after the jump in oil prices caused by contract expirations on Friday of last week, oil prices started down early this week as OPEC, or more specifically the oil ministers from the Emirates and Saudi Arabia, both vowed that they would not cut production to support oil prices, and specifically blamed oil speculators and US frackers for the oil price crash....saying that not all producers deserve a share of the market, Saudi oil minister Ali al-Naimi called on the "inefficient producers", such as high cost north american fracking and tar sands operations, to cut production to bring oil supplies back in balance...even though oil producers are contributing to a glut that the Qataris estimate at 2 million barrels a day, al-Naimi also said the Saudis might even boost their output instead of cutting it, to grow their market share, and that oil might not ever trade at $100 again...later in the week, the Saudi authorities pledged to curb wages and push ahead with more investments in oil infrastructure, indicating they're digging in for a long fight, which could easily put most US fracking operations out-of business..
although US oil prices bounced back up above $57 a barrel on Tuesday, they fell towards $55 again on Wednesday when the EIA reported that oil inventories jumped to 7.27 million barrels, the highest December inventory on record...slipping further in light trading the rest of the week, oil ended the week at $54.73...but once again, it was natural gas prices that were the largely unreported story, as they crashed nearly 30 cents mmBTU on Monday and continued to fall further all week, ending the week at $3.007 mmBTU, after trading as low as $2.99 on Friday...so while OPEC isn't targeting gas producers, gas prices have fallen just as much or more than oil, and are now down 20% in two weeks, and down 35% from their October interim high...now, we know gas prices crashed below $3 once before, in 2012 when a mild winter left a glut, and then they gradually ran back up to $6 last year when the polar vortex hit...but most gas drillers are at least partially into producing oil too, so the last time gas prices crashed, oil stayed around $100 a barrel, and hence their oil operations often saved those drillers from bankruptcy...they have no such cushion this time; they're facing double trouble now, with both oil and gas below their cost of production..
we dont have a rig count yet this week, presumably because the holiday interfered with collecting or publishing the data, but we did get a report from the Texas Railroad Commission, the oil & gas regulator for that state, that issuance of drilling permits dropped by 50 percent in November, even as production in the state continued to grow...also in Texas, an investigation by the San Antonio Express-News found that frackers in the Eagle Ford shale flared off more than 20 billion cubic feet of natural gas in the first seven months of this year, more than the entirety of 2012, which gives us a clue as to what happens in an area where their are no gas gathering pipelines in place...and even without a rig count, we do have reports that those oil-service firms in the business of supplying drilling rigs, such as Hercules,Transocean, and Halliburton, are under pressure to scrap their old rigs as a bunch of new rigs they ordered earlier are about to come into operation...their problem is that if they keep their older less-profitable rigs running, their newer more expensive drilling rigs will sit idle, as their customers opt to lease the cheaper older rigs...and it also looks like the arctic will remain pristine for a while longer; in across the board cutbacks, Chevron announced it's withdrawing its bid to get approval to drill for oil in the Canadian arctic, citing 'economic uncertainty'...that leaves Shell as the last company with any arctic plans remaining, and if you recall the table we posted 4 weeks ago, breakeven costs for arctic oil were the most expensive of all types of drilling, at $115 to $122 per barrel of oil recovered, making it fairly likely that Shell will withdraw from the process soon as well..
the media and the blogs have been covering a lot of the economic issues that will arise with falling oil prices, such as job cuts in the oil industry, losses by financial firms that invested in oil companies, state budget troubles for oil dependent states.and the losses that will be incurred by pension funds and others that are heavily invested in oil...one financial problem that seems to be off the radar are the complex financial derivatives tied to oil...these include futures, or contracts to buy oil at a set price some date in the future, options on futures, or the right to enter into a specific futures contract at a given price over the life of the option, structured notes tied to crude oil prices, and a plethora of more exotic and complex contracts that are no more than sophisticated bets on the fluctuation of oil prices over time...the nominal market for oil related derivatives is huge; it's probably 5 times the size of the market for oil itself, and while most of the players are banks, some oil companies are speculators, too; BP is said to trade 10 times the paper oil than they sell of the real black stuff....total derivatives held by the largest US banks have a paper value of $280 trillion, about 15 times the value of our GDP...normally, it would be the least of our concerns if the high-stakes gamblers lose a pile of money...but the week before last, legislated funding for government operations was running out, and the lame-duck session of Congress took up & passed a budget bill which was dubbed by the press as the "Cromnibus", or a combination of a CR (continuing resolution to fund the government) and an omnibus budget bill...in the horse trading that went on during budget reconciliation, a provision to deregulate derivatives owned by banks written by Citigroup was inserted into the bill by Rep. Kevin Yoder of Kansas, effectively repealing the section of the Dodd Frank financial reform legislation that required the big banks to spin off the most risky portion of their derivatives business into non-FDIC-insured subsidiaries....as a result of this bill's passage, banks are now allowed to leave the riskiest derivatives in the same corporate entity as other banking functions such as savings that are insured by the FDIC...saver's deposits up to $250,000 are supposed to protected by the FDIC, but the FDIC fund has just $46 billion to cover $4.5 trillion worth of deposits, which itself is an amount dwarfed by the derivatives outstanding, and under the bankruptcy reform act of 2005, should a bank fail, derivatives get paid first...and while derivatives are normally hedged against one another such that overall profits and losses are minimal; the models the banks used when building these financial products (which are traded automatically based on quant algorithms) may not account for a 50% downward price move in prices, and should they fail, we'd have another unpredictable and unresolvable financial crisis on our hands, and likely another bank bailout..
the Ohio story of last week - that families within a mile and a half from a blown out Monroe County fracked well were kept from their homes - became the Ohio story of this week too, as the well continued to spew gas uncontrollably until Tuesday, when some of the families were permitted to return as the well was tentatively capped...after final testing, all the families were back in their homes by Christmas eve, after an evacuation that lasted ten days for some, and 11 days for those closest to the well..
we seem to be setting in to an order here such that state specific fracking articles are included first, followed by other oil & gas related environmental issues and articles on the economics of gas & oil in the US & then global stories...you might want to take note of the articles at the end of this package on the oil tanker spill into a Mangrove wetlands in Bangladesh, where one article includes pictures of young children covered in oil, attempting to clean up the spill with their bare hands....it's probably as bad as any tanker spill we've seen to date, but because of it's location away from the wealthy cities, it's received little coverage...
Evacuated families in Monroe County await answers on fracking-well gas leak - Columbus Dispatch: This hollow used to be peaceful. On Dec. 13, that stillness shattered. Crews lost control of a fracked well on a hilltop near Heater’s house. Natural gas surged into the air. From their backyard, less than a mile from the well, the Heaters heard it. The rushing gas sounded like a broken air hose, Heater said — a deep, steady WHOOOOSH. As the weekend approached, gas was still spewing uncontrollably. Families within a mile and a half of the well have been evacuated, although not all have left their homes. They’ve been allowed back during the day, to grab clothes and feed animals, but they are supposed to be elsewhere at night. The county emergency management agency says the families might be allowed home for good by Wednesday, Christmas Eve, but officials aren’t sure. “We weren’t given any answers,” But this is Day 6, right here, and we still don’t have answers.” The well is just outside Sardis, a community of about 560 people about 145 miles east of Columbus. An elementary school that closed in 2011 has been open as a shelter for families during the day. Triad Hunter, the company that owns the well, didn’t return calls last week. But people who were evacuated from their homes said the company told them they would be reimbursed for meals, mileage and hotel rooms. There aren’t many hotels near Sardis, however, and the closest ones, in New Martinsville, W.Va., are filled, mostly by temporary oil and gas workers. Triad Hunter offered to put people up in hotels in Marietta, a 45-minute drive from Sardis.
Some families to return to area around leaking Monroe County oil and gas well - Columbus Dispatch (12/23/2014) A blown-out oil and gas well in eastern Ohio has been capped this afternoon. Crews lost control of the well on Dec. 13. The well had been drilled and fracked a year ago to tap into oil and gas in the shale deposits thousands of feet below ground in Sardis, in Monroe County, about 145 miles east of Columbus. But drilling company Triad Hunter had plugged the well to await production. Crews were unplugging it when they lost control of the well, according to the Ohio Department of Natural Resources, which oversees fracking operations. Since then, the well has been spewing a thick plume of natural gas. Nearby residents say the plume reaches 70 feet in the air. Emergency crewsevacuated about 30 houses within a 1.5-mile radius of the well. Today, they reduced that evacuation area to one-half mile, said Phillip Keevert, director of the Monroe County Emergency Management Agency.
Utica Shale well blowout in Ohio brought under control: A high-pressure “blowout” Dec. 13 at a Utica Shale gas well in Monroe County, Ohio, that caused the evacuation of 28 families was finally brought under control Tuesday. Bethany McCorkle, a spokeswoman for the Ohio Department of Natural Resources, said “surface control” of the 10,653-foot-deep shale gas well, operated by Triad Hunter, a subsidiary of Texas-based Magnum Hunter Resources Corp., was re-established by Wild Well Control, a company specializing in fixing well fires and blowouts. “The new wellhead has been successfully installed, the values are shut and no more natural gas is being released,” she said in an email response to questions. “Contractors will now pressure test the new wellhead.” No explosion or fire occurred during the 10 days that well gas emissions flowed out of control, and the well was continuously doused with water to reduce the risk of an explosion. Families in the area were evacuated on Dec. 13 and kept out for several nights. No residents or well workers were injured. “The local fire department issued an evacuation of 1.5 miles out of an abundance of caution when the incident occurred,” Ms. McCorkle wrote in an email. “Residents were permitted to be in their homes during the day but not during the night. The evacuation was later reduced to a 0.5- mile radius.”
Crews cap gas leak at Monroe County fracking well - Crews regained control of a blown-out well in eastern Ohio yesterday, 10 days after the well shot a plume of natural gas into the atmosphere and caused about 30 homes to be evacuated.That means everyone who has been staying in hotels and with family and friends for the past week and a half will be home for Christmas, said Phillip Keevert, director of the Monroe County Emergency Management Agency.After the well blew out on Dec. 13, the county emergency-management agency ordered people who live within a 1.5-mile radius to find other places to stay.State emergency responders said they worried that the gas could cause an explosion.The well is on a hilltop near Sardis, about 145 miles east of Columbus.Keevert later reduced the evacuation radius to a half-mile, after an emergency crew from Texas removed a broken wellhead from the well.“Once they took the wellhead off, the gas was going straight up instead of off to the sides,” he said. “So we were able to bring the radius in.” Keevert said the emergency crew put the replacement well in yesterday afternoon, tested the pressure and said the new wellhead should work.
Citizen audit of Ohio wells: Doing the regulators' jobs for them - Melissa English and Nathan Rutz of Ohio Citizen Action published a citizen audit of the well data, and I’m happy to be listed as a contributor. The body of the audit is available as a PDF here (appendices separate). Its purpose: “The authors of this report recommend that the U.S. EPA suspend the ODNR’s authority to operate the Underground Injection Control program until completing a thorough audit of all of Ohio’s active injection wells and only reinstating that authority if and when the ODNR’s competence and independence from industry influence can be demonstrated.” The audit is only 17 pages long and is very readable (though I write that as someone who’s been engaged on the issue for a while), and it’s meant to be understandable even by those who aren’t especially familiar with the issue. Part of the reason for it was because the US EPA promised much better oversight of ODNR than it has delivered. It produced audits in 2005 and 2009, with the latter being (as the Ohio Citizen report notes) an 80% copy and paste of the former. The actual work that was done was somewhat cursory, and in any event this was all before fracking really took off in Ohio. In 2009 the EPA said the next audit would occur in 2012 or 2013, and here we are about to close the books on 2014 with nothing. So part of the reason for the project was simple frustration with the EPA not following up on what it said it would do. Can’t be bothered to do an audit? OK, we’ll try one ourselves.
Pa. industry grows by sending its wastewater to Ohio - In the first half of this year alone, the Vienna wells accepted and deposited underground 350,000 barrels of waste from Pennsylvania — more than 14 million gallons — according to records kept by the Pennsylvania Department of Environmental Protection. These wells — and more than 200 others like them across Ohio, including one in Monroe Township in Ashtabula County — figure prominently into the natural gas industry’s growth in neighboring Pennsylvania over the past six years.While drillers treat and reuse 90 percent of their liquid leftovers, according to industry estimates, the remaining 10 percent that gets sent to injection wells adds up. And it’s far easier to dispose of it in the Buckeye State than over the border — so much that last year Pennsylvania exported enough drilling wastewater to this state to fill 200 Olympic-sized pools. Not that you’d want to swim in any of them. The brine is two- or three-times more salty than seawater. Regulators have found evidence that it contains chemicals leftover from hydraulic fracturing, or “fracking,” the drillers’ process of busting through underground with high-pressure liquid to release stores of gas. And, environmentalists warn, the wastewater could be radioactive. A number of reasons explain why Ohio more readily accepts the wastewater than Pennsylvania, which has just eight active injection wells, according to the U.S. Environmental Protection Agency. Geology is one.. Also, regulators in Ohio monitor the disposal wells in their state and are perceived by some as more friendly toward the gas industry, while federal officials watch over the wells in Pennsylvania.
Ohio’s natural gas boom brings flurry of pipeline construction -- A huge supply of natural gas in the shale of northern Appalachia is igniting a mega-boom in gas pipeline construction in Ohio, the likes of which haven’t been seen since the 1940s. “You have interstate, intrastate, local utility service lines upgrades, collection lines for oil and gas utilities, and lines for gas-fired electric utilities. Altogether, there will be 38,000 miles of pipeline development in Ohio over the next decade,” “I tell people you might not see shale and oil drilling development in your area like in the eastern part of the state, but with pipelines and development, it’s coming your way.” Three proposed pipelines are winding their way through the Federal Energy Regulatory Commission approval process now. The largest project is Energy Transfer Partner L.P.’s $4.3 billion Rover Pipeline, an 823-mile conduit running from southeast Ohio west to Defiance County and then north to Michigan and Canada. The 409-mile main line will have nine new lateral pipelines ranging from 4 to 206 miles to connect it to southeast Ohio, Michigan, and Canada. E.T. Rover will begin moving 3.25 billion cubic feet of gas daily from Appalachia to southern Ontario in 2016. Also aimed at the Canadian market is Spectra Energy/DTE Energy’s $1.5 billion Nexus, a 250-mile pipeline that will begin in northeast Ohio’s Columbiana County, cut across to Maumee, and turn north through Fulton County to reach Michigan and Canada. It will move 2 billion cubic feet of gas daily starting in 2017. In southeast Ohio, NiSource subsidiary Columbia Pipeline Group is proposing Leach XPress, a $1.75 billion, 160-mile pipeline to send 1.5 billion cubic feet of gas daily from West Virginia and southeast Ohio to central Ohio, where it will connect to lines running to Leach, Ky. Set to be ready 2017, the line is needed to ship gas to the Gulf of Mexico — where Ohio got most of its natural gas in the past.
Get some fracking sense - paying less is paying more: Temur Akhmedov (opinion) - cleveland.com The United States is currently the world's largest producer of oil and natural gas -- something most people wouldn't think of a decade ago. The United States has recently surpassed Saudi Arabia in raw oil production. It has been holding the position of the biggest natural gas producer for four years. Oil production has reached 9 million barrels a day, and is projected to grow to 13 million by 2019. As a result, U.S. consumers are experiencing a low per-barrel oil price of about $60 and the lowest gas prices since 2009. All these changes are happening thanks to rapid development of hydraulic fracturing, or fracking, on U.S. shale formations.However, rapid development of fracking hasn't entailed rapid improvements in technology used. We should consider switching to traditional methods of resource extraction and alternative fuels. Meanwhile, the fracking industry must improve the technology of extraction and waste disposal to reduce the indirect cost to society.
Blogger calls on Ohio to follow New York's example on drilling - Akron Beacon Journal - Governor Cuomo’s decision was backed by the science described at length in the Health Department’s extensive study of the risks fracking poses to public health. New York Health Commissioner Howard Zucker summed up the study simply: he wouldn’t want his child to play outside in a community that allows fracking. Oil and gas companies claim that accidents are few and far between, but leaks, spills, and explosions are not uncommon. And when they do happen, they are often severe. Ohio, a small shale gas producer compared to states like Texas and Pennsylvania, has seen a distressing number of serious accidents related to fracked wells. Last month, a worker was killed in an explosion and fire at a fracking site. Two weeks before that, Ohio saw three fracking-related accidents in three days, during which a worker was burned, a pipeline fire torched acres of forest, and a well blowout forced 400 families to evacuate.In June, a massive spill and fire forced 25 families to evacuate and killed over 70,000 fish along a 5-mile stretch of a tributary of the Ohio River. The fire took a week to extinguish, with at least 30 explosions occurring over that week, driving dangerous shrapnel though the air. The state lets companies drill up to 100 feet from homes, but explosions at drilling operations are capable of blowing pieces of metal much farther than that.The month before that fire, drillers were unable to prevent the excessive buildup of pressure in a well, which led to a leak of around 1,600 gallons of oil-based drilling fluids into a tributary of the Ohio River. These accidents are unacceptable, yet they are only the most visible instances of pollution. We can’t see the long-term impacts of widespread drilling and fracking—damage to groundwater, the atmosphere, and the public health effects of long-term exposure to chemicals—but they stand to be a much more significant threat.
New York has outlawed fracking. More bans will follow if energy companies don't take action - New York Gov. Andrew Cuomo’s statewide ban on high-volume hydraulic fracturing, or fracking, is a vindication for communities around the country that have been hit hard by unconventional natural gas production. For those in the energy industry who have shrugged off the environmental, health and safety concerns of fracking, Cuomo’s decision was the second rebuke in a little more than a month, following the recent vote to ban fracking in Denton, Tex. There have been a number of other bans and moratoriums across the country in the past couple of years: Mora County, N.M.; Boulder County, Colo.; and Dryden, N.Y., to name a few. These bans demonstrate what can happen when oil and gas producers erode public trust by brushing aside legitimate questions. Increasingly, regulators and the energy industry will be called upon to show that unacceptable risks from fracking can be minimized. Minimizing those risks requires strong, sensible regulation. Industry must finally recognize that it is in its own interest to work with regulators to make that happen. I’ve seen firsthand the local impacts that have made fracking, as Gov. Cuomo put it, “probably the most emotionally charged issue that I have ever experienced.” As part of the U.S. Secretary of Energy’s Advisory Board on shale gas in 2011, I saw that fracking’s environmental impacts are real and important health issues remain unresolved. In rural Pennsylvania, I met a mother who told me she had been forced to leave her family farm because of severe air pollution from shale gas wells. The pollution had made her young son ill. He was staying with friends; she was living out of her car. And due to natural gas operations in Pinedale, Wyo., the town of 2,000 residents has had to cope with smog rivaling that found in Los Angeles.
New York Department of Health Fracking Review - embedded scribd pdf, graphic
Cuomo gets kudos, scorn for hydrofracking ban: New York Gov. Andrew Cuomo is getting heaped with praise by environmentalists and scorn by business interests for a planned state ban on hydraulic fracturing for natural gas, even as he insists the decision wasn’t his. Residents statewide remain almost evenly split on the issue, and the divisions are clear, pollsters said Thursday. The decision announced Wednesday followed Cuomo’s re-election last month, which the Democrat won easily as expected. Quinnipiac University Poll’s Mickey Carroll said the political impact is likely to be limited and the decision was predictable.Following his pledge again Wednesday to defer to experts on “this highly technical question,” his health and conservation commissioners described analyses that identified contamination threats to water, soil and air, the absence of reliable health studies or proof that drillers can protect the public, as well as diminishing economic prospects. “The time to do it is when gas prices are plummeting,” Miringoff noted. “In the short term, this cushions the blow.” Conservation Commissioner Joe Martens said he’ll issue the ban early next year. He said 63 percent of the state’s 12 million acres with these possible gas deposits would already be off-limits because of protections for the New York City and Syracuse watersheds, other drinking water sources and certain other areas, while court rulings have recognized towns’ authority to individually ban hydrofracking through zoning, further limiting financial prospects. Acting Health Commissioner Dr. Howard Zucker said 4,500 staff hours were spent reviewing health studies about the drilling method of extracting oil and gas from deep underground by pumping huge amounts of water, sand and chemicals at high pressures to break up rock formations. It’s being done in many other states, including neighboring Pennsylvania.
Fracking decision brings elation, dismay - Robert Aronson, director of the Seneca County Industrial Development Agency, once thought hydraulic fracturing-related industries might find a home at the former Seneca Army Depot and provide jobs for local residents. He doubts it now. Across the lake in Benton, Scott Osborn of Fox Run Vineyards once worried that fracking might poison the water or generate enough truck traffic to drive away the tourists he relies on. He no longer does. Their reactions to the state’s planned hydrofracking ban highlight both ends of the local opinion spectrum. On the one hand, there was a desire for the economic benefits that fracking might bring. On the other, there was deep concern about its potential impact on the environment. “All the evidence that was coming out — the potential for earthquakes, the water quality issues — there’s so much scientific data that is showing that it’s not a good idea,” Osborn said. “And there’s always the health problems that seem to be created.” Dave Rauscher, owner of Waterloo’s D.C. Rauscher Inc., an oil and gas services company, sees things differently. He believes the state is relying on opinion rather than fact, in relation both to the potential environmental harm and to the potential impact on local communities. “There’s an extreme amount of concern for the people who view the Finger Lakes as a tourist attraction only,” he said. “They do not view it as a mineral owner’s interest or a big farmer or anything like that, and they really believe it’s going to obstruct or destroy that tourism trade. Well, that’s never been proven.”
NY Fracking Decision Puts Spotlight on Gas-Drilling Revenue - New York Gov. Andrew Cuomo's recent decision to ban fracking shines a spotlight on the balancing act governments in potentially oil- and gas-rich regions face weighing economic benefits against environmental concerns. The Democratic governor, who is set to begin his second term on Jan. 1, said in his Dec. 17 announcement that his decision was based on the New York State Department of Health's conclusion that fracking for natural gas cannot be done safely. "All things being equal, I will be bound by what the experts say because I am not in a position to second guess them with my expertise," said Cuomo during a the Dec. 17 cabinet meeting where the state announced the decision to not proceed with fracking. "It is a highly technical field that needs more information and less emotion." New York State Department of Environmental Conservation Commissioner Joe Martens said in a statement that with an increasing number of localities that have enacted fracking bans and moratoriums, "the risks substantially outweigh any potential economic benefits." While many Democratic leaders praised Cuomo's decision, New York State Republican Chairman Ed Cox issued a statement saying this was missed opportunity to capitalize on the recent popularity of fracking across the country. "Andrew Cuomo has given into the radical environmental Luddites in his own party to leave New York as the only one of 35 states with extractable natural gas to be missing out on the hydro-boom," said Cox. "While unemployment in New York's shale-rich Southern Tier remains high, safety regulated natural gas development has led to the creation of a quarter of a million new jobs across the border in Pennsylvania."
The downside of New York's fracking ban: local businesses 'falling apart' -- While environmental groups are doing a victory dance over New York’s decision to ban fracking, farmers such as apple grower David Johnson are grieving for dashed hopes and dreams.“I’m devastated,” Johnson said after governor Andrew Cuomo’s health and environmental commissioners announced on Wednesday that they were recommending a fracking ban. “I have concerns about how to continue this farm that’s been in the family for 150 years.” Energy companies denied the chance to drill in New York can simply raise their rigs in other states. That is what they have done since the Marcellus Shale gas drilling boom began in 2008 and New York launched an environmental review that effectively put a moratorium in place. But landowners in the state’s Southern Tier region who had hoped to reap royalties from gas production do not have that option. “Frankly, my heart breaks for all those families in the Southern Tier who were denied the opportunity to develop their mineral resources,” said Karen Moreau, executive director of the New York branch of the American Petroleum Institute. New Yorkers have watched other states that sit atop the Marcellus Shale – Ohio, West Virginia and neighbouring Pennsylvania – ride the fracking boom and reap profits from one of the world’s largest natural gas deposits. Some New York landowners signed lucrative leases with energy companies and received multimillion-dollar signing bonuses before the natural gas market and the state’s regulatory climate soured. But many landowner coalitions never got the chance to sell their leases.
New York Fracking Babies Compare Fracking to Jesus! - Per Brad Gill, in what must be the world’s most ridiculously sacrilegious analogy of the New York Frack Wars. If I was any further of a lapsed Catholic, I’d have to be on Mars. But, frankly, for the first time in all this, this pretty much fracking offends me: “The highlight of the conference came at the very end when Cuomo said that this decision was not his and that it is really between Martens and Zucker – absolving himself from all responsibility like Pontius Pilate washing his hands.“ No gashole. Not even close. Not even in the same county as close. Getting turned down after a lengthy regulatory review process is not akin to crucifixion. Neither fracking nor Frack Babies are anything like Jesus. Try again, gashole. Something a bit less hackneyed, a bit more topical, a bit less fracking nuts. . . Chalk this up as yet another coffin nail in the New York Frack Babies‘ fracking coffin. The Frack Babies jump the shark. Again.
The politics of Cuomo's fracking decision - During last Wednesday's dramatic fracking announcement, Governor Andrew Cuomo took great pains to say that he had no idea how the commissioners for the departments of health and environmental conservation were going to decide on the issue. Whether the state should allow fracking to proceed was their decision alone, Cuomo said seriously and repeatedly, and was one he would respect either way. But between the timing of the decision—it was held up for years with little explanation, only to come together shortly after the Cuomo's re-election—and the way it comported with the direction of public opinion, the politics lined up rather neatly for the governor. A Quinnipiac poll released Monday found that 55 percent of those surveyed said they approved of the ban, compared to 25 percent who did not.It wasn't always that way.There was a time when the administration was preparing to allow a limited number of wells in the Southern Tier, as trial-ballooned in the New York Times in 2012, and as evidenced by its extraordinary care in editing and delaying a federal fracking study around that time to lessen the appearance of environmental risk. But since then, public polls and election results have made approval of fracking steadily less palatable. This year's elections showed anti-fracking forces could be a significant force at the polls. Democratic gubernatorial candidate Zephyr Teachout attributed her strong showing in September's Democratic primary against Cuomo to anti-fracking supporters upstate, where she won dozens of counties.
Editorial: The right fracking decision - Albany Times-Union - In banning fracking, New York goes against the trend in which a growing number of states are attempting to cash in on a natural gas boom. But that very boom provided state Health Department researchers the abundant and ever-expanding foundation of data that led to their overwhelming conclusion. States where fracking has been under way are experiencing myriad problems with methane, benzene and other volatile organic compounds polluting the groundwater and air. Data also link the gas drilling process with earthquakes. Skeptics may say Gov. Cuomo’s decision was politically easy, coming during an oil glut that has reduced demand for natural gas. But by instituting an outright ban on fracking, the Democratic governor is already taking political hits from the drilling industry and many Republicans, particularly in the financially pressed Southern Tier and Western New York . Even there, however, fracking’s wisdom is disputed by many. Now the governor and his staff must follow through on his pledge to find alternative and safer economic development opportunities for those areas, which have been struggling for decades. Scientific research will continue on fracking, and surely technological improvements will, as well. There might come a time when the process is safe enough for some use in New York . But the science today is clear: that time isn’t now.
Even With Ban, New York Can't Escape Effects of Fracking -- Unfortunately, just because New York banned fracking, and even though more than 150 New York municipalities have banned fracking using local zoning laws, the state won't escape its effects. In fact, New York is already burdened with the fracking industry's health and safety problems and threats to the environment because of gas infrastructure. Gas companies are building pipelines to service increasing demand in New York City. In spite of opposition from groups like OccupythePipeline concerned about radon exposure and the risk of explosion, Spectra Energy's pipeline, which runs under Greenwich Village, went into service in November 2013. On December 1, gas began to flow through the Northeast Connector Project, which will deliver 647,000 dekatherms daily from York County, PA to 1.8 million natural gas customers in Brooklyn, Queens, Staten Island and Long Island. The new delivery point will shift from Long Island to the Rockaway Peninsula via the Rockaway Lateral Project, a disputed 26-inch diameter pipeline currently being constructed under popular beaches, a golf course, and a federally protected wildlife refuge. Two years after Superstorm Sandy hit the Rockaways hard, this high-pressure pipeline may pose some super hazards in the event of another big storm. (Sandy is estimated to have caused 1,600 natural gas pipeline leaks overall.) Pipeline company Williams' record on pipeline incidents and explosions in recent years is troubled, and the company dismissed safety recommendations for Rockaway Lateral from the US Corps of Engineers.
Experts: Cuomo Ban Means Fracking Boom Will Bypass NY - Voters in New York overwhelmingly support Gov. Andrew Cuomo's announcement last week that he was imposing an indefinite statewide ban on fracking, says a Quinnnipiac poll. But the governor's move isdrawing fire from experts who say it was based on flawed science and from residents of struggling rural New York communities who say it will deny state residents the fruits of an economic boom that is transforming other parts of the United States, CNS News reports. According to geologists, the huge Marcellus Shale Formation, beneath parts of New York, West Virginia, Ohio, and Pennsylvania, contains 500 trillion cubic feet of natural gas – enough to supply the entire United States for two years. The New York ban places 14.1 trillion cubic feet of natural gas in western New York off-limits to drilling. State officials have attempted to play down the significance of Cuomo's Dec. 17 announcement by saying that more than 60 percent of the 12 million acres with potential gas deposits had already been placed off-limits to fracking because of local zoning ordinances or existing environmental regulations from Albany.
New York Fracking Ban Contrary To State's Energy Future --Governor Andrew Cuomo announced last week that hydraulic fracturing would be banned in New York State, citing the lack of scientific data on public health effects. The ban was a huge political success for the Governor and for those opposed to fracking. But it’s a reversal of Cuomo’s previous stance in which he embraced fracking as an economic stimulus and a way to reduce carbon emissions when closing old coal plants. And a 2011 study by the New York State Department of Environmental Conservation didn’t show any great issues not faced by most other industrial processes. I’m a little confused – banning fracking for gas, and banning new pipeline construction to transport it, means more dirty energy from coal and oil during the winter months when gas supplies are insufficient to most of New York and New England (Forbes). EPA considers emissions from natural gas systems to be fairly low, even compared to agriculture and organic digesters. True, there is a lack of scientific data, which is starting to be addressed. But there is also a lack of data suggesting fracking is as bad as opponents claim. And the main contamination culprit is poorly cemented fracking wells and poor handling of the return water, not the fracked sediments themselves (Forbes; Duke University;Forbes Opinion). Plus, no one believes data will show fracking for gas to be anywhere near as environmentally destructive as getting coal or oil out of the ground. I’m not a big fan of gas, or of fracking, but there are two big reasons for America’s historic reduction in carbon emissions over the last six years – the Great Recession and the shale gas fracking craze. U.S. carbon emissions are lower than at any time since 1994.
Reed: state should compensate landowners because of fracking decision House Representative Tom Reed says that the state’s decision on high-volume hydraulic fracturing is “the wrong decision for New York State ‘s future.” During a conference call this morning, Reed said that the decision is a missed opportunity for the state and that fracking could provide jobs and a boost for the Southern Tier’s depressed economy. The decision is political, he said, and driven by Governor Andrew Cuomo’s presidential ambitions. Reed’s remarks aren’t much different from those made by other fracking supporters in the wake of the Cuomo administration’s decision to prohibit fracking in New York . But Reed is seizing on a point that other critics haven’t given as much attention. “You should compensate individuals for taking their property,” Reed said. He’s essentially saying that the property owners should be compensated for the money they could have made from fracking.
Uncommon legal concept may surface in New York after fracking ban: For six years while shale gas extraction in New York was in a state of indefinite hold pending environmental and health reviews, landowners and oil and gas firms talked about “takings.” It’s a legal concept that, like eminent domain, requires the government to compensate private property owners for assets taken away because of government action. When New York Gov. Andrew Cuomo last week announced he planned to permanently ban high volume hydraulic fracturing — the practice used to pull gas out of the Marcellus Shale, for example — legal minds and oil and gas hopefuls said the time is right for a takings lawsuit. Or many takings lawsuits. But it may be an uphill battle for the plaintiffs, if any materialize. “Takings is probably one of the trickiest and less well-defined areas of the law that we practice in,” . The concept has legal backing in both federal and state laws, but is largely circumstantial and based on what assets are being taken away; how they could have been monetized; and what would have been the economic value of doing so. Landowners eager to try out the strategy in court say by depriving oil and gas companies of the option of fracking shale wells on their property, the state government is taking away the landowners’ ability to make money on their oil and gas rights.
New York Winemakers Fight Gas Storage Plan Near Seneca Lake - — Over the last two decades, vintners in the Finger Lakes region of New York State have slowly, and successfully, pursued a goal that could fairly be described as robust, with a lively finish: to transform their region into a mecca for world-class wines, and invite an influx of thirsty oenotourists.But long before the local labels went upscale, the Finger Lakes were known for another earthy, if not so refined, industry: underground gas storage.Now, those two legacies have collided over a long-simmering project that would store tens of millions of gallons of liquefied petroleum gas, and up to two billion cubic feet of natural gas, in subterranean salt caverns thousands of feet below the shores of Seneca Lake.Those who oppose the plan describe it as an existential threat to years of carefully cultivated vinicultural development in the Finger Lakes, just as the area is beginning to bloom.“Do we want to be known for world-class wine grapes, farm-fresh food and great hospitality?” . “Or do you want to be the gas-storage hub of the Northeast?” The state must approve the portion of the project that involves liquid propane and butane. The expansion of methane-gas storage received approval from federal energy officials in October. Since then, dozens of protesters have been arrested near the natural gas storage site, just outside this upstate village, where rolling hills fall into deep glacial lakes. Anti-gas signs have become nearly as common as grape trellises. And more than 50 local winemakers — joined by several vintners from acclaimed wineries in California, France and Germany — have spoken out against the project, saying the community’s future is tied to the land, not to the gaping holes deep beneath it.
“We are Seneca Lake” protests and arrests continue. Cuomo must stop this dangerous natural gas project! – As New York State released the long awaited Public Health Assessment on the impacts of fracking, and as Governor Cuomo dramatically announced that High Volume Hydrologic Hydrofracking (fracking) in New York State is banned, actions and arrests continue at Seneca Lake. Yesterday as the Governor spoke, 28 Seneca Lake defenders were arrested. Just the day before, 41 arrests were made.As regular readers ofClimate Connections know, Seneca Lake and the Finger Lakes areas of New York are under siege by those in industry that are trying to turn the region into a transportation and storage hub for natural gas.Crestwood Midstream, a Houston-based energy company, is creating extremely dangerous facilities in, around, and under Seneca Lake, including using abandoned salt mines for the energy hub. This project threatens the environment, drinking water, health and well-being of millions of people, including future generations. The negative regional economic impact will be devastating to local farms including many family-owned grape and wine operations. We call on Governor Cuomo to put a halt to this project immediately and permanently. Be clear Governor Cuomo, we are willing to put our bodies and our lives on the line and we will fill the local jails with grandparents, children, neighbors, health workers, veterans, and the so many others that are defenders of our lands, our health, and our future. We are Seneca Lake. All of us.
Pipeline Threatens Then Trespasses - If you’re in harm’s way, lock the gate and call a lawyer. Don’t sell out cheap and have your land ruined. Grow a pair for the New Year. The New York State Office of the Attorney General has taken a complaint, filed by a landowner who received a threatening letter from Constitution Pipeline, and submitted it to the Federal Energy Regulatory Commission (FERC). This action may indicate that the AG’s office is beginning to respond to complaints by the Center for Sustainable Rural Communities, the Pace Environmental Litigation Clinic and others over the tactics of Constitution’s Lawyers. The AG’s submission to FERC includes a copy of a complaint form in which a landowner states that not only has he received a threatening letter from Constitution’s lawyers but also that representatives of Constitution have trespassed on his posted private property on multiple occasions. A copy of the AG’s submission can be viewed here: http://elibrary.ferc.gov/idmws/file_list.asp?accession_num=20141223-0039 . Constitution has retained several local law firms to act on their behalf during eminent domain proceedings against landowners, including Stockli Slevin & Peters, LLP, a firm involved in the compressed natural gas plant proposed for a rural tract in the Town of Duanesburg, which withdrew its application in response to organized resistance by Town residents. As of close of business yesterday Constitution has filed condemnations complaints against 110 landowners and is expected to serve those landowners with legal papers during Christmas and New Year’s week. The Center urges landowners who have been served legal papers by Constitution to seek legal assistance from attorneys familiar with eminent domain proceedings in Federal Court. Landowners who suspect that pipeline crews have entered their property without permission should immediately contact law enforcement. They may also contact the Center’s Land Owner Response Line at: 800-795-1467. The Center will dispatch available volunteers to assist the landowner in documenting pipeline crew activity.
New York's fracking ban spurs debate in Pennsylvania | WBFO: Governor Cuomo's decision to ban fracking in New York is triggering discussion in Pennsylvania, where fracking is big business. A reporter who covers gas development issues said the industry views Cuomo's action as an economic benefit, because drillers no longer have to fret about losing business to their northern neighbor. Marie Cusick of WITF tells WBFO some experts predict the New York ban will not affect Pennsylvania's gas development initiatives. "I talked to an industry analyst. He said this will have little to no impact on the drilling business that’s already underway in Pennsylvania and Ohio," said Cusick. "Companies have spent billions of dollars, invested a lot in infrastructure. It’s very expensive to get going and do this, so New York has just kind of been a non-entity in this shale boom since the beginning." Pennsylvania voters recently elected a new governor who will take office in January. Tom Wolf ran on a platform of taxing natural gas drillers as a revenue-generator for schools and other key services. Still, Wolf has also talked about imposing additional safeguards, including the creation of a public health registry, in light of some environmental issues that have been raised in New York. "He says he wants stronger regulations. But he said he thinks New York made the wrong decision, and he thinks fracking is safe and that it could really help Pennsylvania's economy," Cusick said.
Pennsylvania lags in studying health risks of shale fracking: New York and Pennsylvania share a border, but on shale gas policy the states are separated by a gulf. The breach widened last week when New York Gov. Andrew Cuomo’s administration announced that state will ban fracking, citing uncertainty about the health risks posed by the oil and gas extraction process. In Pennsylvania, where elected officials from both parties embrace shale gas development, government leaders are still debating whether to fulfill a three-year-old recommendation for how to study the potential impact of shale gas development on public health. Gov. Tom Corbett’s Marcellus Shale Advisory Commission urged the state Department of Health in 2011 to create a health registry to track the well-being of people who live near natural gas drilling sites over time. The project was not funded, and the registry was never created. Mr. Crompton said proposed funding for a health department registry was withheld in the past out of fear that regularly testing residents who live near wells would be “improperly unnerving” for communities. “We have always been careful about this subject because we don’t like a study or some sort of analysis done under the premise that it’s unsafe,” he said. A state health department spokeswoman said the agency tracks and responds to all Marcellus Shale-related health complaints, which now number 76 since 2011.
Fracturing the Keystone: Why Fracking in Pennsylvania Should Be Considered an Abnormally Dangerous Activity - During the early morning hours of December 15, 2007, Thelma and Richard Payne, an elderly couple, were startled awake when an explosion in their basement dislodged their Ohio home from its foundation. Their homestead for more than a half-century was completely destroyed due to nearby hydraulic fracturing (“fracking”) operations. In a similar instance in 2010, high levels of methane were discovered in a Pennsylvania family’s basement. The discovery came after Michael Leighton found his drinking water bubbling over the top of his 100-foot well and twenty small geysers on his property spewing water mixed with methane into nearby streams. Again the likely culprit was a nearby fracking operation. Such events epitomize just some of the risks associated with fracking, which have led many concerned citizens to vehemently voice their opposition to the practice in the Marcellus Shale region. Analyzing those risks, this comment argues that unconventional horizontal fracking should be considered an "abnormally dangerous" activity in Pennsylvania because such a classification is both legally appropriate and paramount in mitigating the future harms of fracking. Part II(A) describes the geological characteristics of the Marcellus shale deposit, including its potential gas reserves and the technological challenges of extracting it. Part II(B) provides a detailed description of the recently pioneered fracking procedure and the environmental risks it presents. Part III discusses the current regulatory framework that applies to fracking in Pennsylvania and discusses the failures of that framework to sufficiently protect the public. Part IV traces the common law development of strict liability, applies the current rule to fracking, and discusses the negative results of alternatively analyzing fracking under a negligence regime. Part V concludes that fracking will become increasingly safer through the imposition of strict liability, which will mitigate the negative environmental impacts of the industry, and in time, allow for expanding gas production through safer methods.
Duke professor: Water samples show fracking contamination in Wolf Creek - Water testing by Duke University reveals that contaminants associated with oil and gas wastewater have migrated into Wolf Creek, a tributary of the New River, above a drinking water intake. During evidentiary hearings before the West Virginia Environmental Quality Board in Charleston, Dr. Avner Vengosh, professor of geochemistry and water quality in the Nicholas School of Environment at Duke, presented a summary of his water testing and research findings. According to court documents, Vengosh said he and graduate student Jennie Harkess collected two water samples from Wolf Creek, 200 feet directly downstream from an injection well site at Danny E. Webb Construction Inc. in Lochgelly on Sept. 14, 2013. He concluded the samples contained elevated levels of chemicals associated with fracking wastewater — chloride, bromide, sodium, manganese, strontium and barium. Vengosh noted this chemical composition is typical of oil and gas wastewater observed in Pennsylvania and West Virginia. He said samples were filtered, acidified, and transported according to standardized U.S. Geological Survey field sampling techniques. He noted that the elevated water quality in stream samples near Webb Construction are not consistent with contamination from acid mine drainage sources, but matches the migration of oil and gas wastewater discharged into the environment.
Fracking Fumes: Where There's a Well, All is Not Well -- Emissions from oil-and-gas production pose a significant threat to human health, and immediate steps must be taken to reduce exposure to the toxic pollution, according to an analysis of scientific studies by theNatural Resources Defense Council. After reviewing the findings of 24 studies conducted by both government agencies and academic organizations, the evidence shows that people living both close to and far from oil-and-gas drilling are exposed to fracking-related air pollution that can cause at least five major types of health problems, according to the NRDC's report, Fracking Fumes. The report says fracking threatens air quality as much as it does water quality and calls for an immediate moratorium on any new wells until a comprehensive analysis of health effects can be performed. Putting a halt to fracking won't jeopardize jobs or local economies, said Kate Sinding, a senior attorney for the NRDC. It will encourage development of alternative energy sources that will mean jobs and financial growth, she said. She argues that these new energy sources will be more sustainable and consequently have a longer-lasting financial impact than oil-and-gas extraction.
Regulators have to require drillers to come clean on what's in fracking fluids - Chris Faulkner -- Baker Hughes, an energy firm in Houston, is about to make history. The company just pledged to publicly disclose the chemical makeup of its fracking fluid. This decision is revolutionary. In most states, energy companies aren't required to be transparent about how, exactly, they extract oil and gas embedded in underground rock formations. So most keep their fracking recipes a secret. There's a budding activist movement urging regulators to step in and mandate full disclosure.As the CEO of an oil and gas company, most people assume I'm against such a mandate. But I'm not. In fact, new regulations requiring increased fracking transparency would be a boon for the oil and gas industry. Fracking disclosure requirements vary wildly by state. California requires full disclosure. Ohio only mandates that firms publicize some of their chemicals and privately report the rest to the state's Department of Natural Resources. North Carolina classifies fracking recipes as trade secrets, effectively criminalizing disclosure. This patchwork of polices scares off investment. Contrary to the activist hysteria, fracking fluids themselves are actually harmless. Typically, they're over 99 percent water and sand. Only very small amounts of chemicals included. Certain acids help create cracks in the rocks. Propping agents keep cracks open. And corrosion inhibitors stop the acids from eroding well pipe casings. These trace-level chemicals pose effectively zero environmental risk. No less of an authority than the U.S. Groundwater Protection Council has reported that there is not a single recorded instance of water contamination due to fracking fluids. Fracking fluids are safe. And the public deserves to know what goes into them. That's why, as an energy industry CEO, I'm firmly in support of fracking disclosure laws.
ExxonMobil slammed with $2.3 million fine for fracking-related water pollution -The EPA just hit XTO Energy, a subsidiary of ExxonMobil and the nation’s largest natural gas company, with a cool $2.3 million fine for Clean Water Act violations related to its fracking activities in West Virginia. This is big: you rarely hear about frackers being held federally accountable for polluting water supplies, thanks to Bush-era legislation commonly known as the “Halliburton Loophole.” Basically, it ensures that fracking is exempted from the portions of the Safe Drinking Water Act and Clean Water Act that would typically make it accountable to federal oversight; as such, the EPA is mostly prevented from regulating both the process and the chemicals it injects into the ground. The EPA’s approach is a clever workaround of those restrictions. As CleanTechnica’s Tina Casey explains, the pollution targeted by the EPA wasn’t caused by fracking itself, but instead by other, ordinary violations committed by XTO: the company, it charges, dumped sand, dirt, rocks and other dirty fill materials into streams and wetlands without a permit, in violation of the Clean Water Act. In total, the company damaged 5,300 linear feet of streams and 3.38 acres of wetland — making the $2.3 million fine comparatively large, particularly when you consider the extra $3 million it agreed to pay in restoration costs. This isn’t the first time the EPA has pursued this roundabout policy of holding frackers accountable. Last year, it nailed fracking giant Chesapeake Energy for the same violation, resulting in a record $6.5 million settlement.
North Dakota Moves to Ease Oil-and-Gas Radioactive Waste Rules Dramatically - North Dakota regulators recently announced plans to bump up the state's allowable oil-and-gas radioactive waste disposal limit by tenfold. The current threshold is one of the strictest in the country, at 5 picocuries per gram. That's roughly the equivalent of the natural radiation levels found in North Dakota soil. Consequently, many companies truck their waste out of state to places with higher limits, including the neighboring Minnesota and Montana. But the new limit of 50 picocuries per gram, proposed by the state's Department of Health last week, on Dec. 12, would change all that. Although it's far from the loosest limit around, it would be one of the highest in the Great Plains region. Both the state's energy and waste industries welcome this rulemaking, which would save oil and gas companies significant transport costs and bring in new waste-disposal business to local landfills. But landowners who live near the disposal sites in rural western North Dakota don't want their home to transform into a regional dumping ground and are wary of the waste's threat to public health. The new limit is based on "the absolutely best science available," said Scott Radig, who heads up the division of waste management at the state's Department of Health. Regulators commissioned research institution Argonne National Laboratory last fall to study the issue. The group's report, published in November, said raising the state's threshold up to the 50 picocuries per gram limit could still be protective of human health and welfare. That's as long as other conditions are met, such as allowing industrial or oilfield waste landfills to receive as much as 25,000 tons of this waste annually and requiring that the waste is buried a minimum of 10 feet below the top of the landfill. North Dakota regulators did include these criteria in the draft rules.
Natural Gas Glut Isn’t Deterring Southwestern Energy - — Across the giant Fayetteville shale gas field here, country roads that were clogged by truck traffic just a few years ago are empty again. Once aglow at night from the bright lights twinkling on drilling rigs, the roads are now dark under the starry Arkansas sky. Virtually all of the few remaining rig and frack crews belong to one survivor: Southwestern Energy, a stubborn believer in the future profitability of natural gas.“I’d rather have the gas to myself with no one following,” Steven Mueller, Southwestern’s chief executive, said last month as he watched his rig hands pull pipe and mud from a new natural gas well here in northern Arkansas. With the price of natural gas plunging along with oil in recent weeks, virtually no one is following his lead outside of Southwestern. Twelve of the 13 rigs still drilling among the chicken farms and cattle ranches are Southwestern’s. The 45 other rigs — once operated by giants like Chesapeake Energy, BHP Billiton and Exxon Mobil’s XTO Energy a few years ago, when natural gas prices were more than twice as high — are gone.“ Most of the companies — on the pure economics, oil versus gas — think we are crazy,” After so much hype and billions of dollars in investment, the nation is deluged with gas and not enough pipelines to carry the bounty to consumers. One energy company after another, year after year, has written off or slimmed down its investments here and in Texas and Louisiana. But not Southwestern Energy, a Houston-based company that has risen from being the nation’s 40th to become the fourth-largest producer of natural gas. Since 2007, Southwestern’s Fayetteville production has risen 800 percent and its reserves are up 570 percent. It still drills more than 30 new wells every month here.
Even more natural gas being flared in Eagle Ford Shale - San Antonio Express-News: Gas flares in the Eagle Ford Shale burned more than 20 billion cubic feet of natural gas and released tons of pollutants into the air in the first seven months of 2014 — exceeding the total waste and pollution for all of 2012.Intro video to flaring project:New records analyzed by the San Antonio Express-News show flaring in the oil patch has continued to increase in the Eagle Ford, an upward trend first revealed in a yearlong San Antonio Express-News investigation called Up in Flames that was published in August.The Express-News obtained new flaring data from the Railroad Commission of Texas, which oversees the oil and gas industry. The updated database shows that from January to July, energy companies flared and wasted enough natural gas to fuel CPS Energy’s 800-megawatt Rio Nogales power plant during the same seven-month period.The newspaper also found some of the top sources of flaring in 2014 lacked state-mandated permits to flare natural gas.
Natural gas flaring in Eagle Ford Shale already surpasses 2012 levels of waste and pollution — Gas flaring in the most profitable shale field in the U.S. is on pace to surpass to 2013 levels of waste and pollution in South Texas, according to a newspaper analysis of state records published Sunday. The Eagle Ford Shale burned off more than 20 billion cubic feet of natural gas in the first seven months of this year, according to the Railroad Commission of Texas, which oversees the oil and gas industry. The tons of pollutants released into the air already exceed levels for 2012. Experts say plummeting oil prices likely won't stifle Eagle Ford production anytime soon. The San Antonio Express-News (http://bit.ly/1ATJFNW ) also found some of the top sources of flaring in 2014 lacked state-mandated permits to flare natural gas. The goal of flaring is to incinerate impurities, but it generates air pollution and carbon dioxide, a greenhouse gas that scientists say contributes to climate change. Railroad Commission spokeswoman Ramona Nye said Friday that the agency sent violation notices to three energy companies after the newspaper asked about their permitting status. "The commission expects all operators to fully comply with all commission rules including our flaring rules," Nye said. She said violators could be fined or blocked from selling their oil, and added that nearly 300 other warning letters have been sent in the past five months to bring other companies into compliance.
Three Reasons Not to Panic About Oil Prices In 2014, the United States became the world’s largest producer of oil, and Texas, of course, is the single biggest oil-producing state in the country. Over the past three years, production has nearly doubled to more than three million barrels a day, a volume not seen in this state since the late 1970s. All of which raises the question: how screwed is Texas right now? Since October, oil prices have dropped by half. As Aman Batheja and Jim Malewitz explain over at the Texas Tribune, that has a lot of people nervous. Some are reporting painful flashbacks to the 1980s, when a collapse in oil prices sent Texas plunging into a lonely and seemingly punitive recession. Here’s my take: Don’t worry. Or at least, don’t worry about a recession. Oil prices have measurable effects on the state’s revenue streams, its employment numbers, and its overall output. But in all three of those areas, Texas is less vulnerable than it once was and less vulnerable than one might think. My main concern, at this point, is that politics (like energy markets) are affected by beliefs and expectations as much as events. With the 84th regular session set to begin in a few weeks, the last thing we need is panic in the ranks. Conversely, if the price drop prompts thoughtful reflection, that would be good. So here’s the case for calm.
Texas drilling permits dropped 50 percent, Railroad Commission reports - Oil drilling activity in Texas is falling dramatically, as the steep decline in crude prices since the summer takes hold, state regulators reported Tuesday. The Texas Railroad Commission issued 1,353 permits for oil drilling last month, 50 percent less than it did the previous month. And in the months ahead, that will likely translate to rigs being shut down and layoffs across oil fields in West and South Texas. “There’s more to come in the months ahead,” . “This isn’t pleasant, but this is how the market rebalances itself.” For now drilling rig counts are holding relatively steady, as companies wind down their contracts. Since peaking in October, the number of drilling rigs operating in the United States has declined by just 5 percent, according to the oil field service company Baker Hughes. That number should continue a steady decline as companies make the decision to delay drilling on their leased land. In recent weeks companies including Conoco Phillips and Marathon have both announced their drilling budgets for next year will be 20 percent less than 2014. For smaller companies, which fill out the bulk of the oil field, the reductions are even more dramatic. Even so, oil production in Texas continues to grow, as existing wells flow and new wells come online. The Railroad Commission reported Texas produced 2.2 millions barrels a day in October, a modest increase from the previous month.
Oil Crash Exposes New Risks for U.S. Shale Drillers - Tumbling oil prices have exposed a weakness in the insurance that some U.S. shale drillers bought to protect themselves against a crash. At least six companies, including Pioneer Natural Resources and Noble Energy, used a strategy known as a three-way collar that doesn’t guarantee a minimum price if crude falls below a certain level, according to company filings. While three-ways can be cheaper than other hedges, they can leave drillers exposed to steep declines. “Producers are inherently bullish,” “It’s just the nature of the business. You’re not going to go drill holes in the ground if you think prices are going down.” The three-way hedges risk exacerbating a cash squeeze for companies trying to cope with the biggest plunge in oil prices this decade. West Texas Intermediate crude, the U.S. benchmark, dropped about 50 percent since June amid a worldwide glut. Shares of oil companies are also dropping, with a 49 percent decline in the 76-member Bloomberg Intelligence North America E&P Valuation Peers index from this year’s peak in June. The drilling had been driven by high oil prices and low-cost financing. Companies spent $1.30 for every dollar earned selling oil and gas in the third quarter, according to data compiled by Bloomberg on 56 of the U.S.-listed companies in the E&P index. Financing costs are now rising as prices sink. The average borrowing cost for energy companies in the U.S. high-yield debt market has almost doubled to 10.43 percent from an all-time low of 5.68 percent in June, Bank of America Merrill Lynch data show. Locking in a minimum price for crude reassures investors that companies will have the cash to keep expanding and lenders that debt can be repaid. While several companies such as Anadarko, Bonanza Creek, Callon Petroleum Co., Carrizo Oil & Gas Inc. and Parsley Energy Inc., use three-way collars, Pioneer uses more than its competitors, company records show. Pioneer used three-ways to cover 85 percent of its projected 2015 output, the company’s December investor presentation shows.
The Dangerous Economics of Shale Oil -- For years, we've been warning here at PeakProsperity.com that the economics of the US 'shale revolution' were suspect. Namely, that they've only been made possible by the new era of 'expensive' oil (an average oil price of between $80-$100 per barrel). We've argued that many players in the shale industry simply wouldn't be able to operate profitably at lower prices. Well, with oil prices now suddenly sub-$60 per barrel, we're about to find out. Using the traditional corporate income statement, it is difficult to determine if shale drilling companies make money. There are a lot of moving parts, some deliberate obfuscation at some companies, and the massive decline rates make analysis difficult – since so much of reported profitability depends on assumptions made regarding depreciation and depletion. So, can shale oil be profitable? If so, at what price? And under what conditions? I try to deconstruct all this here.
Nat Gas Tumbles Below $3 For The First Time Since 2012, Plunges 30% In 2014 - For the past few months, the one silver lining to the energy complex - with crude oil plummeting to levels not seen since 2009 - was nat gas, which soared to the mid-$4s in early November on expectations of a brutal polar vortex for the second year in a row sending heating demand surging. Well, so far the "harsh" weather, which was blamed for the epic collapse in the US economy in Q1 has not materialized, and all those buyers of natgas contracts have been scrambling to sell all of their exposure afraid they may suffer the same fate as their crude trading brethren. End result: as of moments ago, nat gas finally slide under $3, the first time it has done so since 2012! This also means that while crude oil longs have had a horrible year, with nat gas now down 29% in 2014, and headed for the first annual decline since 2011 as mild weather leaves stockpiles at a surplus to year-ago levels for the first time in two years, yet another commodity is set to ring in margin calls
Chart Of The Day: Natural Gas Suggests $33 Oil -- As I discussed at length previously, the current problem in the energy price is a realization of a supply / demand imbalance. While the economists and analysts are hopeful for a sharp recovery in oil prices, the current decline in oil prices is nothing more than a return to historical normalcy. Let me explain, If you ask virtually any oil and gas professional, that has been around the industry longer than the graduating class of 2000, they will tell you that the historical relationship between oil and gas prices is roughly $8. The chart below shows the highly correlated history of oil and gas prices until 2008. Not surprisingly, the divergence between oil and gas prices came to fruition in conjunction with the massive interventions by the Federal Reserve, which lowered borrowing costs enough to sufficiently provide for funding of higher cost shale exploration. As Yves Smith recently stated: “The oil and gas sector is capital intensive. Drillers have borrowed phenomenal amounts of money, which was nearly free and grew on trees, to acquire leases and drill wells and install processing equipment and infrastructure. Even as debt was piling up, the terrific decline rates of fracked wells forced drillers to drill new wells just keep up with dropping production from old wells, and drill even more wells to show some kind of growth. One heck of a treadmill. Funded in part by junk debt.Junk bond issuance has been soaring as the Fed repressed interest rates and caused yield-hungry investors to close their eyes and take on risks, any risks, just to get a teeny-weeny bit of extra yield. Demand for junk debt soared and pushed down yields further. And even within this rip-roaring market for junk bonds, according to Bloomberg, the proportion issued by oil and gas companies jumped from 9.7% at the end of 2007 to 15% now, an all-time record.” With an excess supply now realized, particularly as global demand continues to wane, oil prices are now returning back towards their historical long-term relationship.
First casualties in oil price war – US fracking pioneer sharply reduces drilling -- Billionaire Harold Hamm, whose early adoption of shale drilling in North Dakota helped usher in a U.S. energy renaissance, plans to cut spending by 41 percent at his company after the plunge in oil prices. Continental Resources Inc. and other U.S. producers can adjust quickly to the crude collapse and will be able to withstand the downturn better than many producing countries, which face economic “ruin,” Hamm said in an interview. “The oil and gas industry has lowered the cost of gasoline to consumers in this country,” Hamm , chairman and chief executive officer of Continental, said yesterday. “It’s been good for America , this increase in supplies that we have here. We don’t want to see it all go for naught.” Continental and rivals including ConocoPhillips and Apache Corp. plan to trim spending and move rigs to more profitable areas while prices remain under pressure. Crude has fallen by almost 50 percent since June to a five-year low as demand forecasts fell amid a glut in supply fed in part by the shale revolution.
Oil Jobs Squeezed as Prices Plummet -- U.S. oil and gas companies have been an engine of growth through much of an otherwise lackluster economic expansion, providing steady employment, solid wages and fierce competition for workers across wide swaths of the country. Now, after a roughly 50% plunge in oil prices, exploration and production companies are cutting capital budgets, service companies are weighing layoffs and nonenergy firms that popped up to support the industry are bracing for a protracted slowdown. One company caught in the industry downturn is Hercules Offshore Inc. The Houston-based firm is laying off 324 employees, roughly 15% of its workforce, because oil companies aren’t renewing contracts for its offshore drilling rigs in the Gulf of Mexico while crude prices are depressed. Lower oil prices are still expected to provide an overall boost to the U.S. economy. Consumers are spending less on gasoline and more at retailers and restaurants, while many companies are benefiting from cheaper costs for energy and raw materials—giving a boost to hiring outside the energy sector. Money that would have gone to imported oil—the U.S. remains a net importer—will remain at home. The U.S. Energy Information Administration said the average U.S. household is expected to spend about $550 less on gasoline next year than in 2014. And HSBC expects lower gasoline prices will boost consumer spending enough to add 0.4 percentage point to the U.S. growth rate for gross domestic product next year, a sizable bump for an economy that has struggled to sustain momentum.
Some States See Budgets at Risk as Oil Price Falls - States dependent on oil and gas revenue are bracing for layoffs, slashing agency budgets and growing increasingly anxious about the ripple effect that falling oil prices may have on their local economies.The concerns are cutting across traditional oil states like Texas, Louisiana, Oklahoma and Alaska as well as those like North Dakota that are benefiting from the nation’s latest energy boom.“The crunch is coming,” said Experts and elected officials say an extended downturn in oil prices seems unlikely to create the economic disasters that accompanied the 1980s oil bust, because energy-producing states that were left reeling for years have diversified their economies. The effects on the states are nothing like the crises facing big oil-exporting nations like Russia, Iran and Venezuela. But here in Houston, which proudly bills itself as the energy capital of the world, Hercules Offshore announced it would lay off about 300 employees who work on the company’s rigs in the Gulf of Mexico at the end of the month. Texas already lost 2,300 oil and gas jobs in October and November, according to preliminary data released last week by the federal Bureau of Labor Statistics.On the same day, Fitch Ratings warned that home prices in Texas “may be unsustainable” as the price of oil continues to plummet. In Louisiana, the drop in oil prices had a hand in increasing the state’s projected 2015-16 budget shortfall to $1.4 billion and prompting cuts that eliminated 162 vacant positions in state government, reduced contracts across the state and froze expenses for items like travel and supplies at all state agencies. And in Alaska — where about 90 percent of state government is funded by oil, allowing residents to pay no state sales or income taxes — the drop in oil prices has worsened the budget deficit and could force a 50 percent cut in capital spending for bridges and roads.
"Houston, You Have A Problem" - Texas Is Headed For A Recession Due To Oil Crash, JPM Warns - It was back in August 2013, when there was nothing but clear skies ahead of the US shale industry that we asked "How Much Is Oil Supporting U.S. Employment Gains?" The answer we gave: The American Petroleum Institute said last week the U.S. oil and natural gas sector was an engine driving job growth. Eight percent of the U.S. economy is supported by the energy sector, the industry's lobbying group said, up from the 7.7 percent recorded the last time the API examined the issue.Fast forward to today when we are about to learn that Newton's third law of Keynesian economics states that every boom, has an equal and opposite bust. Which brings us to Texas, the one state that more than any other, has benefited over the past 5 years from the Shale miracle. And now with crude sinking by the day, it is time to unwind all those gains, and give back all those jobs. Did we mention: highly compensated, very well-paying jobs, not the restaurant, clerical, waiter, retail, part-time minimum-wage jobs the "recovery" has been flooded with. Here is JPM's Michael Feroli explaining why Houston suddenly has a very big problem.
Drilling Our Way Into Oblivion - Ilargi - The damage done must be epic by now, throughout the financial system, but we’re not hearing much about that yet, are we? We will in time, not to worry. Everyone’s invested in oil, and big time too, and they’ve all just become party to a loss of about half of what both oil itself and oil stocks were worth just this summer. Just like all the other money managers who pray every morning and night on their weak knees for this nightmare to pass. Your pension fund, your government, they’re all losing. BIG. They’ll try and hide those losses as long as they can. But trust me on this one: all major funds have oil in a prominent place in their portfolios. And there’s a Bloomberg index that says the average share values of 76 North American oil companies, i.e. not just the price of oil, have lost 49% of their value since June. There will be Blood with a capital B. Russia must produce full tilt just to make up for those sanctions. The Saudis know that if they cut, other producers, OPEC or not, will fill in the gap they leave behind. At $55 a barrel, everyone’s desperate. Therefore, the Saudis are not cutting, because it would only cost them market share, and prices still wouldn’t rise. So why does everyone in the western media keep talking about OPEC cutting output, and not the US, just as the same everyone is so proud of saying the US challenges the Saudis for biggest producer status?! Why doesn’t the US cut production? It’s almost as big as Saudi Arabia, after all. Why doesn’t Washington order the (shale) oil patch to tone it down, instead of having everyone talk about OPEC? I know, energy independence and all that, but it’s still a curious thing. Want to save the shale patch? Cut it down to size.Anyway, this is what we have on offer: the oil industry faces a triple whammy. Oil prices are down 50%, oil company share valuations are also down 50%, and their production costs are rising, in quite a few cases exponentially so. That’s what they, and we, face while slip-sliding into the new year. Do I need to explain that that does not bode well? Let’s do a news round. Starting with Bloomberg on how the shale boys are stumbling over their hedges and other ‘insurance’ policies. All you really need to know is: “Producers are inherently bullish ..” And then you can take it from there.
Drilling Our Way Into Oblivion: Shale Was About Land Gambling With Cheap Debt, Not Technological Miracles - The shale patch can exist in its present form only if it has access to nigh limitless credit, and only if prices are in the $100 or up range. Wells in the patch deplete faster than you can say POOF, and drilling new wells costs $10 million or more a piece. Without access to credit, that’s simply not going to happen. That’s about all we need to know. Shale was never a viable industry, it was all about gambling on land prices from the start. And now that wager is over, even if the players don’t get it yet. So strictly speaking my title is a tad off: we’re not drilling our way into oblivion, the drilling is about to grind to a halt. But it will still end in oblivion.
First Oil, now US Natural Gas Plunges off the Chart, “Negative Igniter” for New Debt Crisis - Friday, natural gas futures plunged 6%. Monday morning, when folks were thinking about the beautiful Santa Rally, NG futures plunged nearly 10% to $3.12 per million Btu, the lowest since January 10, 2013. But the crazy day had just begun. NG bounced off and jumped nearly 4%, only to give up much of it later. Tuesday morning, as I’m finishing this up, NG continues to decline, now at $3.11/mmBtu. Down 30% from a month ago. NG demand peaks when the heating season starts. It’s a bet on the weather. Our gurus forecast warmer than normal temperatures across the country, so prices plunged. Or shorts piled into the pre-holiday session with exaggerated effect to make a quick buck. Here is what this 30-day, 30% plunge looks like (each bar = 5 hours): Whatever the cause, NG has traded below the cost of production of many wells for years. That lofty $4.40/mmBtu on the left side in the chart above is still below the cost of production for many wells. The price simply fell from bad to terrible. To make the equation work, drillers have shifted from shale formations that produce mostly “dry” natural gas to formations that also produce a lot of liquids, such as oil, natural gasoline, propane, butane, or ethane that were fetching a much higher price. Thus, they’d be immune to the low price of NG. They pitched this strategy to investors to attract ever more money and keep the fracking treadmill going. Much of this new money was in form of junk debt. Now energy companies account for over 15% of the Barclays U.S. Corporate High-Yield Bond Index – up from less than 5% in 2005. But there is no respite for the American oil patch. The price of oil has plunged 50% since June, the price of propane is down 50% since its recent high in mid-September, and natural gasoline is down 32% since recent high in mid-November. None of the fancy charts natural gas drillers have shown to investors work at these prices.
T. Boone Pickens Rages On CNBC: "I Am The Expert, Not You", Says Oil Down Due To "Weak Demand" -- Narrative, we have a problem! No lesser oil-man than T. Boone Pickens made quite an appearance on CNBC this morning - stunning the cheerleaders into first defense then silence as he broke the facts on oil's collapse to them. Oil is down "mainly due to weak demand," he explains... the anchors deny, "I am the expert, not you" Pickens rages as he warns drilling rigs will be laid down on a very wide scale (just as we have noted previously). Arguing over 'peak oil', he calls CNBC chatter "bullshit" and laid out a rather dismal short- to medium-term outlook for the oil & gas sector - not what the cheerleading tax-cut slurping media narrative wants to hear at all... Enjoy some real-life pushback on the narrative... (apologies for audio quality)
Cheap oil is a costly holiday present - This holiday season has brought what seems like a glorious present: cheap gasoline. Fuel at $2 a gallon or so frees up cash for families to spend on gifts or paying down debts. But by the time this gift is fully unwrapped, it will likely leave people covered with greasy economic residue that will be hard to remove. With oil falling from more than $90 a barrel to under $60, the effects go far beyond how much a tank of gas costs. Because Russia relies heavily on oil exports, its economy is already faltering, and we can expect social unrest, perhaps sparking Vladimir Putin to new military aggression to distract people from their plight. Airfares should fall but likely will not because the three major carriers can maximize profits by avoiding competition. Shares of heavily leveraged fracking companies may burn up like so much flared natural gas, wiping out some investors. The Keystone XL pipeline may be delayed or even killed, preventing a pipeline of American cash that Canadians counted on to buoy their economy. The Chinese are hiring tanker ships, quadrupling rental rates, as they convert some of their trillions of American dollars into oil, which will earn a higher return than the minuscule interest now paid on the U.S. government bonds China holds. Most significant, cheap oil is disrupting the transition to renewable energy, which promises to slow global climate change and save many millions of lives. Our accounting rules ignore much of the damage from relying on oil and natural gas. Corporate profit and loss statements do not record how the slowly heating atmosphere affects crops, sea levels and weather patterns or how diesel fuel particles spewing out of tailpipes affects people’s asthma. But they should: Cheap oil comes at a price that shows up not on your credit card statement but on the universal ledger where all costs must be recorded and paid.
Subsidy Spotlight: Publicly Funding a Utah Disaster in the Making - Now oil and gas executives are flocking to the Uinta Basin in Eastern Utah , as new technologies––and support from the government––offer the dubious possibility of digging up the region’s vast deposits of oil shale and tar sands. Canadian production of tar sands on a massive scale has familiarized the American public with the petroleum substance that’s comprised of sand, clay, water, and bitumen which, after several rounds of energy-intensive refining, can be turned into fuel that burns dirtier than conventional crude oil, releasing more carbon, heavy metals, and sulphur in the process. But tar sands production has never happened on a commercial scale within the United States , and less attention is paid to domestic reserves––even though several tar sands mining projects have been in the works for a number of years. In Utah , there’s an estimated 15 billion barrels of oil within the state’s tar sands deposits (that’s a little more than twice the total amount of petroleum consumed in the U.S. in 2013). These tar sands are lower quality than Canada ‘s, and would require even more processing––using large quantities of fuel just to make more fuel. One report puts it this way, “Every time you fill your car with gas from made-in-Utah tar sands…pour an extra 4 or 5 gallons on the ground.” Oil shale is even less promising. Not to be confused with shale oil (which is oil released by fracking), oil shale is fossil matter that hasn’t been in the ground long enough to turn into oil. It’s basically sedimentary rock with deposits of solid chemical compounds called kerogen inside. The push is coming from companies that want to strip mine some of the West’s most iconic landscapes for tar sands and oil shale. It’s coming from officials at every level of government with financial ties to the fossil fuel industry. But the people bottom-lining the advancement of oil shale and tar sands production, like it or not, are taxpayers.
Oil sands leak that contaminated aquifer renews technology questions - A Canadian Natural Resources Ltd. oilsands operation that has contaminated a groundwater aquifer is renewing questions about a technology that has already been linked to another serious leak in northern Alberta. The Alberta Energy Regulator says CNRL reported a break in a well at its Wolf Lake high pressure cyclic steam stimulation project in late October, and that the company later discovered elevated levels of hydrocarbons in the aquifer about 60 kilometres northwest of Cold Lake.The area is located about 10 kilometres away from the company’s Primrose East property where a bitumen-water mixture was found oozing to the surface last year. CNRL was using the same steam method there as well. “This is a problematic technology. There’s been problems dating back to 2009. And I think Albertans really have to ask themselves, how many times does this company get to say, ‘Oops, we did it again,’ before the government takes proactive action to deal with this technology, which clearly is riskier than this company claims?” Keith Stewart of Greenpeace Canada said in an interview on Saturday. High-pressure cyclic steam stimulation — often described as “huff and puff” — is a process that alternates between injecting steam and drawing the softened bitumen to the surface. Earlier this year, the province’s energy watchdog suggested a link between the process and old drill holes in the Primrose area, which it said may have provided paths for fluids to flow to the surface.
Keystone 'not even nominal benefit' to US consumers, Obama says - President Obama on Friday said building the Keystone oil pipeline would “not even have a nominal benefit” to consumers, pushing back at claims it would lower gas prices further. Obama stressed that the issue at hand for Keystone is “not American oil, it is Canadian oil.” “That oil currently is being shipped out through rail or trucks and it would save Canadian oil companies, and the Canadian oil industry enormous amounts of money if they could simply pipe it all the way down to the Gulf,” Obama said during his final press conference of 2014. “It’s very good for Canadian oil companies, and it’s good for the Canadian oil industry but it’s not going to be a huge benefit to U.S. consumers, it’s not even going to be a nominal benefit to U.S. consumers,” Obama said.Obama has repeatedly criticized Republicans for demanding approval of the $8 billion oil sands project. A Senate vote in November fell one vote short of sending legislation to Obama's desk. Incoming Senate Majority Leader Mitch McConnell (R-Ky.) has vowed to make it the first piece of business for a Republican Senate next year. Obama reiterated that he wants to make sure if the project does go forward it is not add to the “problem of climate change ... which does impose serious costs on American people.” Asked about McConnell's plans, he said:“I’ll see what they do. We will take that up in the new year.”
The Senate, Pipelines and Oil Money - Oil has been in the headlines for the past month or more, mainly because of the rapid downward readjustment in price. As well, in case we've forgotten, in mid-November the transportation of oil caught the media's attention as Senate Democrats blocked Bill S.2280 that would have approved construction of the Keystone XL pipeline. The measure, Senate Roll Call 280, fell one vote short of overcoming a filibuster with a vote of 59 in favour and 41 opposing with 60 votes needed to see the bill proceed. This followed a vote in the House which saw the bill approved by a relatively wide margin. As it looks now, voting on Keystone XL is taking on the appearance of a proxy war between the President and the Republican party with the pro-side consisting mainly of Republicans and the anti-side consisting mainly of Democrats. From Open Congress, here is a summary of who voted for and against the measure: All Republicans (45) voted for Bill S.2280 along with 14 Democrats and 39 Democrats and 2 Independents voted against the bill. What has been little covered by the mainstream media is the real reason why the vote in the Senate was split as it was. According to research by the Center for Responsive Politics, there is a good reason and that reason is money. On average, over the course of their careers, the 59 Senators who voted for the pipeline have received significantly more money from the oil and gas industry than those who voted against the construction of Keystone XL. Here is a graphic showing the total amounts received by both the pro- and anti-pipeline Senators: In total, the 59 Senators who voted for the pipeline received over 33 million in campaign donations from the oil and gas sector, averaging out to $572,000 each. By comparison, the 41 that voted against the bill received a total of $4.2 million from the oil and gas sector, averaging out to only $103,900 each. This means that the pro-pipeline Senators received 5.5 times as much in campaign donations from the oil and gas sector as those Senators that voted against Keystone XL. In case you were curious, here is a complete listing of total career donations from the oil and gas sector for each Senator:
Black Mesa Navajo face ‘scorched earth campaign’ spurred by coal mining interests -- In Waging Nonviolence, Liza Minno Bloom reported on recent federal campaigns to forcibly impound sheep herded by Navajo living in the Hopi Partition Lands (HPL) of Black Mesa in NE Arizona. (Yep, impound, like a car, for us city folk.) The government claims that the livestock were impounded because there are too many and they were overgrazing and harming the land, but the weight of history and the violence of what’s currently happening suggests a different reason. The sheep being impounded from the communities on Black Mesa indicate the continued use of scorched earth policies by the federal government and the continued use of Black Mesa as a resource colony for ever more unsustainable Southwestern cities. More specifically, Minno explains the history and current state of Peabody Energy on the land, going back to the 1970s when the Partition Lands were created, forcing relocation off of the HPL and ushering the way for a grab of the coal-rich land. The herders facing the pressure continue to live on these lands despite the forced relocation. She also clarifies that Peabody Energy now wants to expand mining into the areas used by the Navajo herders that are being targeted. The three families targeted so far need to pay about $1000-2000 to get their sheep back, but also have to sign a condition of release and sell the majority of the sheep right away.
Monumental Growth of Crude-by-Rail Ignites Communities to Fight Back - Crude-by-rail has increased 4,000 percent across the country since 2008 and California is feeling the effects. By 2016 the amount of crude by rail entering the state is expected to increase by a factor of 25. That’s assuming the industry gets its way in creating more crude-by-rail stations at refineries and oil terminals. And that’s no longer looking like a sure thing. Valero’s proposed project in Benicia is just one of many in the area underway or under consideration. All the projects are now facing public pushback—and not just from individuals in communities, but from a united front spanning hundreds of miles. Benicia sits on the Carquinez Strait in the northeastern reaches of the San Francisco Bay Area. Here, about 20 miles south of Napa’s wine country and 40 miles north of San Francisco, the oil industry may have found a considerable foe. A recent boom in “unconventional fuels” has triggered an increase in North American sources in the last few years. This has meant more fracked crude from North Dakota’s Bakken shale and diluted bitumen from Alberta’s tar sands. Unit trains are becoming a favored way to help move this cargo. These are trains in which the entire cargo—every single car—is one product. And in this case that product happens to be highly flammable. . If a derailment occurs on a train and every single car (up to 100 cars long) is carrying volatile crude, the dangers increase exponentially. In 2013, more crude was spilled in train derailments than in the prior three decades combined, and there were four fiery explosions in North America in a year’s span, the worst being the derailment that killed 47 people and incinerated half the downtown in Lac Megantic, Quebec in July 2013.
Rail industry group warns oil tanker shortage imminent - The Railway Supply Institute, an industry trade group, is warning that the nation’s rail infrastructure won’t be able to handle American energy demands over the next four years. That’s because the United States Department of Transportation has mandated that rail cars carrying flammable liquids must meet higher safety standards, and the group contends there simply aren’t enough skilled workers to retrofit all the cars in service that require upgrades before federal deadlines. In turn, that would force energy companies to either shift transportation responsibility to trucks, which is more expensive, or cut back on production.
Katie Couric and the Net Petroleum Exporter Myth - To understand what the general public is hearing about oil, I watched a Yahoo video yesterday with Katie Couric explaining the decline in oil prices. In general the piece was very good. Couric started by explaining that the decline in oil prices could be explained in two words: Supply and Demand. She discussed reasons for more supply and softening demand. Note: from Professor Hamilton "[In October] I discussed the three main factors in the recent fall in oil prices: (1) signs of a return of Libyan production to historical levels, (2) surging production from the U.S., and (3) growing indications of weakness in the world economy." I'd add to the discussion that the short run supply and demand curves are both very steep for oil, so small changes in supply and / or demand can cause a large change in price (see A Comment on Oil Prices). But then Couric mentioned a myth I've heard several times recently. She said: In fact, [the U.S.] is now the world’s largest producer of petroleum, and for the last two years, it has been selling more to other countries than it’s been buying. Who knew? "Who knew?" No one, because it is not true. Yes, the U.S. is the largest producer this year (ahead of Saudi Arabia and Russia), but the U.S. is NOT "selling more to other countries than it's been buying".The source of this error is that the U.S. is a net exporter of refined petroleum products, such as refined gasoline. Here is the EIA data on Weekly Imports & Exports of crude oil and petroleum products. The U.S. is importing around 9 million barrels per day of crude oil and products, and exporting around 4 million per day (mostly refined products). The U.S. is a large net importer! Note: Here is some data on natural gas (the U.S. is net importer). Another data source is the monthly trade balance report from the Department of Commerce that shows about a net petroleum trade deficit of about $15 to $20 billion per month this year. The good news is the petroleum contribution to the trade deficit has been declining, but it is still very large.
The Oil Price Crash of 2014 -- Euan Mearns does a good job of explaining the oil price crash here. Briefly, demand for oil is softening (notably in China, Japan, and Europe) because economic growth is faltering. Meanwhile, the US is importing less petroleum because domestic supplies are increasing—almost entirely due to the frantic pace of drilling in “tight” oil fields in North Dakota and Texas, using hydrofracturing and horizontal drilling technologies—while demand has leveled off. Usually when there is a mismatch between supply and demand in the global crude market, it is up to Saudi Arabia—the world’s top exporter—to ramp production up or down in order to stabilize prices. But this time the Saudis have refused to cut back on production and have instead unilaterally cut prices to customers in Asia, evidently because the Arabian royals want prices low. There is speculation that the Saudis wish to punish Russia and Iran for their involvement in Syria and Iraq. Low prices have the added benefit (to Riyadh) of shaking at least some high-cost tight oil, deepwater, and tar sands producers in North America out of the market, thus enhancing Saudi market share. The media frame this situation as an oil “glut,” but it’s important to recall the bigger picture: world production of conventional oil (excluding natural gas liquids, tar sands, deepwater, and tight oil) stopped growing in 2005, and has actually declined a bit since then. Nearly all supply growth has come from more costly (and more environmentally ruinous) resources such as tight oil and tar sands. Consequently, oil prices have been very high during this period (with the exception of the deepest, darkest months of the Great Recession). Even at their current depressed level of $55 to $60, petroleum prices are still above the International Energy Agency’s high-price scenario for this period contained in forecasts issued a decade ago.
Oil Crash: Don’t Believe the Happy Clatter - There is a mushrooming false narrative taking over the business airwaves: lower oil prices lead to lower prices at the pump which put more cash in consumers’ pockets which will lead to a more robust economy in the United States in 2015. Yes, there are certainly lower prices at the pump. Yes, that gives consumers more disposable income. But it will decidedly not lead to a more robust economy in the United States for very long. This isn’t a little speed bump in oil prices. This is one of the most dramatic and rapid crashes in a key industrial commodity in history. Since June, the price of West Texas Intermediate (WTI), the domestic crude oil produced in the U.S., is down by 47 percent. The price of the internationally traded crude oil, Brent, is down by a similar figure. If this price collapse were happening in just crude oil, it could be shrugged off as a supply glut problem attributable to growing shale production in the U.S. and over production among OPEC members. But other industrial commodities are in freefall as well. Iron ore prices are down 49 percent this year while copper has declined 15 percent. The price of natural gas is down 30 percent in just the past month, including a plunge of 9 percent just yesterday. Data from the Bureau of Labor Statistics shows that a broad gauge of industrial commodity prices entered a gradual decline in June and then began to plunge in September. That chart looks suspiciously similar to the price action in industrial commodities in the same time period in 2008 – which signaled an early warning to the greatest economic collapse in the United States since the Great Depression. (See charts below.) Industrial commodity prices are a leading indicator of things that are more than pesky details to economic stability. A robust manufacturing sector and robust consumer demand is simply not compatible with crashing industrial commodity prices.
Taxpayers Could Be on the Hook for Trillions in Oil Derivatives - Ellen Brown --Senator Elizabeth Warren charged Citigroup last week with “holding government funding hostage to ram through its government bailout provision.” At issue was a section in the omnibus budget bill repealing the Lincoln Amendment to the Dodd-Frank Act, which protected depositor funds by requiring the largest banks to push out a portion of their derivatives business into non-FDIC-insured subsidiaries. Warren and Representative Maxine Waters came close to killing the spending bill because of this provision. But the tide turned, according to Waters, when not only Jamie Dimon, CEO of JPMorgan Chase, but President Obama himself lobbied lawmakers to vote for the bill. A fraction, but a critical fraction, as it included the banks’ bets on commodities. Five percent of $280 trillion is $14 trillion in derivatives exposure – close to the size of the existing federal debt. And as financial blogger Michael Snyder points out, $3.9 trillion of this speculation is on the price of commodities. Among the banks’ most important commodities bets are oil derivatives. An oil derivative typically involves an oil producer who wants to lock in the price at a future date, and a counterparty – typically a bank – willing to pay that price in exchange for the opportunity to earn additional profits if the price goes above the contract rate. The downside is that the bank has to make up the loss if the price drops. As Snyder observes, the recent drop in the price of oil by over $50 a barrel – a drop of nearly 50% since June – was completely unanticipated and outside the predictions covered by the banks’ computer models. The drop could cost the big banks trillions of dollars in losses. And with the repeal of the Lincoln Amendment, taxpayers could be picking up the bill.
Oil Crash Wipes $11.7 Billion From Buyout Firms’ Holdings - Oil’s plunge makes energy a great investment for the coming years, according to Blackstone Group LP (BX)’s Stephen Schwarzman and Carlyle (CG) Group LP’s David Rubenstein. For private equity firms, it’s also been painful. More than a dozen firms -- including Apollo Global Management LLC (APO), Carlyle, Warburg Pincus and Blackstone -- have lost a combined $11.7 billion in 27 publicly traded oil producers since June, when crude prices reached this year’s peak before beginning their six-month slide, according to data compiled by Bloomberg. Stocks of buyout firms with exposure to energy have slumped, and bond prices suggest some closely held oil producers may struggle to pay for their debt. “It’s been a really volatile period, and frankly that’s how Saudi Arabia wants it,” said Francisco Blanch, head of global commodity research at Bank of America Corp. “This is a battle of endurance.”
Saudi Arabia Vows to Ride Out Oil Price Slump - — The world’s top petroleum exporter, Saudi Arabia, said on Sunday that it would not cut output to prop up oil markets even if nations outside OPEC did so, in one of the strongest signals that it planned to ride out the market’s biggest slump in years. Referring to countries that are not members of the Organization of the Petroleum Exporting Countries, Ali Al-Naimi, the oil minister of Saudi Arabia, told reporters: “If they want to cut production they are welcome. We are not going to cut, certainly Saudi Arabia is not going to cut.”He added that he was “100 percent not pleased” with prices but said they would improve, although when was unclear.He said speculators were responsible for the fall in prices to half their levels of six months ago and what he called a lack of cooperation from non-OPEC producers.His remarks at a conference here in the capital of the United Arab Emirates were the second time in three days that the kingdom has signaled that it would not change output levels, preferring to allow the market to stabilize on its own.His tone was echoed by some other Arab oil ministers at the conference.The oil minister for the United Arab Emirates, Suhail Mohamed Faraj Al Mazrouei urged all producers not to raise their oil output next year, saying this would quickly steady prices.The world is forecast to need less OPEC oil in 2015 because of a rising supply of shale oil from the United States and other competing sources, with no significant increase in world demand.
Oil slides as Saudi Naimi tells market to forget OPEC cuts (Reuters) - Oil prices resumed their downward march on Monday, doubling back on the biggest one-day gain in over two years, after Saudi Arabia's powerful oil minister said OPEC would not cut production at any price. After a weekend of comments from several Gulf OPEC members reiterating their intent not to intervene in oil markets despite oil prices that have halved since June, Ali al-Naimi told the Middle East Economic Survey it was "not in the interest of OPEC producers to cut their production, whatever the price is" - his starkest comments yet. U.S. crude's front-month contract settled down $1.87, or 3.3 percent, at $55.26 a barrel. It fell $2 earlier to a session low at $55.13. On Friday, U.S. crude finished up nearly 5 percent, the largest gain since August 2012, as some traders took profits on short positions after prices hit five-year lows. Brent closed down $1.27, or 2 percent, at $60.11 a barrel after a session bottom of $59.84. Naimi also said the Saudis might boost output instead to grow their market share and that oil "may not" trade at $100 again. "The best thing for everybody is to let the most efficient producers produce," he told a conference in Abu Dhabi at the weekend. "The Saudis seem to be continuing with their game plan to shock prices lower by sticking it to the market that they will put more oil out if they have more customers for whatever price they are comfortable in selling,"
Saudi Arabia and UAE blame oil rout on countries outside Opec - FT.com: Saudi Arabia and the United Arab Emirates on Sunday blamed the oil price rout on producers outside Opec and reaffirmed their stance to keep output at current levels. Ali al-Naimi, Saudi Arabia’s oil minister, said he was “100 per cent not pleased” with the near 50 per cent slide in crude oil prices since the middle of June, but said it was a lack of non-Opec co-operation that was a key contributor to the sharp decline. “The kingdom of Saudi Arabia and other countries sought to bring back balance to the market, but the lack of co-operation from other producers outside Opec and the spread of misleading information and speculation led to the continuation of the drop in prices,” he said at an energy conference in Abu Dhabi, according to Reuters. “Let the most efficient producers produce.” Mr Naimi said for the second time in three days that he was “confident the oil market will improve”, but he did not say when. Speaking at the same gathering, Suhail bin Mohammed al-Mazroui, the UAE energy minister, said one of the principal reasons for the price falls was “the irresponsible production of some producers from outside Opec”. He called for oil producers to maintain, and not expand, production throughout next year to keep supply and demand in check. The comments from the two Gulf producers underline their commitment to production targets that stand at 30m barrels a day, despite calls from some poorer members of the cartel to reduce output to bolster prices.
OPEC Blames Speculators, Non-OPEC Countries, US Frackers for Oil Price Crash - OPEC is pointing the finger at speculators as well as Non-OPEC countries, but especially US shale producers for the crude price crash. Let's explore that idea in a series of charts. But first let's take a look at the allegation. The Wall Street Journal reports Gulf Oil Exporters Blame Non-OPEC Producers for Glut. Gulf oil officials on Sunday defended OPEC’s decision last month to keep its production ceiling intact, blaming producers outside of the group for the glut of oil on the market that has depressed prices. Speaking at an energy conference in Abu Dhabi, Saudi Oil Minister Ali al-Naimi blamed a lack of coordination from producers outside the Organization of the Petroleum Exporting Countries—along with speculators and misleading information—for the slump. OPEC officials have singled out American shale producers as a particular problem. U.S. oil production has soared as a result of the shale boom, reducing OPEC exports to the U.S. Non-OPEC producers “will realize that it is in their interests to cooperate to ensure high prices for everyone,” Mr. Naimi said. Are US shale frackers really to blame for the price crash? Let's take a look using OPEC's own data. Please consider charts and other analysis from theOPEC December Monthly Oil Market Report.
OPEC Calls For Widespread production Cuts: The oil ministers of two powerful OPEC members, Saudi Arabia and the United Arab Emirates, say they had no choice but to avoid cutting production to shore up oil prices at their meeting last month because non-OPEC producers refused to do the same. “The share of OPEC, as well as Saudi Arabia, in the global market has not changed for several years … while the production of other non-OPEC [countries] is rising constantly,” Saudi Oil Minister Ali al-Naimi said in an article published Dec. 18 in the Saudi Press Agency (SPA). “In a situation like this, it is difficult, if not impossible, for the kingdom or OPEC to take any action that may result in lower market share and higher quotas from others, at a time when it is difficult to control prices,” al-Naimi said.The energy minister of the United Arab Emirates (UAE), Mohamed Faraj al-Mazrouei, agreed. Quoted by the UAE news agency WAM, he said, “No one likes the price drop, but it is not right that one party should interfere to fix the matter. [The party] responsible for the price fall [by causing the current oil glut] should contribute to fix the imbalance in the market.” Al-Naimi represents the most productive and most influential state among OPEC’s 12 members, widely held as the most responsible for the cartel’s decision not to cut the group’s production from 30 million barrels a day during OPEC’s meeting in Vienna on Nov. 17. Al-Naimi’s comments show he has finally decided to give in to demands that he explain his decision, which ignored pleas for production cuts by poorer OPEC members such as Venezuela and Iran, which can’t weather lower oil prices for as long as wealthier Persian Gulf countries in the cartel.
Saudis to Non-OPEC Producers: Cut Your Own Output, We're Good - Saudi Arabia and the United Arab Emirates reiterated pledges to keep pumping the same amount of crude, blaming non-OPEC producers for the glut of oil that’s driven prices to the lowest in five years. Suppliers from outside the Organization of Petroleum Exporting Countries should cut “irresponsible” output, U.A.E. Energy Minister Suhail Al Mazrouei said in Abu Dhabi yesterday. Even if non-OPEC producers were to offer cuts, OPEC probably wouldn’t follow suit, Saudi Oil Minister Ali Al-Naimi said. The biggest oil producers outside OPEC are the U.S. and Russia. Oil fell about 20 percent since OPEC chose to maintain its production target at a Nov. 27 meeting, seeking to defend market share rather than prices. The highest U.S. crude output in at least three decades is contributing to a glut that Qatar estimates at 2 million barrels a day. Saudi Arabia is confident prices will rebound as economic growth boosts demand and “inefficient producers” trim output, Al-Naimi said.
Saudis Tell Shale Industry It Will Break Them, Plans to Keep Pumping Even at $20 a Barrel - Yves Smith -- When the Saudis announced their intention not to support oil prices when they were sliding towards $90 and plunged quickly through that level, we deemed the move to be a masterstroke. It served to damage both economic and political enemies. On the economic front, the casualties would include renewables, Canadian tar sands, and the US shale gas industry. On the geopolitical front, the casualties would include Iran, Syria, Russia.... and the US. Even though Riyadh is nominally still an ally, relations with the US are fraught. The Saudis are mighty unhappy with America over its failure to get rid of Assad, its refusal to indulge Saudi demands of attacking Iran (our leaders may be drunk on power, but they haven't quite gone over the deep end) and or indirectly working with Iran against ISIS (which started out as Prince Bandar's private army and may still have the kingdom as a stealth patron). So the Saudis are not at all unhappy if the US suffers as a result of the whackage of its energy industry. First, that's an inevitable outcome if the Saudis are to succeed in maximizing the value of their oil assets, which is a survival issue for the royal family. Second, since relations between the US and Riyadh are frayed right now, it is an opportune time to show that the kingdom is not to be treated casually. Yesterday, the Saudis made it even more clear that they are not pulling out of their game of chicken with other energy producing nations. The Saudis will keep pumping and by implication, will force production cuts on others.
Not everyone “deserves” oil market share according to Naimi -- Izabella Kaminska - For seasoned oil watchers the latest spew of “informed commentary” hitting the media waves is probably becoming nauseating. That’s because everyone from Robert Peston and Peter Hitchens to Vitol’s Ian Taylor seem to have a view on the oil price decline, some making claims that “the market may have hit bottom”, others hinting that the fall was too “mysterious” to be market led and the latter even admitting that even oil traders can’t predict what’s going to happen next. But it’s the words of Saudi Oil Minister Ali Naimi that matters most. And as he explained to Mees Energy on December 21 — echoing what FT Alphaville has been saying for a long time now — in a price war, everything turns into a market-share-based game of chicken, meaning there’s no incentive for the world’s most efficient and financially buffered producer to cut at all. A good insight into Saudi thinking comes by way of the following paragraph: It is also a defense of high efficiency producing countries, not only of market share. We want to tell the world that high efficiency producing countries are the ones that deserve market share. That is the operative principle in all capitalist countries.You see, it’s not just that Saudi Arabia wants to defend market share, the kingdom believes it deserves the market share it has achieved due to the superior quality of their fields, its prudent investment over the years and the financial reserves it has diligently accumulated. So the view from Saudi Arabia is basically that, well, it’s unfair for the world to expect the Opec states to take the cuts so that inefficient producers can be spared.
OilPrice Intelligence Report: Cold War In The 21st Century - The modern era is replete with new forms of warfare that have recently started to emerge in a far more ostentatious manner than ever before. Amid multiple conspiracy theories regarding Saudi Arabia’s plans to end the U.S. shale boom through an oil price war, or Russia putting the squeeze on European energy security in response to sanctions which have crippled its own energy sector, one thing is for sure: energy is being increasingly weaponized on a global scale. The recentfall in oil prices (WTI closed at $55.26, Brent at $60.13 on December 22), with a resultant knock-on effect on commodity prices in general, has shot energy security to the top of the international agenda. This has led to multiple deals on an unprecedented scale and the early signs of a shift in global energy and political dynamics. While not wishing to fan the flames of sensationalized conspiracy theory that are already flooding the media, it is more important now than ever before to examine the shifting geopolitical landscape and the potential consequences for the energy sector as a whole.
Ready for $20 Oil? - When the U.S. Federal Reserve ended its quantitative-easing program in October, it also ended the primary driver of U.S. stocks during the past six years. . At the same time, investors must cope withslower growth in China, minuscule growth in the euro area and negative growth in Japan. Such widespread sluggish demand -- along with ample supplies of oil and most everything else -- is the reason commodity prices are falling. They have been since early 2011, but many people failed to notice until recently, when crude oil prices nosedived. Saudi leaders must grind their teeth over the last decade's unchanged demand for OPEC oil, while all the global growth has been among non-OPEC suppliers, principally in North America. That may explain why, while Americans were enjoying their Thanksgiving turkeys, OPEC surprised the world. Pressed by the Saudis and other rich Persian Gulf producers, it refused to cut output despite a 38 percent drop in the price of Brent crude, the global benchmark, since June. OPEC, in effect, is challenging other producers to a game of chicken. Sure, the wealthier producers need almost $100 a barrel to finance bloated budgets. But they also have huge cash reserves, which they figure will outlast the cheaters and the U.S. shale-oil producers when prices are low. The Saudis also seized the opportunity to damage their opponents, especially Iran and what they see as Iran-dominated Iraq, in the Syria conflict. They also want to help allies Egypt and Pakistan reduce expensive energy subsidies as prices fall.
The reason oil could drop as low as $20 per barrel - How low can it go — and how long will it last? The 50 percent slump in oil prices raises both those questions and while nobody can confidently answer the first question (I will try to in a moment), the second is pretty easy. Low oil prices will last long enough for one of two events to happen. The first possibility, the one most traders and analysts seem to expect, is that Saudi Arabia will re-establish OPEC’s monopoly power once it achieves the true geopolitical or economic objectives that spurred it to trigger the slump. The second possibility, one I wrote about two weeks ago, is that the global oil market will move toward normal competitive conditions in which prices are set by the marginal production costs, rather than Saudi or OPEC monopoly power. This may seem like a far-fetched scenario, but it is more or less how the oil market worked for two decades from 1986 to 2004. . The history of inflation-adjusted oil prices, deflated by the U.S. Consumer Price Index, offers some intriguing hints. The 40 years since OPEC first flexed its muscles in 1974 can be divided into three distinct periods. From 1974 to 1985, West Texas Intermediate, the U.S. benchmark, fluctuated between $48 and $120 in today’s money. From 1986 to 2004, the price ranged from $21 to $48 (apart from two brief aberrations during the 1998 Russian crisis and the 1991 war in Iraq). And from 2005 until this year, oil has again traded in its 1974 to 1985 range of roughly $50 to $120, apart from two very brief spikes in the 2008-09 financial crisis. What makes these three periods significant is that the trading range of the past 10 years was very similar to the 1974-85 first decade of OPEC domination, but the 19 years from 1986 to 2004 represented a totally different regime. There are several reasons to expect a new trading range as low as $20 to $50, as in the period from 1986 to 2004. Technological and environmental pressures are reducing long-term oil demand and threatening to turn much of the high-cost oil outside the Middle East into a “stranded asset” similar to the earth’s vast unwanted coal reserves. Additional pressures for low oil prices in the long term include the possible lifting of sanctions on Iran and Russia and the ending of civil wars in Iraq and Libya, which between them would release additional oil reserves bigger than Saudi Arabia’s on to the world markets.
Saudi Arabia Ready For $20, $30, $40 Oil - Brent crude and West Texas Intermediate (WTI) fell 2 and 3.3 percent respectively to start the week and Saudi Arabia is prepared to go much lower in a bid to trim the fat. Oil Minister Ali al-Naimi said as much in an interview with the Middle East Economic Survey on Monday. Naimi defended the Saudi position and made clear that OPEC nations will not cut production at any price. His comments dismiss any notion of collusion with the United States and spell trouble for producers everywhere. Since its November meeting, OPEC production has remained relatively steady while trending upward. Libya has had a few slip-ups and Venezuelan production is hurting, but the 12-member cartel exceeded their collective target for the sixth straight month, pumping 30.56 million barrels per day (mbpd). For its part, Saudi Arabia accounts for nearly one-third of current OPEC production, or approximately 9.86 mbpd in the month of November. Still, production capacity is nearing 12 mbpd and Naimi suggested the oil-rich nation might put it to use sooner rather than later. It’s all part of a plan to demonstrate that high-efficiency producing countries deserve the greatest market share – an idea Naimi describes as the operative principle of all capitalist countries. OPEC produces around 40 percent of global output, but non-OPEC production is projected to grow 2.3 percent next year after a 3.5 percent expansion this year.
Annotated History Of Oil Prices Since 1861 - Oil prices have crashed since the summer. But oil price volatility is not new. Indeed, the price of WTI crude surged by 5% today alone. In a new note to clients, Goldman Sachs analysts offer this cool annotated chart of the history of crude oil prices.
Seven Questions About The Recent Oil Price Slump - IMFdirect - The IMF Blog - Oil prices have plunged recently, affecting everyone: producers, exporters, governments, and consumers. Overall, we see this as a shot in the arm for the global economy. Bearing in mind that our simulations do not represent a forecast of the state of the global economy, we find a gain for world GDP between 0.3 and 0.7 percent in 2015, compared to a scenario without the drop in oil prices. There is however much more to this complex and evolving story. In this blog we examine the mechanics of the oil market now and in the future, the implications for various groups of countries as well as for financial stability, and how policymakers should address the impact on their economies. What follows is our attempt to answer seven key questions about the oil price decline:
- What are the respective roles of demand and supply factors?
- How persistent is this supply shift likely to be?
- What are the effects likely to be on the global economy?
- What are likely to be the effects on oil importers?
- What are likely to be the effects on oil exporters?
- What are the financial implications?
- What should be the policy response of oil importers and exporters?
The Positive Side Of Low Oil Prices - In a year of plummeting oil prices and the dismay it brings to producers and traders, two senior economists at the International Monetary Fund (IMF) haven’t taken their eyes off the bright side, something that every oil customer already knows: Cheap oil can be very, very good. In fact, they wrote in a blog on Dec. 22 that the low price of oil could increase global gross domestic product (GDP) in 2015 by between 0.3 and 0.7 percent above the Fund’s baseline world growth forecast of 3.8 percent, made in October. The assessment was made by two of the IMF’s highest-ranking officials, Olivier Blanchard, its chief economist, and Rabah Arezki, the head of the Fund’s commodities team. They emphasized that their conclusions are merely a numerical simulation not a formal forecast for next year, which is handled by others at the IMF. But they also say if the Fund’s formal forecast, released in January, has similar numbers, it would mean a dramatic shift in the IMF’s outlook for the world economy. The organization’s forecast issued in October expected drops in economic growth worldwide during 2015 by between 0.2 percentage points and 3.8 percentage points because of economic sluggishness in Brazil, Russia and the eurozone – the 18 European Union countries that have adopted the euro. Blanchard and Arezki’s report says the lower oil prices should increase GDP in China, for example, by between 0.4 and 0.7 percentage points in 2015 above the IMF's baseline estimate made in October. Chinese GDP growth could be even greater in 2016, up by between 0.5 and 0.9 percentage points.
Saudi Arabia Seen by Former Adviser Assuming $80 Oil - Bloomberg: Saudi Arabia’s 2015 budget is probably assuming an oil price of $80 a barrel, and will be seen as a sign of confidence in the market, according to a former economic adviser to the country’s government. The assumption is down from $103 a barrel for this year, John Sfakianakis, who used to be chief economic adviser to Saudi Arabia’s Ministry of Finance, said by phone after the budget was announced yesterday. The world’s biggest crude exporter set 2015 spending at 860 billion riyals ($229 billion) with revenue falling to 715 billion riyals from 1.046 trillion riyals in 2014, the Finance Ministry said. Oil, which has slumped 47 percent this year to $60.23 a barrel in London, accounted for 89 percent of its 2014 revenue. Brent crude tumbled into a bear market this year as the U.S. pumped the most oil in more than three decades, leading the United Arab Emirates Energy Minister Suhail Al Mazrouei to urge producers from outside the Organization of Petroleum Exporting Countries to trim output. Iraq, the second-biggest producer in OPEC, said this week its 2015 budget is based on $60 oil. “Everyone was expecting to see a budget built on a price around $60 but that would have sent a negative message to the oil market,” Sfakianakis said from Riyadh. “With a fiscal break even price of $80 a barrel, the government is sending a message to the market that we are expecting to see a rebound in oil prices.” Sfakianakis is Middle East director at London-based Ashmore Group Plc.
Oil heavyweights differ on catalyst for crude price rebound - FT.com: Oil is going to rebound. That is the view of both Harold Hamm, a leading figure in the US shale industry, and Ali al-Naimi, the veteran Saudi oil minister. However, both have sharply contrasting views on how that recovery will come about. Oversupply of oil has caused a near-50 per cent fall in prices during the past six months, and producers worldwide have been locked in a battle over who will cut output to bring the market back into balance. Mr Naimi suggested in an interview with the Middle East Economic Survey this week that he expected higher-cost production, in Russia, Brazil, west Africa and the shale oilfields of the US, to be squeezed out of the market. Oilfields in the Gulf, he said, had production costs of just $4-$5 per barrel, and in any market economy, “high-efficiency producing countries are the ones that deserve market share”. He was confident the Gulf countries, and especially Saudi Arabia, could afford to hold out. Those comments were described by Mr Hamm as “bravado”. Mr Hamm argued that pressure was building on Saudi Arabia and other large oil-producing countries because of their need to fund expensive social welfare programmes. “They can’t live with these prices,” he told the Financial Times. “They can talk pretty bravely, until people are knocking on their door.” Either they would decide voluntarily to cut their production, he suggested, or political instability would do it for them.
EIA December Crude Inventories Surge To Record Highs -- WTI Crude is down over 3.5%, dropping back towards $55 - dismissing yesterday's dead-cat-bounce deja vu - as EIA inventory builds more than expected at 7.27 million barrels (biggest build in 2 months to 6-month highs). This is the largest inventory for the time of year since records began. Of course, while energy stocks are fading broad equity indices do not care at all... EIA Inventories rose most in over 2 months... This is the highest inventory for December on record... WTI Crude slipped once again back towards $55, remaining in the broad $54.50 to $59 range for now... Energy stocks ripped yesterday... dropping now... Because fun-durr-mentals... Charts: Bloomberg
Oil Slides as U.S. Supplies Jump Most in Two Months - Oil dropped as a government report showed U.S. crude inventories increased the most in two months. West Texas Intermediate fell as much as 3.6 percent in New York. Stockpiles climbed 7.27 million barrels in the week ended Dec. 19 as imports surged, the Energy Information Administration said. The report was projected to show a 2.5 million-barrel decline, according to the median estimate in a Bloomberg survey of nine analysts. Gasoline supplies advanced to a seasonal record. “This report provides us with a very consistent picture that we’ve got supply outpacing demand and inventories are piling up,” . “There’s too much crude coming in. Refineries are operating at a high rate but not high enough to make a dent in this.” Oil is heading for the biggest annual drop since 2008 amid a global glut exacerbated by the highest U.S. output in more than three decades. Prices have dropped about 20 percent since the Organization of Petroleum Exporting Countries decided Nov. 27 to maintain its output ceiling at 30 million barrels a day. WTI for February delivery fell $1.59, or 2.8 percent, to $55.53 a barrel at 12:47 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 43 percent below the 100-day average for the time of day. The U.S. benchmark grade is down 44 percent this year.Brent for February settlement dropped $1.58, or 2.6 percent, to $60.11 a barrel on the London-based ICE Futures Europe exchange. Volume was 62 percent below the 100-day average. The North Sea crude is down 46 percent this year. The European benchmark traded at $4.58 premium to WTI on ICE, down from $4.57 yesterday. The gain left U.S. crude stockpiles at 387.2 million barrels, the highest level since June, according to data from the EIA, the Energy Department’s statistical arm. Imports surged 17 percent to 8.29 million barrels a day, the most since September 2013.
Oil companies seen cutting spending 25 pct in 2015 due to falling crude (Reuters) - Plunging oil prices will prompt energy companies to cut investments in new projects by 25 percent or more in 2015, analysts said over the past week, as firms try to stay cash-flow positive and keep debt in check. With oil prices down more than 40 percent since June, some companies, including ConocoPhillips, have slashed spending by 20 percent. But because crude prices have yet to stabilize, other companies are waiting to draw up budgets. "Many are buying time on 2015 capex and production guidance while hoping for a stable baseline to plan from," Capitol One Securities said in a note to clients. "We think cuts of 25 percent or more versus a year ago are on the way and won't be unusual." Whiting Petroleum Corp said on Monday it will not release its 2015 capital spending plan until February, citing volatile oil prices. Budgets from Chevron Corp and Exxon Mobil Corp are also due out in early 2015, along with comprehensive spending surveys from industry analysts at Cowen and Barclays. The spending reductions, once announced, are likely to be the biggest in years. But the U.S. government still expects output to be the highest in decades as productivity for new wells rises. Investment bank Simmons expects average U.S. oil production growth of about 900,000 barrels per day (bpd) next year, up from around 9 million bpd in November. Bernstein Research said if benchmark Brent crude oil was at $80 per barrel, then global exploration and production spending would fall 20 percent to $640 billion.
Chevron puts Arctic drilling plans on hold indefinitely - Chevron Canada, in a letter to the National Energy Board, has announced it's put its Arctic drilling plan on hold "indefinitely," in part due to “the level of economic uncertainty in the industry.” The company bid $103 million to explore a parcel of deep water in the Beaufort Sea about 250 kilometres northwest of Tuktoyaktuk, N.W.T. In the letter, sent yesterday, Chevron announced it's withdrawing from a process whereby the NEB would evaluate the company's proposed blowout response plan. A ruling on Chevron's blowout response plan would have been followed by an actual application to drill, according to a two-phased approach recommended by Chevron. The company's postponement does not come as a shock to Doug Matthews, an analyst and former oil and gas director with the Northwest Territories government. With the price of oil down by 40 per cent since June, "Companies all over the world are starting to pull in their horns," he says. "They have to conserve their cash. So we're seeing delays everywhere."
If Shell Backs Out, Arctic Oil Off The Table For Years -- The next several months may be pivotal for the future of oil development in the Arctic. While Russia has proceeded with oil drilling in its Arctic territory, the U.S. has been much slower to do so. The push in the U.S. Arctic has been led by Royal Dutch Shell, a campaign that has been riddled with mistakes, mishaps, and wasted money. Nearly $6 billion has been spent thus far on Shell’s Arctic program, with little success to date. Now, 2015 could prove to be a make or break year for the Arctic. Shell may make a decision on drilling in the Chukchi and Beaufort Seas by March 2015. If it declines to continue to pour money into the far north, it may indefinitely put Arctic oil development on ice (pun intended).The crossroads comes at an awful time for Shell. Oil prices, hovering around $60 per barrel, are far too low to justify Arctic investments. To be sure, offshore drilling depends on long-term fundamentals – any oil from the Arctic wouldn’t begin flowing from wells until several years from now. That means that weak prices in the short-term shouldn’t affect major investment decisions.Unfortunately, they often do. Just this week Chevron put its Arctic plans on hold “indefinitely,” citing “the level of economic uncertainty in the industry.” Chevron had spent $103 million on a tract in the Beaufort Sea in Canadian waters, but weak oil prices have Chevron narrowing its aspirations. Shell is now the only one left standing, still mulling its next move. According to Platts, a decision on whether or not Shell plans to proceed with drilling in 2015 will be made by March. And if they turn their back on drilling, it could mean closing the doors on the Arctic for years to come.
Oil Drillers Are Under Pressure to Scrap Rigs to Cope With Downturn - Offshore oil-drilling contractors, who last year were able to charge record rates for their vessels, are now under pressure to scrap old rigs at an unprecedented pace. The recent five-year low in oil prices is threatening an industry already grappling with a flood of new vessels and weakening demand. More than 200 new rigs are scheduled to be delivered in the next six years. That’s a 25 percent jump from the number currently under contract. To cope, many rig owners will try to keep revenue up by culling older vessels to balance supply and demand. “The older assets, particularly those built before the 2000 time period, are really less desired by the industry,” Those vessels “are only causing the customer base to use those rigs against higher quality rigs to get pricing lower.”About 140 older rigs would need to be scrapped to make way for the new vessels scheduled for delivery by 2020, according to Andrew Cosgrove, an analyst at Bloomberg Intelligence. That pace would double the number scrapped in the previous six years and even eclipse the 123 vessels retired since 2000, according to data compiled by Bloomberg. Booming offshore exploration earlier in the decade encouraged a flurry of rig orders. That’s now leading to a potential market crash in a global industry pegged to generate revenue of $61.5 billion this year. Low oil prices are compounding the problem, alarming investors.
Drilling Cutbacks Mean Service Companies Forced to Scrap Rigs -- Despite the decline in oil prices, the U.S. is expected to boost production by 300,000 barrels per day in 2015, up to a yearly average of about 9.3 million barrels per day, according to the most recent government estimates. But the number of oil and gas rigs in operation is already beginning to drop. For the week ending in December 19, the rig count dropped to 1,875 active rigs, down from 1,893 a week earlier. The fall off is an indication that exploration companies are beginning to pare back investments. Pulling back on drilling may result in a lower future production, which could hurt the growth prospects of some oil firms. However, the slowdown in drilling activity is having a much more immediate and acute effect on a separate set of companies – those supplying the rigs. Offshore oil contractors such as Halliburton or Transocean have seen their share prices tank worse than exploration companies because their revenue comes from being paid to drill, not necessarily from oil production after wells are completed. That means that when drilling slumps, their profits take an immediate hit. Even worse, exploration companies may see rising profits from existing production as oil prices rebound, but drilling service companies don’t benefit if their drilling contracts had been put on hold or cancelled. The problem is compounded by the fact that a slew of new offshore oil rigs are set to come into operation – an estimated 200 over the next six years. As Bloomberg reports, these new rigs will mean there could be a surplus of about 140 rigs, meaning offshore oil contractors will have to scrap that many to bring new ones online. If oil prices stay where they are now – in the neighborhood of $60 per barrel – a deep contraction in shipping rig supply will be inevitable. In 2015, spending on offshore exploration may be slashed by 15 percent, which will mean taking a deep knife to companies providing rigs and contracting. Transocean has already announced that it is idling seven deepwater rigs, along with several other drillships.
Hopes, Fears, Doubts Surround Cuba's Oil Future - One of the most prolific oil and gas basins on the planet sits just off Cuba's northwest coast, and the thaw in relations with the United States is giving rise to hopes that Cuba can now get in on the action. It's a prospect welcomed by Cubans desperate for economic growth yet deeply concerning for environmentalists and the tourism industry in the region. But a Cuban oil boom is unlikely anytime soon even if restrictions on U.S. businesses are relaxed because of low oil prices and far better drilling opportunities elsewhere. "(Cuba) is not going to be the place where operators come rolling in," says Bob Fryklund, chief strategist for oil and gas exploration and production at the analysis firm IHS. Although Cuba's oil and gas industry has long been open to foreign investment, the U.S. embargo has denied it some of the world's best deep-water drilling technology and expertise. As a result, Cuba produces just 55,000 barrels of oil per day. About one-third of that is produced by a Canadian firm called Sherritt International. Cuba needs 155,000 barrels per day, and it fills the gap with oil from Venezuela, part of a trade agreement established under former Venezuelan President Hugo Chavez. By comparison, a single large oil platform in the deep water U.S. Gulf of Mexico can produce 200,000 barrels per day. The few major exploration projects in Cuba in recent years have had little success. Most recently, the Spanish company Repsol abandoned a yearslong exploration project in 2012 when an offshore exploratory well failed to find much oil.
Cuban Oil May Prove A Boon For U.S. Companies --With diplomatic relations warming between the U.S. and Cuba, oil and gas companies may train their sights on what’s off Cuba’s coast — large oil reserves. Right now Cuba produces just over 50,000 barrels per day of oil and relies on Venezuela for around another 100,000 bpd. However with Venezuela’s economy reeling from the staggering drop in oil prices this year, Cuban officials want to avoid the impacts of a sudden drop in Venezuelan support. The commitment by Cuba and the U.S. to normalize relations may allow Cuba to buy more oil on the open market, and for U.S. companies to bring expertise and experience to tap into the country’s offshore reserves.This outcome is far from certain. With Saudi Arabia refusing to cut oil output, which would stabilize prices, and previous offshore efforts yielding unsuccessful results, many experts believe that most of Cuba’s 124 million barrels will remain inaccessible. Brazilian, Malaysian and Spanish companies have failed to produce any major wells during exploration efforts in the last few years. Pavel Molchanov, an energy company analyst with Raymond James, told Politico that there is “not going to be a Cuban oil rush.” Even if there is no rush, the arrival of U.S. oil and gas firms could help boost production through better drilling services. Jorge Piñon told FuelFix that if companies like Halliburton and Schlumberger gave technological assistance to Cuba, the country could significantly increase the amount of oil it recovers from its current wells.
OilPrice Intelligence Report: 2015 Will Not See A Cuba, Mexico Oil Boom - Mexico’s sweeping energy reforms and Washington’s normalization of relations with Cuba are both great victories of 2014, but issues of security dull the potential for major projects in Mexico, while downward spiraling oil prices render deep-sea Gulf of Mexico projects too expensive. The news earlier this week that the US would finally normalize diplomatic relations with Cuba following the release of an American government subcontractor and a swap of intelligence assets opens up a plethora of commercial opportunities for American business, but it will be some time before oil and gas are ready to take advantage of this. Plummeting oil prices make significant exploration of the billions of barrels of crude believed to be buried off Cuba’s part of the Gulf of Mexico prohibitive right now. It’s there somewhere, but efforts over the past two years by majors such as Spain’s Repsol and Malaysia’s Petronas to find the oil have come up dry—or at least not wet enough for commercial development. Drilling offshore Cuba will be expensive, and US and Mexican auctions of exploration licenses in the Gulf of Mexico will for now be prioritized by explorers. Even then, catastrophically low oil prices promise to put these big projects on hold. In a soon-to-be-published exclusive interview with Oilprice.com, Breitling Energy CEO Chris Faulkner notes that current oil prices will put large offshore projects on hold. “These are $100 million wells. The only oil that is more expensive than this is Canadian oil sands,” he said.
Egypt And The Double-Edged Sword Of Cheap Oil -- The good news for Egypt: Inexpensive oil means the government needs to spend less on its fuel subsidies for its energy-hungry population of 86 million people, the third largest in the Middle East. The bad news: Rich oil-producing countries in the region are making less money on their primary exports and thus may eventually have to reduce the financial aid they’ve been showering on Cairo. The price of oil has plummeted by nearly 50 percent since June, leaving benchmark crudes now trading at around $60 per barrel, down from their peak of more than $110. If the current price of oil holds, the Egyptian government is expected to save $4.2 billion on fuel subsidies in the fiscal years that spans parts of 2014 and 2015, a 30 percent reduction, says Egypt’s Petroleum Minister Sherif Ismail. The low price of oil has benefits that go far beyond the subsidies, according to one company, Citadel Holding, also known as Qalaa Holding, a major business conglomerate in Egypt. In a report issued Dec. 18, the conglomerate claimed that cheap oil would help cut the country’s budget deficit and balance of payments by at least $5.5 billion.
Oil’s Swift Fall Raises Fortunes of U.S. Abroad - A plunge in oil prices has sent tremors through the global political and economic order, setting off an abrupt shift in fortunes that has bolstered the interests of the United States and pushed several big oil-exporting nations — particularly those hostile to the West, like Russia, Iran and Venezuela — to the brink of financial crisis.The nearly 50 percent decline in oil prices since June has had the most conspicuous impact on the Russian economy and President Vladimir V. Putin. The former finance minister Aleksei L. Kudrin, a longtime friend of Mr. Putin’s, warned this week of a “full-blown economic crisis” and called for better relations with Europe and the United States. But the ripple effects are spreading much more broadly than that. The price plunge may also influence Iran’s deliberations over whether to agree to a deal on its nuclear program with the West; force the oil-rich nations of the Middle East to reassess their role in managing global supply; and give a boost to the economies of the biggest oil-consuming nations, notably the United States and China. It might even have been a late factor in Cuba’s decision to seal a rapprochement with Washington. After a precipitous drop, to less than $60 a barrel from around $115 a barrel in June, oil prices settled at a low level this week. Their fall, even if partly reversed, was so sharp and so quick as to unsettle plans and assumptions in many governments. That includes Mr. Putin’s apparent hope that Russia could weather Western sanctions over its intervention in Ukraine without serious economic harm, and Venezuela’s aspirations for continuing the free-spending policies of former President Hugo Chávez.
The upcoming petrodollar bifurcation risk? - Izabella Kaminska - One of the still to be appreciated side-effects of falling oil prices is a reduction in so-called petrodollar recycling by oil producers. As we’ve already noted, there are analysts who believe petro-induced liquidity shortages may already be impacting certain eurodollar markets. Furthermore, there’s also the fact that as liquidity shortfalls manifest in external markets, the opposite could become true for internal US markets. So, just as the dollar liquidity tap gets switched off externally, it gets turned on with gusto back at home. But Bank of America Merrill Lynch’s Jean-Michel Saliba gets to the same point somewhat differently. As Saliba noted last week: Lower oil for longer could imply material shifts in petrodollar recycling flows. Petrodollar recycling through the absorption channel has generally been USD negative, helping an orderly reduction of global imbalances though greater domestic investment. Although recycling through the financial account is less well understood, the bulk has likely, directly or indirectly, ended up in US financial markets and has thus been USD-positive. A prolonged period of low oil prices is thus likely to lead to lower petrodollar liquidity with, in time, an allocation shift towards more inward-looking repatriation and financing flows, in our view.
Children are cleaning up a devastating oil spill in Bangladesh—with their bare hands – (photos) The Sundarbans, which literally translates as “beautiful forest,” straddles the border between India and Bangladesh along the eastern Indian state of West Bengal. India has 40% and Bangladesh has 60% of the mangroves. Both areas are designated wildlife sanctuaries and reserve forests. This mangrove margin is home to some of the world’s most endangered creatures: the masked finfoot; the Irrawaddy, Gangetic, and four other kinds of dolphins; the Bengal tiger and the beautiful, endangered Sundari tree (Heritiera fomes). Almost a million forest people depend upon this ecosystem for their livelihood. By definition and by law, heavy shipping traffic carrying hazardous cargo has no place in the Sundarbans. Yet in Bangladesh, tankers carrying “modified cargo”—oil, pesticides, fertilisers, insecticides, fly ash, cement, sand, and salt—travel through these channels every day. On Dec. 9, the inevitable happened. Two ships collided and 230,000 liters of oil flowed into this corner of the Sundarbans. Men, women, and children were knee deep in the mudflats and elbow deep in heavy fuel oil. They were scraping black, viscous goo from sedges, reeds, leaves, trunks and roots. Each painstaking handful of black pulp collected was smeared off along the rim of a cooking pot. Then, they turned back to the plants for more. Children, mostly aged between 10 years and 16 years, were covered in black from toe to waist. Save for the blackened fishermen and children, no one else was cleaning the spill. The slick sloshed forward in the ebbing tide. We followed it: four km past the spill site, eight km past the spill site, 12km past the spill site and eventually, 40km past. The slick sloshed ahead of us, beside us, behind us. Films of oil of varying thicknesses floated in the main channel and pooled in the smaller khals. The tide went out by nightfall and came back in at dawn. The oil was no different. Fishermen claimed that the slick was visible almost 80km down the river.
Experts Arrive To Help Barehanded Children Clean Up Massive Bangladeshi Oil Spill -- In the early morning of December 9, foggy weather in the estuarine waters of the Sela River caused a cargo ship to ram the Southern Star 7, a tanker ship laden with between 66,000 and 92,000 of thick furnace oil bound for one of the nation’s oil-burning power plants. The tanker had dropped anchor because of the fog, and when the cargo ship ran into it, the collision was strong enough to kill the tanker’s captain and spill most of the thick, black, sludgy liquid cargo. The estuary was protected as a sanctuary for rare dolphin species, but that designation did not stop the oil from gushing into the mangrove forest. Even worse, twice-daily tidal flows in and out of the estuary spread the oil spill over 40 miles along the Sela and Pusur Rivers, deep into the area’s mangroves, shorelines, and wetlands. For more than a week following the collision, oil spill response comprised little more than local fishermen, villagers, and even children manually scooping up oil with buckets and pans, with no protective gear. Following an official request from the Bangladeshi government, the United Nations has mobilized an international response team. That group left for the Sundarbans on Monday, “comprised of multi-disciplinary experts from seven different countries including Bangladesh,” . The team was chosen for this expertise, as well as the specialization in mangrove forest systems. In support of the Bangladeshi government, the team will assess the situation, work to contain the spill, clean it up, and “develop an action plan for a phased response and recovery.” The situation facing the response crew is as daunting as it is depressing. First, the fishermen and their children who have been the front line defense in the cleanup effort have been covered in oil containing toxic chemicals all day, and bring the fumes home with them at night. As Quartz put it, exposure to these chemicals “can have dire digestive, pulmonary, and dermatological effects and, if the exposure extends over time, also neurotoxic effects.”