Those prices at the pump could make any of us wish we had an oil goldmine in our backyards, but that wish may not too far off the mark in Nevada. Geologists think there could be billions of gallons of oil under Nevada's deserts. If so, why hasn't anyone found it? Eyewitness News has reported in past years about Nevada's petroleum potential.
As the price of crude has passed $60 and then $70 a barrel, companies have been gobbling up the mineral rights to vast tracts of government land here. So, when are they going to start drilling?
On certain outcroppings in central Nevada, you can pick up a rock, bust it open, and literally smell petroleum, or something like it. Deposits of chainman shale are thicker there than anywhere outside of Saudi Arabia and Kuwait. As far back as 1905, Nevadans were touting our state's oil potential.
Alan Coyner, with the Nevada Commission on Mineral Resources, said, "We have an established track record for oil production in this state and people know that."
State minerals chief Alan Coyner is bullish on Nevada's oil potential, and with good reason. The single most productive oil well in the nation sits in Nevada's Railroad Valley. The Grant Canyon well peaked at 4,000 barrels per day -- more than 40 million barrels overall -- and is still pumping decades later.
Other pools of oil have been found in Railroad Valley but nothing like Grant Canyon, and as it's output has lessened, so has the state's, dropping from more than 3.5 million barrels per year to less than 500,000 barrels today.
In spite of this trend, the buzz has never been bigger. Last year's discovery of a billion-barrel field in neighboring Utah has would-be oil barons licking their chops. Four times each year, the Bureau of Land Management holds public auctions where wannabe wildcatters can be for the mineral rights on government land. The minimum bid is 2 bucks per acre, but spirited competition can drive the price much higher.
It's a fascinating process, for the gamesmanship if nothing else. Bidders play their cards close to their chests. Since anyone can nominate a parcel to the auction, cagey oilmen have been known to pad the auction list with less desirable parcels as distractions for the competition.
Of all the bidders during this recent auction, only one was willing to talk about his plans. "This is a fun hobby. It's a grown-up treasure hunt," said Curt Rosen, a Michigan oil investor.
Rosen got the oil bug many years ago and when a $360 investment ended up paying him 7 figures per year for several years, he was hooked. On the day we saw him, he picked up 300 acres of BLM land.
George Knapp: "What's next with your parcels?"
Curt Rosen: "I'm going to sit on them and accumulate more."
Oil speculators lease the rights to large chunks of land in hopes that someone bigger will come along and buy them out or cut them in. Few of them are interested in the risks of paying to drill themselves. Only three new drilling permits have been approved by the state this year. None of the three has started drilling. One reason is geology.
Nevada's twisted and fractured geology makes it very tough to find the oil that everyone believes is down there, and far more expensive than drilling somewhere else. Although the potential is enormous, the big oil companies find it cheaper to drill in, say, Indonesia.
Alan Coyner continued, "It's tough to explore for oil here. The faulting and geothermal activity creates a difficult situation in the search for oil."
So it's left to the little guys, the dreamers, to roll the dice and hope for a score. And if one of these Rockefellers-in-waiting does find oil, the big companies will come calling.
Curt Rosen added, "It's a poker game without the house taking a percentage. Mother Nature is the house."
Another factor in a lack of drilling here is a shortage of drilling rigs. With so much new drilling elsewhere, Nevada doesn't have enough rigs since we're a long way from the centers of oil productions. These rigs can cost up to $100,000 a day to lease. The same rigs are needed for geothermal exploration. One of these days, though, someone will hit a pool here and the shortage will vanish.
Email investigative reporter George Knapp at firstname.lastname@example.org
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