. The oil industry has taken sporadic stabs at Nevada over the years, poking holes here and there, and have found oil, but not the huge bonanza many veteran geologists say is still out there. A few years back, oil geologist Alan Chamberlain predicted there could be a few billion barrel fields.

But Nevada's twisted, tortured geology has defied previous attempts to find the petroleum wellspring. Techniques that work in Texas don't work here. A new approach was needed. Its proponents say infrasonic technology allows geologists to essentially listen for oil and its distinct sonic signature. When combined with more traditional techniques, they say, it can help wildcatters figure out where to drill.

When the I-Team first visited the Hot Creek rig last spring, it was quiet and empty, but there were tantalizing signs such as oil-soaked sand and droplets of oil floating on a pool of wastewater.

In the months since, the project has kicked into gear. A small Irish company named U.S. Oil & Gas first hinted to its investors last year that it found oil in Hot Creek Valley. A company video caused a spike in the stock value and was noted in American oil journals. The company CEO wouldn't answer the I-Team's questions, except to confirm there was an oil discovery.

"We have a discovery, a discovery of oil, the first in 32 years," U.S. Oil & Gas CEO Brian McDonnell said.

McDonnell and a handful of staff have been living in trailers at the drill site for months, overseeing what's known as flow testing to figure out just how big their discovery might be. Is their infrasonic technique a gimmick or a legitimate tool for finding the right spot? After all, a drilling rig can cost tens of thousands of dollars per day.

"We didn't move forward until we were satisfied that the data reduced the risk as far as we could on our first well," McConnell said. "We achieved that by having the discovery of oil on our first well drilling."

He repeatedly declined to speculate about how big his find might be. His publicly-traded company is subject to securities regulations in both the United Kingdom and the United States and he is wary of crossing a line. But he's told his investors the oil is there and 8,000 feet of drilling pierced nine separate reservoirs. A sample of the oil shows what is called light sweet crude, considered the best oil.

"We found this very, very light oil, and this could be very shallow horizons, and there is some medium oil, dark brown oil, and this very light oil," said Dr. Karim Akrawi, U.S. Oil & Gas geologist and board member.

In Europe, heads explode with every tiny update from the drill site. McDonnell's exuberant investors are already calculating their potential riches while bombarding the company 24/7 with calls and emails. The boss isn't biting.

"We have been very cautious in everything we have said and announced so far," McDonnell said. "We would just like to verify the flow test results from this well before we say anything more. But we are very excited, and I think it is good for Nevada too."

One tell-tale sign of potential oil riches is something called chainman shale, or compressed hydrocarbons. The shale in parts of Nevada is thicker than even Saudi Arabia or Kuwait, which is one reason the company came to Nevada. How big could it be? The unofficial numbers are staggering.

The I-Team's George Knapp will have the unofficial size of the oil field at 11 p.m. on 8 News NOW.

Copyright 2017 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.