Originally aired February 27, 1998

PERSPECTIVE

Bedrock and Black Gold

Reported by Bill Kelly, STATEWIDE Correspondent

Kimball County has been in the oil business for about 50 years. Unfortunately, the last 10 years have been a little lean. Easy oil was pumped out years ago, and what's left can be hard to find and expensive to cultivate. Pumps on top of previously-drilled wells still chug away filling storage tanks but the major players in the business, Exxon and Amoco, stopped exploring and drilling new wells years ago. So late in 1996, there was a lot of excitement around town when word got out that a small army of out-of-towners were doing research at the county clerk's office sifting through records to figure out who owned what land and rights to the oil underneath.
"Well, he's been a busy man, to say the least."
But who that busy man was remained a mystery for months. While boosting the county coffers with thousands of dollars in photocopying charges and filing fees, the clerk's office was swamped with both paperwork and local gossip.
[City Employee] "Downtown they were talking what's going on? Who's doing what? As I said we wouldn't know nor do we ask."
"So they were being pretty quiet about it, too?"
[City Employee]"They just come in and do their work. "
When it was over, three companies quietly bought up tens of thousands of acres of oil rights from land owners all over Kimball County. Checks for oil lease rights were fattening savings accounts around town.
Mayor Shorty Keifer, the proprietor of an oil supply company, shared her town's anticipation.
[ Keifer] "[Mayor Shorty Keifer] "We wanted a big gusher. What the community felt was excitement because if there was a discovery. It was just hope for a new beginning again."
Last spring another flurry of paper transactions in the county courthouse revealed the secret speculator.
[City Employee] "George Vrtatko and his wife gave a lease to High Plains in January of 1997, and then High Plains turned around and signed their interest that they have to Evertson."
That's Bruce Evertson of Kimball. It turned out that the three companies were snatching up the oil rights for just one man, a local.
[Kelly] "What could this do for Kimball?"
[Bruce Evertson] "It could totally change Kimball around."
Bruce Evertson, the owner of the only local company still digging exploratory wells in the panhandle, is making a huge gamble in the oil supplies left hidden below the prairies of Kimball County.
[Evertson] "We're convinced that the sand is saturated. It's tight rock and the only way to make it produce, we feel, is to open up enough of it through horizontal to make it economic."
A map in Evertson's office shows just how much of the oil-producing land he signed oil leases on in one fell swoop. It was an unprecedented acquisition.
"You have sealed up an awful lot of this county now. "
[Evertson] "Yeah. A big portion of it."
"Why was that necessary for this?"
[Evertson] "Because of the risk dollars we were spending, we wanted to protect ourselves. The worst thing we could do is to lease up oh, 10 or 15 sections or 20 sections and then our ideas work out and everybody else owns all the acres."
Evertson's company partnered with a major investor, a drilling company named Belco. Their bet was on new technology that they had used successfully elsewhere but untested in Nebraska.
"Is this a reflection of your confidence, or is it putting everything on one last number and spinning the wheel? "
[Evertson] "I think it reflects a confidence. I think we really feel, just as Bill told you, we feel we've got something if we just feel figure out how to get it out without damaging it."
"You're smiling when you say that. That's a good sign."
[Evertson] "We hope."
The basics are the same -- using powerful drill bits a rig cuts in 8-10 inch hole into solid rock where oil is hidden.
[Phil Kriz, chief geologist] "This acts like a big chisel and chisels the rock and chips it up. We will have anywhere from 10,000-40,000 pounds on this bit. The drill pipe will weigh that much and the weight chisels the rock up, busts it up, and then the fluid -- mud, water, diesel, whatever we're using -- carries those rock chips up to the surface."
Phil Kriz is Evertson's chief geologist on this project.
[Kriz] "This kind of a well takes a lot of teamwork compared to a lot of vertical wells."
Unlike traditional wells which drill holes straight down to the oil supply, these rigs begin boring straight down but then begin to turn the drill shaft so that it is eventually horizontal, actually parallel to the surface of the Earth so that it follows a layer of rock believed to contain oil.
"On this well, now this is the second well."
"This horizontal drilling allows a drill hole to snake out a mile away from the place where the actual oil rig has been erected. "
[Matt Goolsby, well site geologist] "We've gone into it at an 80-degree angle so it looks like we're going to dip down into the bottom part of the formation. We'll have to steer our way back up into the top of it into the sweet spot.
The specialist uses that information to determine the best target to aim for. A narrow band of the drill bit must stay inside if oil is to be drawn to the surface."
[Goolsby] "Once we get down into the zone, all I'm doing is basically steering it, trying to keep it in the zone. There's usually a sweet spot -- in any horizontal well, there's usually a sweet spot within the zone that you want to keep it in. In this case it happens to be three or four foot from the top of the formation."
That's three or four feet within a rock formation that shifts up and down where a drill bit must be directed.
[Goolsby] "So basically I'm navigating and he's driving. That's what it amounts to. I'm telling where I think we're at and where we need to go and he is putting us there."
In another trailer packed with computers, the path of the drill shaft is tracked using an electronic probe that follows the drill bit below the surface.
"But you're giving them the information to steer the well and find oil. Strike it rich or not. "
Another specialist called a mudder constantly examines samples of ground rock sent to the surface for microscopic signs that oil is there.
[Heino Volmer, well site mudder] "Essentially this is the typical sample looking something like that, about that size. You put that under a microscope and you can see it pretty well."
"In fragments that small?
[Volmer] "Yeah. "
This is not a place where there are pools of crude to be pumped. The oil is embedded into the pores of dense rock. The pressure underground will force it into the drill shaft. If this crew steers the drill bit off course out of the layer of rock containing oil, it's expensive and time consuming.
[Kriz] "Sometimes it takes a day to three days so that at $30-40,000 a day, it's $90-120,000."
"Staying on the right track is pretty important."
[Kriz] "Very important."
The costs for exploration are staggering. Just setting up this rig near Dix, Nebraska cost over $100,000. The total operation would run up a $10 million plus tab before it was over.
"Are you at the point right now where you're saying, it's worth it or are you at the point where you're saying my God, what have I gotten myself into?"
[Evertson] "What do you think, Bill? There's a lot of ups and downs. One day we're up, the next day we're down, you know."
As it turns out, this was a down day. The line that provides the essential electronic data was jammed during drilling. Efforts to use pressurized gas to pop it free like a cork are not working. At his office an anxious Bruce Evertson is staying in constant contact.
[Evertson] "Hal, how are we doing now? Still can't get it pumped out?"
There are lots of people in the oil business watching whether Bruce Evertson is successfully finding fresh oil under Kimball County. People at the courthouse checking records to see what's leased and what's not leased.
[Evertson] "Every morning at one of our locations that we drilled, you see a couple of cars down the road watching to see what's going on."
"Got the binoculars out?"
"Oh, yes."
Evertson's crew will run up a $40,000 tab today, the precious dollars of investors behind this project and there will be no progress. The stakes are high for Evertson, but they're also high for the panhandle. Even a small boost in oil production would help a depressed industry. The state's director of the Oil and Gas Commission has watched the business that supports oil production close shop one by one. Low crude prices made the cost of drilling here unprofitable for producers.
[Bill Sydow, NE Oil & Gas Commission] "A year ago this time we had $24 a barrel. $13 a barrel now. That's a 50% cut in prices. And we don't know when we're going to come out of that cycle."
Bill Sydow was on site frequently at Kimball to see if Evertson's high tech process would work here. We were allowed to visit last summer only if we kept the story under wraps until the exploration team determined if it had been a success or a failure. In January, we returned to the same site. You'll notice there is no pump here bringing oil to the surface, just bare land and a pipe cap.
[ Keifer] "I guess you figure when things aren't working out, you're not seeing a lot of drilling rigs and new companies in and people hollering and screaming around town that it's happened. "
Bruce Evertson did not succeed but nor did he really fail according to his chief geologist.
[Kriz] "It was a frustrating summer. Our partners, Belco Energy and us, especially Belco Energy spent a lot of money out here and they're going to make some of their money back off the jay wells but essentially they lost money testing an idea."
That's the bad news. The good news is Evertson did determine there is still a sizable store of oil underground covering nearly a million acres under Kimball, Banner, and Cheyenne Counties and the technology that Evertson used for the first time in Nebraska, the horizontal drilling and a number of ways to use chemicals to flush out oil, were successful. They just cost more to use than the oil was worth on the market.
[Kriz] "That has been proven it mechanically can be done. It was proven there's oil in the zone and not water. Who know, you could move a mile away and get a little bit better rock and have a great well."
"You did a ton of work for your competitors in this, actually."
[Kriz] "That's always the way it is."
Bruce Evertson wasn't in town when we visited. He'd flown down to Bolivia where he knows he is more likely to hit oil that's affordable to pump. In Kimball, the oil leases Evertson negotiated are expiring one by one. The wells already drilled still pump away and landowners wait for oil prices to rise again, enough to get speculators back in town willing to spend millions on the next big gamble. For Statewide, I'm Bill Kelly.