Tennessee Natural Gas Exploration - Success!

AMESTOWN, Tenn. - They call him the boom maker.

Known for hitting substantial oil wells on and around the Cumberland Plateau, Young Oil Corp. owner and CEO Anthony Young has made a name for himself. Tales of his oil exploration in Tennessee have reached the Los Angeles Times, and the entrepreneur is enjoying success, with fancy cars and private jets.

Young's company is among dozens of oil and natural-gas businesses that have made millions in Tennessee during the past 150 years, and their finds have spurred jobs in many rural East and Middle Tennessee counties. But just as many others have struck out. The state has battled images of rough terrain and overall small production numbers that have kept major oil companies away.

But with record crude oil prices and an increase in demand for domestic exploration, could Tennessee's role in the oil industry be changing?

Big plays for a small player

As far as total oil production, Tennessee is still a relatively small player on a national scale. The state ranks 28th, but only 31 or 32 states produce any oil at all, according to Jeff Bailey, CEO and director of Tengasco Inc., a Knoxville-based oil and natural-gas exploration and production company.

Tengasco produces only a small amount of oil, mostly in the Swan Creek area of Hancock County, but at one time was the largest natural-gas producer in the state.

"We produce about 10,000 barrels of oil a year out of Tennessee, and all of that was found accidentally while we were drilling for gas," Bailey said. "Tennessee has a very small amount of oil and is pretty far down on the list."

All-time production for the state since the 1860s is 20.8 million barrels for an estimated total value of $428 million, according to a state geology report.

To compare, Alaska's production is about 30 times that in a given year. And the United States uses more than 20 million barrels of oil a day.

Because of that, Bailey said, exploration in East and Middle Tennessee and largely across the country is focused mostly on natural gas. For oil, the company relies more on its leases in Kansas and along the Gulf Coast.

But just because Tennessee ranks relatively low in nationwide production doesn't mean oil wells discovered here aren't big in their own right. Several companies, including Kentucky's Basin Oil & Gas Corp. and Huntsville, Tenn.'s Miller Petroleum, have hit record-setting wells. In its lifetime, the Days Chapel Field in Campbell County has produced 3 million barrels for Miller Petroleum, and the company claims to have drilled or serviced 65 percent of the wells in the state.

Basin Oil & Gas also claimed one of Tennessee's biggest wells in 1999, when a find in Overton County initially produced 2,400 barrels a day.

"There have been some pretty amazing fields in Tennessee," Bailey said. "A few of the finds over there (on the plateau) are kind of unique. So there's kind of a little new niche going on over there. Those guys may have stumbled onto something."

More recently, in March 2007, Young Oil Corp. hit one of those million-dollar wells. Located on leased property in eastern Overton County and assigned the name Norrod No. 1, the well came in free-flowing at more than 1,900 barrels a day. The landowners, who make about one-eighth of the profits, were pocketing $9,000 daily.

Leaseholders and landowners aren't the only ones making money from the exploration. A 3 percent tax is levied on all oil discovered in Tennessee, according to the Tennessee Department of Environment and Conservation. Of that 3 percent, that state receives two-thirds and the county of origin receives one-third.

In 2006, the most recent year for information, Tennessee realized $448,000 in severance tax revenue from petroleum exploration, TDEC reported.

Young reports that Norrod is still producing at a controlled rate of 100 barrels a day, meaning production was cut to sustain the well for a longer period of time. The well has produced 40,000 barrels of oil in less than a year.