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Noble Energy and Rulison…Gather Ye Gas Drilling Leases While Ye May…

October 5, 2007

Gather ye rose-buds while ye may,
Old Time is still a-flying;
And this same flower that smiles today,
Tomorrow will be dying.

Robert Herrick. To the Virgins, to Make Much of Time
English lyric poet (1591 – 1674)

1.

Change a word or two and the poem has a certain relevance to the dilemma of independent oil and gas drillers in the Rockies in the last months of the Bush Cheney Presidency. The glory days – when gas drillers could obtain permits with little concern for environmental concerns or federal oversight – just might be coming to a close, making the scramble for the remaining crumbs among the main independent players that much more intense. So gather ye gas drilling leases while ye may…

The party for the oil and gas companies might not be over, but it won’t be as much fun as it used to be after 2008. As a result there is a flood of activity to get as much as possible done between now and November 2008 when more than likely, the licensing environment will stiffen some, and the companies will lose their `democratic right’ to drill radioactively polluted natural gas.

Add to this the fact that the change from a Republican to Democratic governor already has cramped their style. The new composition of the state’s oil and gas commission is not especially to the liking of independent gas drillers. But this is just a taste of things to come. Should the Republicans lose in November of 2008, it is more than likely that the Department of Energy’s staff and emphasis will shift a few notches away from granting drilling leases to every fly by night operator wanting one. In what would be a truly novel development, environmental considerations just might be taken more seriously and the department’s information and data on contamination around Project Rulison might become transparent.

Craven Greed or the Ordinary Variety?

Perhaps this is what Dick Cheney warned his oil and gas supporters in Colorado last week: better get in there while the going is good before next November. Of course it remains to be seen if a Democrat will be elected president next year. The Dems has a developed a keen sense of how to give away presidential elections if the last two are any indication. And furthermore, it’s not at all clear to what degree the Dems will rein in independent oil and gas companies – both domestically and internationally, any less than the Republicans did.

Still such logic does go a long way in explaining why it is that an oil and gas drilling company with such extensive international contracts would find it necessary to grovel for a lease on land within earshot of a nuclear blast site. It seems odd that a company as prosperous as Noble Energy – and with such powerful assets both in the US and globally – would apparently waste its time and energy nitpicking for a license to drill for natural gas within the 3 mile radius of Project Rulison. Rulison is the spot where in Sept 10, 1969, the Atomic Energy Commission in conjunction with the private sector exploded a 43 kiloton atomic bomb underground creating a natural gas cavity that has been, not surprisingly, radioactive ever since. Although it seems (because monitoring data is hard to come by) that the radiation caused by the explosion as been contained these 38 years, still the very presence of the nuclear bomb created cavity represents a significant environmental threat. Why play with fire for a few dollars of profit?

It all seems – to put it politely – quite undignified. Is it just a case of craven greed or the ordinarily run-of-the-mill variety?

Nor is Noble Energy alone. For the past few years a slew of oil and gas companies have been swarming around the site, pushing the Colorado state agency involved – the Colorado Oil and Gas Conservation Commission – to grant drilling licences within three miles of the blast site. The three mile radius had previously been considered a safety zone within which drilling was considered dangerous because of possible radioactivity leaks.

 Independents Pushed by the Majors (Exxon, BP, etc)

And until recently, recently being the election of Democratic governor Bill Ritter, the Commission was quite receptive to these licensing requests. This was, in part, no doubt because under the former governor, Republican Bill Owen, with his close – no incestuous – ties to Texas oil and gas money. Owen stacked the Commission with oil and gas men. Ritter has re-organized the commission, expanded its membership and although the oil and gas reps are still there, they do not run the show as they did previously, a fact which they find terribly annoying it appears.

Before the Commission’s reorganization, the natural gas companies made out like bandits. The commission granted many licences to drill closer and close to the blast site. Currently there are 19 natural gas wells in various states of completion within the three mile radius of ground zero and 31 approved applications for a permit to drill. One well has been drilled a mere 851 feet from the blast site.

The situation in the oil and gas industry perhaps helps explain the rush to Rulison. According to Chuck Davidson, chair and CEO of Houston-based (why is this not surprising?) Noble Energy, the majors already control many of the potential oil and gas sites. `Here in the United States’, he commented in a 2004 interview, `we’re challenged if we can even pull together a few thousand acres of land’. Very sad, indeed.

This situation has pushed independent companies like Noble in two directions – first outward, to explore internationally. As described below, Noble Energy has been one of the more successful, if not one of the most successful independent companies to move into the international arena (which they began to do energetically after 1998). The majors’ stranglehold on leases also has pressured independents to fight for the remaining domestic scraps (mostly among themselves) more aggressively, even if they butt up against radioactive contaminated sites like Project Rulison.

This seems to be what the flurry of activity in the vicinity of Project Rulison is all about.

2.

Noble Energy: A Company On A Roll

A person who had the financial acumen – or the luck of the dice – to have invested $10,000 in Noble Energy stock – five years ago would be sitting pretty. She would have watched the value of each share climb from around $16 then to $71.20 cents today, a rise in value of close to 450%. Not bad. Other indicators also suggest just how well the company is doing and that overall, it continues what might be described as being on a roll.

1. For example, it continues to move up the Fortune 500 ladder. In 2006 it was rated overall the 761st strongest company in the world, up from 980 the previous year. Then in 2007 it moved up again to the 660th place. In the `Forbes 2000′ ratings it placed 994 in 2007. These are not at all shabby numbers if you’re into this sort of thing
2. Within the Fortune Mine and Crude Oil Production sector, its numbers look even more impressive. In 2006 it ranked 18th overall with 2005 revenues at $2.187 billion up a whopping 60.3% from the previous year and profits, at $645.7 million, up an obscene 96.4%. Now in 2007 its rating has jumped up five notches to 13th among mining and crude oil producers with revenues at $2,940.1 billion for 2006 and profits down at $678.4 million, up only 5.1% over the previous year, but still not bad at all
3. The company has struck black gold in significant quantities in a number of places. In June of this year the company announced that it had made a new discovery containing both oil and gas `an extremely high quality Miocene reservoir’ (Miocene = from 25-12 million years old) in the Douala Basin of the coast of Equatorial Guinea, a discovery which `delighted’ H.E. Atanasio Ela Ntugu Nsa, the country’s Minister of Mines, Industry and Energy. Not mentioned in the article is the fact that the country has one of the most repressive governments – not only in Africa but in the world. (See Ken Silverstein’s 2002 piece in the Nation). The country is ruled by Teodoro Obiang who came to power in 1979 after executing his uncle.
4. By 2004 the company’s energy reserves had grown more than 400% over its 1970s levels. At the end of the year before, 2003, Noble announced the discovery of a major natural gas field called Mari-B in the Mediterranean off the coast of Israel. Three months later, in February 2004, the company began producing natural gas for Israel. `Israel now has a safe, clean and inexpensive energy source’ the company’s president, Charles B. Davidson was quoted as saying. Noble has a working interest of 47.059% in the project on a contract that is to last 11 years.
5. The company also has major operations in other countries including Argentina, China, Ecuador, the North Sea and Vietnam

The company’s fortunes began to change in the late 1990s when its focus shifted dramatically from domestic to international oil and gas exploration. By 2004 the percentage of Noble’s foreign assets had risen to 65% of the company’s reserves, up from 28% in 1998 and the percentage of output from its international properties had soared as well.

Given these stats, why does a company like Noble need to drill near a nuclear contaminated cavity?

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