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NR 2001-58
September 10, 2001

Contact: Carol Dahmen
Mark Oldfield
Don Drysdale
Ed Wilson
(916) 323-1886

SPIKE IN NATURAL GAS DRILLING IN CALIFORNIA

Natural gas well permitting in Northern California is on fast track.
At current pace, 267 permits will be issued -- most since 1984

SACRAMENTO –Notices to drill new natural gas wells in Northern California are being received at a pace not seen since the mid-1980s, and the total for any single year in the 1990s will soon be surpassed.

As of August 31, the Department of Conservation (DOC) records show that its Division of Oil, Gas, and Geothermal Resources' office in Sacramento had issued 178 permits to drill new wells in Butte, Colusa, Contra Costa, Glenn, Solano, Sutter, Yolo, San Joaquin, Sacramento and Tehama counties. At the current rate, 267 notices will be filed by the end of the year, compared to 137 in 2000. Drilling activity in the previous decade ranged from 187 permits issued in 1990 to only 78 in 1995.

In March, 2001 Governor Davis directed Mary D. Nichols, Secretary for Resources, to form and chair the multi-agency Natural Gas Working Group to closely monitor natural gas supply, demand and price. The Group also facilitates gas projects throughout the State.

"I congratulate our gas producers for their rapid response to California's pressing energy needs,” said Secretary Nichols. “The latest figures on in-state natural gas drilling show that California is making progress to increase our native sources of energy production."

Most of the new activity is taking place in proven gas fields, which contain about 900 active wells. In some cases, such as the Denverton Creek field in Solano County,field boundaries are being extended when the new well drilling proves successful. In other cases, such as the Willows-Beehive Bend field in Glenn County and the Rio Vista field, operators are drilling deeper within existing field boundaries.

Last January, the fair market price of gas, according to the Natural Gas Intelligence Weekly Gas Price Index, was $14.32 per thousand cubic feet, and soared into the $50-$60 range in the spot market. Currently, gas sells for about $3.40 per thousand cubic feet, and the spot-market price has at times dipped below $3. The price could rise as winter approaches.

The pace of new drilling notices has been relatively consistent this year, peaking at 18 the week of June 30. All of the new drilling is unlikely to put much of a dent in the amount of natural gas the state imports, however. California produces about a billion cubic feet per day -- ranking it 10th in the nation -- but uses more than six times that amount, with most of the gas coming from Texas, Wyoming and Canada.

California natural gas production dropped between the mid-1980s and the early 1990s, falling off sharply in 1992. Production has risen slightly of late, led by Stream Energy Inc. in the Todhunters Lake gas field in Yolo County and Calpine Natural Gas Co. in the Rio Vista field.

Most of the natural gas produced in-state comes not from gas wells, but as a byproduct of oil production. The Elk Hills oil field in Kern County accounts for 40 percent of the state's natural gas production.

Situated within the Resources Agency, DOC regulates oil, natural gas and geothermal wells; studies and maps earthquakes and other geologic phenomena; maps and classifies areas containing mineral deposits; ensures reclamation of land used for mining; administers agricultural and open-space land conservation programs; and promotes beverage container recycling. DOC's Division of Oil, Gas, and Geothermal Resources ensures the safe exploration and development of energy resources. It oversees the construction, operation and closure of oil, natural gas and geothermal wells, an important step in guarding drinking and agricultural waters against pollution.

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