To beat high oil prices, an Indiana man Greg Losh, has built an oil well in his back yard. The oil comes from the Trenton oil field and produces 3 barrels a day. The project cost $100,000. He plans to build 4 more. [WLKY]

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  1. edosan says:

    He’s not really going to “beat high oil prices” unless he also has a facility to make gasoline in his basement or a car that runs on unrefined crude.

    According to the original article, he’s selling the stuff, so he’s just capitalizing on high prices. (Still, I’d be curious to see the ROI of that)

  2. No word on his opinion on milkshakes.

  3. B says:

    At 3 barrels per day, with current oil prices, it’ll take him 257 days to recoup his costs. Not a bad business model at all.

  4. hi says:

    @edosan: He is beating high oil prices by drilling his own.

    “His oil well also produces natural gas to heat Losh’s home and several others.”

  5. Kajj says:

    Whoa, you can do that? I didn’t know there was a Trenton or an oil field in Indiana.

  6. Toof_75_75 says:

    That’s awesome! Such a good plan. Good luck to him!

  7. zentex says:

    and here I thought the oil companies had all the drilling rights for the entire US

  8. geeky_reader says:

    @edosan: The price of crude oil is the biggest factor in the cost of gasoline. By doing this I think he can definitely “beat the high oil prices”.

    California Estimated Gas Price Breakdown & Margins

    How Stuff Works – Gas Prices

  9. hi says:

    This just in: US invades Selma, Indiana.

  10. jusooho says:

    @hi: That’s silly. The US already controls Selma, Indiana!

  11. Toof_75_75 says:

    @zentex:
    That being because oil companies are obviously evil overbearing earth-destroyers…

  12. Toof_75_75 says:

    @apronk:
    Good links.

  13. flamincheney says:

    How long until his property is seized through eminent domain laws ;)

  14. MeOhMy says:

    @hi: ” didn’t want to say this. He bought yellow cake. All right! From Gary. He went to Gary and bought some yellow cake.”

    I’m surprised that someone doesn’t already have an ownership right to the oil!

  15. Truvill says:

    @jusooho:

    And yet they still won’t be able to apprehend Greg Losh :)

  16. Greeper says:

    @Kajj:
    When I took the Texas bar, I had to learn about oil and gas law, which is really interesting historically. When there is an oilfield, the “rule of capture” applies, so whoever gets the oil first gets to keep it. Oil companies don’t usually own the land, they own a mineral lease, where thay pay the landowner 1/8 of the value of the product that is produced at the wellhead. Theoretically, an oil co could lease an acre (or less) and still pump millions of gallons. But they want the lease to be broad (geographically) to prevent other wells from going near them. Some leases covered millions of acres, like the King Ranch in Texas, which produced the bulk of domestic oil for much of the 70s. BUt this guy is probably pumping the same crude as a major oil company, and it’s his right to do so.

  17. Toof_75_75 says:

    @Troy F.:
    The ownership of the oil/gas/mineral rights would show up in his deed. If he purchased the property and with it came the rights to the oil/gas/minerals, then he is able to do with them whatever he pleases. As long as those rights were never sold separate from what he purchased, he’ll be ok. It is surprising, if he’s able to get so much production out of each well, that he never signed a lease with an oil & gas company!

  18. Bladefist says:

    I still think complaining on your blog is the best way to fight oil prices.

  19. Greeper says:

    @Toof_75_75: I believe that even if you sign a lease, you are still entitled to use the land and minerals as you wish; you just need to allow the lessee access and the right to produce. You would not be able to lease to anyone else, but you would still be able to drill your own wells. Obviously every lease can have different terms but I think those are the standard lease terms.

  20. @B: I’m not sure if you were be sarcastic, but if not, I agree with you.

    project cost: $500,000
    barrels per day: 15
    crude oil price: $129
    income per day: $1,935
    days to recoup costs: 258

    So in less than one year this guy will recoup all his costs in the project and be making a sweet 2K every day.

  21. Bladefist says:

    @LucasAnderson: Until the dollar comes back, the speculators come on board, and oil drops, like it will, like it always has done.

  22. Mr_D says:

    What’s the upkeep on a very small well, though? I imagine that might take a significant chunk of that $2,000 away.

  23. Bladefist says:

    @Mr_D: I’m going to laugh when Obama is elected and does a winfall tax percent on this poor guy

  24. I see your points. I’d still imagine he’d turn a profit though, even with upkeep and lowered prices.

  25. Toof_75_75 says:

    @Greeper:
    That sounds reasonable. I’m going off borrowed knowledge. My fiance is a Land Coordinator for an Oil and Gas Company so that kind of stuff is her forte. I’m just commenting from acquired info.

  26. Toof_75_75 says:

    @Bladefist:
    Seriously, as much as Obama scares me as a candidate, it would be funny to see his supporters’ “chickens come home to roost.”

  27. backbroken says:

    I’ve got a Mr. Drysdale on line one. Says he is calling about opening an account for you at the Commerce Bank.

  28. Bladefist says:

    I’m just messing around. I say good for this guy. Capitalism baby. I hope the government stays out of his way, but that is just not going to happen. They are going to want to regulate his business, tax the crap out of him, and it’s not going to be profitable. He’ll need to increase his volume to get a profit.

  29. sixninezero says:

    This is perfectly reasonable and I applaud the man for having the gumption to go ahead with this scheme. My grandparents leased mineral rights to an oil company in Ohio for years, the oil co. installed/maintained the 3 pumps and hauled away the oil. They never paid for gasoline or natural gas again.

  30. Nighthawke says:

    I can sink a 2,500 ft well in my own backyard and hit a HP wet natural gas field. A little drying and compressing, sell, sell, sell.

    The drillers have been having a field day drilling into this wildcat strike they found under a salt dome that flattened out a bit. It took a couple of seismic surveys to spot the telltales and one test bore to hit paydirt. I suspect that they are extracting oil under pressure as well, large collection tanks have been sprouting up.

    I’m envious of that one boy in LA that struck clear oil. His well hit a vein of oil so pure it comes out of the well clear as mineral oil. He turns a million a year on that one well alone.

  31. cmdrsass says:

    Most oil is found in small pockets, not the large fields that major oil companies exploit. It is not efficient for them to tap the small pockets, so it is likely that you will see more and more “mom and pop” oil companies if prices remain high or easily accessible supplies in major fields dwindle.

  32. Greeper says:

    My biggest concern if I were to do something like this would definitely be entering the world of environmental regulation. The amount of environmental regulation in oil production is astonishing. It’s possible that the regs don’t kick in until you hit a certain volume, but I don’t know. I also wonder if his insurance company knows about this–though most policies have a pollution exclusion, the liability concerns (fire, explosion, toxic exposure claims, etc) are huge.

  33. sir_pantsalot says:

    I’m not even sure if he can count on 3 barrels per day for more than 200 days. Once you hit oil your rate only decreases after day one. It is like making a small hole in a water balloon. At first you get the best rate of fluid flowing out but int keeps decreasing until there is none left.

  34. asphix20 says:

    @edosan:

    3 x 365 x $125 a barrel (number isnt accurate but its the last I knew a barrel was going for) = $136,875

    Then add what he charges his neighbors for the natural gas… he’s probably around 137,000 or so… I’m sure he gets taxed a bit.. so I think a good guestimate would be between 20-30,000 for the first year (recouping investment) and then straight $$$ after that (assuming his line doesnt run dry and need re-drilling.. etc.

    I could be completely off the mark…

  35. Greeper says:

    Federal production tax rate 15%
    Indiana Severance Tax 1%

  36. Orv says:

    @zentex: Who has the rights depends on the terms of the purchase. In places like Indiana most people who the mineral rights to their own properties. Out west, though, it’s not uncommon for a developer to retain the mineral rights when a property is sold. There are people who have to put up with oil wells on their property even though they don’t see a dime.

  37. edosan says:

    @asphix20: I wonder what his other costs would be — I mean, I’m sure that it the well will require some maintenance and repair, as well as other junk I’m sure I don’t know about…

    Anyway, good for him until someone gets pressured to shut him down. It’ll happen now that he’s in the news.

  38. Orv says:

    Err, that should read “In places like Indiana most people own the mineral rights to their own properties.”

  39. Empire says:

    @Orv: Most mineral rights deeds don’t entitle the owner to an easement or give them the right to drill or mine; they still have to negotiate that if they want access to those resources.

  40. stinerman says:

    @Bladefist:

    And we’ll be greeted as liberators and the war will only take 6 weeks.

    The dollar ain’t going back up and oil ain’t coming back down.

    If I had the money, I’d bet “dollars to doughnuts” (what does that mean anyway) that oil never goes back below $100/bbl and gas never goes back below $3/gal. I wouldn’t be surprised to see $4.25 this summer and $5 next.

  41. TexasP says:

    “Marginal or so-called stripper oil and gas wells are important to overall U.S. production… These small wells provide some 16% of U .S. oil and 8% of gas production onshore.

    Marginal wells are defined as those that produce 10 barrels or 60,000 cubic feet a day or less. “

    The stripper business is booming now; you don’t even need a drill, you can buy an existing well and restart the pumps. Then you need an old F150 with a tank on the bank to drive around and collect the oil and sell it.

    However, you don’t get $129 per barrel, that’s the big contract price for West Texas Intermediate grade. Plus you have to pay for the electricity to operate the pumps, so your return on investment is stretched out considerably.

  42. Bladefist says:

    @stinerman: That is a very pessimistic view. And a view that only makes things worse. You realize this has happened before? It happened during the WW’s, it happens when we are not in war, it happens.

    But obviously it feels like it’s the worst when its happening to you, and not when you’re reading about it in a text book.

    It will come back. It always does. Obviously there is inflation and other market factors, so it’ll never be $.50 a gallon again, but it will come back to being the same % of your income as it was before.

  43. Nighthawke says:

    @TexasP: Go get aalmost indestructible cast iron hit-n-miss engine that’ll run on distillate or gas. They still sell them on the market, slightly used though. Or one of the Lister engine knockoffs that the Indians make.

  44. TexasP says:

    > Go get aalmost indestructible cast iron hit-n-miss engine
    > that’ll run on distillate or gas.

    I think there’s too much water in most of the old strippers. Mr. Indiana’s 3 barrels a day are probably more like 2 barrels after drying.

    He’ll probably make a profit but it’s not an investment for the faint of heart…

  45. DH405 says:

    This guy is violating so many people’s mineral rights it’s not funny. Lawsuit gangbang to follow.

    @Greeper: “Theoretically, an oil co could lease an acre (or less) and still pump millions of gallons.”

    Unless, like ANY underground oil reserve, the area was unitized so that everyone within that unit has a share in the total production in proportion to their mineral rights owned.

  46. consumerd says:

    @B:

    This guy is violating so many people’s mineral rights it’s not funny. Lawsuit gangbang to follow.

    I disagree, if he sells it at a good price and most people realize within a year he could be making money, he could be a serious contender. I can be willing to bet if he survives good enough, he might give the big guys a run for his money!

    At 3 barrels per day, with current oil prices, it’ll take him 257 days to recoup his costs. Not a bad business model at all.

    Yea not a bad ROI, all he has to do is hold out for one year! I wonder how many other people are going to start drilling.

  47. MHB00 says:

    So much bad information is being tossed around on this thread it is amazing.

    First, he is stealing from all other mineral owners in the area that own interest in the same unit. The article doesn’t specify the amount of acreage the man owns, but assuming it is less than 20 acres, his ownership will not be a full 100% of the unit that must be created for the well to be valid under state laws. I am not familiar with the Indiana law, but in Oklahoma he would be up to his neck in lawsuits and fines.

    Second, a surface owner does not have the right to prevent a mineral owner from receiving the benefit of owning said minerals, there is no negotiation between the mineral owner and the surface owner, the mineral owner will always be superior to the surface owner. The comment about surface owners with oil wells on their property and not seeing a dime is a bit offensive to mineral owners, and incorrect as all surface owners are compensated by the operator of the well, the amounts vary, and each state has their own guidelines that must be met. Surface owners do not receive a royalty payment like mineral owners but they do receive compensation for surface use.