last week, in reporting on the push in the Senate to overturn the 40 year ban on crude oil exports, we stated that if there's one policy change that will bring fracking back with a vengeance, it would be to allow domestic drillers to sell their crude overseas, and then cited the two trade deals currently being negotiated in secret by the Administration as the greatest threat that that might come about, because not only will these agreements allow for oil and gas exports, they effectively mandate those exports, giving the signatories equal claim to our oil and gas resources as our own citizens, and superseding domestic energy policy and protections currently in place...it was pure coincidence that a draft chapter of one of those secret agreements, the Trans Pacific Partnership (usually just "the TPP"), being negotiated with Japan and 12 other countries was released by Wikileaks this past week, with the NY Times acting as their media agent in the US...
the Wikileaks page to access the document is here, and the purpose of the chapter they released is to establish the means by which a multinational corporation can get compensation from a signatory government if one of that government's laws interferes with the corporation's profits...it sets up a supra-national court under the World Trade Organization's Dispute Settlement Body, whereby foreign firms can sue governments and obtain taxpayer compensation for whatever "expected future profits" that the government's law encumbered...the adjudication of these disputes would not be by elected officials of any of the signatory governments, but by a tribunal of international trade attorneys representing the multinational corporations....in effect, this trade agreement, and the similar trade agreement that we are negotiating with Europe, gives these world trade tribunals trump power over federal, state or local financial and environmental regulations, patent law, labor laws and worker safety rules, public health, anti-smoking legislation and drug laws, or any law that could be construed as interfering with corporate profits...
now, none of this is really new...even though congress has been kept out of the loop, this secret agreement has been in the works for 5 years, and rumors of the associated investor-state dispute settlement mechanisms have been kicked around the blogosphere for at least a couple of those years...as early as June 2012, these provisions led this agreement to be referred to by Lori Wallach at the Nation as 'NAFTA on steroids', a characterization that has stuck with many of the others who've written about it since...in fact, i thought these provisions were so well known that when i first saw the initial article about this in the New York Times this week, i wrote my favorite trade correspondent asking "did the NY Times just find this out?", not realizing that Wikileaks had actually released a new chapter about the creation of this mechanism and these tribunals...FYI, an earlier TPP chapter on the environment released by WIkileaks is here...
it's worth noting that similar investment protection mechanisms have also been applied under other trade agreements as well...under a trade agreement between Hong Kong and Australia, Philip Morris Asia successfully sued the Australian government over a law mandating plain cigarette packaging; under a Netherlands / Czech trade agreement, the Czech Republic was sued for refusing to bail out an insolvent bank that a Dutch investor had an interest in, and in an example the most relevant to our situation, Lone Pine Resources, a mostly Canadian fracker incorporated in Delaware, sued the government of Quebec under NAFTA for potential profits lost when they banned fracking under the St Lawrence River...under the provisions of this chapter of the TPP, the state of New York could be sued by the natural gas leaseholders in the Southern tier of the state who've been economically encumbered by the state fracking ban, Pennsylvania frackwater disposal operations could sue Ohio after being shut down for causing earthquakes in Trumbull county, and California oil companies could sue the counties who passed fracking bans last November...
even Frack Free Geauga discussed this agreement as early as April and May of 2013, when the Sierra Club released a statement on Japan's participation, warning that this trade pact would result in automatic exports of natural gas to countries in the trade bloc, when prices at the time were five times US prices, hence raising domestic prices and resulting in an explosion of fracking for gas for gas in our area...despite lower prices overall, not much about that has changed since; as of this week, Japanese LNG (Liquefied Natural Gas) import prices were at $13.77 mmBTU, and European Union natural gas import prices were at $8.27 mmBTU, while benchmark US natural gas prices at Henry Hub in Louisiana were $2.64 per mmBTU, and well head prices in some parts of Pennsylvania were below $1.50 ...you don't need to be a Harvard MBA to understand that US companies that are now shutting down rigs at those low domestic prices would ramp up drilling for the chance at unrestricted exports to those countries at their prices, and that when they're able to command more than 5 times as much overseas as here, domestic shortages will develop until such time as US gas prices rise to meet the international market...so not only will this agreement negate our environmental regulations, it will also be the impetus for higher domestic prices for oil and gas and increased fracking in even the thinnest bands of shale that have been ignored up till now...
as it stands now, the TPP is still being negotiated by the 605 corporate advisers to U.S. Trade Representative Michael Froman and their counterparts from the other 12 nations, and as of Thursday Froman was quoted as saying "we can close this out in a very small number of months."...one stumbling block with Japan, New Zealand and possibly other countries is the possibility that any signed agreement might be altered once congress gets a look at it....to avoid that possibility, Obama has asked congress for "trade promotion authority" aka TPA or "fast track", wherein congress would allow the trade agreement to be completed and signed without any knowledge of what's in it...although Democrats in congress held this up last year, fast track has been used in the past to pass other agreements, such as NAFTA, so it's not out of the question...right now, the Republican leadership is lining up behind giving Obama the go-ahead, while some fringe tea party Republicans and progressives in Congress such as Sherrod Brown have voiced opposition...so fast track appears to be the line in the sand...if Obama gets that, a majority vote to approve the agreement without debate will likely be relatively easy...if he doesn't get fast track, then what's in the trade agreements will be exposed for public debate, and once it becomes known what's in it, it will be nearly impossible to pass with the 2/3rds vote needed for a trade treaty...so this is the time to call or write your senators and congressmen, if you're into that sort of thing, and demand they have a full hearing on these trade agreements, so we can find out what's hidden in the other 24 secret chapters written by the multinationals that have not yet been seen by congress or the public....because we strongly suspect that if these agreements pass, we'll be transitioning into a new era where governments are completely subservient to the global corporate oligarchy in a way that will make what we've seen with Citizen's United seem like child' s play in comparison...
NB: since there's more to this trade agreement than i could cover in my brief comments here, i will include a few selected links to media stories on it before this week's fracking links..
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a few quick notes on the other news of the week....as far as we know, there were just two derailments involving fossil fuels this week, and neither of them resulted in an explosion or loss of human life...in the first derailment incident, a train hauling methanol derailed outside of Valley Mills in central Texas, and a dozen cars, including 5 of the methanol tank cars, left the tracks, and two of those started leaking....ten nearby homes were evacuated, and Hazmat teams were called in to handle the cleanup...we have been unable to determine if the cars that leaked were the old DOT-111s or the newer, “safer” CPC-1232s...later, 27 cars of a coal hauling train derailed next to I-76 near Hudson Colorado and dumped tons of coal, making a terrible mess...cleanup crews were still working on the BNSF tracks a day and a half later when three cars of a 23 car Union Pacific train carrying fertilizer jumped the track nearby and damaged another 200 feet of Weld county track...
also as far as we know, there was only one fracking related oil spill this week, and once again it was in North Dakota, where a failed valve resulted in the release of 630 gallons of oil & 29,500 gallons of brine on to the site of an injection disposal well..both were said to be contained on the site, and all but five barrels (200 gallons) of the oil was recovered...
we had previously discussed West Virginia's plan to lease their land under the Ohio River for fracking, and hat deal has apparently been completed, as the Norwegian oil giant Statoil has agreed to pay an average price of $8,732 per acre to drill and frack under 474 acres of state-owned land under the river in Marshall and Wetzel counties; as you'll recall, the state boundary is on the Ohio side of the river...on the plus side for Ohio, Chesapeake Energy, who drills more wells in Ohio than the next 5 Utica shale operators combined, is cutting their 2015 capital spending budget by $500 million due to low prices for natural gas and liquids; that means they'll operate 25 to 35 rigs in 2015, down from the 64 rigs they ran in 2014..
it was only two months after gasoline prices fell following the Thanksgiving day OPEC meeting that American car drivers managed to return to their old gas guzzling driving habits...the latest report from the Department of Transportation found that vehicle miles driven increased by 4.9% to 237.4 billion vehicle miles in January over January from a year ago...this means that the 85 month American hiatus brought on by high oil prices in 2008 has ended and we have now set a new record for driving, covering 3.050 trillion miles on U.S. highways in the 12 months ending in January...in a similar vein, 40% of the increase in American's consumption of durable goods in the 4th quarter was for recreational vehicles and equipment..
US oil production saw the smallest increase in oil production in two months this week, as our oil production for the 3rd week in March averaged 9,422,000 barrels per day, up from the 9,419,000 barrels a day rate of the prior week, and 15% higher than the 8,190,000 barrels per day that we produced in the 3rd week of March last year...nonetheless, our inventories of crude oil in storage reached yet another record, increasing by 8.2 million barrels from the previous week to 466.7 million barrels, 22% more than the 382,471 barrels of oil stored commercially in the US in the 3rd week of March a year ago, and more than 25% over our 5 year average...the weekly Petroleum Status Report (62 pp pdf) also showed that US crude oil imports averaged 7.4 million barrels per day last week, down by 104,000 barrels a day from our imports in the 2nd week of March, and that in the four weeks ending March 13th, US crude oil imports averaged over 7.3 million barrels per day, 1.0% lower than the same 4 week period last year...
in the week just ended, the count of rigs drilling for oil in the US fell by 12 to 813, while the number of active gas rigs fell by 9 to 233...with two miscellaneous rigs still active, that left the rig count as reported by Baker Hughes at 1046, down 21 from the week of March 20th and representing the least number of rigs shut down in any week since the week of December 5th...of those that were idled this week, 17 were engaged in horizontal drilling and 4 were vertical drilling rigs; over the past year, American drillers have stacked 761 rigs, and they're now operating 829 horizontal rigs, 399 less than a year ago, 148 vertical rigs, 240 less than a year ago, and 92 directional rigs, 122 less than the same week last year ...this week's shutdowns were widespread; of the major basins, only the Niobrara Chalk, which stretches over 5 states under the Rockies front range, saw as many as 3 rigs idled, while of the states, Texas, Oklahoma, Louisiana and Alaska each saw 3 rigs idled, while Pennsylvania and Kansas both added a rig...north of the border, Canadian drillers shut down another 20 rigs, leaving them with just 120 rigs active..that's down from the 300 rigs they were running just 3 weeks ago...this week they idled another 12 oil rigs, leaving them with just 18, while they shut down 8 of the 110 gas rigs they ran last week, leaving 102...
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Wikileaks releases Trans-Pacific Partnership investment chapter - Via Daily Kos, we learn that Wikileaks has released the investment chapter of the Trans-Pacific Partnership (TPP). This is a critical chapter, as it was in the North American Free Trade Agreement (NAFTA), because it establishes investor-state dispute settlement (ISDS) mechanisms. Despite its neutral-sounding name, ISDS is actually a radical concept. Instead of using the courts to settle disputes, which have appeals procedures and build up case law via precedent, ISDS allows companies to take governments to arbitration, where neither precedent nor appeals exist. Susan Sell gave several examples of ISDS in her guest post in February, which illustrate the dangers well. Eli Lilly had two of its pharmaceutical patents invalidated in Canada; the company appealed both of these decisions to the Canadian Supreme Court, and lost both times. Then the company turned to investor-state dispute settlement under NAFTA to receive $500 million in compensation for the Supreme Court decisions. . In an example also noted by Wikileaks, Sell points out that U.S. tobacco maker is using ISDS against Australia because the country mandated plain packaging on cigarettes to make them look less attractive. The Obama administration continues to seek “fast track” negotiating authority from Congress for the TPP. This would allow the agreement to be voted on only as negotiated, with no amendments allowed. Note that this also means that the TPP would be incorporated as a U.S. law rather than as a treaty. As a law, it only needs a majority in both Houses of Congress. If it were to be offered for approval as a treaty, it would need a 2/3 majority in the Senate, with no House vote. Both NAFTA and the World Trade Organization agreements were passed as laws rather than treaties.
Trans-Pacific Partnership Seen as Door for Foreign Suits Against U.S. — An ambitious 12-nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document. The Trans-Pacific Partnership — a cornerstone of Mr. Obama’s remaining economic agenda — would grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations. Backers of the emerging trade accord, which is supported by a wide variety of business groups and favored by most Republicans, say that it is in line with previous agreements that contain similar provisions. But critics, including many Democrats in Congress, argue that the planned deal widens the opening for multinationals to sue in the United States and elsewhere, giving greater priority to protecting corporate interests than promoting free trade and competition that benefits consumers. The chapter in the draft of the trade deal, dated Jan. 20, 2015, and obtained by The New York Times in collaboration with the group WikiLeaks, is certain to kindle opposition from both the political left and the right. The sensitivity of the issue is reflected in the fact that the cover mandates that the chapter not be declassified until four years after the Trans-Pacific Partnership comes into force or trade negotiations end, should the agreement fail.
Trans-Pacific Partnership Seen as Door for Foreign Suits Against U.S. — An ambitious 12-nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document. The Trans-Pacific Partnership — a cornerstone of Mr. Obama’s remaining economic agenda — would grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations. Backers of the emerging trade accord, which is supported by a wide variety of business groups and favored by most Republicans, say that it is in line with previous agreements that contain similar provisions. But critics, including many Democrats in Congress, argue that the planned deal widens the opening for multinationals to sue in the United States and elsewhere, giving greater priority to protecting corporate interests than promoting free trade and competition that benefits consumers. The chapter in the draft of the trade deal, dated Jan. 20, 2015, and obtained by The New York Times in collaboration with the group WikiLeaks, is certain to kindle opposition from both the political left and the right. The sensitivity of the issue is reflected in the fact that the cover mandates that the chapter not be declassified until four years after the Trans-Pacific Partnership comes into force or trade negotiations end, should the agreement fail.
Corporate Sovereignty Provisions Of TPP Agreement Leaked Via Wikileaks: Would Massively Undermine Government Sovereignty - For years now, we've been warning about the problematic "ISDS" -- "investor state dispute settlement" mechanisms that are a large part of the big trade agreements that countries have been negotiating. As we've noted, the ISDS name is designed to be boring, in an effort to hide the true impact -- but the reality is that these provisions provide corporate sovereignty, elevating the power of corporations to put them above the power of local governments. If you thought "corporate personhood" was a problem, corporate sovereignty takes things to a whole new level -- letting companies take foreign governments to special private "tribunals" if they think that regulations passed in those countries are somehow unfair. Existing corporate sovereignty provisions have led to things like Big Tobacco threatening to sue small countries for considering anti-smoking legislation and pharma giant Eli Lilly demanding $500 million from Canada, because Canada dared to reject some of its patents noting (correctly) that the drugs didn't appear to be any improvement over existing drugs. The US has been vigorously defending these provisions lately, but with hilariously misleading arguments. The White House recently posted a blog post defending corporate sovereignty, with National Economic Council director Jeff Zients claiming the following: ISDS has ome under criticism because of some legitimate complaints about poorly written agreements. The U.S. shares some of those concerns, and agrees with the need for new, higher standards, stronger safeguards and better transparency provisions. Through TPP and other agreements, that is exactly what we are putting in place. There's something rather hilarious about saying that there needs to be "greater transparency" and promising that the secret agreement you're negotiating behind closed doors and won't share with the public has those provisions in them somewhere.
TPP vs. Democracy: Leaked Draft of Secretive Trade Deal Spells Out Plan for Corporate Power Grab -- Newly leaked classified documents show that the secretive Trans-Pacific Partnership deal, if it goes through as written, will dramatically expand the power of corporations to use closed-door tribunals to challenge—and supersede—domestic laws, including environmental, labor, and public health, and other protections. The tribunals, made infamous under NAFTA, were exposed in the "Investment Chapter" from the TPP negotiations, which was released to the public by WikiLeaks on Wednesday. "The TPP has developed in secret an unaccountable supranational court for multinationals to sue states," said Julian Assange, WikiLeaks editor. "This system is a challenge to parliamentary and judicial sovereignty. Similar tribunals have already been shown to chill the adoption of sane environmental protection, public health and public transport policies." Responding to the leak, Lori Wallach, director of Public Citizen’s Global Trade Watch, declared: "With the veil of secrecy ripped back, finally everyone can see for themselves that the TPP would give multinational corporations extraordinary new powers that undermine our sovereignty, expose U.S. taxpayers to billions in new liability, and privilege foreign firms operating here with special rights not available to U.S. firms under U.S. law." The document reveals that negotiators plan to recycle language from past trade agreements to create the controversial "investor-state dispute settlement" system (ISDS). Under this framework, multinationals would be granted a parallel legal system in which they can sue governments, and therefore taxpayers, for loss of "expected future profit," with the power to overrule national laws and judicial systems. The language included in this draft is even worse than previously thought, because it excludes a minor safeguard included in a version leaked in 2012.
The secretive TPP scam - The real deal is in the 24 other chapters that create a supranational scheme of secretive, private tribunals that corporations from any TPP nation can use to challenge and overturn our local, state and national laws. All a corporate power has to do to win in these closed proceedings is to show that a particular law or regulation might reduce its future profits. This is big stuff, amounting to the enthronement of a global corporate oligarchy over us. Yet it's been negotiated among trade officials of the 12 countries in strict secrecy. Even members of Congress have been shut out – but some 500 corporate executives have been allowed inside to shape the “partnership.” Now that President Obama and his corporate team intend to spring it on us and start ramming TPP through Congress. He recently arranged a briefing of two House Democrats to support it – but he even classified the briefing as a secret session, meaning the lawmakers are not allowed to tell you, me or anyone else anything about what they were told. A gag order on Congress? Holy Thomas Paine! The only reason Obama is desperate to hide his oligarchic scheme from us is because he knows the people would overwhelmingly oppose it. So he's resorting to government by sucker punch. It's cowardly ... and disgraceful. So the TPP, by far the largest trade flim-flam in history, is written in legalistic gobbledygook and was negotiated by corporate lobbyists and government lawyers. Even Congress doesn't know what's in it – yet the plan is to hustle TPP into law through a super-rushed, rubber-stamp process called “fast-track.”
TPP Corporate Insiders - Below is a list of 605 corporate advisers who have been allowed access to the TPP text, while the public and members of congress have been kept in the dark.
Thoughts About the Trans-Pacific Partnership -- Yves Smith -Concern about the toxic misnamed trade deals known as Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership are finally breaking out of the blogosphere ghetto as the Obama administration is making another push to get so-called fast track approval from Congress. Note that Obama failed in the last Congress due mainly to considerable opposition in the Democratic party, along with some resistance among Republicans as well. What may have torched the latest Administration salvo is a well-timed joint publication by Wikileaks and the New York Times of a recent version of the so-called investment chapter. That section sets forth one of the worst features of the agreement, the investor-state dispute settlement process (ISDS). As we’ve described at length in earlier posts, the ISDS mechanism strengthens the existing ISDS process. It allows for secret arbitration panels to effectively overrule national regulations by allowing foreign investors to sue governments over lost potential future profits in secret arbitration panels. Those panels have been proved to be conflict-ridden and arbitrary. And the grounds for appeal are limited and technical. So the significance of this particular document release cannot be overstated. For the first time, Congress can do a decent review of this critical section. Not surprisingly, they are finding a lot not to like. For instance, from the New York Times: “This is really troubling,” said Senator Charles E. Schumer of New York, the Senate’s No. 3 Democrat. “It seems to indicate that savvy, deep-pocketed foreign conglomerates could challenge a broad range of laws we pass at every level of government, such as made-in-America laws or anti-tobacco laws. I think people on both sides of the aisle will have trouble with this”…Senator Brown contended that the overall accord, not just the investment provisions, was troubling. “This continues the great American tradition of corporations writing trade agreements, sharing them with almost nobody, so often at the expense of consumers, public health and workers,” he said…
The New York Times Covers the TPP: A Commentary -- Wikileaks did us all another service yesterday by releasing the “Trans-Pacific Partnership Agreement (TPP): Investment Chapter Consolidated Text,” and collaborating with the New York Times to get the word out. Jonathan Weisman wrote the story for the New York Times. Apart from providing a very high level and very selective summary of what the chapter says, the article contains talking points used by proponents and opponents of the TPP. I think a close commentary on the article and associated issues would be useful. So here it is. An ambitious 12 nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document. Why are we negotiating the TPP at all? Why is it the business of the Representatives of the people of the United States in Congress to support agreements that will mitigate the political risks borne by American businesses who chose to invest in other nations, as well as the political risks borne by foreign corporations, who choose to invest in the United States? Why is it their business to provide protection against such risks to foreign corporations beyond the protections we provide to our own corporations?The “expectations” of business investors are their own business, not the public’s business; and there’s no reason why either the government of the United States or the governments of other nations should have to accommodate themselves to these expectations. If it is the will of the people of a nation as expressed through their representatives to pass legislation that destroys the “expectations” of business investors, then that’s just too bad for the investors. Private businesses have no right to expect that their governments will protect them against risks that they alone choose to take, and that they alone will profit from. Risk is part of the game of investing. It’s business.
These TPP safeguards won't protect us from ISDS - Amid increasing calls for transparency in negotiations for the Trans Pacific Partnership (TPP) in Australia and abroad, WikiLeaks today released another draft of the agreement's controversial investment chapter. The draft confirms that Australia's position on investor-state dispute settlements (ISDS) remains in limbo: the Abbott Government has seemingly not yet agreed to ISDS but has also not ruled it out. This is consistent with recent statements made by the Minister for Trade Andrew Robb. In light of this ongoing uncertainty, it is worth scrutinising the detail of the chapter and in particular the so-called 'safeguards' meant to prevent legitimate regulatory actions taken in the public interest from being challenged in ISDS. The question that everyone is asking is whether Australia could be faced with another case like the Philip Morris/plain packaging dispute under the terms of the TPP. This is a particularly salient question given that the TPP would be the first investment treaty that Australia would have with the US - home of the most litigious foreign investors. A close reading of the draft suggests that the TPP investment chapter, while being substantially better written than bilateral investment treaties (BITs) drafted in the 1980s and 1990s, cannot be said to 'safeguard' domestic regulatory authority. The provisions in the chapter largely follow an American model that has proven insufficient to prevent investors from challenging environmental regulation.
Ohio senators on different sides of trade promotion authority - Farm and Dairy: Ohio’s two U.S. senators say trade is good for agriculture, but they’re divided over a policy that would give the president and his administration more authority to negotiate trade.U.S. Sens. Rob Portman and Sherrod Brown both addressed Ohio Farm Bureau Federation members during the organization’s county presidents’ trip to Washington, D.C., March 18-20.In his January State of the Union Address, President Barack Obama requested Congress grant him “trade promotion authority” — which would allow the U.S. to continue its negotiations with other countries, but in a way that allows the president to make final-deal offers.Those offers are later reviewed by Congress, but would not be subject to the lengthy, and sometimes deal-breaking, process of amendments.Portman said the United States needs to be more competitive in securing new trade agreements. “America has been sitting on the sidelines while other countries have been negotiating trade agreements,” the Republican said. “That opens up markets for their products and we get left out.”
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A $600-Million Fracking Company Just Sued This Tiny Ohio Town For Its Water - A tiny town in eastern Ohio is being sued by an Oklahoma-based oil and gas company that bought more than 180 million gallons of water from the town last year. That water use, combined with a dry fall, prompted the village to temporarily shut off water to Gulfport Energy. Now, a second company has a water agreement, and there might not be enough water to go around. Gulfport Energy alleges in the lawsuit that the village of Barnesville, population 4,100, violated its agreement to provide water from its reservoir by entering into a contract with oil and gas company Antero Resources. Gulfport says the village’s contract with Antero allows for withdrawals beyond what Gulfport is allowed to take. Gulfport’s water supply can be shut off whenever water levels in the reservoir create a risk to the health and safety of the village residents and businesses. Last fall, the reservoir was down three feet below average when village officials stopped all outside withdrawals. “We felt like we had to shut everyone off to protect the regular users,” said village solicitor Marlin Harper. “We don’t have unlimited water.” But here’s the catch: Only Gulfport pumped water out of the reservoir last year. So even though, as Harper admits, the Antero contract has “a little bit of a priority” over the Gulfport contract, that’s not the reason Gulfport’s water supply was shut off. During the unusually dry fall, water withdrawals by Gulfport alone were too much for the reservoir to sustain. Environmentalists stress how valuable water is in the area, and particularly how valuable the reservoir at the heart of the lawsuit is. The water being sold to Gulfport comes from the Slope Creek Reservoir, which supplies water to all the town’s residents as well as another 8,000 people in neighboring areas, said John Morgan, a spokesman for Concerned Barnesville Area Residents.
Fracking Company Sues Ohio Town for its Water - Here in Ohio, the fracking industry can get water from just about anywhere for their thirsty drilling endeavors. Apparently, that’s still not enough for this water-intensive industry. Yesterday, the Oklahoma-based Gulfport Energy sued Barnesville, Ohio to bully them into allowing continued withdrawals from the Slope Creek Reservoir. The fracking process uses up to 4.1 million gallons per gas well, and 2 million gallons per oil well, and that number is expected to grow. This intensive water use, combined with Ohio’s dry fall, would not leave enough water for Barnesville residents. That’s why officials stopped water withdrawals for any other purposes besides municipal use last fall due to abnormally low water levels. As Village Solicitor Marlin Harper told Think Progress, “We felt like we had to shut everyone off to protect the regular users…” because “We don’t have unlimited water.” There is no shortage of options for oil and gas companies in terms of buying water. And thanks to multiple sweetheart deals with the Muskingum Watershed Conservancy District (MWCD), oil and gas companies can purchase it on the cheap. Out-of-state companies have purchased hundreds of millions of gallons of water over the last couple of years from reservoirs in the largest watershed within Ohio’s borders. This year, frackers plan to take billions of gallons from the Muskingum Watershed at the rate of less than ten dollars per 1,000 gallons. The special treatment for fracking companies must end, especially when it means depriving people of water. The water crisis in Toledo last summer should be warning enough of the importance of access to water, and Barnesville took a step to avoid their own crisis and stood up for their citizens when they put their drinking water first.
Chesapeake Energy cuts 2015 capital spending, will drill fewer wells - Chesapeake Energy Corp. is cutting its 2015 capital budget by $500 million due to low prices for natural gas and liquids. The Oklahoma-based company, the No. 1 player in Ohio’s Utica Shale, made its latest adjustment Monday. That means Chesapeake intends to spend $3.5 billion to $4 billion and to operate 25 to 35 rigs in 2015. Earlier, the company had said it intended to spend $4 billion to $4.5 billion. It operated an average of 64 rigs in 2014. Chesapeake intends to drill and connect to sales between 520 and 650 gross operated wells in 2015. That would be a reduction of about 50 percent from 2014. In Doug Lawler, Chesapeake’s chief executive officer, said, “We entered 2015 with a strong liquidity position and we intend to manage it prudently.” The company said it expects to produce 231 million to 236 million barrels of oil equivalent in 2015, representing a growth of 1 percent to 3 percent from 2014. That revised forecast is down from last month when Chesapeake said it expected to produce 235 million to 240 million equivalent barrels in 2015, which would have represented a growth of 3 percent to 5 percent from 2014.
Government response to fracking concerns still inadequate -- With Ohio's judicial approval striking down community rights, the world's wealthiest industry, drilling, will barrel along like a freight train with no grassroots efforts coming close to stopping it. The municipal zoning regulations to prevent fracking within city limits mean nada now. Here in Pennsylvania the municipalities are slow to act, perhaps due to fear of lawsuits, but local home rule is still in effect. However, it appears the Federal Energy Regulatory Commission, the state Department of Environmental Protection and other agencies that are supposed to protect us and our drinking water are laying out the red carpet for the industry. At least the frustrated voice of the grassroots is still being heard in opposition. We say the industry is poorly regulated on all sides, that fracking results in air and water pollution and that the aging infrastructure is a ticking time bomb for leaks and explosions. In September 2014 Yale University found "increased reporting of upper respiratory symptoms" and "dermal" problems in southwest Pennsylvania, which is dotted with wells. With all the talk about profit and jobs, there's no room for any consideration of what happens when the wells dry up or with accidents or the health damage done to the populace. If our government will not protect us, then it has stopped being legitimate.
Utica well activity in Ohio - Activity in the Utica has gone up a tiny bit when compared to our last Utica well report published on March 19th. During the week ending on the 21st, a total of ten horizontal permits were issued and 26 rigs were up and running in the shale formation. While production numbers have fluctuated up and down the past few weeks, there is talk about the potential for another gas boom in the Utica Shale located in Pennsylvania. Seneca Resources, a subsidiary of National Fuel Gas Company, announced that it successfully completed a well on state forest land in Tioga County, Pennsylvania. According to test reports, the well will produce 22.7 million cubic feet of natural gas per day. Two other success stories in the Utica Shale formation come from Range Resources and Royal Dutch Shell. Back in December, Range Resources completed a well located in Washington County with a daily flow rate of 59 million cubic feet of natural gas. Last September, Shell completed two wells also located in Tioga County. The following information is provided by the Ohio Department of Natural Resources and is through the week ending on March 21st.. DRILLED 304 - DRILLING 267 - PERMITTED 464 - PRODUCING 829 - TOTAL 1,864
Marcellus horizontal well activity in Ohio - While Marcellus well activity in Ohio is about the same as it has been the last few weeks, things in Pennsylvania are heating up when it comes to drilling regulations. Last week, during a meeting of the State Department of Environmental Protection’s Oil and Gas Technical Advisory Board (TAB), Marcellus Shale industry representatives called out the Wolf administration’s efforts in handling the revision of drilling regulations. Several groups challenged the level of transparency regarding new draft rules, which have been in revision since 2011. The Chapter 78 regulations, which manage the oil and gas industry, were available for public comment and nine hearings regarding the rules were held during 2013. Shortly after Governor Tom Wolf took office, the DEP made numerous serious changes to the regulations, including stricter rules on waste, noise and streams. The issue that industry representatives are wrangling with pertain to detailed comments from the Macellus Shale Coalition (MSC) regarding the rules being completely ignored and a sudden change in TAB members. However, the DEP’s Deputy Secretary for Oil and Gas Scott Perry has stated that the governor typically appoints new members when elected into office and that is part of the process. The DEP plans to release the newly revised regulations on April 4th for 30 days for public comment but will not hold any more hearings or extend the public comment period. The regulations must be completed by March 2016 or the revision process will start over. The following information is provided by the Ohio Department of Natural Resources and is through the week ending on March 21st. PERMITTED: 15 DRILLED: 15 PRODUCING: 13 INACTIVE: 1 TOTAL: 44
Shale Gas: "An Orgy of Over-Production" - Spending cuts for oil-directed drilling have dominated first quarter 2015 energy news but rig counts for shale gas drilling are too high. Investors should pay attention to this growing problem. Bank of America fears sub-$2 gas prices now that winter heating worries are over. Low natural gas prices affect the economics for gas-rich oil production in the Eagle Ford Shale and Permian basin plays as well as for the shale gas plays. Meanwhile, an orgy of over-production is taking place in the Marcellus Shale. Well head prices are now below $1.50 per thousand cubic feet of gas because of limited take-away capacity and near-saturation of regional demand. Even companies in the Wyoming, Susquehanna, Allegheny and Washington County core areas of the Marcellus play are losing money at these prices. The rig count for shale gas plays has decreased by only half as much as for the tight oil plays. The reason appears to be that most shale gas companies do not have significant positions in the tight oil plays and must continue to drill to maintain production levels. Shale gas rig counts have dropped only 19% for horizontal rigs and 25% for all rigs from 2014 highs. The corresponding decrease for tight oil plays is 41% and 46%, respectively, as shown in the table below. This has puzzled me because the shale gas plays are not commercial at less than about $6/mmBtu except in small parts of the Marcellus core areas where $4 prices break even. Natural gas prices have averaged less than $3/mmBtu for the first quarter of 2015 and are currently at their lowest levels in more than 2 years. Most shale gas producers either do not have positions in the tight oil plays or are strongly gas-weighted in their production mix. These companies must continue to drill in shale gas plays despite poor economics in order to avoid the consequences of falling production levels. The only criterion that seems to matter to investors these days is production guidance. If production drops, stock value will fall even farther than it has already. This will trigger loan covenants if asset values fall below thresholds set out in the loan agreements. When that happens, the loans will be called unless the companies can come up with more cash. This might result in bankruptcy. So, the drilling must continue as long as there is capital.
Statoil, West Virginia agree on deal for drilling under Ohio River - FuelFix (AP) — West Virginia and Statoil have agreed on a deal for natural gas and oil drilling under the Ohio River. The Intelligencer and Wheeling News-Register (http://bit.ly/1BfYGJm ) reports that Norway-based Statoil plans to drill on about 474 acres of state-owned land under the river in Marshall and Wetzel counties. Statoil has agreed to pay an average price of $8,732 per acre. The state also will receive 20 percent production royalties. Department of Commerce spokeswoman Chelsea Ruby tells the newspaper that the state is still finalizing drilling agreements with Gastar Exploration and Noble Energy. Leasing state-owned land for hydraulic fracturing, a drilling technique commonly called fracking, is a new venture for West Virginia.
Pipeline would carry natural gas liquids through 18 Kentucky counties under controversial plan - A company’s proposal to change the product flowing through an existing natural gas pipeline, and to reverse the flow through that interstate line, is drawing increasing concern and comment from Kentuckians. Of particular concern to people in Lebanon and Marion County is the possibility of an explosion in the underground line or a leak and resulting contamination of the Rolling Fork River, a drinking water supply for Marion and parts of Taylor and LaRue counties, . “A breach of that line anywhere in that pathway could really jeopardize — who knows for how long? — the long-term water supply of this community,” Residents have similar questions in neighboring Danville and Boyle County. There, a segment of pipeline now suspended over Dix River and Herrington Lake — which provides drinking water for Boyle, Garrard and Mercer counties — will be put underground by boring beneath the lake, said Boyle County Judge-Executive Harold McKinney. A leak could happen where 70-year-old pipe joins new pipe above the lake surface. At issue is Tennessee Gas Pipeline’s proposal to “repurpose” a natural gas pipeline that runs 256 miles through 18 Kentucky counties, from Greenup County in the northeastern corner through Simpson County on the Tennessee state line. In an application filed in February with the Federal Energy Regulatory Commission, the company seeks to abandon a 964-mile section of line that runs from Natchitoches Parish, La., to Columbiana County, Ohio. The natural gas line would be sold to Utica Marcellus Texas Pipeline LLC or UMTP, a subsidiary of Tennessee Gas Pipeline. The subsidiary would convert the line for transportation of natural gas liquids instead of natural gas.
Obama’s Trade Deals Could Overturn New York’s Fracking Ban and Accelerate Climate Change - Thanks to a recent Wikileaks’ leak, certain truly onerous provisions of President Obama’s secret trade deals are no longer secret. As reported this week in the New York Times, the Transpacific Partnership (TPP) would “grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings—federal, state or local—before tribunals organized under the World Bank or the United Nations.” As terrible as this sounds for the rule of law, and democracy, it’s even worse. Long-time consumer advocate, Ralph Nader describes how the Investor State Tribunals would work: Suppose that Brazil sues the U.S. and says “your food labeling laws are too restrictive and they are keeping out our exports to your country.” Then we send our Attorney General to Geneva before the Tribunal. There can be no press, no public disclosure of what happens behind closed doors. If we lose, as we almost certainly will, there is no independent appeal. It circumvents our courts, legislative and regulations. Foreign corporations can take our food, health and safety protections and bring us before these tribunals and if they lose, we pay millions of dollars in compensation. The cases are argued, tried and judged by a small, revolving group of elite corporate attorneys, taking turns playing the role of judge and prosecutor. The potential for conflicts of interest and secret handshakes exceeds even the current regulatory revolving door, in which industry lawyers, officials and consultants move into key positions in public agencies, alter governmental regulations in industry’s favor and then return to their bespoke industry.
EXPOSED! Crestwood Uses Smoke and Mirrors to Claim Support in the Finger Lakes - Last week, Crestwood’s PR firm sent out a news release (attached) declaring that it has support for its gas storage-transport project in the heart of the Finger Lakes. But here is what we found:
- -The owner of “Munroe Vineyards” isn’t really a “vinter” (sic), because “Munroe Vineyards” is really JM trucking– a company that hauls propane.
- -The “grape inspector” isn’t exactly a grape inspector, she is the secretary for JM Trucking, the company that hauls propane.
- -The farmer, George Zemak, actually owns a trucking company too: http://www.truckcompaniesin.com/dot/1405129/
And he sold his land to Crestwood in Savona for a good price. (After you listen to the podcast, you might agree that if Mr. Zemak is the best spokesperson Crestwood can find for the project, they have a problem.) Hear all about it on Evan Dawson’s Connections podcast from earlier today.
Anti-pipeline activist: Gas battle isn't over yet - Since state leaders decreed in December that hydraulic fracturing for natural gas won’t be permitted in New York, those battling the Constitution Pipeline have seen attrition from “NIMBY” (not in my backyard) protesters, though most activists remain engaged, an opposition leader said Wednesday. “I have seen no diminishment in involvement on the part of people who really oppose the pipeline,” said Anne Marie Garti, an environmental lawyer who helped organize Stop the Pipeline. “But the NIMBY crowd was really not committed to anything in the first place. So of course they have dropped out of everything since the state’s announcement because it is not in their nature to be involved.” The $700 million Constitution Pipeline project has received conditional approval from federal regulators and now awaits crucial decisions on water permit requests to the state Department of Environmental Conservation and the U.S. Army Corps of Engineers. Garti said some activists suspect that the state ban on fracking was “just a way of defusing the opposition to the pipeline.” She cautioned that it is entirely possible future state leaders will allow fracking once natural gas prices rise. “The New York fracking ban is a moment in time,” she said. “Pipelines last for decades. Some of them are over 100 years old. So in five years or whenever the price of gas goes up they could approve fracking, and this pipeline will be in place, and the whole area will get fracked to death.”
Maryland Senate Passes Bill To Declare Fracking An ‘Ultrahazardous Activity’ --On Tuesday, Maryland legislators passed legislation that would place strong limits on the extraction of natural gas in the state.The Maryland House of Delegates passed a three-year moratorium on hydraulic fracturing — or fracking — in the Western part of the state, while the Maryland Senate approved a bill that would impose strict financial liabilities on fracking companies and would declare fracking an “ultrahazardous and abnormally dangerous activity.” The bills must pass through the other chambers before heading to the desk of Republican Governor Larry Hogan for approval.Maryland has been under a de facto fracking ban for more than three years, following former Democratic Governor Martin O’Malley’s hold on permits while the state conducted studies of the fracking industry. The results of those inquiries were mixed, with one study raising concern over fracking’s impact on air quality and another finding that, under best practices, fracking would pose no threat to Maryland’s drinking water. The just-passed House bill fills in what proponents of the bill claim were gaps in these previous studies.“We’ve got to get this right, because if we get this wrong, it is unfixable,” Del. Dereck Davis (D) said during the House debate. “You cannot undo this.”The bill passed 93-45, mainly along party lines, facing staunch opposition from Western Maryland delegates and Republicans from Baltimore county, who argue that fracking would only impact a small portion of the state’s residents who are already willing to accept the industry.
Regulators Issue Tougher Disposal Well Directives as Oklahoma's Quake Risk Rises -- (document imbedded) As earthquakes continue to surge in Oklahoma and seismologists warn of more frequent and more damaging shaking, the state’s oil and gas regulator is issuing new orders to companies operating wells in seismically active regions of the state. The Oklahoma Corporation Commission’s new requirements, known as directives, were mailed March 18 to 92 people or companies operating 347 Arbuckle formation disposal wells in quake-prone regions of the state. The directives expand the definition of “areas of interest” — a term the agency uses to describe locations of concentrated seismic activity — and require operators to prove to the commission that their wells aren’t in contact with granite basement rock. Fluid injection into basement rock has been identified by researchers as a major risk factor for triggering earthquakes. “This is a way of quickly getting our hands around the issue, particularly in those areas that have seen huge increases in seismicity,” says commission spokesman Matt Skinner. The Arbuckle is a deep rock formation that underlies most of Oklahoma and is known for its ability to absorb and hold fluid — a characteristic that has made it a popular target for wastewater disposal. More recently, the commission has revised its permitting process to scrutinize disposal wells and has employed a “traffic light” system to manage wells in quake-prone areas which, under the previous system, included wells located within 6 miles of a magnitude-4.0 or greater earthquake. The new orders were written to take into account “swarms” of earthquakes, and define areas of interest as any region within 6 miles of locations containing at least two earthquakes within a quarter-mile of each other, with at least one of the quakes registering a 3.0 or greater magnitude. The new directives issued this month are more strident than previous quake-related commission actions and put on oil companies the onus of proving their wells aren’t capable of injecting fluid into basement rock. To do this, operators are given 30 days to supply the commission with well logs or gamma ray tests to verify a well’s depth.
Don’t Frack with Denton: A Community’s Fight to Defend Home Rule - Citizens of Denton, Texas are still fighting to keep fracking banned within city limits despite the vote last November in favor of the ban. Ever since the vote, state lawmakers in cahoots with the oil and gas industry and the American Legislative Exchange Council, or ALEC, have attempted to strip municipalities like Denton of home rule authority to override the city’s ban, according to Frack Free Denton. The town is the first municipality in Texas to ban fracking and has consequently become ground zero for the fracking debate. Yesterday, Denton Mayor Chris Watts and City Attorney Anita Burgess traveled to Austin to testify at a hearing on two bills that have emerged in response to Denton’s fracking ban, according to Frack Free Denton. In solidarity with grassroots organizers from the Frack Free Denton movement and other residents from small Texas towns who also testified in Austin, documentary filmmaker and Denton resident Garrett Graham released a new trailer for his forthcoming film. With the help of Frack Free Denton, Graham made a film that “chronicles Denton’s uphill battle against oil and gas interest deep in the heart of the gas patch,” said Frack Free Denton. The oil and gas industry is working hard to undo Denton’s ban and to keep other cities from following Denton’s example but residents of Denton are speaking out.
Editorial: Overreaching bill could bring fracking to your doorstep - Oil and gas operators have economic rights, and it seems some Austin lawmakers think those are the only rights that matter. HB 40, sponsored by Rep. Drew Darby, R-San Angelo, would strip the authority of cities to regulate oil and gas drilling on the grounds that the state has the sole authority to regulate oil and gas and mineral rights. This bill is an all-out assault on local control, seemingly designed to punish cities like Dallas and Denton that dared exercise their home-rule rights to protect their residents. It is a bad bill. If enacted, say goodbye to Dallas’ drilling ordinance and Denton’s ban on fracking within its city limits. Such local decisions wouldn’t be honored, because economic rights would trump the rights of homeowners to protect property values, health, safety and overall quality of life. This bill is the creation of lawmakers who don’t have to live with the consequences. We would expect North Texas lawmakers to stand up for local rights on this issue that touches all their constituents, so vital in the heart of the Barnett Shale. Cities have to live with the noise, traffic and fumes, for sure. And the jury is still out on whether fracking or a related disposal process is causing an increase in earthquakes. Don’t cities and their residents deserve a voice in this issue?
Texas Frack Anywhere HB 40 Hearing Or How to Frack Texas Cities Without Really Trying. Joined The Calvin, The Sharon and The Marc in Austin yesterday to testify against Texas House Bill 40 Frack Anywhere. About 100 people turned out to testify, 80% against, the rest were the usual assortment of fracking lobbyists, Man Camp followers and some Judas Goat mayors. My take on it – a crudely crafted attempt to gut local zoning ordinances – and replace them with frack all: (embedded text, picture...
Texas Frack Anywhere Test Fail - Texas Frack Anywhere Bill imposes a “commercially reasonable” test on any municipal oil and gas ordinance – such as a setback. The sponsors think that Dallas’s 1,500 foot setback is “too long” – when the average length of a lateral in the Barnett Shale is a mile, 5,280 feet. And the average spacing unit is a section, 640 acres. If the well pad is in the middle of the spacing unit, the lateral would be 2,640 feet long. In fact, it couldn’t be much less than 2,000 feet in order to worth drilling. So the standard for a “commercially reasonable” setback – based on spacing unit sizes – is a lot more than 1,500 feet. Maybe Dallas should increase its setback to make it more “commercially plausible.” (includes embedded document)
Texas bill to limit local anti-fracking ordinances advances - A bill that would limit cities and towns from passing local ordinances restricting oil and gas drilling and exploration is headed to the full Senate. The Senate Committee on Natural Resources and Economic Development voted 8-0 on Tuesday to advance a proposal by its chairman, Horseshoe Bay Republican Sen. Troy Fraser. The bill is among the most-watched of nearly a dozen bills that seek to limit local regulations in the wake of a ban on hydraulic fracturing that voters in Denton overwhelmingly approved in November. The measures have been cheered by energy companies who worry about local bans crimping key segments of Texas’ economy, but municipal groups fear the state may impede local authority too much. A similar bill in the House was considered in committee Monday but left pending.
Train cars hauling methanol derail in central Texas - — Texas authorities say a dozen train cars have derailed near Valley Mills, including five tanker cars carrying methanol. Department of Public Safety spokesman Trooper D.L. Wilson says no injuries or fires have been reported from the Saturday evening accident. He says one or two of the methanol-hauling tanks have small leaks. Wilson says about 10 nearby homes were evacuated as a precaution. Residents were allowed to return around 9 p.m. Wilson says it’s unclear what caused the derailment, but says heavy rain has been falling in the area. He says the weather was making it difficult for vehicles to get to the scene to unload material from the derailed cars, which also include seven flatbeds carrying oil-well pipes. He says a hazardous materials crew is on the scene.
Manchin among senators urging tighter safety rules for rail tankers - Following a number of train derailments hauling crude oil, U.S. Sen. Joe Manchin, D-W.Va., was among 21 senators who sent a letter to the Senate Appropriations subcommittee Tuesday supporting funding for a program aimed at improving coordination between various agencies with the U.S. Department of Transportation. The proposed program would consolidate the regulatory units within each agency to allow the Secretary of Transportation to develop uniform safety standards for the transportation of crude and other energy products, said a spokesperson for the senator. The agencies affected would including the Federal Railroad Administration, the Pipeline and Hazardous Materials and Substances Administration and the Federal Motor Carrier Safety Administration. “As you know, five years ago, our nation’s railroads hauled very little crude oil by rail. Now, railroads transport approximately one-tenth of U.S. crude oil output — approximately 1.1 million barrels per day,” the letter reads. It continues that since 2007 crude-by-rail is driven largely by the vast natural gas and oil developments in the Bakken oilfields in North Dakota and Montana. “In light of several tragic accidents involving crude-by-rail trains — including the most recent derailments and explosions of tanker cars carrying crude oil in West Virginia and Illinois — communities stretching across our country from the Midwest to coastal ports and refineries are rightly concerned about the safe movement of these combustible products,”
As oil trains roll across America, volunteer firefighters face big risk -- Volunteers at the Galena, Illinois, fire department were hosing down the smoldering wreck of a derailed BNSF oil train on the east bank of the Mississippi River on March 5 when a fire suddenly flared beyond their control. Minutes later, the blaze reached above the treetops, visible for miles around. “They dropped the hoses and got out” when the flames started rising, said Charles Pedersen, emergency manager for Jo Daviess County, a rural area near the Iowa border which includes Galena. “Ten more minutes and we would have lost them all.” No one was hurt in the fire, which burned for days, fed by oil leaking from the ruptured tank cars. But an increase in explosive accidents in North America this year highlights the risks that thousands of rural fire departments face as shipments of oil by rail grow and regulators call for improved train car standards. Nearly two years after a crude oil train derailed, exploded and killed 47 people in the Canadian town of Lac-Megantic, Quebec, in 2013, there are no uniform U.S. standards for oil train safety procedures, and training varies widely across the country, according to interviews with firefighters and experts in oil train derailments and training. About 2,500 fire departments are adjacent to rail lines transporting oil in North Dakota, Minnesota, Wisconsin, Illinois and Iowa alone, according to figures provided by the Department of Transportation, but no nationwide statistics exist. The DOT does not know which of these fire departments are in need of training, a spokesman said. The scenario concerns experts who say more needs to be done for sparsely equipped, rural, mostly volunteer-run fire departments to prepare as oil train accidents increase.
North American Railroads Caught by Speed of Crude-Oil Collapse - -- The slowdown that North American railroad companies had been bracing for in crude oil shipments has turned into a rout, with volumes falling faster than executives had predicted. With energy companies scaling back drilling after prices for the commodity fell about 50 percent since July, industry executives and analysts anticipated that demand for hauling crude and extraction materials such as frac sand and pipes would slow after a four-year surge. They didn’t expect it to slow this much this fast. “The impact is occurring more quickly than the rails originally projected to investors,” “The consensus view was that very high double-digit growth would moderate to low double digits, and as we have seen in recent weeks we’ve broken that floor and in some cases gone negative.” Rail stocks and tank-car leasing are reflecting the dwindling traffic. The Standard & Poor’s 500 Railroads Index posted its biggest weekly decline since October and lessors’ rates for oil cars have fallen by about a third in the last six months, Cowen & Co. said in a report on Friday. “We would not be surprised if the downward trend continues as long as oil prices remain depressed,” Jason Seidl, a New-York-based Cowen analyst, said in the report. As recently as January, companies including CSX Corp. and Canadian Pacific Railway Ltd., were forecasting that even with prices below $50 a barrel, oil projects already under way would buoy production and keep trains hauling even more crude than last year. Instead carloads of U.S. petroleum products fell 2.8 percent in the last four weeks after growing 13 percent last year.
Rail industry's improved tank cars failing to prevent spills — In the short time since the derailment of a CSX train here hauling 109 tankers of crude oil last month, a number of similar accidents have occurred across the nation, despite federal and industry officials’ assurances that transporting the hazardous liquid is safer than ever. On Saturday, the derailment cleanup was complete. A mile or so from the site, residents sat in their colorful former coal camp houses and talked of that day and their worries that it might happen again. Something biblical, wrath-of-God, is how some described it. Others used a similar word — apocalyptic. Many said they know little if anything about rail or tanker regulations, but they now know what happens when things don’t work like they are supposed to. Incidents like the Feb. 16 spill, followed by fireballs along the banks of the Kanawha River, are becoming common, federal documents show. A search of federal records indicates that last month’s derailment was not unusual, and that the number of incidents involving derailments of oil tankers is increasing. This leaves many wondering why the sturdier train cars built specifically to carry crude oil have failed to prevent major spills.
Reroute oil trains? History suggests it's a long shot — Last week, U.S. Sen. Al Franken asked the Federal Railroad Administration to consider rerouting trains carrying volatile Bakken crude oil from North Dakota so they do not pass through Minnesota’s biggest cities. For Franken, the possibility of rerouting is an integral part of a comprehensive response to a recent rash of fiery oil train derailments that also includes stabilizing Bakken crude before it is loaded into stronger tanker cars. For the nation’s powerful railroad lobby, however, rerouting is an unwarranted intrusion into a rail safety system that the industry says works. Government-ordered rerouting of private rail traffic is not exactly a snowball in hell. It is more like a blizzard in Bahrain — possible, but unprecedented. In Minnesota and around the country, “rerouting issues ought to be high on everyone’s agenda,” said rail safety expert Fred Millar, who fought unsuccessfully against railroads to move chlorine trains out of the District of Columbia. “But rerouting has been pushed off the table.” Congress created the Federal Railroad Administration in 1966. In nearly half a century it does not appear to have forced any railroads to reroute trains around big cities for safety reasons, despite computer modeling that estimates routing changes could lower citizens’ risks to hazardous materials derailments by 25 to 50 percent and reduce casualties in an actual derailment by half.
Crews working to clean up Colorado coal train derailment - — Crews are working to clean up a stretch of railroad where a coal train jumped the tracks in eastern Colorado, spilling tons of coal. The 120-car Burlington Northern Santa Fe train derailed Sunday near the town of Hudson. At least 27 freight cars derailed and lost their cargo as the train was traveling from Gillette, Wyoming to La Junta, Colorado. Railroad spokesman Joe Sloan said it hopes to have the line connecting Denver to Brush back open later Monday so no trains have been re-routed. Both BNSF and the Federal Railroad Administration are investigating the derailment. Neither has speculated on a possible cause. BNSF carries a variety of the freight on the line but not large quantities of oil from the Bakken region of North Dakota, according to state regulators.
Boulder researchers take to sky for look at emissions' impact on air quality - -based scientists on Monday are launching a study to determine how gas emissions from shale oil and natural gas basins in the western United States affect air quality. Using over a dozen state-of-the-art chemical instruments, a team of seven scientists will measure trace gas emissions as they fly a research aircraft over production sites in various stages of development located across the West. The project, dubbed SONGNEX 2015, is expected to conduct 15 research flights out of Colorado and Texas between March and May. The collaborative study is a joint project of the Cooperative Institute for Research in Environmental Sciences at the University of Colorado and the National Oceanic and Atmospheric Administration. Sites of interest in the study include the Bakken oil fields of North Dakota, the Niobrara shale formation of northern Colorado and Wyoming, and the Four Corners area. "Some [hydraulic fracturing] areas are quite remote. But here in the Front Range, you've got major metropolitan areas right next to the oil and gas production region," said Joost de Gouw, a research physicist and lead scientist on the project. "Denver has a long-standing air quality concern — everybody knows about the brown cloud."
Feds offer tradeoff for gas drilling in northwest Colorado - A new plan for oil and gas development in energy-rich northwestern Colorado would ease restrictions on what time of year drilling rigs can operate on federal land if well sites are consolidated to minimize disruptions to the environment. The federal Bureau of Land Management released a proposal Friday for drilling on about 2,700 square miles in Rio Blanco County and parts of Moffat and Garfield counties. The BLM says the area could yield more than 7.5 trillion cubic feet of natural gas, enough to heat 7.5 million homes for 15 years. The agency reviewed the possible impacts if more than 15,000 wells were drilled on 1,100 sites over 20 years. The release of the plan triggers a 30-day period for public protests. A final decision is expected later this year.
Nebraskans: We don’t want your wastewater - If Nebraska’s Oil and Gas Conservation Commission’s public hearing Tuesday is any indication, Nebraskans are adamant in their objection to a proposed oil field disposal well in Sioux County. Unable to reach a conclusion, the commission will continue to deliberate on the matter. The Omaha World-Herald reports that of the 50 residents to speak at the six-hour hearing, only three spoke in favor of Terex Energy Corp., the company planning the disposal well. Opponents expressed concern over the well’s potential negative impacts such as increased truck traffic and aquifer contamination. Other concerns came from Sen. Ken Haar, who worried about oilfield waste water’s role in causing earthquakes. Haar also relayed a statement from Sen. John Stinner outlining his plans for a legislative study of the commission’s authority in oil field water regulation. “What we oppose is accepting waste products of other states, who should have their own disposal facilities,” Jenny Hughson said. Broomfield, Colorado-based company Terex submitted an application last fall to convert a dormant well site into a disposal site. The company’s plans illustrate what would not only be the state’s largest disposal site, but take in the most waste as well. The company expects to dispose of 10,000 barrels of waste every day.
New regulations bring additional costs to over half of NM well sites - – More than half of New Mexico’s oil and gas wells are going to be affected by new regulations that were announced by the Department of the Interior on Friday. Any new well to be drilled in New Mexico will need to get new permits from the Bureau of Land Management before production on the well sites can start. The new regulations are targeted at all hydraulic fracturing on public and American Indian Lands. “This updated and strengthened rule provides a framework of safeguards and disclosure protocols that will allow for the continued responsible development of our federal oil and gas resources,” said Secretary of the Interior Sally Jewell. Wally Drangmeister, New Mexico Oil and Gas Association vice president and director of communications, said the new rule is similar to already existing regulations. “In general, these are just redundant regulations that are already being effectively done by the state of New Mexico,” Drangmeister said. “More than half of oil and gas produced in New Mexico is on federal land.”
Say It Ain’t So: Is Brown Really a Fracking Whore? « Calbuzz: Gov. Jerry Brown is dedicated to preserving the environment and leading the fight against climate change. He’s fearless enough to slap Senate Majority Leader Mitch McConnell as a a “disgrace” for trying to incite the states to reject White House efforts to reduce carbon emissions. And he’s deft enough to label Sen. Ted Cruz, a climate-change-denying GOP presidential candidate, as “absolutely unfit to be running for office.” All of which renders Brown’s persistent defense of fracking – the environmentally dangerous and water polluting practice of drilling for oil by hydraulic fracturing – such a huge disappointment. On the one hand, he calls for – and even leads – a “crusade to protect our climate”; on the other he allows oil companies to engage in a practice that science and common sense insist is destructive, wasteful and unsafe to the environment and to Californians. So, more in sadness than in anger, we must ask: Why is Brown acting a fracking whore? Quid Pro Quo? Oh No. Surely, it can’t be that Occidental Petroleum gave $500,000 in 2012 to help Brown pass his crucial Proposition 30, which raised taxes on wealthy Californians and increased spending on public education. That would seem oh too quid quo pro for this political Jeremiah who self-righteously thunders that climate change denial “borders on the immoral.” And yet, whenever he is challenged on his approval of fracking – he called it a “fabulous economic opportunity” in May 2013 – Brown slips the punch by citing all the other good stuff he’s set in motion to combat climate change.
ND oil rig count drops below 100 for first time in 5 years — The number of drill rigs in western North Dakota’s oil patch has slipped below 100 for the first time in five years due to the sagging price of crude. There were 98 rigs drilling in North Dakota on Wednesday. That’s exactly 100 fewer than on the same day one year ago and the lowest since March 2010. North Dakota is the nation’s No. 2 oil producer behind Texas. North Dakota has been producing about 1.2 million barrels of oil daily. Industry officials say about 115 rigs need to be drilling to keep that level of production.
Oil, saltwater contained following spill in Williams County — North Dakota oil regulators say hundreds of gallons of oil and saltwater have been contained following a spill at a disposal well in the northwestern part of the state. Landtech Enterprises, LLC, reported Friday that about 630 gallons of oil were released at contained at Foss SWD 1 near Ray. The company said all but 210 gallons of oil had been recovered. The Minot Daily News reports nearly 29,500 gallons of saltwater were released, contained and recovered on site. The North Dakota Oil and Gas Division was notified, and a state inspector visited the disposal well. A failed valve reportedly caused the spill.
Prospects minimal to recover more oil from Yellowstone spill — State and federal regulators say the response to a 30,000-gallon oil spill into Montana’s Yellowstone River is shifting from emergency crude recovery to long-term monitoring and remediation. Paul Peronard with the U.S. Environmental Protection Agency said Wednesday that about 2,500 gallons of oil were recovered. That’s just over 8 percent of the amount spilled. Because there are minimal prospects for further oil recovery, Peronard says his agency no longer has jurisdiction over the spill. That means the Montana Department of Environmental Quality will become the lead agency in the response. The Jan. 17 pipeline breach temporarily contaminated the water treatment plant downstream in Glendive. State officials say they will negotiate with pipeline owner Bridger Pipeline LLC of Casper, Wyoming, in coming months over a penalty for water pollution violations.
Report: Canada’s Government Is Allowing Its Oil Industry To Pollute Rivers And Lakes -- Canada’s federal government, under the leadership of Prime Minister Stephen Harper, is systematically removing regulations and putting the country’s water at risk, according to a new report released this week by the Council of Canadians. “Blue Betrayal,” written by Maude Barlow, a former UN adviser on water and national chairperson of the Council of Canadians, states that the Harper government has allowed mining companies to dump toxic waste into lakes, exempted oil and gas pipelines from environmental review, and allowed for-profit companies to sue for the right to use clean, potable water in fracking and other commercial applications. The oil and gas industry in Canada is booming. Since 2008, when Harper took office, Canadian tar sands production has nearly doubled, according to an industry report. This has huge implications for water. Alberta’s tar sands alone could eventually use 20 million barrels of water each day, scientists estimate. Already, according to the report, nearly 3 million gallons of “toxic water” enters Canada’s watershed every day. Water used for oil and gas extraction is contaminated with a variety of toxic chemicals that are difficult, if not impossible, to remove. “There is a clear and intimate link between energy policy and fresh water protection,” Emma Lui, a representative for the Council of Canadians, told ThinkProgress. Environmentalists say the drastic reductions in regulatory oversight for Canada’s waterways are largely due to pressure from the oil and gas industry.
US drillers scrambling to thwart OPEC threat - OPEC and lower global oil prices delivered a one-two punch to the drillers in North Dakota and Texas who brought the U.S. one of the biggest booms in the history of the global oil industry. Now they are fighting back. Companies are leaning on new techniques and technology to get more oil out of every well they drill, and furiously cutting costs in an effort to keep U.S. oil competitive with much lower-cost oil flowing out of the Middle East, Russia and elsewhere.Spurred by rising global oil prices U.S. drillers learned to tap crude trapped in shale starting in the middle of last decade and brought about a surprising boom that made the U.S. the biggest oil and gas producer in the world. The increase alone in daily U.S. production since 2008 — nearly 4.5 million barrels per day — is more than any OPEC country produces other than Saudi Arabia. But as oil flowed out and revenue poured in, costs weren’t the main concern. Drilling in shale, also known as “tight rock,” is expensive because the rock must be fractured with high-pressure water and chemicals to get oil to flow. It became more expensive as the drilling frenzy pushed up costs for labor, material, equipment and services. In a dash to get to oil quickly, drillers didn’t always take the time to use the best technology to analyze each well. When oil collapsed from $100 to below $50, once-profitable projects turned into money losers. OPEC added to the pressure by keeping production high, saying it didn’t want to lose customers to U.S. shale drillers. OPEC nations can still make good profits at low oil prices because their crude costs $10 or less per barrel to produce.
How American frackers plan to beat OPEC - Gary Evans, CEO of Houston-based energy firm Magnum Hunter Resources (MHR), has a blunt message for OPEC oil ministers hoping to force down prices and drive American competitors out of business. “OPEC is making a huge mistake,” he says. “We made a lot of money with oil at $100 (per barrel), and we’ll become more efficient and make a lot of money at $50.” For now, the U.S. energy industry is reeling from oil prices that have plummeted from about $105 a barrel last summer to $50 or so now. The profits and stock prices of energy firms are plunging, with job losses beginning to mount. The global supply of oil has outstripped demand for several reasons, but a big one is the unexpected move by Saudi Arabia—lead member of the OPEC oil cartel—to keep pumping oil amid the glut, a change from its usual practice of curtailing production during soft spells to boost prices. Many analysts believe the Saudis are deliberately undercutting their new competitors in North America, who have been producing record amounts of oil thanks to new hydraulic fracturing technology, or fracking. The Saudis are right when it comes to costs: Extracting so-called tight oil from shale deposits in America is considerably more expensive than Saudi Arabia’s own drilling costs, which by some estimates is as low as $10 per barrel. What the Saudis may not have counted on, however, is extreme cost-cutting underway at many drillers, which is making them far more efficient and pushing down the price at which they can turn a profit. The Saudis’ market-share move could even backfire, as U.S. frackers become more efficient competitors. “We will figure out how to operate in a lower price environment,” Evans says. “Anybody who thinks our costs are too high – that’s absolute bull crap.”
U.S. refiners turn to tanker trucks to avoid 'dumbbell' crudes - In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going straight to the source. Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste. While the business of hauling crude from individual oil wells to bulk storage depots or pipeline hubs has become a lucrative niche in recent years thanks to the shale oil revolution, refiners are getting into the “first mile” game for a different reason: taking control of their supply chains to secure a more predictable, consistent stream of crude. Phillips 66, the nation’s fourth-largest refiner, has added trucks and offloading equipment at several of its refineries to help reduce its reliance on oil coming from Cushing, Oklahoma, the nation’s biggest crude oil crossroads and storage hub. Here, a growing volume of Canadian oil sands is often mixed with lighter domestic shale crude, resulting in blends that can be less profitable than similar oil fresh from the field. Phillips 66 executives say operations at its 200,000-barrel-per-day refinery in Ponca City, Oklahoma, only 62 miles (100 km) from Cushing, have improved since it began getting more of its crude directly from wells in the Mississippian Lime shale patch nearby.
Pipelines, trade pacts would push U.S. energy forward: If the U.S. wants to keep boosting its oil and gas industry, it needs better pipelines and better trade pacts, U.S. Rep. Charles Boustany Jr., R-Lafayette, said Monday. Speaking after a public forum at Lafayette City Hall, Boustany said some of the "headwinds" the industry faces includes insufficient pipelines to move oil and gas from oil-producing sites in Canada, Pennsylvania and Ohio to market. He said that includes not only the Keystone XL pipeline, which would have aided moving oil from Canada to the Gulf Coast, but other pipelines as well. "To achieve market efficiency we need more pipelines," he said, citing what he was as a "logjam" of oil at Cushing, Oklahoma. Boustany also said that new and enhanced trade agreements in the Pacific rim would enable U.S. producers to move products like liquefied natural gas to Asian markets but would also enable Louisiana service companies to share in emerging oil production sites in places like Vietnam. "If we had the trade agreements in place, it would open new markets for suppliers and for service companies, instead of them being locked into situations where they have to lay people off," Boustany said. Boustany said trade agreements might be an area where Congress and President Obama could work more closely. He suggested the president "seems to be in line" with Congress in wanting more treaty agreements.
America split dead even on hydraulic fracturing -- On the coat tails of the recent hydraulic fracturing regulation for federal and tribal lands, a recent Gallup poll has given some insight to America’s general perception on fracking operation in general. The recent poll found a 40 to 40 percent even split between those who favor the procedure to those who oppose it. While a substantial 19 percent have no opinion on the matter at all. The Gallup survey was taken March 5-8, prior to the U.S. Interior Department final unveiling of the new national fracking regulations. According to Gallup, The survey asked Americans whether they favor or oppose “hydraulic fracturing or ‘fracking.'” The survey did not further define the process, list pros or cons or measure the degree to which the public has been following the issue. But eight in 10 Americans are willing to give an opinion, with the results split evenly, along with 19 percent who explicitly said they didn’t have an opinion. As one could imagine, the opinions of hydraulic fracturing are very politically charged. When Democrats were asked about fracking, 26 percent voted in favor while a majority of 54 percent opposed. A predictable flip-flopped position was observed among conservatives where about two thirds (66 percent) answered in favor of fracking while only 20 percent opposed. Additionally, younger responders where more likely against the operations of fracking. Again this is in line with what we know about members of generation Y, who are more likely to vote based on environmentalist policies. However, nearly one quarter of respondents who were in favor of fracturing operations were also self-proclaimed “active participants” in Environmentalists movements. You can check out a full summation of the recent national Gallup poll by Art Swift here.
T. Boone Pickens defends fracking in Monterey talk: A week after Monterey County supervisors rejected a temporary ban on fracking, one of the biggest proponents of the technology was in town defending it. Oilman T. Boone Pickens, in Monterey for a Panetta Institute talk on energy, said hydraulic fracturing — a controversial oil extraction technique known as fracking — was safe. “I’ve fracked over a thousand wells,” Pickens said at the Monterey Conference Center. “I’ve never had a failure on one of them. ... Texas, Oklahoma lead in fracking wells and it has been a great success for both those states.” Pickens, chairman of BP Capital Management, was joined on the panel by Carol Browner, former director of the White House Office of Energy and Climate Change Policy, Sen. Joe Manchin, D-West Virginia, and Steven Chu, former secretary of energy. Chu said there have been mistakes made in fracking and there are questions about extracting natural gas safely. “I, personally, think, like everything else we’ve learned to do — oil drilling, mining, everything — it can be done more safely,” Chu said. Pickens countered that at his ranch in Roberts County, Texas, which sits on top of the Ogallala Aquifer, he has drilled 44 wells for fracking and will drill 62 more. “We’ve had no problems with any of those wells,” he said. Pickens has a vested interest in the aquifer because he intends to sell much of the water below his ranch, according to Bloomberg Business News.
Obama's controversial new fracking rules, explained - On Friday, the Bureau of Land Management unveiled its new fracking rules. There are a few key parts:
- Oil and gas companies operating on federal and Indian lands will have to publicly disclose the chemicals they use 30 days after fracking a well. They'll use FracFocus, an industry website for self-disclosure.
- Drillers will have to conduct well integrity tests on every well they drill to ensure that the cement is holding up and nothing can leak out to nearby groundwater.
- Companies will have to store the wastewater that flows back out after fracking in tanks — they won't be allowed to use pits.
Interior Secretary Sally Jewell argued that these rules were necessary to keep up with new drilling techniques: "Current federal well-drilling regulations are more than 30 years old and they simply have not kept pace with the technical complexities of today's hydraulic fracturing operations," she said in a statement. These rules will only apply to federal lands — not state or private lands. There are currently about 92,000 wells operating on federal lands, most of them fracking wells, accounting for about 11 percent of gas drilling and 5 percent of oil drilling. That doesn't sound like much. But many states are expected to use these federal standard as a minimum when setting their own rules. It's a sign that the federal government is slowly moving toward creating a single nationwide standard on fracking.
The Obama administration strikes the right balance on fracking regulations - Washington Post Editorial -- AFTER MORE than four years of effort, on Friday the Obama administration finalized new rules on hydraulic fracturing, also known as “fracking,” on federal lands . Critics on both sides of the fracking wars descended immediately, picking the regulations apart for being either too tough or too lax. Industry groups filed lawsuits within an hour of the rules coming down, and their Republican allies submitted a bill to stop the standards. Left-wing politicians and pressure groups complained that the administration didn’t take their advice and issue tighter restrictions . One side wants a harsh regulatory crackdown or ban on fracking, while the other side opposes any additional federal requirements. Instead of accepting either flawed mind-set, the Interior Department staked out the sensible place in the debate: Fracking has valuable economic and environmental benefits, and it can be done with relative safety, as long as the right rules are in place. Energy companies are now unlocking vast reserves of fuel, accessing much of it from wells on the 700 million subsurface acres that the Interior Department’s Bureau of Land Management oversees. Daily production on these parcels has increased 81 percent since 2008. There are now about 2,800 fracking operations on federal land every year. The Interior Department understandably wants to ensure that its standards for oil and gas operations conducted on public land, which haven’t been updated in decades, reflect the reality of the fracking boom and allay concerns about water contamination near well sites. The department will require that the cement meant to separate wells from groundwater is thoroughly tested before operations begin, for example. It will also require that water flowing back to the surface be collected in above-ground storage tanks rather than in lined pits, and it will insist that drillers list which chemicals they used on an industry Web site within 30 days. Interior reckons that the requirements will cost a measly $11,400 per well, a fraction of a percentage of total drilling costs.
Nobody's Happy About the U.S. Government's New Fracking Rules - The U.S. government just laid down new rules that substantially increases the requirements for hydraulic fracturing, a.k.a. “fracking,” a move that has somehow managed to upset people on both sides of the controversial topic. The United States fracking industry promises that fracking is a safe and essential source of oil and natural gas that helps to decrease our countries’ dependency on foreign oil. Opponents claim that fracking is one of the dirtiest energy extraction methods on earth, a process that poisons surrounding water and soil and requires more than its fair share of natural resources, including water, a scarce commodity in states like California, now facing its fourth year of drought. Last week the Obama administration announced that it is requiring companies that drill for oil and natural gas on federal and most Indian tribal lands to disclose chemicals used in hydraulic fracturing, plus adhere to new rules concerning well construction and the disposal and reporting of fracking related fluids. According to the new rules, which are outlined in the Dept. of the Interior’s document Oil and Gas; Hydraulic Fracturing on Federal and Indian Lands released last week, companies operating on federal land are required to disclose chemicals they use in fracking fluid within 30 days of the fracking operation on the independent website FracFocus.org, or another Bureau of Land Management (BLM)-designated database, or directly. FracFocus.org was formed by industry and intergovernmental groups in 2011 and allows states to track the chemicals used in fracking operations across the country. Assuming all goes according to plan, the new rules are due to become effective June 24, 2015. The final rule does not preempt any State or Tribal law on hydraulic fracturing and makes clear that more stringent laws would continue to apply, including those that require different reporting or disclosure requirements.
Lawmakers unhappy with new fracking rules — Republican and Democratic lawmakers in the House have found something in common. Many have issues with the Obama administration's new regulations requiring companies that drill for oil and natural gas to disclose chemicals used in hydraulic fracturing. Republicans say the new regulations, announced last week, will delay new drilling projects and take marginal lands out of production. Democratic lawmakers say the regulations are so mild that they won't change current operating standards. The lawmakers' complaints were aired Thursday during a House subcommittee hearing called to review the Bureau of Land Management's budget for the coming fiscal year. Bureau Director Neil Kornze (KORN'-zee) says fracking is taking place in 32 states, and the new regulations were aimed primarily at those states with limited or no regulation of the practice.
North Dakota may sue federal government over fracking rule: — The state of North Dakota may sue the federal government over its new rules regulating hydraulic fracturing on federal lands in the state. The rules, the federal government’s first regulation of fracking, are unnecessary or inapplicable to North Dakota’s geology and are duplicative of existing state rules, Department of Mineral Resources Director Lynn Helms told the North Dakota Industrial Commission on Tuesday. The Independent Petroleum Association of America and the Western Energy Alliance already have filed a lawsuit against the Bureau of Land Management and Interior Secretary Sally Jewell in federal court in the district of Wyoming. The rules, in slowing down permitting, could “very negatively” affect oil production in the Bakken, where 32 percent of multi-well pads drill on federal land, mostly in the Fort Berthold Indian Reservation, Helms said. He said after the meeting that the state’s own lawsuit would be the best course of action because it would be “more North Dakota-centric.” The rules go into effect June 1, leaving the state little time to act. The NDIC members -- Attorney General Wayne Stenehjem, Gov. Jack Dalrymple and Agriculture Commissioner Doug Goehring, voted to have Stenehjem’s office look at all the legal options for fighting the new rules. “We need to take action,” Dalrymple said.
Consumers and Industry Both Hurt by Toothless Fracking Rules - After five years of planning, 1.5 million comments, intense lobbying from the oil and gas industry, and innumerable photos of tap faucets on fire, the Bureau of Land Management has finally announced newregulations for fracking. The promise of the rules is robust: we can continue to reduce carbon in the atmosphere, transition from coal to a cleaner burning fuel, and continue to drastically reduce our dependence on imported energy -- while, thanks to the new rules, eliminating ground and water contamination from fracking. Industry is forced to behave well and thereby forestalls its most serious opposition.The rules only cover federal and tribal lands, representing just 11 percent of the natural gas the U.S. consumes, with the hope that operators on state and private lands will follow suit. But still, whatever the regulations do cover should be a satisfying start, shouldn't it? In fact, the rules satisfy no-one. News reports from both sides of the issue claim the regulations are deeply flawed. As reported in The Huffington Post, environmental groups call it "toothless," faulting the exceptions loophole and inspections that are delayed until 30 days after fracking wells are in place. A Harvard Law School study found that the reporting mechanism stipulated by the regulation called "FracFocus," a chemicals tracking registry used voluntarily by Exxon Mobil and other drillers, fails as a fracking disclosure tool. On the other side, The Wall Street Journal reports that that the industry was so outraged that it "filed a lawsuit to block the rules just minutes after they were announced."
Fracking by the rules: What will it cost drillers? -- The United States released new regulations for fracking on federal and Indian lands that it said would put minimal costs on the booming American oil and gas sector, but some estimates place the actual impact of the rules as much as 84 times larger—and that cost isn't even the industry's biggest worry. The Bureau of Land Management estimates that the compliance cost for its new policies will run about $11,400 per well, or roughly $32 million per year to the industry in total, the agency wrote in its nearly 400-page final rule, released Friday. On the other hand, an analysis of a draft rule from research and consulting firm Advanced Resources International estimated total annual costs associated with the regulation could range anywhere from $30 million to $2.7 billion in total. And at least one industry group leader puts the cost higher than that. Erik Milito, director of upstream and industry operations for the American Petroleum Institute, told CNBC that his energy trade association is still assessing costs of the new regulation, but that some elements of the final rule could prove more expensive than what's come out in a draft.
Will Fracking Rules Impact Energy Costs? - The US Department of the Interior (DOI) has issued rules for hydraulic fracturing (“fracking”) on federal lands that aim to protect groundwater from contamination, reported the Business Journals’ Washington Bureau last week. The legislation would affect 90 percent of the more than 100,000 wells on federal lands. The American Petroleum Institute (API) said the rules are unnecessary since states already have fracking regulations of their own. API suggested the rules will hamper development on federal lands, which has already seen a 22 percent drop in production since 2009. It should be noted that there is a major glut of natural gas supply on the market, as Retail Energy Buyer reported last week. The glut has led to lower prices, and in turn producers have dramatically cut spending on exploration efforts, which makes it questionable the extent to which drillers would increase fracking activities on federal lands regardless of regulations.
DOT: Vehicle Miles Driven increased 4.9% year-over-year in January, Rolling 12 Months at All Time High -- With lower gasoline prices, vehicle miles driven have reached a new high on a rolling 12 month basis. The Department of Transportation (DOT) reported:
◦Travel on all roads and streets changed by 4.9% (11.1 billion vehicle miles) for January 2015 as compared with January 2014.
◦Travel for the month is estimated to be 237.4 billion vehicle miles.
◦The seasonally adjusted vehicle miles traveled for January 2015 is 257.9 billion miles, a 5.1% (12.5 billion vehicle miles) increase over January 2014. It also represents a -0.2% change (-0.5 billion vehicle miles) compared with December 2014.
The following graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors. The rolling 12 month total is moving up, after moving sideways for several years.In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months. Miles driven had been below the previous peak for 85 months - an all time record. The second graph shows the year-over-year change from the same month in the previous year.In January 2015, gasoline averaged of $2.21 per gallon according to the EIA. That was down significantly from January 2014 when prices averaged $3.39 per gallon.
Record traffic is boosting U.S. fuel demand - Traffic on U.S. highways has hit a new record as the economy recovers and the lower cost of gasoline and diesel encourages more travel. Cars and trucks drove a record 3.050 trillion miles on U.S. highways in the 12 months ending in January, passing the previous peak of 3.039 trillion set in the 12 months to November 2007, according to the Federal Highway Administration. In January, traffic was 4.9 percent higher than in the corresponding month in 2014, the agency said on Tuesday. Information on traffic volumes is collected from 4,000 roadside monitoring stations across the country and published with a two-month delay. Traffic fell more than 3 percent between November 2007 and November 2011, as the increased cost of fuel coupled with the recession and increased unemployment to produce the most sustained drop in motoring since World War Two. Traffic volumes have been gradually recovering since the end of 2011 as the economy has grown and joblessness has fallen. Since March 2014, however, there has been a marked acceleration. Traffic volumes have grown more in the last 12 months than in the previous two and a half years.
Low returns drag down US shale oil industry - FT.com: In the boom years of the US shale oil industry, profitability was something of an optional extra. Companies were focused on growth, it was easy to raise capital, and making a decent return on investment could be put off for another day. Now that growth is grinding to a halt because of the slump in oil prices, investors may become less tolerant of persistently low returns. The industry’s poor record of returns on investment was highlighted in a presentation last month from EOG Resources, the largest shale oil producer and one of the most efficient. EOG said it made a return on capital employed of 12.4 per cent in 2013 and 13.7 per cent last year, but noted that comparable US exploration and production companies had done far worse — making just 3.4 per cent on average in 2013 and 4.3 per cent in 2014. Given that those low returns were made with US benchmark crude prices averaging about $98 per barrel in 2013 and about $93 last year, prospects for profitability at today’s price of about $47 a barrel look dire. “People said the oil industry was doing great, and it was, in terms of growth and activity and feeling good about it. But when you looked under the covers, it wasn’t really,” Generally low returns across the industry meant that oil companies had to keep attracting fresh capital to finance their investment programmes. In 2013 and 2014 the US E&P sector raised $34.2bn in new equity, $62.6bn from bond sales and $191bn from syndicated loans, according to Dealogic. Even the most successful companies were spending more on drilling and completing wells than they booked in cash revenue.
US oil industry needs capital to keep flowing - FT.com: The world may run on oil, but the oil industry runs on money. The US shale boom would not have been possible without a huge inflow of capital: the small to midsized companies that led the revolution raised $875bn from syndicated loans, bonds and equities in 2007-14, 83 per cent of it in debt, according to Dealogic. The critical question for the industry, and for the future of US oil production, is whether that financial lifeblood will continue to flow. It is clear that some sources are drying up. E&P companies are still raising funds through equity issues: Noble Energy announced a $1bn-plus share sale last week, and Goodrich Petroleum a $49m issue on Monday. But equity is a more expensive source of capital now than it was in August, after a 35 per cent-plus drop in the S&P 500 E&P sector index. Bond issuance by smaller independent companies has slowed to a trickle, with only two sales in January and February, according to Dealogic. At the same time, bank lending is also facing constraints. Smaller US independents generally use reserve-based lending, with their borrowing secured against valuations of their oil and gas assets, which are linked to market prices. The borrowing bases are typically calculated twice a year, with one round of valuations going on about now. The plunge in both crude and US natural gas in the past six months will curb the amount that companies can borrow. So given those constraints, where will the industry find the capital it needs? One answer is through larger companies, including ExxonMobil and Chevron, swallowing up the smaller, buying both assets and entire businesses. With its triple A credit rating — better than the US government’s — Exxon has ample access to cheap capital, as its $7bn bond sale on Tuesday showed. Even Exxon, though, will want to be selective about its acquisitions. Management capacity is finite, and it cannot buy everything. Market valuations are also a disincentive to making acquisitions for shares. Anadarko Petroleum, for example, is often talked about as a takeover target, but its shares are trading at about 40 times 2016 earnings, while Exxon’s are at 16 times. A takeover would dilute Exxon’s earnings unless it can improve Anadarko’s performance dramatically. The best value deals will be available only from companies that are forced sellers.
Oil & gas debt issuance up despite crude slump - Oil and gas producers are still raising debt after the slump in the oil price, but it helps a lot if they've got an investment grade rating. Companies with an investment grade rating have raised 88 per cent of all the debt oil and gas companies have issued this year, according to data provider Dealogic. That's the highest proportion since 2009. The 54 per cent tumble in WTI, the US oil benchmark, since late June has strained the finances of highly leveraged producers and hurt the ability of those companies without an investment grade to raise debt. However, the overall volume of debt raised globally by oil and gas companies in 2015 is 25 per cent higher from a year ago at almost $74bn, according to Dealogic. WTI was little changed at $46.66 in mid-afternoon trading in New York.
Oil majors pile on record debt to plug cash shortfalls - FT.com: The world’s biggest energy groups have sold record amounts of debt this year, taking advantage of historically low interest rates to plug cash shortfalls with borrowing, after a 50 per cent plunge in oil prices. The total debt raised in the first two months of 2015 by large US and European oil and gas companies has jumped by more than 60 per cent from the final three months of 2014. It outstrips the previous quarterly record set six years ago after the last price collapse, Morgan Stanley research shows. Sales by half a dozen of these companies, which include multibillion dollar bond offerings from ExxonMobil, Chevron, Total and BP, reached $31bn in January and February, accounting for almost half the $63bn raised by oil and gas groups globally. The dominance of the majors also reflects the increasing difficulties faced by the smaller oil explorers, whose borrowing costs are rising. Gulf Keystone recently put itself up for sale and EnQuest had to renegotiate its banking covenants. Martijn Rats, analyst at the US bank, says some of the so-called oil “majors” could be preparing the ground for acquisitions, borrowing now to be able to act quickly should smaller, weakened groups become vulnerable to take over. Mr Rats said that mergers and acquisitions could pick up as early as the second half of this year: “As a result, it would seem reasonable for integrated oil companies to lock in extremely competitive rates of financing,” he said. Another reason for the high levels of issuance is that debt remains a relatively cheap way to cover spending on big projects and fund dividends as cash flow dwindles due to lower prices.
US shale oil firms raise enough equity to avoid loan reset squeeze – Despite a 50 percent slide in crude prices since last summer, U.S. shale oil producers are enjoying remarkably easy access to capital markets and this will allow them to avoid getting squeezed when banks reset their loans in April. A surge in equity issuance so far this year by oil and gas companies has surprised many who in December thought the price drop would hurt the ability of producers to tap capital markets. But investor appetite has held up in the first quarter, amounting to a vote of confidence in the ability of shale oil companies to weather the storm by relying on hedges and slashing spending to show a commitment to capital discipline. “Because the capital markets are so good companies that are more worried about their borrowing base are able to … raise either debt or equity, take those proceeds, and reduce their borrowing base,” said Timothy Perry, a managing director for energy investment banking at Credit Suisse in Houston. He said one client had reduced its borrowing base by two-thirds after doing a capital market deal. According to Thomson Reuters Deals Intelligence, there have been 29 U.S. oil and gas equity deals so far this year that raised $13.9 billion, the highest volumes for that period in 15 years. Banks typically reassess loans in October and April, and some have started to trim the value of reserves tied to credit lines by $10 to $20 a barrel from the mid-$70s.
Oil council: Shale won't last, Arctic drilling needed now — The U.S. should immediately begin a push to exploit its enormous trove of oil in the Arctic waters off of Alaska, or risk a renewed reliance on imported oil in the future, an Energy Department advisory council says in a study to be released Friday. The U.S. has drastically cut imports and transformed itself into the world’s biggest producer of oil and natural gas by tapping huge reserves in shale rock formations. But the government predicts that the shale boom won’t last much beyond the next decade. In order for the U.S. to keep domestic production high and imports low, oil companies should start probing the Artic now because it takes 10 to 30 years of preparation and drilling to bring oil to market, according to a draft of the study’s executive summary obtained by the Associated Press. “To remain globally competitive and to be positioned to provide global leadership and influence in the Arctic, the U.S. should facilitate exploration in the offshore Alaskan Arctic now,” the study’s authors wrote. The study, produced by the National Petroleum Council at the request of Energy Secretary Ernest Moniz, comes at a time when many argue the world needs less oil, not more. U.S. oil storage facilities are filling up, the price of oil has collapsed from over $100 a barrel to around $50, and prices are expected to stay relatively low for years to come. At the same time, scientists say the world needs to drastically reduce the amount of fossil fuels it is burning in order to avoid catastrophic changes to the earth’s climate.
Steve Horn: Industry-Stacked Energy Department Committee: Shale Running Dry, Let's Exploit the Arctic - A report assembled by an industry-centric US Department of Energy committee recommends the nation start exploiting the Arctic due to oil and gas shale basins running dry. In the just-submitted report, first obtained by the Associated Press, the DOE's National Petroleum Council — many members of which are oil and gas industry executives — concludes that oil and gas obtained via hydraulic fracturing (“fracking”) will not last beyond the next decade or so, thus the time is ripe to raid the fragile Arctic to feed our fossil fuel addiction. The NPC just launched a website and executive summary of the report: Arctic Potential: Realizing the Promise of U.S. Oil and Gas Resources. Confirming the thesis presented by the Post Carbon Institute in its two reports, “Drill Baby, Drill” and “Drilling Deeper,” the National Petroleum Council believes the shale boom does not have much more than a decade remaining. The NPC report appears to largely gloss over the role of further fossil fuel dependence on climate change, or the potentially catastrophic consequences of an oil spill in the Arctic. The first mention of climate change appears to refer to “concern about the future of the culture of the Arctic peoples and the environment in the face of changing climate and increased human activity,” but doesn't mention the role of fossil fuels in driving those changes. Instead, the report immediately pivots to focus on “increasing interest in the Arctic for tourist potential, and reductions in summer ice provide an increasing opportunity for marine traffic.” ExxonMobil CEO Rex Tillerson, a National Petroleum Council member, chimed in on the study in an interview with the Associated Press. “There will come a time when all the resources that are supplying the world's economies today are going to go in decline,” remarked Tillerson. “This is will [sic] be what's needed next. If we start today, it'll take 20, 30, 40 years for those to come on.”
Canada’s New Brunswick province bans fracking, plans study — — Lawmakers in New Brunswick voted on Thursday to prohibit fracking in the eastern Canadian province, committing to study the controversial method of extracting oil and gas for one year before reconsidering the ban in 2016.The province’s Liberal-led government said it will require five conditions be met before the moratorium is lifted. These include beefed-up environmental and health regulations, a plan for waste water disposal, consultations with aboriginal groups, a royalty structure, and the establishment of a “social license,” which is the approval by local communities and stakeholders.“It is responsible and prudent to do our due diligence and get more information regarding hydraulic fracturing,” said Energy and Mines Minister Donald Arseneault.The province is the latest of several in eastern Canada, including Quebec, Labrador and Newfoundland, and Nova Scotia, to stop companies from fracking while they study its impact.New Brunswick is believed to sit atop one of the thickest shale gas reservoirs in North America, although much of it is trapped in unconventional and hard-to-reach deposits.Local environmental and indigenous groups worry hydraulic fracturing, or fracking, a method that involves pumping water, sand and chemicals deep into a well to extract oil or gas, could contaminate local water supplies.Industry advocates say the technique is safe and boosting gas output will create jobs in New Brunswick, whose sluggish economy consistently ranks near the bottom of the Canadian provinces. Questions about supply have dogged the progress of four export terminals proposed in New Brunswick and neighboring Nova Scotia, which plan to liquefy then ship North America’s natural gas bounty to energy markets overseas.“For anyone anticipating a domestic supply from New Brunswick, yeah, this is a major problem,”
Canada's Biggest Oil Casualty To Date: Calgary's Nexen Shutters Oil Trading Desk -- Last December, traditionally permabullish energy trader Andy Hall shocked the world when he became the first casualty of the oil crash after Phibro, his 113 year old employer then owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer. He wouldn't be the last. Overnight, Nexen Energy, a wholly owned subsidiary of China's CNOOC Ltd, reported it too would close its crude oil trading division following a round of job cuts announced last week, four market sources said on Monday.
API Signals Fastest Inventory Build In At Least 34 Years -- Against expectations of a 4.75 million barrel build (according to Bloomberg), API reported a 4.8 mm barrel build overall but the Cushing build (2mm barrels) was less than last week's 3mm build. This is the 11th weekly build in a row - the longest streak of builds since October 2004. The last 11 weeks have seen inventories build over 20% - the fastest pace on record.
Tank tops? Cushing isn't the whole oil market - - Traders do not appear worried that rising oil stocks in the United States will cause storage space to run out in the next few months, despite the rapid accumulation of inventories at Cushing in Oklahoma. The term structure of futures contracts has remained broadly stable since the end of January. Stocks “may soon test storage capacity limits,” the International Energy Agency worried in its latest monthly Oil Market Report. “That would inevitably lead to renewed price weakness,” it added. The view is shared by many bearish hedge fund managers and oil analysts, who have watched the steady climb in U.S. oil inventories for 15 consecutive weeks. Crude stockpiles at the Cushing storage hub hit a record 54 million barrels on March 13, according to the latest Weekly Petroleum Status Report from the U.S. Energy Information Administration (EIA). Tank farms at Cushing are now 77 percent full, the EIA said on Monday (“Crude oil storage at Cushing, but not storage capacity utilization rate, at record level” March 23). But the stock build at Cushing does not represent the storage situation across the United States as a whole or the state of the global oil market. A closer look at the structure of futures prices suggests the market as a whole is much less concerned about oil stockpiles hitting “tank tops” in the next few months.
Too Much Oil - We tend to associate oil and crisis with high prices and scarcity. Yet when prices plummet — as they have over the last few months — it creates a different kind of problem for oil producers. As this shock reverberates through the state coffers of Russia and Venezuela, and the oil fields of Texas and North Dakota, how might the Left respond? Certain provinces of the Left are no doubt befuddled by the development, long confident that humans were exhausting the earth’s oil supply. From Michael Klare to John Bellamy Foster, many during the 2000s also assumed peak oil and scarcity underpinned American imperialist adventures in Iraq and beyond. In this view, powerful corporations and states collude to secure access to dwindling oil reserves and the attendant money and power. The insatiable drive to extract more oil, in other words, is the primary concern. But as the radical left collective Retort observed a decade ago: “The history of twentieth-century oil is not the history of shortfall and inflation, but of the constant menace — for the industry and the oil states — of excess capacity and falling prices, of surplus and glut.” The problem right now — for oil producers and those of us concerned with climate change — is that there is too much oil. What of peak oil? The Energy Information Agency (EIA) recently estimated that in 2015, the US will reach an oil production level of 9.3 million barrels per day — a mere 300,000 barrels shy of the 1970 zenith that peak oil proponent M. King Hubbert famously predicted in 1956. It is possible that the massive boom in fracked “tight oil” from shale formations will “reset” US peak oil nearly fifty years after it supposedly occurred. But peak oil proponents consistently underestimate the capacity of capital to revolutionize the technical capacity to profitably access new deposits.
Cheap oil, complexity and counterintuitive conclusions - It is a staple of oil industry apologists to say that the recent swift decline in the price of oil is indicative of long-term abundance. This kind of logic is leading American car buyers to turn once again to less fuel efficient automobiles--trading efficiency for size essentially--as short-term developments are extrapolated far into the future. The success of such argumentation depends on a disability in the audience reading it. The audience must have amnesia about the dramatic developments in the oil markets in the last 15 years which saw prices reach all-times highs in 2008 and then after recovering from post-crash lows linger at the highest average daily price ever from 2011 through most of 2014. And, that audience must have myopia about the future. It is an audience whose attention has narrowed to the present which becomes the only reference point for decision-making. History is bunk, and what is, always will be. The alternative narrative is much more subtle and complex. As I've written before, the chief intellectual challenge of our age is that we live in complex systems, but we do not understand complexity. How can cheap oil be a harbinger of future supply problems in the oil market? Here's where complexity, history and subtle thinking all have to combine at just the right intellectual temperature to reveal the answer. Cheerleaders for cheap oil only seem to consider the salutary effects of low-priced oil on the broader economy and skip mentioning the deleterious effects of high-priced oil. They seem to ignore the possibility that the previously high price of oil actually caused the economy to slow and thereby dampened demand--which then led to a huge price decline.
Three Triggers That Will Send Oil Crashing Again -- Oil prices bounced back on March 24 on a sliding U.S. Dollar, but the pain may not be over yet. Oil storage capacity continues to deplete. Storage levels at Cushing, Oklahoma, home to the crucial WTI benchmark, are at record levels. As of March 13, Cushing oil inventories hit 54.4 million barrels, the highest ever, according to the Energy Information Administration. That means that Cushing’s storage is now 77 percent full, up from just 27 percent in October 2014. The glut of oil has led to a flood of crude being diverted into storage tanks. As storage nears capacity, it becomes more likely that prices could drop significantly below current levels. That, of course, depends on if drillers cut back production enough to slow the storage build. Yet another reason to suggest that oil prices could fall over the next two to three months is the annual planned maintenance that takes place at many U.S. refineries. Spring maintenance often leads to a significant volume of refining capacity temporarily closed down for several months. As that occurs, demand for domestic crude in the United States will decline, potentially pushing down prices. That also would force more output into storage, again exacerbating the shrinking ability for U.S. storage to handle more oil.
The Perfect Storm For Oil Hits In Two Months: US Crude Production To Soar Just As Storage Runs Out -- At the current rate of record oil production, storage will be exhausted in under two months, some time in mid-May. At that point, with no more storage to buffer the record oil production, the open market dumping begins and prices of WTI will crater as every barrel will have to be sold at any clearing price, since the producers will have no other choice than to, literally, dump the oil. In other words, a perfect storm is shaping up for oil some time in late May, early June. And then we learned something even more startling. As the Platts oil blog reports, even as oil prices continue to fall amid flat demand and near-record supply, "North Dakota is likely to see a “big surge” in production this June, potentially besting another supply record even if prices continue to crater, according to Lynn Helms, director of the state’s Department of Mineral Resources." What make things worse is that this time the production "surge" will have nothing to do with game theory, or beggaring thy oil producing neighbor in hopes that the other, more levered guy goes bankrupt first. This surge will be largely propelled by two factors: a state-mandated time limit on drilling and the expected trigger of a major oil tax incentive, Helms said.
Don’t panic about Cushing yet -- It’s the EIA’s take on the US crude system’s “l’embarass de richesses” problem. Inventory levels at Cushing may be at a record high, they note, but not as a percentage of total working storage capacity. The great thing about the Cushing storage system is that it’s a private market. That means whenever storage gets tight the incentive to build new capacity increases for commercial operators. Due to that market dynamic, there’s way more storage around than there was in 2008/2009. Here are the charts from the EIA that tell the story nicely: As the EIA notes: Capacity utilization at Cushing is now 77%, a large increase from a recent low of 27% in October 2014. However, utilization reached 91% in March 2011, soon after EIA began surveying storage capacity twice a year, starting in September 2010. For those interested, John Kemp at Reuters provided some Google pictures of what the facilities at Cushing actually look like: As he noted in a Tuesday column: If the market was concerned about space at Cushing and onshore more generally, the contango would have widened even further as stocks rose to make it profitable to use more expensive offshore storage. However the term structure of futures prices has remained essentially unchanged for the past two months – implying traders are not particularly concerned about storage issues and do not foresee the need for more expensive options like floating storage. Markets are not infallible: the current view about storage space and inventories could prove to have been complacent. But right now physical traders do not seem worried about storage space running out. What we’d really like to know is what operators are charging in storage fees. We’ve heard monthly tank storage rental rates have nearly doubled in the last six months. It would be nice to have this corroborated from the main providers who are Enbridge, Plains and Magellan.
WTI Tumbles After Crude Inventories Rise For 11th Straight Week - Longest Streak On Record - Crude prices rallied this morning - on the back of absolutely nothing - ahead of this morning's DOE inventory/production data. Following last night's bigger than expected 4.8 mm barrel API inventory build, DOE reports a huge 8.17mm barrel build (against expectations of a 4.91mm build) - the 11th consecutive week and longest streak on record. Cushing inventories rose for the 16th consecutive week, up 1.91mm barrels (against a 2.1mm barrel build expectation). Crude production hit a new record high. Oil prices are giving back this morning's gains...
US Oil Stockpiles >25% Above 5-Year Average - Another Record High - US oil stockpiles have risen for the 11th consecutive week, hitting yet another record. The EIA reported Wednesday that oil inventories increased 8.2 million barrels, or 1.8%, to 466.7 million barrels last week. US production also continued to rise- to a rate of 9.42 M/bd- marking the 7th straight weekly increase. Stockpiles are now more than 25% above their 5-year average. Though inventories are not likely to max out, even the potential of nearing this threshold is exerting further pressure on the oversupplied oil market. According to a note released by Morgan Stanley Wednesday, "US crude stocks will build through May, but there is plenty of storage. The system is more flexible than most realize." The bank also said that tank farm utilization in the US could peak at 73%. "However, record builds should support bearish sentiment for now," Morgan Stanley said.
Oil production growth means no quick price fix - Oil prices were in recovery Wednesday after a three-week slide that took West Texas Intermediate crude to a six-year low last week. But a new report today warns that oil prices are unlikely to bounce back as quickly as they did in 2009, when they plunged to $33 US a barrel but recovered within three years. That's because both Canada and the U.S. continue to produce more oil in the face of a global glut in crude production. WTI was trading up $1.46 at $48.97 a barrel on Wednesday. That's down 7.6 per cent since the beginning of the year and less than half the $107 it hit last June. But the price bounce defies news from the U.S. Energy Information Administration today that crude inventories rose by 8.2 million barrels last week, setting an 80-year high. The nine-month slide in oil prices has been caused by a worldwide oversupply of oil, while demand remains soft. U.S. fracking technology has opened a new source of oil and shale oil producers have responded to the current slump by finding cheaper ways to get their oil out of the ground. That's one reason why oil won't return to triple digits in the near term, according to a the Conference Board of Canada. The other reason is an increase in oilsands oil. The Conference Board predicts oil may creep back towards $60 by the end of this year, but is unlikely to surpass $80 by 2019.
Saudis Up The Pressure On Oil Markets: This week started badly for oil prices, and the chief culprit seems to be Saudi Arabia and its drive to produce more and more oil. Brent crude, the European benchmark from the North Sea, fell below $55 per barrel on March 23 in London, while WTI, the American light, sweet crude dropped under $46 per barrel in New York. This was no coincidence. The day before, Saudi Oil Minister Ali al-Naimi said his country was now producing about 10 million barrels of crude per day, the most since July when an oil glut more than halved the price of oil from an average of more than $110 per barrel. Related: Oil Price Speed Limit Presaging An Age Of Austerity? Part of the reason for the plunge in prices was the virtual flood of oil from the boom in US shale production. As prices kept falling, OPEC was urged to cut production at its November meeting in Vienna to shore them up. But under Saudi leadership the cartel decided to keep its combined production limits at what are now 4-year-old levels of 30 million barrels a day. At first al-Naimi didn’t explain his strategy, but in January he said the reason was to regain market share from the US shale drillers and others who were contributing to the oversupply of oil. At a conference in Riyadh on March 22, he said the cartel would have lost even more market share if it had decided to cut production at the November meeting.
Oil below $56 as Saudi output near record, China activity slows (Reuters) - Brent crude oil held below $56 a barrel on Tuesday on signs of slowing growth in China and as Saudi Arabia said its production was close to an all-time high. Factory activity in China, the world's second-largest economy and top oil importer, slipped in March with the flash HSBC/Markit Purchasing Managers' Index (PMI) reading at 49.2, below the 50-point level that separates growth from contraction. Economists polled by Reuters had forecast a reading of 50.6. Brent futures for May delivery were trading down 20 cents at $55.72 at 0856 GMT, while U.S. crude dropped 31 cents to $47.14 a barrel. Its discount to Brent widened to $8.58 a barrel. The Chinese data followed comments from OPEC kingpin Saudi Arabia that it is pumping around 10 million barrels of crude per day, close to an all-time high and some 350,000 bpd above the figure it gave OPEC for its February output. OPEC's decision to fight for market share rather than cutting output has contributed to a halving in oil prices since June as the global surplus of oil supplies has grown. The market is expected to be at its weakest in the second quarter as winter fuel demand wanes while peak summer driving activity is yet to kick in. Energy consultancy FGE forecasts a global surplus of 2 million barrels per day between April and June.
Protecting the message on petroleum -- Fresh out of Riyadh… Saudi Oil Minister Ali Al-Nuaimi Sunday proposed establishment of an association dedicated for petroleum media, which comprised of Gulf and Arab journalists covering energy affairs. Saudi Arabia is ready to support the establishment of this association with the objective of boosting transparency among GCC countries and prepare oil strategies of the Arab Gulf countries… Similar thoughts from Kuwait’s Minister of Oil, Dr Ali Al-Omair, at the 2nd GCC Petroleum Media Forum: Al-Omair, also Minister of State for parliament affairs, said media have been influencing economic policies including the oil ones. Media in the region should defend Gulf oil producers and defend their policies, said Al-Omair, but petroleum media should be “credible, transparent and influential.” In fact, there seems to be full agreement amongst higher-ups across the Gulf that an association aimed at improving reporting around the oil price is a must… Suhail Al-Mazroui, UAE’s oil minister, said there were many oil consultants in the GCC countries who could help in the establishment of the petroleum media association.
Saudi Production Comments Send WTI Sliding To $45 Handle -- Following Friday's manic quad-witching melt-up in oil (and everything else), the exuberance (surprise surprise) is fading as fundamental reality is slapped back onto the face of the energy complex by Saudi Arabia. As Reuters reports, Saudi oil minister Ali al Naimi also said the kingdom was now pumping a record high 10 million barrels per day (bpd), and would only cut if non-OPEC countries cut production. The 'supply' weakness in crude has been tempered somewhat by a tumbling USD (EUR surging) for now (and also by news from Sinopec of major capex cuts).
US oil and natural gas rig count drops by 21 to 1,048 — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 21 this week to 1,048 amid falling oil prices. Houston-based Baker Hughes said Friday813 rigs were seeking oil and 233 exploring for natural gas. Two were listed as miscellaneous. A year ago, 1,809 rigs were active. Among major oil- and gas-producing states, Alaska, Louisiana, Oklahoma and Texas each lost three rigs while California, Colorado, New Mexico and North Dakota were down two apiece. Wyoming was off by one. Kansas and Pennsylvania each gained one rig. Arkansas, Ohio, Utah and West Virginia were unchanged.
U.S. oil rig decline smallest since December - Baker Hughes - The number of rigs drilling for oil in the United States declined by 12 this week to 813, the smallest decline since December, oil services firm Baker Hughes said in its closely watched survey on Friday. That compares with declines of 41 and 56 rigs in the prior two weeks and is a sign the collapse in drilling over the past few months has slowed. With the decline this week, the number of oil rigs has fallen for a record 16th week in a row to the lowest level since 2011, according to Baker Hughes data going back to 1987. Despite the reduction in oil-directed rigs by about 49 percent since hitting a record high of 1,609 in October, the more than 50 percent decline in oil prices since the summer have forced U.S. energy firms to slash spending and idle wells but have not yet slowed oil output. U.S. oil production hit 9.4 million barrels per day (bpd)last week, the highest since the early 1970s, according to the U.S. government data, as drillers focus on their most productive acreage, become more efficient at extracting oil from existing wells and complete previously drilled wells. U.S. crude futures this week rebounded to over $50 a barrel this week from a six-year low near $42 last week on worries oil supplies from the Middle East could be disrupted due to the Saudi Arabia-led air strikes in Yemen. But by Friday, worries over Middle East disruptions eased and prices were down about 3 percent.
Rig Count Decline Reaches 16 Weeks, Pace Of Decline Drops Dramatically - In 2008/9, the rig count decline 18 weeks straight (dropping 57% overall over a 41 week period). Today's mere 21 rig decline to 1048 marks the 16th straight week of drops (down 45%) and is the smallest drop in 11 weeks. This is the biggest 16-week decline in rig count in 30 years. Crude is not reacting significantly yet but it appears the limits of efficiency gains before production takes a hit.
Saudi Arabia Imposes Naval Blockade On Red Sea Strait, Deploys 150,000 Troops As Iran Condemns Military Action -- As noted earlier, the biggest significance of any Yemen conflict has little to do with its own domestic oil production, which at 133,000 bpd is negligible, but due to its location, which not only shares a border with Saudi Arabia, but more importantly due to the Bab el-Mandeb strait which connects the Red Sea with the Gulf of Aden: it is the fourth-biggest shipping chokepoint in the world by volume (3.8 million barrels a day of oil and petroleum products flowed through it in 2013) and is just 18 miles wide at its narrowest point. It’s located between Yemen, Djibouti, and Eritrea, and connects the Red Sea with the Gulf of Aden and the Arabian Sea. And since to Saudi Arabia preserving the logistics of oil supply is critical, it is hardly surprising that as Egypt's Ahram Gate reported earlier, the Saudi-led Firmness Storm coalition imposed a naval blockade on Bab El-Mandab strait earlier today. The Saudi navy's western fleet has also secured Yemen's main ports including Aden and Midi. It is not just Saudi Arabia: moments ago Reuters reported that four Egyptian naval vessels have crossed the Suez Canal en route to Yemen to secure the Gulf of Aden, maritime sources at the Suez Canal said on Thursday. The sources said they expected the vessels to reach the Red Sea by Thursday evening. The naval blockade is just part of what so far has been mostly an air-based proxy war. As Al Arabia reported previously, as part of the "Decisive Storm" coalition against the Yemen rebels, Saudi Arabia has deployed at least 150,000 soldiers in preparation for what appears to be a land assault next, an assault that already has the preemptive blessing of the US. As a reminder, Saudi Arabia will be fighting US-armed rebels, but that's a different story.
Oil up after Saudi air strikes in Yemen; dollar limits gains - (Reuters) - Oil prices rallied for a second straight day on Thursday after Saudi Arabia and its Gulf Arab allies began air strikes in Yemen, sparking fears of a bigger Middle East battle that could disrupt world crude supplies. The military operation against Houthi rebels, who have driven the president from Yemen's capital Sanaa, has not yet affected oil facilities of major Gulf producers. But fears the conflict could spread has stoked concerns about the security of Middle East shipments, even as analysts and commentators doubt the probability of an all-out war amid continued signs of crude oversupply. Benchmark Brent oil jumped 5 percent early in the session before giving back some of that in European trade as the dollar rebounded from Wednesday's drop, making commodities denominated in the greenback costlier in other currencies. In New York, Brent was up $2.30, or 4 percent, at $58.78 a barrel by 12:00 p.m. EDT as the dollar held its strength, particularly to the euro. U.S. crude rose $1.60 to $50.81. "A lot of times you get the market reacting dramatically right off the bat to events like these, before people begin putting things in perspective after a greater study of the risks involved," "That aside, there is a growing realization that the oversupply in crude may not be the only thing in pricing oil now," Flynn said. Yemen's relatively small oil output has been disrupted for months by the conflict. More importantly, Arab producers have to ship their crude past the Yemen coastline via the Gulf of Aden to get to the Suez Canal, a key passageway to Europe.
Saudi battle for Yemen exposes fragility of global oil supply - The long-simmering struggle between Saudi Arabia and Iran for Mid-East supremacy has escalated to a dangerous new level as the two sides fight for control of Yemen, reminding markets that the epicentre of global oil supply remains a powder keg. Brent oil prices spiked 6pc to $58 a barrel after a Saudi-led coalition of ten Sunni Muslim states mobilized 150,000 troops and launched air strikes against the Iranian-backed Houthi militias in Yemen, prompting a furious riposte from Tehran. Analysts expect crude prices to command a new “geo-political premium” as it becomes clear that Saudi Arabia has lost control over the Yemen peninsular and faces a failed state on its 1,800 km southern border, where Al Qaeda can operate with near impunity. Over 3.8m barrels a day (b/d) pass through the 18-mile Bab el-Mandeb Strait off Yemen, one of the world's key choke points for crude oil supply. While there is little likelihood of disruption to tanker traffic, Saudi Arabia is increasingly threatened by Shiite or Jihadi enemies of different kinds. Shiite Houthi rebels have already seized Yemen’s capital, Sanaa, and pose a potential contagion risk for aggrieved Shia minorities across the Saudi border in the kingdom’s Southwest pocket, never an area friendly to the ruling Wahhabi dynasty in Riyadh. The Houthis are well-armed with rocket-propelled grenades and surface-to-air missiles that were either caputured or came from Iran. They have been trained by the Lebanese Hezbollah.
The Wahhabis’ War On Yemen - The Saudis have now announced, through their embassy in Washington(!), that a coalition of Sunni led countries will attack Yemen. These include at least nominally Egypt, Morocco, Jordan, Sudan, Kuwait, the United Arab Emirates, Qatar and Bahrain. The Saudis say that 100 of its warplanes and 150,000 soldiers will take part in the campaign. They also announced an air and sea blockade against the country. The U.S. is "supporting", i.e. guiding, the campaign through a coordination cell. The White House statement says: In response to the deteriorating security situation, Saudi Arabia, Gulf Cooperation Council (GCC) members, and others will undertake military action to defend Saudi Arabia’s border and to protect Yemen’s legitimate government. As announced by GCC members earlier tonight, they are taking this action at the request of Yemeni President Abdo Rabbo Mansour Hadi. The United States coordinates closely with Saudi Arabia and our GCC partners on issues related to their security and our shared interests. In support of GCC actions to defend against Houthi violence, President Obama has authorized the provision of logistical and intelligence support to GCC-led military operations. While U.S. forces are not taking direct military action in Yemen in support of this effort, we are establishing a Joint Planning Cell with Saudi Arabia to coordinate U.S. military and intelligence support. While bashing Obama the usual warmongers in Congress support this attack. There seems to be the idea that Saudi/U.S. selected president Hadi, out now, could be reintroduced through force. The U.S. claims that Hadi was "elected" but with a ballot like this any "election" is a mere joke. There is no way Hadi can be reintroduced by force. The chance to achieve the war's aim is therefore low.
Did Saudi Arabia Just Suffer Its Largest Foreign Capital Flight In 15 Years? - The last few days have been almost the worst for the Saudi Arabian stock market in 4 years. Between low oil prices, a new King's big social welfare budget, and now "war," it appears this year's dead cat bounce from last year's exuberance is dying rather rapidly. However, what is perhaps even more troublesome for The Kingdom than the net worth destruction and potential blowback from instigating war against the Houthis is the fact that this month saw the largest drop in foreign curreny reserves on record (over 15 years) for the Arab nation... somewhat suggesting capital flight on a scale never seen before in one of the richest states in the world.
The World's Greatest Oil Chokepoints, And Why Yemen Matters -- About half the world's oil production is moved by tankers on fixed maritime routes, according to Reuters. The blockage of a chokepoint, even temporarily, can lead to substantial increases in total energy costs and thus, these checkpoints are crucial to global energy security. While Hormuz remains the largest chokepoint (and along with Bab el-Mandeb explains why Yemen matters so much), Malacca (as we noted previously) is quickly becoming another area of potential problems. (maps and graphics)
Just as Global Oil Glut Deepens, China Cuts Oil Imports - “We don’t want to lose our share in the market,” Kuwait Oil Minister Ali al-Omair said on Thursday. OPEC had to maintain production despite the plunge in price since last summer, he said, underscoring Saudi Arabia’s position. OPEC would not cut production to goose prices. No one wants to cut production. In the US, production is still soaring. Demand is lackluster. What gives? Crude oil is piling up around the globe. Commercial inventories across all OECD countries can now supply 28 days’ of OECD demand, near the very top of the range, the EIA reported. In the US, the amount of oil in commercial storage facilities (not counting the Strategic Petroleum Reserve) is at historic highs. Another 9.6 million barrels were added during the latest week. To put that in perspective: the US produces 9.3 million barrels per day. So in one week, the US added nearly one day’s production to its already high crude oil stocks! According to the EIA, stocks now amount to 458.5 million barrels, up 22% from a year ago. By another measure, at the end of February the US was sitting on 29 days’ supply, the most since the 1980s when the last big oil bust was wreaking havoc in the American oil patch. Speculation is now running wild that the US will run out of crude oil storage capacity. Some voices are claiming that storage in Cushing, Oklahoma, which accounts for 14% of the US total and serves as delivery point for WTI futures contracts, could be full by April. These speculations have dollar signs at the other end. When storage gets scarcer, or when the perception can be stirred up that it will get scarcer, storage fees jump, boosting revenues and profits of the storage companies. There’s money to be made, as long as the speculation can be maintained. And so the insiders came out all guns blazing.
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