Nebraska in midst of its own oil boom

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Posted: Saturday, January 11, 2014 12:00 am | Updated: 11:09 am, Tue Mar 25, 2014.

An oil lease in southwestern Nebraska didn't begin yielding any oil until July 5, 2013, but production levels soared through November to account for 224,680 barrels, or about 9 percent of statewide production in all of 2012.

State officials said production of this magnitude is the best they've seen in decades, and with only five of 15 permitted wells actually drawing on the lease in southwestern Hitchcock County, production volumes are all but certain to continue increasing.

“Historically, we have had wells like this in Nebraska, but I've been here 22 years and have never seen any production like this before,” said Stan Belieu, deputy director at the Nebraska Oil and Gas Conservation Commission.

Berexco LLC of Wichita, Kan., is named as the drilling operator for the lease, which is on the Burntwood Canyon oil field near Stratton, Neb., and on the Kansas-Nebraska line. In November, the most recent report, the company listed production of about 87,000 barrels.

Only six operators in the state reported more production in all of 2012.

Bill Sydow, director of the state commission, said total production for 2013 should total around 2.75 million barrels, or 10 percent above year-ago production. If December production levels are as expected, Nebraska could have its best year for oil production since 1996, Sydow said.

Preliminary data showed a 32 percent increase in well permits issued in 2013 compared with 2012. There are nine companies presently drilling wells in Nebraska.

“For us, this is really significant,” Sydow said.

According to the U.S. Energy Information Administration, Nebraska ranked No. 22 among 31 U.S. oil-producing states in 2012, with 2.4 million barrels. Texas, far and away the nation's largest oil-producing state, had about 727 million barrels, while North Dakota produced about 242.5 million barrels.

Still, oil production will boost the state and counties, which collect real estate taxes and income taxes as well as severance taxes that provide funding for public schools across the state.

As with other recent activity in western Nebraska locales like Cheyenne and Banner Counties, Belieu said 3-D seismic technology has helped Berexco and other production companies find oil that was previously not visible with older technology. Digital seismic data now enables producers to see a profile of the earth and determine, for example, whether water, oil or gas is in reservoirs obscured by sandstone.

Positive economic effects have already been felt in the area despite rural roads taking a toll from increased truck traffic, said Scott McDonald, a Hitchcock County Board member.

“The motels are full around here and the fuel business is good,” said McDonald, who also owns the Sinclair gas station in Stratton.

Jay Sporer, owner of Lakeside Sand & Gravel LLC in Trenton, Neb., has hired three to five additional employees this winter, a time in which he typically has to lay off workers.

“Our winters have normally been extremely slow, but there's not been a day go by this winter where we haven't sold product to the oil industry,” Sporer said.

In McCook, about 35 miles east of Stratton, local hotels and RV parks are also putting up construction workers for long-term stays, said Rex Nelson, executive director of the McCook Economic Development Corp.

Nelson estimated there are a couple hundred workers drilling wells in the region and seismic crews have been exploring the area for about a year.

Area retailers have also benefited, Nelson added, and demand for auto service has ratcheted up at Chris Wagner's Ford and Chevy dealerships in McCook. Maintenance and warranty service for contractors have seen the biggest spikes, Wagner said, though there have been some new-vehicle purchases he suspects are oil-related.

“I've seen a few people wanting to upgrade,” he said, “and I assume it's folks that have been fortunate to have oil leases on their land.”

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