it's starting to seem like the news from the oil patch each week is a repeat of the news from the week before, with just some minor changes in the numbers and the places...like last week and two weeks before, this past week saw another oil train derailment and explosion, and like every week over the past two months, oil production rose, oil inventories rose, and the count of active drilling rigs fell...about the only thing that changed substantially this week was the price of oil, which had stagnated between $50 and $55 a barrel for the past month and a half, but fell more than 9% this week, and ended the week below $45 a barrel for the first time since January...
our bomb train explosion of the week was again in a remote area of northern Ontario, near where another Canadian National Railways derailed & exploded 3 weeks ago, wherein a 94 car train carrying upgraded tar sands crude from Alberta derailed while passing over a bridge above the Makami River near the town of Gogama, Ontario...reports indicated that 38 rail cars left the tracks, at least 7 exploded and burst in to flames, and 5 five broke through the ice and sunk into the river, the town's source of drinking water....locals from the Mattagami First Nation tribe were warned not to drink their water and to stay indoors to avoid exposure to toxic fumes from the fire, which continued to burn days later...this was the third CN rail train wreck in 3 weeks, and the once again the tank cars involved were the new state of the art CPC-1232 model, ie Casualty Prevention Circular 1232, the same supposedly super safe railcars that failed in three previous derailments over the past month...
meanwhile, in the wake of last week's oil train bombing near Galena, Illinois, the U.S. Environmental Protection Agency issued an assessment that the spill of oil into the Galena River a quarter mile upstream from the Mississippi River contaminated the seasonal wetland there and threatened the adjacent Upper Mississippi National Wildlife and Fish Refuge, and further presented a imminent and substantial danger of discharging oil into the Mississippi River, obviously the source of drinking water for thousands downstream...also, a new analysis of oil shipments through Pennsylvania from PublicSource found that 1.5 million citizens of that state, including 327 K-12 schools, 37 hospitals and 61 nursing homes were close enough to rail lines to be at risk should a train derail and catch fire in that state...roughly one-fifth of all the explosive oil produced in North Dakota's Bakken is processed by Philadelphia's Energy Solutions 350,000 barrel-per-day refinery, meaning up to 80 unit trains of Bakken oil travel through Minnesota, Wisconsin, Chicago, northern Illionois, Indiana, and Ohio each week before they even threaten those 1.5 million Pennsylvanians...
some communities along these train routes aren't just sitting back and waiting for a bomb train to go off in their town, incinerating their businesses and residents; they're taking action to stop it...after seeing two bomb trains go off to the south of them, officials in Hennepin County, Minnesota moved to buy a large parcel of land in the Minneapolis suburb of Crystal, where Burlington Northern and Canadian Pacific planned to build a connector yard for their rail lines that are involved in hauling oil from North Dakota’s Bakken fields to points south and east...the county's goal in acquiring the land would be to prevent the railroads from using eminent domain to take the properties, which are now occupied by local businesses, feeling that their public safety purpose in acquiring the property would supersede the railroads’ rights...and also in Minnesota, Citizens Acting for Rail Safety, a group based in LaCrescent, sent a letter to the Corps’ of Engineers St. Paul District requesting they hold up any rail project permits until investigators determined the cause of the derailment on the Mississippi south of them and two others since early February...then in Wisconsin, in an area that saw an explosive derailment just south of their border with Illinois last week, petitioners are asking the La Crosse County Circuit Court to reverse a permit granted last month to fill a wetlands and build a bridge to facilitate more crude oil shipments through their state...
a much smaller oil bomb went off on I-94 in Dearborn, a stone's throw from Detroit on Wednesday, as a fuel tanker truck travelling the freeway swerved to miss a car, clipped a bridge abutment and burst into flames ...while this may seem like just an ordinary if spectacular traffic accident, what we find instructional here was in watching the 2 hour effort by the big city fire departments in the area to attempt to put the fire out....in the news video taken from a helicopter flying over the scene included below, we can watch two or three fire department booms continuously spray fire-retardant foam on the burning truck and the adjacent highway, only to have the oil spill out and catch the asphalt in all three lanes on fire about 30 minutes later...as a result, it took them nearly two hours to get the fire under control and a major Detroit artery will be closed for a week....if a fire contained to one truck on an accessible freeway posed this much difficulty for big city fire departments, how in the hell are small town volunteer fire departments expected to deal with a life-threatening derailment of several rail tanker cars 5 times the size?
meanwhile, explosions and spills were once again the story in North Dakota, where an explosion followed by a fire said to be so massive that it could not be approached by firefighters completely obliterated an oil waste disposal site north of Alexander...the explosion was contained by an earthen berm which had been built around the facility, and the 5 workers on duty at the time managed to escape before it blew...on the same day, three oil storage tanks exploded at a Marathon oil well outside of Killdeer in a blast so severe that it rattled the town 5 miles away...no personnel were on site at the time, and N Dakota officials suspected it had been caused by a rapid temperature change, as N. Dakota was experiencing its first spring warm spell...later in the week, a spill of 1,680 gallons of oil well brine leaked into a creek about 7 miles northwest of Williston, downstream from the site of a a much larger spill of roughly 3 million gallons of fracking wastewater that had leaked over a period of more than 17 days at the end of January..since the area had already been covered with toxic metals and radioactive brine from the previous spill, the damage from this one was probably minimal by comparison...
another big oil related accident this week involved the collision of two large freighters in the Houston Ship Channel, the second oil related ship collision in the same area in 5 days...ship traffic in and out of several miles of the 53-mile channel was halted for 3 days after a 600 foot chemical tanker carrying 216,000 barrels of the gasoline additive methyl tertiary-butyl ether, or MTBE, collided with a 623 foot bulk carrier hauling steel, rupturing the tanker ..the MTBE, a flammable, water soluble and toxic central nervous system poison, leaked from 3 of the holds of the chemical tanker and resulted in an order to nearby residents to shelter in- place and not use their air conditioners... the collision was quite disruptive to Houston shipping; two days into the salvage operation, it was reported that 36 ships, carrying all kinds of cargo, were waiting to get in while 28 waited to get out, while three Very Large Crude Carriers of Saudi and Kuwait crude anchored outside the harbor, raising fears of a drawdown of Gulf Coast oil supplies....by the time the MTBE was removed from the hold of the damaged tanker, there were 90 vessels waiting to load or unload; although officials assured the media that cleanup was ongoing, none had offered an explanation of how they expected to clean a toxic water soluble chemical from a large body of water...
meanwhile, on the western side of the state, 3 oil field workers were killed when a drilling rig exploded in Upton County Texas, about 40 miles south of Midland, while one worker who was on the site at the time survived...Mason Well Services, the company that was working the Permian Basin well owned by Parsley Energy when the explosion occurred, had been previously cited by OSHA for allowing “flammable and combustible liquids” near “sources of ignition,” according to OSHA’s website...such accidents are apparently so common, officials from the Upton County sheriff's department were unable to the give exact number of recent oil field fatalities in Upton County...finally, in another Permian oil basin death that crossed our news feeds, an oil field worker in southeastern New Mexico was killed by metal debris from a blast that occurred when he was loading material into a pipe being installed into a drilling pipe; another worker was injured in the same explosion...
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US oil production rose to another record high of 9,366,000 barrels a day in the week ending March 6th, 0.45% higher than the output of 9,324,000 barrels a day we saw in the week ending February 27th and 14.5% higher than our output of 8,182,000 barrels per day in the first week in March of last year...similarly, our stockpiles of oil reached another record, as the weekly Petroleum Status Report (62 pp pdf) showed that US crude oil inventories rose by 4.5 million barrels to a record high 448.9 million barrels, 21.3% higher than the same period a year ago...while crude oil imports fell by 575,000 barrels per day from the previous week to 6.8 million barrels per day this week, possibly due to the ship traffic disruption at Houston, we continued to import over 7.1 million barrels a day over the past four weeks, only 1.2% less than the same four weeks in 2014...
this continuous weekly increase in production and inventories persists despite the ongoing drop in the number of rigs actively drilling for oil...for the week ending March 13, Baker Hughes reported that the count of rigs drilling for oil fell by 56 to 866, which is 595 less than their count of active oil rigs a year earlier, and down from the recent high of 1609 rigs that were drilling for oil early this fall...they also reported that there were 11 fewer rigs drilling for gas this week than last, dropping the US gas rig count to 257, which was 87 less than the 344 gas rigs that were active in the 2nd week of March last year...in addition, two active drilling rigs were classified as miscellaneous, unchanged from last week, leaving the total end of week rig count at 1125, down 67 from last week...of those rigs still running, 849 were drilling horizontally, 46 less than last week; another 166 were standard vertical drillers, which was 11 less than the week ending March 6th, and the remaining 110 rigs were directional, which was 10 less than the 120 directional rigs in operation last week...of the net of 67 rigs that were taken out of service this week, 64 had been land based, leaving the week end land based rig total at 1069, while 3 offshore drilling platforms were also idled, leaving 48 offshore rigs working in the US at the end of the week...meanwhile, Canadian drillers shut down 80 rigs this week, leaving them with just 220, of which 85 were drilling for oil, 65 less than last week, while 135 were drilling for gas..that leaves the Canadian count down 302 rigs from a year ago, with their idling of 242 oil rigs and 60 gas rigs over the past year..
so we've seen that even though US oil rig counts have been nearly halved in the face of lower oil prices, US oil production and inventories continue to grow...a visualization of this can be seen in the graph from Bloomberg below, where the recent historical oil rig count in dark blue is shown on the left scale, and our oil production in millions of barrels of oil output per day is shown in yellow on the right scale...we can see that our oil production has pretty much continued to rise uninterrupted almost irregardless of the count of oil drilling rigs operating at any point in time over the past 4 years...
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Frackers show their true colors - Columbus Dispatch editorial -- A bill that would allow fracking in Ohio state parks and forests shows again that many Statehouse legislators are in the pocket of the oil and gas industry, and that the industry’s cries of poverty and hardship are phony. Members of the Republican-dominated Ohio House are fast-tracking legislation that would permit fracking for oil and gas on public lands. House Bill 8 would go against the wishes of fellow Republican Gov. John Kasich. Kasich had a change of heart after first supporting drilling on such lands several years ago, and he has enacted a de facto moratorium on issuing drilling permits. This is another example of Kasich acting in a nonpartisan fashion in the best interests of Ohioans. Kasich has correctly recognized that the state’s parks have been set aside as a public trust for current and future generations to enjoy. While they continue to counter Kasich’s efforts to enact reasonable severance taxes in Ohio, these legislators are bending over backward to accommodate deep-pocketed out-of-state oil and gas companies who have plied them with hundreds of thousands of dollars in campaign contributions. These are the same companies that have claimed that lower oil prices and the mere threat of higher taxes will cause them to pull up stakes and leave Ohio. So which is it? Are these companies now so interested in expanding in Ohio that they’re seeking a change to state law, or have they lost interest because they might have to pay a little more in taxes to compensate Ohioans for extracting irreplaceable natural resources?
Panel accepts some fracking safeguards for state parks, rejects others - By mostly party-line votes, a legislative panel turned back a pair of amendments today that would have offered additional protections to state parks and forests from fracking. However, a possible final vote on House Bill 8 was delayed for yet another week. The measure would set up a new process in Ohio for combining parcels of land from different owners into a large unit that oil and gas drillers need. An amendment was approved today from Rep. Christina Hagan, an Alliance Republican who is vice chair of the House Energy and Natural Resources Committee, to stipulate that fracking not disturb the surface of any state area included in a fracking unit. She said that, with the change, frackers would need a completely separate agreement for operations that would affect any public land at the surface. However, the panel shot down amendments from Columbus Democrat David Leland and Warren-area Rep. Sean O’Brien. Leland took issue with the fact that the bill would bypass current requirements that mandate a public impact statement and environmental and geological studies before fracking can occur on public lands. “These lands will be gone forever” if fracking damages them, he said, citing the possibility of “endangering our legacy to our children and our grandchildren.” Hagan said she understands the sensitivity about harming public lands, but with her amendment, doesn’t think Leland’s additional safeguards are necessary. She noted the presence of oil and gas drillers in the room, and said lawmakers could check with them if they had questions. Leland’s amendment was defeated 7-4, with every Republican committee member voting against it, and every Democrat in favor. O’Brien’s amendment, which paralleled Hagan’s, was beaten 6-5 after virtually no discussion. One Republican voted in favor of his proposal.
Kasich predicts drilling tax hike could hit ballot — Gov. John Kasich (KAY’-sik) says he foresees a ballot measure emerging if his latest effort to raise taxes on oil-and-gas drillers fails to get through the Legislature. Kasich predicted at a news conference Friday that a citizen group or aspiring politician would spearhead the effort and seek rates even higher than he has proposed. Kasich’s current budget proposal calls for a fixed rate on crude oil and natural gas of 6.5 percent at the wellhead, and a lower 4.5 percent for natural gas and natural gas liquids sold downstream. Kasich said a ballot campaign would probably push a 10-percent rate with earmark proceeds for something popular with voters. Proceeds of his tax would go to income-tax reductions. The industry says tax increases would kill momentum and cost jobs.
Fracking will happen despite taxation - I respond to the Wednesday letter “ Don’t raise tax on shale-energy industry” from Jonathan McRae, who is surprised that The Dispatch would endorse Gov. John Kasich’s plan to lower income taxes and raise the severance tax on oil drillers.He said, “Taxes are a primary consideration when companies decide where to invest their money, and driving oil and gas investments to another state would be catastrophic for Ohio.” McRae is misses two important factors, one for the drillers and the other for the state. Extraction industries go where the resource is, and there is shale oil in Ohio.The drillers and their jobs will come, regardless of taxation. The proposal in Ohio is 6.5 percent on oil and gas. Natural-gas liquids, for which Utica shale is known, would be taxed at 4.5 percent. Part of the proposed severance-tax increase is designated for the Ohio Department of Natural Resources and 20 percent is earmarked for local governments. There also should be a driller’s surcharge placed into an untouchable fund for future cleanup operations, because ultimately, the state is going to be responsible for cleaning up the mess created by fracking’s toxic brew of chemicals. The Dispatch is showing good sense in endorsing the proposed increase in severance taxes.
Some fighting state proposal on disclosure of fracking chemicals - The Columbus Dispatch: Environmental groups, people who live in Ohio’s oil-and-gas country, and some emergency responders say that a proposal by Gov. John Kasich to filter information about chemicals used in fracking activities through the Ohio Department of Natural Resources could leave firefighters without what they need during an emergency. The department, some groups and residents argued this week before state legislators, already has proved it can’t get that information to the people who need it when a fracking site catches fire. And that worries people who live near oil and gas sites. Firefighters, not the Department of Natural Resources, should have that chemical information, residents testified this week. Amanda Kiger, a Columbiana County resident who testified before an Ohio House of Representatives subcommittee this week, said she lives near a hazardous-waste incinerator that is scheduled to start taking fracking waste soon. “If any volunteer fireman or EMT would have to respond to an accident regarding the frack waste, they would not know the chemicals they are walking into,” Kiger said. “I would like to know that our first responders have knowledge of the chemicals they are dealing with.” But the Department of Natural Resources and representatives of the oil and gas industry say passing that information through the department would actually make it more accessible.
Schiavoni wants tougher penalties for wastewater dumping (AP) — A state senator wants increased penalties and stiffer permit rules for improperly disposing of gas-drilling waste and toxic brine in Ohio. Senate Minority Leader Joe Schiavoni’s legislation would raise the state’s penalties for knowingly disposing of oil and gas waste illegally to levels found in the federal Clean Water Act. Schiavoni of Boardman, D-33rd, says violators could face a felony. They could be fined between $10,000 and $50,000, be imprisoned for three years, or face both penalties for their first offense. Potential fines and prison sentences increase for subsequent offenses. The proposal comes after a former owner of a Youngstown-based wastewater company pleaded guilty last year to violating the federal Clean Water Act in the dumping of thousands of gallons of fracking wastewater into a northeast Ohio storm sewer.
AEP produces the best and is selling, what? - American Energy Partners LP’s (AEP) natural gas game may not be the best, but in Ohio its oil wells are top notch. Three of AEP’s wells in Ohio are performing undoubtedly well. The wells are located on the Shugert Daddy pad in Guernsey County and each produced over 51,000 barrels during the last three months of 2014. One of the wells also claimed the title of top producer with almost 56,500 barrels produced. According to state data, the second best oil well, which is owned by Chesapeake Energy Corp., produced just above 28,000 barrels. There are a few possible explanations for why AEP’s wells did so well in Ohio—the first being location The Shugert Daddy pad is located in the western part of the Utica Shale, which is known for its oil supplies. The second explanation involves what went on after drilling took place. For instance, the number of frack stages to take place. The more stages used, the better the early production numbers will be. It’s obvious that AEP believes the land in Guernsey County to be valuable; it would be crazy not to. However, AEP is selling 29,000 undeveloped acres of its Utica Shale assets. The land is located in Noble, Tuscarawas, Jefferson, Columbia, Carroll and Guernsey counties. The land in Guernsey that is for sale is located west of the Shugert Daddy area. AEP is considering trading or selling parts or all of the land. Due to the geology of the Utica Shale play, the western part of it works for oil. As you travel west in Ohio, the play becomes shallower. Bob Chase, a petroleum engineering professor at Marietta College, explained how over time the organic matter in the shallower shale rocks is “cooked” less compared to the gassier parts of the shale play. Chase also mentioned that more of these areas will be found in Guernsey County, but will be limited in size. The offer for the sale was released in February.
Chesapeake Energy testing waterless fracking in Ohio’s Utica shale with GasFrac - Chesapeake Energy Corp. is partnering with GasFrac Energy Services Inc. to test waterless fracking at one of its Ohio oil wells. The most-active driller in the Utica shale play is in the early stages of the test on a Tuscarawas County well, the company confirmed. "One of our partners (EV Energy Partners) attempted to use the technology," said Chris Doyle, executive vice president of operations for Chesapeake's northern division. "We're using that technology and we want to test that out and see if it could drive additional value." GasFrac, based in Calgary, Alberta, made waves late last year when it started testing its first waterless fracking well, also in Tuscarawas County. It partnered on that well with EV Energy, whose CEO Mike Mercer said this month the test well was fracked with liquid butane and mineral oil. Waterless fracking is appealing because of concerns about the large amounts of water used in the hydraulic fracturing process, which involves injecting fluid, including water, into cracks in shale formations to release gas or oil. A cost- and operational-effective alternative could help remedy one of the industry's major environmental concerns.Doyle cautioned that the test is in the very early stages, so it's unclear yet if it's something the company would use going forward. Nonetheless, it's a potential plus for the future of waterless fracking and the company whose technology is seen as the best chance yet to crack the issue.
Company asks panel for permission to resume fracking operations at Trumbull County site - American Water Management Services Inc. asked a state panel Wednesday to allow it to resume operations at a Trumbull County injection well, following seismic activity near the site last year. The state ordered the company to cease operations at the Weathersfield Township site after two minor quakes in July and August. The company appealed that order and wants the Ohio Oil and Gas Commission to allow it to restart oil field waste injections, though at a lower rate. "On occasions, even government officials with good intentions exceed their authority or act unreasonable," said John Keller, legal counsel for AWMS. "We believe that this commission's primary function is to establish a check and balance over the actions of the government, and we ask you to revise the orders to allow for a phased start-up (and) further monitoring." The state has countered that it is developing criteria for dealing with injection wells and seismic activity. Legal counsel for the Ohio Department of Natural Resources also voiced concern over increasing seismic events in Weathersfield Township. "We had these two seismic events, and they occurred very close to the injection activities," said Brett Kravitz, legal counsel for the state, noting schools, homes and commercial development near the wells. "... The consequences here are serious consequences. The concern is an escalation of greater magnitude. ... If something happens, if there's greater seismic events in the future, they're the ones that are going to feel the effect." The Oil and Gas Commission listened to testimony from a company representative, seismologist, petroleum engineer and the head of the ODNR's Division of Oil and Gas Resources Management during a hearing that lasted more than eight hours Wednesday.
Injection wells inducing tremors in fracking policy debate - There’s one message that has been heard loud and clear at the Statehouse: The good people of the Mahoning Valley are tired of earthquakes and expect their public officials to do everything in their power to prevent future fracking-induced tremors. Companies that pump massive amounts of salty oilfield waste into the ground now are required to install seismic monitors to track earth movement. When those devices record quakes — even small ones — the state can step in and shut down operations until it can assess the situation and devise plans to prevent additional seismic events. Which brings us to the nearly nine-hour hearing that took place in Columbus a few days ago, before a state panel that is considering an appeal to restart operations at a Trumbull County injection well where a couple of minor quakes happened last summer. Both sides have legitimate-sounding arguments. American Water Management Services Inc. says the two seismic events — a magnitude 1.7 tremor in July and a 2.1 about a month later — were minor and were not felt by the general populace or big enough to cause damage. Company officials want to restart injections at the site, only at a reduced volume, to see whether the reduction would help control any ground movement. The state allowed similar activities at a Washington County well, with the results showing a correlation between reduced injections and reduced seismicity. The company also points out that it has invested millions of dollars in the operation, and officials aren’t happy that the state’s been stringing them along with promises of restarted activities that never come to fruition. Add to that the ongoing development of guidelines by the state for dealing with wells that are tied to ground movement. There’s no timeline for adopting any new guidelines, leaving AWMS in limbo.
Marcellus horizontal well activity in Ohio - While production and permitting in the Marcellus Shale play located in Ohio has managed to the stay the same, the Pennsylvania region of the shale has received some exciting news. National Fuel Gas has finally received the go-ahead from federal regulators to go forward with its plans to construct a pipeline that will run from the Marcellus shale region in Pennsylvania to Niagara Falls. The Northern Access 2015 Pipeline project is being built in conjunction with Tennessee Gas Pipeline Co.’s Niagara Expansion Project pipeline, and the two pipelines will run from the Pennsylvania Marcellus Shale and connect to the TransCanada pipeline located near Niagara Falls. National Fuel plans to spend $66 million on the Northern Access pipeline, which will be able to transport 140,000 dekatherms of natural gas per day. With the expansion, the company will be able to transport natural gas produced in the Marcellus Shale to markets throughout the Northeast and Canada. Construction on the pipeline expansion will begin this month and the pipeline is scheduled to be up and running in November. The following information is provided by the Ohio Department of Natural Resources and is through March 7th. DRILLED: 15 - DRILLING: 1 - PERMITTED: 15 - PRODUCING: 13 - TOTAL: 44
Utica well activity in Ohio - Activity in the Utica Shale play has increased a slight bit and is still going strong. However, even with drilling still occurring companies are still selling assets in the region. One company that is selling its undeveloped land in the Utica is American Energy Partners LP (AEP), which is odd considering the company’s oil wells are considered top notch. AEP’s top three oil wells are located on the Shugert Daddy pad in Guernsey County, Ohio. The three wells each produced over 51,000 barrels of oil during the last three months of 2014. One of the wells produced over 56,500 barrels by itself. Nonetheless, the three wells aren’t enough to convince AEP to keep all of its land in the Utica. The company plans to sell 29,000 acres of undeveloped land located in Noble, Tuscarawas, Jefferson, Columbia, Carrol and Guernsey counties. The land located in Guernsey is located just west of AEP’s Shugert Daddy pad, which is where the company believes it will have more success. AEP is considering trading or selling parts or all of the land. The offer for the sale was released in February of this year. The following information is provided by the Ohio Department of Natural Resources and is for the week ending on March 7th. DRILLED: 305 - DRILLING: 260 - PERMITTED: 466 - PRODUCING: 821 - TOTAL: 1,852
Large Utica Shale reserve could house the next gas boom - Once pipelines in the Utica Shale region are built, the area could see another natural gas drilling boom, according to Seneca Resources anyways. The company recently announced its successful completion of a well on state forest land located in Tioga County. The well tests report that the well will produce 22.7 million cubic feet of natural gas per day. Seneca is a subsidiary of National Fuel Gas Company. National Fuel’s CEO and President Ronald J. Tanski commented on the success of the well and how it could lead to more Utica Shale gas drilling on state forest land in Tioga and across the state: This well, along with wells drilled by other operators in the area, have de-risked the Utica potential of our 10,000 acres on DCNR Tract 007. We estimate resource potential on this tract alone of approximately 1 trillion cubic feet. With these strong results in hand our team is evaluating options to develop this acreage in the next few years, depending on local gas prices and pipeline take-away capacity. We have additional Utica potential not only in Tioga County, but across much of our large Pennsylvania acreage position. Our next Utica exploration well is planned for fiscal 2016.The thought of producing 1 trillion cubic feet of natural gas is mind blowing, but none of that gas will be going anywhere until pipeline infrastructure is developed. Tioga County is considered one of the most remote areas in Pennsylvania. The forest, which consists of 10,493 acres, is where Seneca’s test well is located and was leased to the company back in 2010 for $48,530,125. As of now, the DCNR lease hasn’t witnessed much development.
Wolf administration advances tougher gas drilling rules — A forthcoming proposal to toughen regulations for the Marcellus Shale natural gas drilling industry will target how it stores waste, dampens noise and affects public water resources, schools and playgrounds, state environmental regulators said Monday. The proposal is the first signal from Gov. Tom Wolf’s administration of how it will approach the natural gas industry after the Democrat campaigned last year on a promise to toughen state regulation of the industry. He also is seeking lawmakers’ approval of higher taxes on booming natural gas production to boost aid to public schools. The administration’s approach to waste storage was motivated, in part, by leaking wastewater impoundments in southwestern Pennsylvania that prompted the Department of Environmental Protection last year to pursue multimillion-dollar fines.In the proposal, agency officials say they want inspectors to undertake more stringent reviews of proposed drilling sites that are within 100 feet of streams or wetlands and require drillers to create site-specific noise control plans. They also want tougher regulations over waste storage and to require drilling permit applications to analyze how the proposed new well could affect drinking water sources, schools and playgrounds. On waste storage, the administration wants to eliminate the use of pits to store drill cuttings and wastewater at drilling sites — even though it knows of none in use by the shale drilling industry — and toughen regulations for the centralized impoundments that store wastewater from multiple drilling sites.
Pennsylvania DEP moves to discourage or ban open waste pits in shale operations -- The Pennsylvania Department of Environmental Protection is moving to discourage and, in some cases, ban the use of open waste pits in shale gas operations in favor of closed tanks, in a revised draft of drilling rules that the agency released Monday. The draft rules would ban waste pits at Marcellus and Utica shale gas well sites, and require companies to close or substantially upgrade large centralized wastewater storage ponds that have leaked and been implicated in soil and water contamination cases in the state in recent years. The changes are among dozens the agency is proposing to make in its final draft of wide-ranging revisions that will direct how the oil and gas industry operates above ground. They reflect the agency’s consideration of thousands of suggestions submitted by citizens, industry representatives and environmental groups during a public comment period last year, as well as the policy priorities of the new administration, which inherited the years-long revision process that began in 2011. Among other significant changes, the agency is moving to institute noise reduction requirements at shale well sites for the first time, as well as add schools and playgrounds to the list of public resources, like parks and historical sites, that will trigger stricter well permit reviews when drilling is planned nearby.
Large reserve of Utica Shale gas could lie beneath state forest land - Tapping the Utica Shale in north central Pennsylvania could become the state’s next natural gas drilling boom, at least once the pipelines get built. Seneca Resources has announced the successful completion of a well on state forest land in Tioga County. Seneca, a subsidiary of National Fuel Gas Company, says its test well generated 22.7 million cubic feet of natural gas daily. National Fuel Gas Company CEO and President Ronald J. Tanski praised the results in a release, saying the development could lead to more Utica Shale gas drilling on state forest lands in Tioga County and other parts of the state. “This well, along with wells drilled by other operators in the area, have de-risked the Utica potential of our 10,000 acres on DCNR Tract 007. We estimate resource potential on this tract alone of approximately 1 trillion cubic feet. With these strong results in hand our team is evaluating options to develop this acreage in the next few years, depending on local gas prices and pipeline take-away capacity. We have additional Utica potential not only in Tioga County, but across much of our large Pennsylvania acreage position. Our next Utica exploration well is planned for fiscal 2016.” One trillion cubic feet is a lot of untapped natural gas. But right now, that test well is shut in because there’s no pipeline infrastructure in that part of the state to take it to market. Tioga County is one of the most remote parts of Pennsylvania, and includes the prized “Grand Canyon of Pennsylvania,” popular with hikers and campers. The 10,493 acres of forest land where the Seneca test well lies was leased to the gas producer by the Rendell Administration back in 2010 for $48,530,125. So far, that DCNR lease has not seen much development.
Wolf supports drilling moratorium in Delaware River Basin - Gov. Tom Wolf supports a moratorium on gas drilling in the Delaware River Basin, his spokesman confirmed a day after the issue came up in a legislative committee hearing. “This is a regional decision between Pennsylvania, New Jersey, New York and Delaware and (Mr.) Wolf supports it,” spokesman Jeff Sheridan said in an email Thursday. On Wednesday, state Department of Environmental Protection Secretary-designate John Quigley told the House Appropriations Committee Mr. Wolf supports the de facto moratorium, which has been in effect since 2011. Mr. Wolf’s proposed budget also increases funding to the Delaware River Basin Commission to $750,000, up almost 73 percent from last fiscal year. “It was certainly very encouraging news for us,” commission spokesman Clarke Rupert said. “We’re definitely heading in the right direction.” Exploration and production of natural gas is on indefinite hold in regions east of the Wyoming Valley, where the commission, a compact of four states and the federal government that oversees the Delaware River and its watershed. Meanwhile, the counties west of the Wyoming Valley have developed into some of the most heavily drilled gas fields in the state. There, the Susquehanna River Basin Commission,Department of Environmental Protection another compact among multiple states — New York, Pennsylvania and Maryland — has not significantly regulated the gas industry beyond permits for withdrawing water from rivers, streams and below ground.
PennEast natural gas pipeline may run past Bethlehem's water supply - The idyllic Carbon County acreage where Bethlehem gets its drinking water — called one of the last great places on Earth by one conservancy group — might get a natural gas pipeline. On a 114-mile route from the Wilkes-Barre area to a distribution terminal outside Trenton, N.J., the proposed PennEast pipeline would pass close to a pair of spring-fed reservoirs holding 10 billion gallons of water. The pipeline would run past the historic Three O’Clock Spring in Towamensing Township, the source of Wild Creek, which fills the city’s reservoirs, and farther south over a water main carrying 12 million gallons of water a day toward the spigots of 115,000 customers in the Lehigh Valley. To install the pipeline, contractors would have to remove valuable hardwood trees that the Bethlehem Authority has sold as carbon credits to corporations looking to offset their carbon footprints. The possibility of a pipeline has prompted Bethlehem officials to alert the Federal Energy Regulatory Commission about their concerns, and has led to an outcry from Carbon County residents and environmentalists about the potential impact on water quality and biodiversity.
Sunoco backs down in pipeline zoning fight - Philadelphia-based Sunoco Logistics has withdrawn a request with the state Public Utility Commission to circumvent local zoning in order to build pump and valve structures along its 300- mile Mariner East 1 natural gas liquids pipeline. Late last year Mariner 1 partially came online, and it’s already shipping propane across the state. Approximately 15 pump and valve control structures are needed along the route to keep the liquids flowing. These facilities faced a backlash from environmental groups and communities that were upset Sunoco attempted to bypass local zoning. In October the PUC affirmed the company has “public utility” status and the pipeline is not subject to zoning– however the structures housing its pump stations could be subject to zoning. Although it’s backing out of the case, Sunoco is still moving forward with the overall project. The company now says it will work with municipalities– either by modifying the structures around the pumps and valves or not building any at all. But some opponents remain wary, like Tom Casey who heads the Chester County Community Coalition– a group that has fought the pipeline. “It’s an odd request for them, to fight for almost a year and then pull out. It doesn’t make sense,” he says. “Until we get more information, it’s really hard to say where they’re heading.”
Study: 1.5 million at risk in Pennsylvania for crude oil derailment -- In Pennsylvania, nearly 1.5 million people are in potential danger if a train carrying crude oil derails and catches fire, according to a PublicSource analysis. That is about one in every nine Pennsylvanians, or 11.5 percent of the state’s population. The analysis also found 327 K-12 schools, 37 hospitals and 61 nursing homes in the state are at risk. These numbers take on new meaning in the wake of the recent derailment near Mount Carbon, W. Va. And, a federal report predicts 15 trains carrying crude oil and ethanol in the United States could derail in 2015 alone. On Feb. 16, the nation watched as blazing orange clouds of fire shot out of crushed tank cars in West Virginia from a derailed CSX train carrying Bakken crude oil. Fires burned for days, drinking water was affected, a house was leveled and hundreds were evacuated from their homes. And there were derailments in the last week in Illinois and in Canada. The West Virginia scene had some Pennsylvanians wondering: Could it happen here? Fractracker, a group that vets data about fracking, and PennEnvironment, an environmental advocacy group, also published a map looking at crude-oil trains and population. Their numbers vary from PublicSource because of different methodologies and sources.
Project studying illnesses near Minisink gas compressor - Public health toxicologist David Brown does not call his work with people living around gas compressor stations “research.” “When people are sick, you don’t do a study. You find out what they’re sick from,” he said. Brown is a founder of the Southwest Pennsylvania Environmental Health Project, a nonprofit group begun in 2011, initially devoted to providing public health information and services related to natural gas extraction in Washington County. Now the Environmental Health Project is studying 30 people living near the Millennium Pipeline gas compressor that was built in Minisink 18 months ago. The Environmental Health Project’s work with residents near gas drilling sites led to investigation of areas surrounding gas compressors. Brown said he found those people were often sicker than the population near gas wells. “Around compressors, emissions are bigger and more frequent, “ he said. Brown previously worked for the national Centers for Disease Control in Atlanta, but left to investigate what he calls “orphaned” public health issues — neglected trouble spots. Last year, Brown and his colleagues published a peer-reviewed article about the health impact of natural gas facilities. Pramilla Malick, a weekend resident of Minisink and founder of the group Protect Orange County, saw it and called Brown.
Massive Explosion & Fire After Yet Another Crude Tanker Crashes In Detroit - Live Feed - It is becoming just a little too much of a daily occurrence but instead of a rail freight car crashing, today we see a massive explosion and fire erupt from an oil tanker crash in Detroit... As gas prices remain low, the shift from rail to road will likely increase the frequency of these scenes....As WXYZ reports,A massive tanker fire on eastbound I-94 in Dearborn has shut down both directions of the freeway between Addison and Michigan Avenue. The fire is raging on the Detroit - Dearborn border. At least two vehicles, in addition to the tanker, are on fire. There is no word on injuries at this time. A number of people can be seen on the side of the road. Flames can also be seen coming from sewer system manholes. One witness says they heard what sounded like an explosion. The heavy black smoke can be seen for miles. Rob Morosi from the Michigan Department of Transportation says crews are re-routing traffic. Once the fire is out, Morosi says crews will assess any damage to the freeway, and expects that the freeway will be closed for an indefinite amount of time.
Drilling down on fracking in Indiana -- Fracking is nothing new in Indiana. Frequent earthquakes would be. Geologists and environmental activists have been raising concerns for years about increased hydraulic fracturing — called “fracking” for short — and other unconventional oil production methods in the United States. Hydraulic fracturing is the drilling and injection of fluid into the ground to create cracks in rock formations and release natural gas, oil and other energy-producing resources. Fracking proponents say the practice lessens the U.S. reliance on foreign oil, creates jobs and leads to energy savings in American households. Those who oppose U.S. drilling and using fossil fuels point to accidents at oil wells with detrimental environmental effects, such as a January pipeline leak in North Dakota that spilled 3 million gallons of brine and contaminated two creeks. And a recently documented natural phenomenon near wastewater injection sites — a byproduct of fracking — has provided environmentalists with another argument against unconventional drilling. “It turns out that many things that we do that affect the subsurface of the Earth are also capable of triggering earthquakes,” said Michael Hamburger, a professor of geological sciences at Indiana University. “This is one of the unexpected side effects of oil and gas exploration. There are places in Kansas or Texas that have never experienced an earthquake that have now experienced an earthquake and have no idea what to do about them.”
Proposed W.Va.-Va. pipeline finding some resistance - — Companies proposing a natural gas pipeline from West Virginia to Virginia are threatening legal action against property owners who refuse to allow surveyors on their land. Mountain Valley Pipeline is a joint venture between EQT Corp. and NextEra Energy Inc. It would run from Wetzel County, West Virginia, to another pipeline in Pittsylvania County in Southside Virginia. It would deliver natural gas from the Marcellus and Utica shale deposits. Elise Keaton of the Greenbrier River Watershed Association told West Virginia Public Broadcasting the organization had received calls from landowners in four counties who had been mailed letters from the pipeline company. EQT spokeswoman Natalie Cox said the company is trying to work with landowners to resolve their concerns, but legal action may be necessary to move the surveying forward.
EQT amps up pipeline project -- EQT Corp. announced that its master limited partnership, EQT Midstream Partners, will be expanding a natural gas gathering system in northern West Virginia on a rather large piece of undeveloped land owned by EQT. According to EQT the partnership is planning on doubling the system in size and is spending $370 million to do so. Currently, the natural gas gathering system consists of 70 miles of gathering lines and a 30-mile long, high-pressure pipeline that runs into a MarkWest Energy Partners processing facility. The system also has 25,000 horsepower (hp) of compression capacity. The expansion includes adding 100 more miles of gathering pipe and an additional 23,700 hp of compression capacity. The construction for the project will continue past 2018. EQT shared that is has an estimated 76,000 net acres around the gathering system. Of that, about 59,000 of it is undeveloped. The company has plans to transport gas through the systems under the terms of a 10 year contract. EQT will be the only shipper using the system. On Tuesday, EQT announced it will be selling the gathering system to the partnership for just about $1 billion. Since EQT formed the partnership in 2012, the company has been letting go of its midstream assets. The West Virginia gathering system is one of the last two assets EQT owns. EQT spokesperson Natalie Cox said the other asset consist of a transmission system and some gathering lines that are mainly located in Pennsylvania. According to Cox, EQT will more than likely keep the remaining asset for the rest of 2015.
Dominion Proposes Alternate Routes for Natural Gas Pipeline - Owners of hundreds of properties in three counties will receive letters from Dominion Resources, asking permission to survey their land for a proposed natural gas pipeline. Landowners in Augusta, Nelson and Buckingham Counties are now in the path of new alternative routes for the Atlantic Coast Pipeline project. These new alternatives affect 281 properties in those counties. One of the new route options shifts the pipeline eight miles south, to cross the mountain through the George Washington National Forest and run near Nellysford instead of Afton. Two other routes change the path around Lovingston to avoid areas damaged by Hurricane Camille. A fourth option re-directs the pipeline around Wingina’s historic district. Dominion says these alternatives are due to Nelson Co. landowners blocking its surveying crews. “Until we get permission to survey property in Nelson County and other counties, we're going to find the best route by doing so. That's why we're looking at alternative routes at this point,” said Dominion spokesperson Frank Mack.
Residents fear North Carolina pipeline will destroy property values - Economic development and plummeting property values were passionately discussed Monday night during a public meeting with representatives from the Federal Energy Regulatory Commission, which could oversee the proposed 550-mile Atlantic Coast Pipeline that would cut through portions of North Carolina. Supporters — including county commissioners and local government officials — said the pipeline could bring job opportunities to the state’s counties most in need. But opponents argued it would destroy their property values and likely wouldn’t bring the jobs people have touted. “My husband and I worked hard for this property and now it’s being taken away from us,” said Darlene Bain, whose property would include a portion of the pipeline. Bain was one of 14 speakers in the audience of about 100 to participate in the commission’s first Public Scoping Meeting. The commission has scheduled two more meetings in North Carolina this week before moving on to West Virginia and Virginia. The $5 billion natural gas pipeline is a joint venture of Dominion, Piedmont, Duke Energy and AGL Resources.
Long-term impacts of unconventional drilling operations on human and animal health - Abstract: Public health concerns related to the expansion of unconventional oil and gas drilling have sparked intense debate. In 2012, we published case reports of animals and humans affected by nearby drilling operations. Because of the potential for long-term effects of even low doses of environmental toxicants and the cumulative impact of exposures of multiple chemicals by multiple routes of exposure, a longitudinal study of these cases is necessary. Twenty-one cases from five states were followed longitudinally; the follow-up period averaged 25 months. In addition to humans, cases involved food animals, companion animals and wildlife. More than half of all exposures were related to drilling and hydraulic fracturing operations; these decreased slightly over time. More than a third of all exposures were associated with wastewater, processing and production operations; these exposures increased slightly over time. Health impacts decreased for families and animals moving from intensively drilled areas or remaining in areas where drilling activity decreased. In cases of families remaining in the same area and for which drilling activity either remained the same or increased, no change in health impacts was observed. Over the course of the study, the distribution of symptoms was unchanged for humans and companion animals, but in food animals, reproductive problems decreased and both respiratory and growth problems increased. This longitudinal case study illustrates the importance of obtaining detailed epidemiological data on the long-term health effects of multiple chemical exposures and multiple routes of exposure that are characteristic of the environmental impacts of unconventional drilling operations.
Measures banning local drilling rules pass both chambers - (AP) - Legislation that prohibits cities and other local governments from regulating oil and natural gas drilling operations has been approved by Oklahoma lawmakers in both chambers. House members voted 69-26 for a measure by House Speaker Jeff Hickman of Fairview. The Senate approved a similar bill by President Pro Tem Brian Bingman of Sapulpa by a vote of 36-7. Oil and gas drilling is regulated by the Oklahoma Corporation Commission. The measures ban local governments from regulating oil and gas exploration, drilling, fracturing and production but permits local ordinances involving road use, traffic, noise and fencing for health and safety purposes. Opponents say the measures don't go far enough to give local governments the authority to regulate drilling operations near rural homes. The chambers will now exchange the versions of the legislation.
Fracking Industry Conspiring To Cover Up Oklahoma Earthquake Evidence? - Are seismologists in Oklahoma being pressured to play down the connection between fracking and the state’s recent uptick in earthquakes? All of a sudden Oklahoma is one of the most earthquake-prone areas in the country. Last year, with a grand total of 585 earthquakes, Oklahoma far surpassed the notoriously seismic State of California. Seismologists postulate that disposal wells are to blame. Water and brine injected underground at enormous pressure can cause faults to slip, triggering an earthquake. EnergyWire reported on March 3 that Oklahoma regulators made that connection years ago, but have maintained silence in public due to industry pressure. According to secret emails obtained by EnergyWire, one seismologist with the Oklahoma Geological Survey came out in 2013 and said that there was in fact a link between seismic activity in Oklahoma and drilling operations, quickly earning him a meeting with superiors and industry leaders who were “concerned” about his comments. Intriguingly, in one specific instance, Holland was called in to meet with his boss, University of Oklahoma’s President David Boren, and the CEO of Continental Resources, Harold Hamm. Continental is a major oil and gas producer in the state and Hamm and Boren have close ties. Boren serves on Continental Resources’ board and Hamm is a major donor to the university. The Harold Hamm Oklahoma Diabetes Center bears his name after a $20 million donation. Since then Holland has played down the link between earthquakes and disposal wells, instead pointing to natural causes. Those conclusions run counter to what federal seismologists have found.“This rise in seismic activity, especially in the central United States, is not the result of natural processes,” USGS stated recently. “Deep injection of wastewater is the primary cause of the dramatic rise in detected earthquakes and the corresponding increase in seismic hazard in the central U.S.”
Oklahoma could be in danger of strong earthquakes - For residents in Oklahoma, thousands of tiny earthquakes in the past five years have mostly been annoying. But a new study in Geophysical Research Letters suggests the future could be more dire, with the state possibly seeing larger temblors. It found that the same fault lines that have triggered earthquakes of between 3 and 4 magnitude are capable of producing events as high as 6 on the Richter scale. The study, led by Dan McNamara, a research geophysicist at the U.S. Geological Survey, found that there were 3,639 earthquakes in Oklahoma between late 2009 and 2014, which was 300 times more than in previous decades. Several of these earthquakes caused damage and many were felt, with over 153,000 individual reports for 474 separate earthquakes entered at the USGS. Many of those quakes occurred on average 3 miles underground along the Nemaha and Wilzetta fault zones. Until recently, the faults in Oklahoma had largely been quiet so the huge increase initially puzzled scientists. Several studies have traced the increase of earthquakes in Oklahoma as well as Ohio to the oil and gas industry's increased use of injection wells to bury huge amounts of wastewater underground. Resulting from enhanced hydrocarbon extraction operations, scientists believe the wastewater may increase the pressure on the rocks enough to cause seismic events. A paper in Science last year concluded that four of the highest-volume disposal wells in Oklahoma are likely behind 20 percent of hundreds of quakes since 2008 east of the Rocky Mountains. And a 2013 study in the journal Geology concluded that a 2011 earthquake in the tiny remote town of Prague - a 5.6 magnitude temblor that was the largest in Oklahoma's history - was due to the injection of wastewater underground.
Texas earthquakes linked to oil, gas development - For more than 100 years, people have questioned whether taking oil and gas from the depths of the earth can cause tremors. When an earthquake shook Austin in 1902, some thought an explosion in the oilfields of Spindletop, in southern Beaumont, might be to blame. The 1902 earthquake was naturally occurring. But the link between human activity and earthquakes is very real and well established, said Cliff Frohlich, associate director and senior research scientist with UT’s Institute for Geophysics. “When people make the statement that it hasn’t been established that humans can cause earthquakes, they’re either woefully uninformed about the research by myself and hundreds of others over the last 70 years or they’re trying to mislead you,” he said. “That’s like people saying the world is flat; that evolution hasn’t been proven or that humans can’t cause climate change.” Research by Frohlich and others have linked disposal wells and oil and gas extraction to earthquakes in Texas. Most of these earthquakes have been small enough or far enough away from communities that they haven’t caused injuries or damage to infrastructure. But some researchers argue an increase in small tremors ups the odds of a big quake. And while new state regulations make earthquakes a consideration for permitting disposal wells, further research and management could help energy companies develop oil and gas safely.
3 killed in oil field accident in Upton County | eaglefordtexas.com: Three people were killed in a pulling unit accident in Upton County, according to the Upton County Sheriff’s Department. Investigator Dusty Kilgore of the Upton County Sheriff’s Office said deputies were assisted by the Rankin Volunteer Fire Department when they arrived at the scene of an explosion that killed three people around 9:30 a.m. Tuesday. “One person survived,” Kilgore said when asked if other workers were at the scene. That person was not taken to a hospital, he said. The families have been notified, but Kilgore said the sheriff’s department will not release their names until arrangements have been made for the victims. The explosion happened off FM 2401, about four miles inside Texas 49, according to Kilgore. The explosion happened when a pulling unit crew was working on an existing well owned by Parsley Energy of Midland. Kilgore declined to name the company that employed the pulling unit crew, directing that question to Parsley Energy. Kilgore said he did not have exact statistics for oil field fatalities in Upton County.
Since the City of Denton Banned Fracking, Texas GOP Moves to Pre-empt Local Control State lawmakers and the oil and gas industry isn't just responding to the blow delivered to fracking interests in Texas, but also hoping to beat back frack bans nationally. Bans on hydraulic fracturing passed in local municipalities across the nation during midterms elections. Those bans, and in particular, Denton's ban - have created a backlash from the oil and gas industry and conservative statehouses in the United States. Last month, the Ohio Supreme Court ruled that only the state - not cities or counties - has the authority to regulate oil and gas drilling, effectively killing a municipality's ability to ban the drilling practice. But in other states, judges have ruled exactly the opposite, such as in New York's Supreme Court, which in July decided that local governments did have the authority to ban fracking. In another case in Pennsylvania, a court ruled that cities have the authority to regulate fracking, but not to outlaw it. "The reason all these [pre-emption] bills are being filed is [state legislators are] in a state of shock, because the people of Denton conducted an electoral revolution and passed this [fracking ban], and now they are reeling from it," Burnam said. Dentonites and other North Texans living on top of the Barnett Shale formation are fighting a state and industry attack on their right to determine what's best for their communities. They point out the hypocrisy of conservative lawmakers in Austin who rail against so-called "Big Government" at the federal level while simultaneously attempting to strip small municipal governments of their power. The grassroots activists have also been quick to point out conservative lawmakers' duplicity when it comes to property rights. They have largely framed their arguments at the state Capitol in those terms because state representatives often ignore other valuable environmental and health concerns.
Measure shields oil, gas interests - The chairman of the Texas House Energy Resources Committee filed legislation in Austin on Tuesday that would prevent cities from not only regulating oil and gas production with new rules but also from enforcing any such rules they have on the books now. House Bill 40, filed by state Rep. Drew Darby, R-San Angelo, would pre-empt cities from making any rules concerning the oil and gas industry by expressly protecting activity deemed “commercially reasonable.” The measure defines commercially reasonable as “a condition that permits a reasonably prudent operator to fully, effectively, and economically exploit, develop, produce, process, and transport oil and gas.” Darby’s office did not return a call for comment Tuesday. Denton Mayor Chris Watts said the city staff and others were still studying the legislation, but on its face, he expected the bill would not only prevent Denton from pursuing its co-location program but also from enforcing its ban on hydraulic fracturing. “That’s my gut reaction,” Watts said. “This would take us back to long before anything we passed.” Denton voters overwhelmingly passed a citizen-driven initiative to ban fracking in November. The ban has been in effect since December. Both the Texas General Land Office and Texas Oil and Gas Association have challenged the ban’s constitutionality in state court. Watts said he expected a companion bill to HB 40 that would give the Texas Railroad Commission the authority to determine whether a city ordinance would be pre-empted by state law. The proposed legislation is similar to pre-emption legislation the oil and gas industry has pursued in other states, an effort to limit the growing number of cities and counties that have banned fracking around the country.
“Frack Anywhere” Law Proposed in Texas -- There are no state setbacks for oil and gas wells in Texas. Setbacks come under local zoning ordinances. If your city does not address oil and gas drilling it its zoning code, a fracker can frack anywhere – next to a day care center, a restaurant, hospital or school.The frackers have floated a bill in Austin to gut local zoning ordinances of any right to determine setbacks or land use on oil and gas rigs. Meaning a fracker could frack anywhere in a city and there’s nothing the city could do about it. It is time to head to Austin to speak before the Texas House Energy Resources Committee in opposition to HB 40, described below: HB40 hearing is scheduled for Monday 3/23 at 2PM, per clerk Jamie Burchfield.The meeting may not start promptly at 2PM if the morning house session does not adjourn on time. It may not start until 4PM. Meeting location is Room E2010.We can setup of our personal profiles online ahead of time, but we can only sign in to testify at the capital using kiosh stations located around the capital and extension, including near the meeting room.
Digging in for the downturn - FT.com: Around the flickering flames of an outdoor fireplace, cold beer is flowing and salty epithets are flying as a group of nomadic American oil workers rue the fickle price of a barrel of crude. They have had their hours slashed, been told not to come to work or lost contracts as the oil price slump has forced producers to cut spending in Texas’s Eagle Ford shale formation. For Carrizo Springs and countless communities across Eagle Ford , the question is what will happen when he and the oil industry leave. In recent years, residents have watched as the oil juggernaut — with its jobs, dirt, steel and noise — has overrun sleepy towns and ranchland. Government officials accustomed to counting heads of cattle had barely got used to the thrum of multimillion dollar investments. Now, as each week brings more retrenchment, they have been reminded that booms come to an end. Their opportunity to plant the seeds of long-term prosperity is limited and the risks of ending up with scorched earth are growing. Rick Perry, the former Texas governor and a potential Republican presidential candidate, said earlier this year that the plummeting oil price would make things “very uncomfortable” for parts of the state. “This is going to be a painful period of time.” Texas’s wide open spaces are already dotted by more than 250 ghost towns — once-vibrant settlements that fell into decline when the lone driver of their economy disappeared, says Thomas Tunstall of the University of Texas at San Antonio. In some cases the end came with the exhaustion of an oil reservoir or a coal mine; in others a town lost its status as a county seat or was bypassed by a new highway. Each one is a reminder of the impermanence of economic success. “The state does not need any more ghost towns,” he says.
NextDecade pushing pair of billion dollar LNG projects in Texas - A pair of multi-billion dollar LNG projects are set to take off in the coming months in Brownsville and Galveston. According to the Houston Business Journal, Woodlands-based NextDecade LLC is planning to file applications later this month for an $8 billion Rio Grande LNG project and a $6 billion Pelican Island LNG project near Galveston. NextDecade CEO Kathleen Eisbrenner says both projects aim to export LNG to non-Free Trade Agreement nations like Japan and India. The Rio Grande Project includes a new option-to-lease agreement with the Port of Brownsville and would expand the company’s site from 500 acres to 1,000 acres for its proposed export terminal near the southern-most tip of Texas. The company would also construct a 130-mile pipeline from Brownsville to the Agua Ducle market hub near Corpus Christi. Eisbrenner says the goal is to begin construction in Brownsville as early as 2017 and to begin operations in 2020. As far as the Pelican Island Project near Galveston, Eisbrenner says the company is currently in the midst of negotiating acreage for the project and that the Pelican Island Project is running about three months behind the Rio Grande LNG venture. So far, the Galveston Wharves Board of Trustees has signed off on a short-term, six month deal for $100,000 to set aside 185 acres on the northeast corner of Pelican Island. . “Pelican Island continues to progress as hoped.”
Houston Ship Channel remains closed after ships collide — A portion of the Houston Ship Channel remained shut down early Tuesday after two 600-foot ships collided during foggy conditions a day earlier, causing some leakage of a flammable liquid. The Coast Guard said a gasoline additive aboard a chemical tanker was no longer leaking methyl tert-butyl ether — or MTBE. It was not immediately known how much spilled. Petty Officer Andy Kendrick said that the Liberian bulk carrier Conti Peridot had been moved from the collision site but that the Danish-flagged Carla Maersk would remain in the channel until decisions are made about what to do with its chemical cargo. He said that won’t happen until after daybreak. No injuries were reported from the collision, and the immediate area remains closed, including the Barbours Cut Terminal, where cargo vessels are loaded and unloaded. Three cargo tanks on the tanker were ruptured, releasing an unknown quantity of the water-soluble, flammable gasoline additive, said Coast Guard Capt. Brian Penoyer, commander of the Houston-Galveston Coast Guard District. “This is not a cargo chemical that is easy to clean up,” he said.
Water usage decreases with oil price - The drop in oil prices should mean less water used by the industry in drought-stricken West Texas, but with that comes a blow to long-term efforts of water recycling even as the amount of produced water injected into the ground continues to grow, industry experts and outside analysts have said. Water requirements for fracking Permian Basin wells should drop from 551 million barrels last year to 422 million barrels in 2015, according to PacWest, a company recently bought by the Houston firm IHS that tracks industry water usage. PacWest revised water usage as oil prices drop from their June peak of about $104 a barrel. Before, the firm expected demand for fracking, and thus water, to grow by 20 percent. “The drilling and completion activity has just fallen off a cliff,” said Piers Wells, the CEO and co-founder of Digital H20, another firm that analyzes water usage in the area. “Demand for water to complete wells has really dried up.” That is welcome news for some in the drought-scorched region. Less demand for fresh water means less competition between oil companies and other heavy users such as municipalities. But the reality too is that low oil prices will push back implementing new recycling technology or expanding experimental programs, analysts have said. The dirty water that emerges from an oil well falls into two categories: flow-back water, which emerges from the well during through the first month or so after it is fracked, and produced water, which seeps up to the surface through the life of the well. Flow-back water accounts for about 30 percent of the contaminated water a well will produce, according to Digital H20. Produced water accounts for about 70 percent.
Explosion kills oil field worker in southeastern New Mexico -- An explosion at an oil field site in southeastern New Mexico has killed one worker and injured another. Authorities say preliminary information indicated the explosion occurred Wednesday in southern Lea County while the workers were loading material into a pipe being installed into a drilling pipe. The county Sheriff’s Department said the victims were struck by metal debris from the blast. The office said cause of the explosion is under investigation. There was no fire following the blast.
Groups sue feds over drilling in northwest New Mexico — A coalition of environmental groups is suing the federal government over the approval of oil and gas drilling permits in northwestern New Mexico. The groups filed their lawsuit Wednesday as they prepared to rally at the State Capitol. They contend that more development and hydraulic fracturing could harm the environment and sites such as the Chaco Culture National Historical Park. The suit names the Bureau of Land Management and the U.S. Interior Department. The BLM did not immediately respond to a request for comment. The agency is in the process of updating its management plan for the San Juan Basin in the face of an expected shale oil boom, and the groups have been pushing the agency to stop approving new drilling permits until the plan is in place.
Analysis of California’s Fracking Wastewater Reveals a Slew of Toxic Chemicals Linked to Cancer and Other Illnesses - California is currently the only state that requires chemical testing of fracking wastewater and public disclosure of the findings. That’s good. What’s not so good is what the testing and disclosure reveal. The Environmental Working Group (EWG) has completed an analysis of data released by the state during the first year of new reporting requirements. It found that the high levels of the carcinogen benzene in California’s fracking wastewater isn’t the only thing Californians have to worry about from the state’s extensive oil and gas fracking operations and the injection of chemical-laced wastewater back into the ground once drilling is completed. The study, Toxic Stew: What’s in Fracking Wasterwater, revealed the presence of hundreds of chemicals, including many linked to cancer, nervous system damage and reproductive disorders. Among the chemicals found in up to 50 percent of the samples were chromium-6, lead and arsenic, all linked to cancer and/or reproductive damage. The samples also contained thousands of times more radioactive radium than the goals set by the state, along with high levels of nitrate and chloride ions. And an another analysis last month by the Center for Biological Diversity found that 98 percent of the fracking wastewater samples tested exceeded federal and state water safety levels for benzene.
Toxic Stew: What’s in Fracking Wastewater - Wastewater from hydraulic fracturing of oil and gas wells in California is heavily contaminated with a toxic stew of chemicals known to cause cancer or reproductive harm, an analysis by Environmental Working Group shows. Because California is the only state to require comprehensive chemical testing of drilling wastes and public disclosure of the results, the findings also provide a unique window into what chemicals likely contaminate fracking wastewater nationwide. In 2014, the first year of California’s groundbreaking fracking disclosure program, more than a dozen hazardous chemicals and metals as well as radiation were detected in the wastewater, some at average levels that are hundreds or thousands of times higher than the state’s drinking water standards or public health goals (Table 1). These findings underscore the gravity of recent revelations that the state tolerated illegal injection of billions of gallons of drilling wastewater into thousands of disposal wells that pour into aquifers that potentially could be tapped for drinking water or irrigation. What’s more, the mandated disclosure data on the state’s website is still incomplete and confusing, so Californians cannot be confident that it provides a clear picture of the threat these hazardous substances pose to water supplies. According to state officials, there is no evidence to date that California aquifers currently used for drinking water have been contaminated by fracking chemicals. But there is clear cause for alarm.
'We Are Next': California Looks to Follow New York's Fracking Ban - Juan Flores stands in the community garden at Sequoia Elementary School in Shafter, California, and points to one, two, three oil wells within view of the school. The closest well stands the length of a couple of football fields from the edge of the garden, and all day its pump slides up and down sucking crude oil from the earth. “There are probably a hundred wells within a mile radius of this school,” says Flores, an environmental organizer and the son of local farmworkers. “And many of them have been fracked.” The tall well at the edge of school property is the nearest example. Before Flores can say more, a man in a white truck comes by and tells us that the farmer next door is about to spray pesticides on his almond grove. The wind is blowing in the direction of the garden and the school. It’s time to leave. This is life in Kern County, one of the most productive and poisoned places in California. Located at the southern end of California’s Central Valley, Kern County boasts a $6.7-billion farm economy that churns out huge quantities of almonds, grapes and other foodstuffs each year. It’s a place where farmworkers fill the fields and crop dusters zip across the sky. About 75 percent of in-state oil production also takes place here, according to the local Chamber of Commerce. Wells, pumps, storage tanks and oil workers in big white trucks seem to be around every bend. Air pollution, meanwhile, is out of control. The county seat, Bakersfield, consistently ranks near the top of the American Lung Association’s list of cities with terrible air quality. One in 10 adults in the county suffer from active cases of asthma, according to state data. Water resources are also damaged. Kern River, for instance, which runs through much of the county, is as dry as parchment paper and filled with weeds.
Oil-loading facility sanctioned in Washington rail car spill - The Federal Railroad Administration has issued a violation against a North Dakota loading facility over a leaking oil car in northwest Washington state that initially wasn’t reported to state officials for a month. The leak was discovered at the BP Cherry Point refinery near Ferndale, Wash., in early November by federal inspectors. About 1,600 gallons of oil was missing from the car, which had originated in Dore, N.D., at a facility operated by Musket Corp. and apparently escaped through a valve that was not properly shut. No local emergency officials were notified, and the state Utilities and Transportation Commission first learned about the spill in early December when BNSF Railway sent the agency a copy of a federal report it had 30 days to file. The FRA violation was issued on Jan. 28, two days after McClatchy first reported on the leaking car. The agency has yet to determine the amount of the penalty, and the company will have a chance to negotiate what it will ultimately pay. Though the spill was detected in Washington state, neither the railroad, nor the third-party company that unloaded the oil at Cherry Point could determine where the missing oil had spilled. BNSF said that no one reported a leaking car or an oil spill along the train’s path. The Washington State Department of Ecology also investigated the incident, but ultimately determined that it could issue no penalties.
Mesa County says it may sue over Gunnison grouse listing - (AP) — The Mesa County commissioners say they might join other governments in suing the U.S. Fish and Wildlife Service for listing the Gunnison sage grouse as threatened. The Grand Junction Daily Sentinel reports commissioners approved a notice of intent to sue Monday. They say the listing wasn’t necessary. Officials say the notice doesn’t obligate them to sue but puts the county on record as opposing the listing. The listing, announced in November, could restrict oil and gas, agriculture and other activities. About 5,000 Gunnison grouse remain, only in Colorado and Utah. The states of Colorado and Utah and three other counties in the two states have also said they might sue, arguing the listing was unnecessary. Environmental groups filed their own lawsuit notice, saying the listing wasn’t strong enough.
Weld oil production soars for 2014 - Crude production in Colorado’s top county has gone off the charts since 2011, and three years later it’s still not disappointing. While production numbers are always a few months behind, solid counts through much of last year show Weld County’s 2014 oil production up 33 percent from the previous year, and expanding to 85 percent of the state’s oil output, according to the Colorado Oil and Gas Conservation Commission’s tracking system. Weld’s production also is 8 percent higher than the entire state’s production last year. Some analysts predict the state’s largest producer, and largest oil field employer, will continue to put up the big numbers through much of 2015 — even amid a slowdown precipitated by plummeting global prices. Weld County production numbers as of March 6, show a total output of 70.5 million barrels of oil for 2014. Last year, total output had hit a record 52.9 million, a 33 percent increase with final numbers not in. Production numbers, however, change daily, as they are continually updated. The numbers are encouraging as the world faces its first massive oil slowdown since 2009, one that has seen crude price bottoms well beyond six-year lows. Prices hover around $50 per barrel, about half what they were last summer, prompting companies to lay down rigs, slow down its drilling and concentrate mostly on its moneymakers. While drilling will slow due to the ultimately supply-demand problem the world now faces, production in Weld County likely will keep churning out the big numbers.
Oil and gas spill report for March 9 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks. PDC Energy Inc, reported on March 4 that a hose was accidentally disconnected, after completing cementing operations outside of Milliken. It is approximated that less than 100 barrels of drilling fluid released. The spill was cleaned up immediately, and a majority of the spilled mud was recovered. Whiting Oil & Gas Corp., reported on March 3 that a hydro-vac operator left a valve open on a truck, outside of New Raymer. About 17 barrels of drilling water mixed with fresh water to the pad. Roughly 2-3 inches of soil was removed and stockpiled. Soils not in compliance with COGCC standards will be removed. Noble Energy Inc., reported on March 3 that impacted soil was discovered, outside of Greeley during the removal of a water vault. It is approximated that less than five barrels of produced water spilled. All production equipment was shut in. An excavation has been scheduled. Noble Energy Inc., reported on March 3 that produced water surfaced after a corrosive hole formed in a water line, outside of Gill. It is approximated that less than 100 barrels of produced water spilled. All production equipment was shut in and an excavation of soil has been initiated. A third party environmental consultant will collect a soil sample. Synergy Resources Corp., reported on March 3 that oil misted over a location outside of Johnstown, due to rupture disc that had popped off a separator. It is approximated that less than one barrel of oil was spilled. To stop the flow of oil into the atmosphere, the well was shut in. Contaminated snow and soil was stock piled for disposal. PDC Energy Inc., reported on March 2 that a load line valve on one of the production tanks froze and cracked, releasing approximately 5.5 barrels of produced water inside tank containment, outside of Ault. Kerr McGee Oil and Gas Onshore LP, reported on March 2 that a sewage on the back of the tank was sheared off, resulting in an approximate spill of 82 barrels of condensate and 20 barrels of produced water, outside of Platteville. When discovered the well was shut in and a vacuum truck recovered about 35 barrels of condensate material. It is approximated that less than 15 barrels of condensate and five barrels of produced water released outside of containment. Excavation activities are ongoing at this time.
Colorado’s Frack Anywhere Committee - Composed almost entirely of frackers in favor of fracking. Anywhere they fracking want to frack. This is what comes when a state does not have Home Rule – a sham regulatory scheme proposed by the frackers for the frackers.Colorado’s Fracking Wars Reignite You’ve got to have a mind of winter to fully appreciate the pall Colorado Governor Hickenlooper’s Task Force on Oil and Gas cast over the concept of good government in this state. Termed Blue Ribbon by the governor, it easily was not. It included not one person from the many local citizen groups that have organized to protect themselves against a rampaging oil industry given free license to drill at will by a benighted legislature and a puppet governor. The Colorado Oil and Gas Conservation Act is one of those stupid laws. It established a small bureaucracy, called the Colorado Oil and Gas Conservation Commission, which was invited to walk hand in hand with the oil and gas industry in developing a poison garden of oil and gas wells in the state. Beyond the obvious, there are several problems with this prescription to economic development and efficiency. First, the legislation defies Colorado’s constitution, which declares explicitly that, in matters of dominant local interest, those rules and regulations propounded by local government in such matters are superior to those of the state. In Colorado this is called home rule or local control and is selfishly guarded. Can there be anything more local than objecting to the creation of an industrial landscape of 8 or 12 oil wells over a mile deep and up to two miles long, with concomitant storage vessels on the surface, all spitting out poison, noise, and fire and explosion risk just out your kitchen window? These concerns are at the heart of the lawsuit brought against the people of Longmont by the industry with the support of the governor, who, as some have reminded him, is effectively suing his own people on behalf of the oil industry. Their crime? They told the industry they weren’t welcome in their backyards, they weren’t interested in an industrial landscape outside their kitchen windows.
Shale Reserves Parallel Rise In Costs - Shale operators have claimed that as they have became better and better at drilling for shale gas and tight oil in the US, the costs of producing such shale reserves fell. This is simply not the case. Ernst and Young, a preeminent accounting firm, carries out an annual survey of reserves and cost analysis for oil and gas. Production costs have risen steadily since 2009 right in line with increased shale reserves. So although shale reserves have increased, they have not increased without additional expense. This problem has been obfuscated by the large investment banks which were earning lucrative fees off shale transactions. In Spring 2014, Ed Morse, Global Head of Commodity Research at Citi and one of the chief cheerleaders for shales, stated in Foreign Affairs: “…the cost of finding and producing oil and gas in shale and tight rock formations are steadily going down and will drop even more in the years to come”.
Iowa lawmakers urge independent environmental study for Bakken Pipeline -— Several Iowa lawmakers are calling for an independent environmental study of a proposed crude oil pipeline through Iowa financed by the Texas company requesting a permit to build the Bakken Pipeline.The Iowa Utilities Board should commission the study, and use the finding to inform whether to grant or refuse Dakota Access, LLC.’s permit request, according to the March 5 letter signed by 15 lawmakers, including 12 Democrats and three Republicans in the Iowa House. The board should also place conditions or restrictions on the permit, if approved, or reject the application altogether, the letter stated, “Preserving our natural resources and protecting the health and safety of Iowans are public necessities,” the letter stated. The group said they have concerns after pipeline accidents in Montana, Louisiana, Arkansas, Michigan, California, Missouri, Texas and Ohio. “We do not prejudge the issues that would be explored in an environmental assessment,” the letter stated. Dakota, which is owned by Dallas-based Energy Transfer Partners, is proposing the 1,100-mile-long pipeline from the Bakken supply area in North Dakota to Pakota, Ill., including 343 miles cutting diagonally across 17 Iowa counties.
Drugs, Prostitution, Violence Plague Oil Boom Towns Gone Bust -- With crude prices reeling from the effects of geopolitical wrangling and surging production, it’s a tough time to be a resident of an oil boom town. Although drilling in areas like North Dakota’s Bakken oil patch has generated hefty revenues for once quiet communities, it’s also led to an increase in crime. As the Washington Post noted last year, “the arrival of highly paid oil workers living in sprawling ‘man camps’ with limited spending opportunities has led to a crime wave -- including murders, aggravated assaults, rapes, human trafficking and robberies -- fueled by a huge market for illegal drugs, primarily heroin and methamphetamine.” While this would be a rather undesirable situation under any circumstances, collapsing crude prices are beginning to leave some towns cash-strapped, which means less resources to dedicate to things like deterring crime. Meanwhile, production isn’t slowing down, which means boom town populations aren’t declining alongside revenues. According to NPR, this dynamic is leaving some communities with a combination of decaying infrastructure, less money for public schools, and inadequate manpower to combat sharply higher crime rates. This comes as monthly expenses like rent skyrocket in the face of surging demand. ViaNPR: What happens when the price of oil tanks and suddenly you're faced with a whole lot less money to deal with your town's explosive growth? If you're 52-year-old Rick Norby, you lose a lot of sleep. "I haven't slept since I became mayor," he says. "I really ain't kidding you." When Norby became mayor of Sidney, Mont., oil prices were about $100 a barrel. A year later, they've fallen to roughly half that. Yet oil production has continued to churn right along.
Explosion razes waste disposal facility near Alexander - A fire so massive that it could not be approached by firefighters erupted after an explosion at an oil waste disposal site north of Alexander, North Dakota. According to KXNews, McKenzie County Emergency Manager Karlin Rockvoy said the only thing to do at first was watch the fire burn itself out. The explosion occurred at approximately 3:30 a.m. Emergency responders from both Williston and Alexander established a perimeter around the site to ensure the safety of anyone in the area. Five employees at the facility escaped unharmed, one of whom reported jumping out of the way just in time. Firefighters were able to get the flames under control by midmorning, though the cause of the explosion is still unknown. The complex, which undertook the treatment and disposal of oilfield waste, was completely destroyed during the incident. According to the Bismarck Tribune, Rockvoy reported that any damage caused by the explosion was contained by a surrounding embankment.
Oil tanks explode in the Bakken - At around 9 a.m. Saturday morning, three oil storage tanks exploded outside Killdeer, North Dakota. Although the blast occurred five miles outside the city, residents reported feeling the blast, according to The Bismarck Tribune. Dunn County Emergency Manager Denise Brew says that the cause of the blast and resulting fire has yet to be determined. An official from the North Dakota Department of Health reported a similar incident occurring at a different tank on Friday night. The events are speculated to be related to the recent rise in temperature. Marathon Oil, the operator of the well site, reported that nobody was on location when the tanks exploded. As reported by The Tribune, Brew said, “[The blast] did blow the tops off of the three tanks. It was pretty powerful.” KX News reports that a man that lives near the site was walking out to feed his cattle at the time of the incident and was knocked to the ground by the blast. The West Dunn County Fire Department, Sheriff’s Department and Killdeer police responded to the incident. Crews were called back to the scene at around 5 p.m. the same day after an oil heater-treater reignited. The resulting fire has since been extinguished.
No injuries in separate blasts in North Dakota oil patch — No injuries were reported in two large fires in the western North Dakota oil patch over the weekend. McKenzie County Emergency Manager Karolin Rockvoy says emergency crews from Alexander and Williston were called to an oil and gas waste disposal site north of Alexander about 3:30 a.m. Saturday. Firefighters had the blaze contained about 5 ½ hours later. Three oil tanks exploded about 9 a.m. Saturday at a site about 5 miles north of Killdeer. Dunn County Emergency Manager Denise Brew says the boom was felt by people in Killdeer. Authorities are investigating the causes of both fires.
Water quality examined after North Dakota spill - -- Health officials in North Dakota said they're investigating potential water quality issues related to a small spill of liquids associated with oil production. About 40 barrels, or 1,680 gallons, of brine, a liquid associated with production in the state, spilled into a creek about seven miles west of Williston. The Environmental Protection Agency said brine may contain toxic metals and radioactive substances that can be "very damaging" to the environment and public health if released on the surface. "The spill impacted a nearby creek and water quality impacts are being investigated," the North Dakota Department of Health said in a Tuesday statement. The department said it was working with Golden Eagle Trucking, the responsible party, on a remediation plan. The trucking company, which transports water and brine in Montana and North Dakota, had no public statement on the release. At least two brine releases were reported in January.
Lawmakers Move to Regulate Pipelines, After a Record Spill in a Drilling Boom - Two months after the biggest fracking-related spill in recent North Dakota history, state lawmakers are pushing legislation that could help prevent similar disasters in the future. More than 2 million gallons of toxic wastewater gushed from a hole in the type of pipeline known as a "gathering line" near the town of Williston between the last week of December and first week of January. The spill contaminated at least two local waterways. The rupture went unnoticed for about 12 days before a pipeline worker discovered it. Gathering lines carry oil, gas and wastewater laced with heavy metals, high salt levels and possibly radioactive material from wells to other sites, for processing or disposal. The number of such lines continues to soar in the midst of the nation’s fracking boom.North Dakota has 20,000 miles of gathering lines, mostly in rural areas, and that number is expected to increase by around 60 percent over the next five years. State regulators know the location of only about one-third of the existing gathering lines—all the lines installed after August 2011. .Of the more than 240,000 gas-and-crude gathering lines nationwide, the federal Pipeline and Hazardous Materials Safety Administration regulates only a fraction of them—mainly the lines that cut through cities. Few states have any regulations on the books for such pipelines. Wastewater, or produced water, lines are another animal: No one knows how many exist, they don't fall under federal jurisdiction, and most states aren't tracking them. Now, two competing bills in the North Dakota legislature would take the first steps to regulate wastewater-and-crude gathering lines, because those lines have proved to be most at risk of spills. The bills are currently written to target future pipelines, not the thousands of miles of active pipelines for either produced water or crude oil.
North Dakota rigs take a big hit from oil's steep fall - The number of oil-drilling rigs in North Dakota has fallen to the lowest level in six years, triggering an estimated 3,000-4,000 oil field job losses that could get worse, a top state official said Thursday. “It is becoming painful out there in the oil patch,” Lynn Helms, director of the North Dakota Department of Mineral Resources, said on a monthly conference call with reporters. The department, which tracks and regulates the oil industry, also reported that North Dakota oil production declined to just under 1.2 million barrels per day in January, the most recent period for which data are available. Helms forecasts lagging oil output for a few months because the 111 operating drilling rigs — down from 193 rigs a year ago — aren’t enough to sustain production growth. He said the rig count is the lowest since February 2009 and could drop to 100 rigs this year, resulting in more layoffs. Hundreds of North Dakota wells also have been drilled but not completed, he said. Oil companies are saving money, and awaiting a potential major tax savings, by delaying hydraulic fracturing on 825 wells — a number that likely will increase, Helms said.
Bakken production, flaring drop in January - Oil production in North Dakota declined by approximately 37,000 barrels per day in January and the number of wells awaiting completion continues to grow, reports the Bismarck Tribune. Regulators are attributing these figures to low oil prices. The North Dakota Department of Natural Resources released the preliminary production figures for January earlier this week. January production was reported to be 1.19 million barrels per day, down from December’s production level of 1.23 million barrels per day. As reported by the Tribune, Director of the Department of Mineral Resources Lynn Helms said, “We’re going to see some months of declining production.” Companies are continuing to cut budgets and consolidate their operations to the core of the Bakken formation. As of Thursday, North Dakota’s rig count dropped to 111, down by more than 50 from last summer. While the rig count drops, the amount of wells waiting to be hydraulically fracked continues to grow. In December, there were 750 wells awaiting completion. For the month of January, the number of wells waiting to be fracked sits at around 825. Helms told the Tribune, “That inventory of wells continues to grow and grow and grow … until they can see a little better oil prices.” Despite the decreased production levels, the percentage of natural gas being flared off dropped from 24 percent in December to 22 percent in January. Last year, the Industrial Commission set goals to reduce the amount of gas flared to 26 percent by October 1. The next largest target was to reduce flaring to 23 percent in January. Helms said that part of this was due to improved infrastructure as well as voluntary restrictions on production.
Rockin’ the Bakken 21st Century Style » In Western Montana and Wyoming, we hear a steady drumbeat of stories about what the boom has brought—truck fatalities, worker deaths, pipeline spills, exploding trains, illegal dumping of radioactive waste, murders, gangs andhuman trafficking … to name a few. We also hear about the wealth. Shiny pick up trucks line our downtown streets with bumper stickers announcing hard working men and women are “Rockin’ the Bakken.” We’re also told that desperately needed jobs are being created to provide energy independence for Americans. The boom/bust cycle is not a new phenomenon; our region has seen our share. What’s hard to understand about this particular boom is that oil industry executives and our government officials didn’t have the foresight to prepare for it. Ensuring basic public health safeguards, social services and workplace safety should be automatic in the 21st century. Communities who bear the brunt of producing this nonrenewable resource should have the same protection as the people who consume it. But in the Bakken, public officials are watching North Dakota crumble into unmonitored ruin—ignoring environmental chaos and a public health crisis that promises to boom after the after the oil has gone bust. Meanwhile, the Bakken’s local health and social service professionals, educators, and faith-based leaders have been overwhelmed by a stream of social issues including: a housing crisis, worker deaths, migration of national and international workers, childhood homelessness, crime, violence, a burgeoning drug and sex industry, and nearly insurmountable obstacles to the distribution of basic human services.
Bakken Shale: Too Many Wells, Too Much Expense - The number of Bakken shale wells needed to produce a million barrels a day is staggering when you compare it to a typical OPEC well. If you’ve ever wondered why shales are struggling to compete with OPEC, this may give you a clue. According to the IEA, International Energy Administration, it takes approximately 2500 Bakken shale wells per year to produce 1 million barrels of crude per day whereas only 60 Iraqi wells are needed to produce an equal amount. Bakken shale wells are land consumptive and expensive. They also decline rapidly. In short, drilling for tight oil faces a number of headwinds not least of which is low crude prices.
Introducing Fracklog, the New-Fangled Oil Storage System (Bloomberg) -- Oil drillers expecting prices to rebound after the biggest drop in six years have come up with an alternative to storing their crude in tanks: They’re keeping it in the ground. It’s a new twist on an old oil-trading technique, known as a contango storage play, in which a trader buys cheap crude in an oversupplied market and saves it to lock in profits at higher future prices. Drillers who have spent millions boring holes through petroleum-rich shale rock are just waiting for prices to go up before turning on the spigot. From North Dakota to Texas, there are more than 3,000 wells that have been drilled but not tapped, based on estimates from Wood Mackenzie Ltd. and RBC Capital Markets LLC. Waiting gives producers such as Apache Corp. and EOG Resources Inc. a better chance of receiving a higher price. It could also delay a recovery by attracting more supply every time prices rise. “Effectively, the rock is the storage,” Troy Cook, an analyst with the Energy Information Administration in Washington D.C., said by phone. “If you can afford to hang on to it, you could certainly choose to wait until the price goes up.” Shale drilling is a two-part process. Once a rig bores a horizontal tunnel through the underground shale layers, another crew blasts it with a mixture of water, sand and chemicals to crack the rock and release the oil. It’s only after the second process, known as hydraulic fracturing or fracking, that the well is complete and able to produce oil. The backlog of unfracked wells -- call it a fracklog -- is one reason that U.S. crude output is poised to climb even as companies have idled more than a third of the rigs that were drilling for oil in October. About 85 percent of U.S. wells aren’t being completed right now, Continental Resources Inc. Chief Executive Officer Harold Hamm said in a March 2 interview.
How Debt Has Caught Up With U.S. Shale -- Whiting Petroleum is the latest victim of the flawed U.S. shale play business model. The shale and tight oil play model is based on large-scale acreage acquisition at any price and massive over-production to satisfy growth targets. In Whiting’s case, it also involved debt-based acquisition of Kodiak Oil and Gas, another large Bakken player. The $3.8 billion deal closed in December 2014 when WTI oil prices averaged $66 per barrel, down from $106 per barrel in June. Whiting’s demise shows that location isn’t everything. The company is looking for a buyer despite having a premium position in the Bakken Shale play in North Dakota. Whiting discovered the Sanish Field in 2006 that began the Bakken-Three Forks play and that has been the centerpiece of activity for the past several years. The map below shows Bakken commercial areas at $45 WTI oil price based on an average well EUR (estimated ultimate recovery) of 650,000 barrels of oil equivalent. The table below summarizes Whiting’s financial performance. The company ended 2014 with free cash flow of almost negative $3 billion and 100% debt-to-equity ratio. The increase in debt from 3rd quarter 2014 was because of the Kodiak acquisition.
OPEC chief says cartel hurting U.S. shale producers - OPEC’s top official said Sunday that the cartel’s decision to keep pumping crude in the face of collapsing prices is hurting the U.S. shale-oil industry and a global pullback on investment could lead to a shortage that will push the market upward again. “Projects are being canceled. Investments are being revised. Costs are being squeezed,” said Abdalla Salem el-Badri, the secretary general of the Organization of the Petroleum Exporting Countries, at the Middle East Oil and Gas conference in Bahrain. “If we don’t have more supply, there will be a shortage and the price will rise again.” Other top officials at the conference said they would maintain their response of continuing to pump in the face of collapsed prices caused in part by a glut of U.S. shale oil--a relatively new product obtained through hydraulic fracturing, or fracking, of shale rock formations underground. Brent crude, the global benchmark, was trading at about $60 a barrel on Friday, an amount that is almost half its price last July but that officials in places like Kuwait say they can live with. “We are very lucky oil prices did not drop to $20,” said Kuwait Oil Minister Ali al-Omair.
OilPrice Intelligence Report: OPEC Boasts About Pain In U.S. Shale -- On March 6, Baker Hughes reported another round of declining rig counts. Only this week the pace of cutbacks accelerated. An estimated 75 rigs were removed from the oil patch for the week ending on March 6, a big jump from a week earlier. It is important to remember that week-to-week numbers are largely statistical noise; the long-term trend line is more important. Still, after several weeks in which the rig count collapse appeared to be slowing, last week’s figures are a reminder that the rout is not over yet. After all, production has not dropped off – U.S. production surpassed 9.3 million barrels of oil per day in February, the highest level in decades. Still, the falling rig count is evidence that OPEC’s strategy is working, something emphasized by its top official over the weekend. OPEC’s Secretary-General Abdallah Salem el-Badri spoke at the Middle East Oil and Gas Conference in Bahrain on March 7, in which he highlighted the growing cracks in the U.S. shale industry. His comments echoed confidence in OPEC’s strategy of undermining its main competitor. Without explicitly saying so, he emphasized that OPEC will successfully force some shale production out of the market as private companies pullback on investment. “When OPEC didn’t reduce its production, everything collapsed for the U.S. shale-oil-rig market,” el –Badri said. At the same time, he cautioned that the industry may be cutting too much, which could lead to a price spike in the future. “Projects are being canceled. Investments are being revised. Costs are being squeezed,” he warned. “If we don’t have more supply, there will be a shortage and the price will rise again.” Not that that would necessarily be a bad thing for OPEC. But as el-Badri noted, low prices are indeed putting a strain on the industry. Significantly lower revenues for oil and gas exploration companies have sparked a wave of credit downgrades, which along with new bond offerings, are contributing to an unsettling level of “junk” bonds. The energy sector accounts for a large and growing share of the high-yield credit market. Junk bonds in the energy sector have reached $247 billion, or 17.5%, the highest share for any industry. The growing level of debt with poor credit ratings is beginning to concern big banks, which warn that defaults are most likely just around the corner.
OPEC is winning its battle with U.S. shale:-- U.S. shale producers are falling behind in the Red Queen’s Race as the downturn in drilling means that new oil production is failing offset falling output from existing wells. The famous race is named after the scene from Lewis Carroll’s novel “Through the Looking-Glass,” in which the Red Queen warns Alice: “It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run twice as fast.” The race is a metaphor for the relationship between increased oil production from newly drilled wells on the one hand and declining output from old wells on the other. The net result is that the downturn in drilling is threatening to cut output for the first time since the start of the shale revolution. Other forms of oil production, notably from offshore fields in the Gulf of Mexico, will continue to increase in the next few months. But in the shale sector, the Organization of the Petroleum Exporting Countries (OPEC) has won its battle with U.S. shale producers and forced output growth to a standstill. By refusing to cut its own output in November and allowing prices to fall sharply, OPEC has attempted to force shale producers to curb their rapidly swelling output.
This chart shows the true collapse of fracking in the US - “People need to kinda settle in for a while.”That’s what Exxon Mobil CEO Rex Tillerson said about the low price of oil at the company’s investor conference. “I see a lot of supply out there.”So Exxon is going to do its darnedest to add to this supply: 16 new production projects will start pumping oil and gas through 2017.Production will rise from 4 million barrels per day to 4.3 million. But it will spend less money to get there, largely because suppliers have had to cut their prices.That’s the global oil story. In the US, a similar scenario is playing out. Drillers are laying some people off, not massive numbers yet. Like Exxon, they’re shoving big price cuts down the throats of their suppliers. They’re cutting back on drilling by idling the least efficient rigs in the least productive plays – and they’re not kidding about that.In the latest week, they idled a 64 rigs drilling for oil, according to Baker Hughes, which publishes the data every Friday. Only 922 rigs were still active, down 42.7% from October, when they’d peaked. Within 21 weeks, they’ve taken out 687 rigs, the most terrific, vertigo-inducing oil-rig nose dive in the data series, and possibly in history: As Exxon and other drillers are overeager to explain: just because we’re cutting capex, and just because the rig count plunges, doesn’t mean our production is going down. And it may not for a long time. Drillers, loaded up with debt, must have the cash flow from production to survive. But with demand languishing, US crude oil inventories are building up further. Excluding the Strategic Petroleum Reserve, crude oil stocks rose by another 10.3 million barrels to 444.4 million barrels as of March 4, the highest level in the data series going back to 1982, according to the Energy Information Administration. Crude oil stocks were 22% (80.6 million barrels) higher than at the same time last year. “When you have that much storage out there, it takes a long time to work that off,” said BP CEO Bob Dudley, possibly with one eye on this chart:
‘How Did This Happen': Shell Using Seattle Ports For Arctic Drilling Rigs -- The specter of Shell using the Port of Seattle to dock its Arctic drilling rigs is causing major upheaval in the Emerald City. For the last two months, outrage over the Port of Seattle’s clandestine leasing of a terminal to Royal Dutch Shell’s Arctic oil drilling fleet has been slowly gaining steam. What began as a quiet deal between the port and Foss Maritime Co., which would work for Shell under the two-year lease, has burgeoned into an expansive debate over the image of one of the country’s greenest cities, the extraction of some of the most remote fossil fuels, and the global effort to confront climate change. “How did this happen without anyone paying attention to it?” Seattle City Councilmember Sally Bagshaw told ThinkProgress. “Shell is one of the few oil companies that’s still contemplating Arctic drilling; it’s just inconsistent with what we believe is this city’s direction.” On Monday, Seattle Mayor Ed Murry and Seattle City Council announced that the city would “review, investigate and determine” whether the Port of Seattle’s plans for Terminal 5 are permitted under current regulations.
About 1,000 laid off by Husky oil sands contractor, union says | bakken.com: About 1,000 construction workers employed by a contractor at Husky Energy Inc’s Sunrise oil sands project were laid off unexpectedly on Wednesday, a union official confirmed. Izzy Huygen, a Fort McMurray, Alberta, representative of the Christian Labor Association of Canada, said many of the workers had expected their jobs to last until summer but were informed of the layoffs on Wednesday morning. “Guys were just notified this morning as they woke up in camp,” Huygen said. “They were supposed to be there until June, July and August. It was supposed to be a gradual decline through the summer, so this was unexpected.” The workers were employed by Saipem SpA’s Canadian unit, which could not immediately be reached for comment. However, Husky spokesman Mel Duvall confirmed that Saipem’s work has wrapped up at the site 60 km (37 miles) northeast of Fort McMurray and any remaining work at the site will be handled by the company and other contractors. The layoff is among the largest yet seen from companies operating in Alberta’s oil sands, as oil prices that have dropped more than half since June squeeze profits and force operators to slash capital spending and new projects.
EPA: Illinois oil train derailment threatens Mississippi River -- An oil train derailment and spill in northwest Illinois poses an “imminent and substantial danger” of contaminating the Mississippi River, the U.S. Environmental Protection Agency said Saturday. The spill from the derailment, which occurred Thursday, also threatens the Galena River, a tributary of the Mississippi, and the Upper Mississippi National Wildlife and Fish Refuge, one of the most complex ecosystems in North America. The EPA said it couldn’t estimate how much oil was spilled, but that the 21 cars of the 105-car BNSF Railway train that derailed contained 630,000 gallons of Bakken crude from North Dakota. Small fires from the wreckage continued to burn Saturday. Earlier Saturday, another oil train derailed and caught fire near Gogama, Ontario, bringing to five the total number of fiery derailments in the U.S. and Canada in as many weeks.The safety of trains carrying flammable materials has become an issue as the introduction of new drilling technology has allowed the development of crude oil deposits far from traditional pipelines, particularly in the so-called Bakken formation in North Dakota. Rail has become the preferred way to transport that crude to refineries, with railroads moving about 500,000 carloads of oil last year, according to industry estimates, up from 9,500 in 2008. One tank car holds 30,000 gallons.But recent derailments have cast doubt on the effectiveness of safety efforts and suggest that no tank car currently in service on the North American rail system is tough enough to resist damage in relatively low-speed derailments. According to the Federal Railroad Administration, which is investigating the Illinois derailment, the train was traveling at just 23 miles per hour when it left the tracks, well below the maximum speed allowed. The damaged tank cars were newer CPC-1232 tank cars, which are supposed to be safer than previous ones, but have failed in at least four derailments this year and at least two in 2014.
We Keep Spilling Oil Into America’s Greatest Rivers -- The U.S. Environmental Protection Agency issued a grave warning about the Mississippi River on Saturday. Because of an oil spill, it said, the cultural landmark is in “imminent and substantial danger” of being contaminated. The oil spill came from a train carrying 103 cars of Bakken crude oil from North Dakota. On Thursday afternoon, 17 cars of that train derailed in northern Illinois, each carrying approximately 30,000 gallons of crude. EPA officials aren’t sure how much oil has spilled, but noted that a seasonal wetland has already been affected. The river, one of its tributaries, and the Upper Mississippi National Wildlife and Fish Refuge are all in danger of contamination, the agency said. This isn’t the first time in recent months that one of North America’s most powerful and historic rivers have been threatened by oil. In the last year, the Mississippi, the Yellowstone, the Missouri, and the Ohio Rivers have been contaminated because of oil train derailments, barge crashes, and pipeline spills. Here are some of the more significant incidents.
Train carrying crude oil derails near Gogama, Ont. - Several tanker cars caught fire after a Canadian National Railway train carrying crude oil derailed in Northern Ontario, prompting officials to advise nearby residents to stay indoors and avoid consuming water from local sources. CN said its crew reported the derailment to emergency services at about 2:45 a.m. ET Saturday. Police said the train was 30 to 40 cars in length and 10 cars went off the track four kilometres northwest of Gogama, Ont. There were no reports of injuries. Some of the rail cars that caught fire entered the Mattagami River System, CN and police said. The cause of the derailment is still under investigation and the Ministry of Environment has been notified. Residents of Mattagami First Nation were being advised not to consume water from their community source for the time being. Residents of Gogama and Mattagami First Nation were also being asked to stay inside until further notice due to possible smoke inhalation. CN Rail said in a statement that there is no evidence so far, however, that either the water or air quality near the site have been affected. The CN statement said emergency crews are conducting a full site assessment and activating the emergency response plan with local officials. Booms have been deployed into the river to try to contain any spilled oil, the company said.
Fire Burns After Another Oil Freight Train Derails, This Time In Canada - In the early hours of this morning, yet another oil-carrying freight train derailed. Canadian National Railways says a fire continues to burn after a train carrying crude oil derailed in Northern Ontario (near Gogama). As yet no injuries have been rported and a team of specialists are on the scene. This is the fourth derailment for CN Rail in Northern Ontario this year. As CP24 reports,, CN Rail says crews reported the derailment near Gogama, Ontario, about two-and-a half hours north of Sudbury, around 2:45 a.m. No one was injured in the derailment, CN said. The company said a number of teams, including senior operations, engineering, dangerous goods and environment officers were responding to the scene. Ontario Provincial Police said Highway 144 between Highway 560 (Watershed) and Mattagami Reserve Road near the site of the derailment will be shut down for between 24 and 36 hours due to safety concerns.As CN states: Train U70451-02 derailed along the Ruel subdivision of the CN main line, near Gogama, ON. The incident, which occurred at 0246hrs EST on Saturday, March 07, is currently impacting rail traffic running between Toronto, ON, and Winnipeg, MB.CN crews are responding to the site in order to undertake the necessary repairs. Both westbound and eastbound traffic scheduled to cross the affected area is currently obstructed, and may be delayed by 24 hours or more. Every measure is being taken in order to reduce the impact to customer shipments.
Yet Another Oil Bomb Train Explosion Marks Fourth Derailment in Four Weeks -- Once again this weekend, we saw scenes of tanker cars strewn across the landscape on their sides emitting huge billows of smoke and fire. On Saturday a 94-car train carrying Alberta tar sands oil derailed two miles outside Gogama, Ontario, with at least 35 cars going off the rails and at least seven igniting. Five cars landed in the Makami River, prompting a warning to residents not to drink the water as well as to stay inside to avoid possible toxic effects from the fire. It follows fiery derailments of the so-called oil bomb trains carrying volatile crude oil that have occurred in Illinois, West Virginia and Ontario since the beginning of the year. In each of those cases, only about half a dozen cars derailed, making the Gogama derailment the biggest so far this year. Gogama is about 60 miles north of the remote, unpopulated area outside Timmins, Ontario where a derailment occurred Feb. 14. And while Gogama itself is remote, it’s not unpopulated: the town has almost 400 residents and the nearby Mattagami First Nation community, and it’s a major center of outdoor tourism. The tracks the train was traveling go through the town, raising the specter of another tragedy like the one that killed 47 people and leveled much of the town of Lac-Mégantic, Quebec in July 2013. Mattagami chief Walter Naveau told northern Ontario news outlet Village Media that he had met with representatives from CN, the company whose train derailed and wasn’t comfortable with their reassurances.
Bomb Train Roulette? Latest Derailment in Ontario Is Fourth in Four Weeks --A train carrying crude oil that derailed in northern Ontario on Saturday—which resulted in numerous overturned cars catching fire and oil spilling into a local waterway— is the fourth such accident in North America in as many weeks.The train, owned by the Canadian National Railway Co., was passing over a bridge above the Makami River near the town of Gogama, Ontario when the derailment occurred, sending thirty-five cars off the tracks, at least five of which ended up in the water. A large fire and huge black clouds of smoke followed. The CBC reports the train was 94 cars long and all were tanker cars carrying crude oil from Alberta. Officials with rail company have said their disaster response team was on the scene and tried to assure residents that drinking water supplies have not been harmed. Local residents who spoke to media did not seem convinced there was nothing to worry about. "It’s frightening and nerve-wracking, especially after what happened in Quebec," Roxanne Veronneau, owner of the Gogama Village Inn, told the Toronto Star, referring to the train derailment in Lac-Mégantic in 2013 that killed 47 people."People here are on pins and needles," Veronneau continued. "The tracks run right through town … I’m sure that there’s going to be a lot of talk afterward that this shouldn’t be in the middle of our town."
CN back on track but still worries in Gogama - One week after a CN train derailment occurred near the village of Gogama, people in that community south of Timmins are calming down but there are still some concerns about the long term safety for rail traffic in general and oil trains in particular. The big CN locomotive had just crossed the Makami River bridge west of town when suddenly, seven or eight cars back, tank cars began leaving the tracks. The entire 94-car train consisted of tank cars carrying synthetic crude oil from Alberta. Within seconds, 38 of the cars had derailed. Several caught fire. At least five of the cars plunged into the Makami River. It was a violent thing. The old iron bridge which had spanned the river for decades was suddenly ripped off its foundation. Creaking and twisting, it too fell into the river. Despite the scope of the wreck, no injuries occurred. The train crew at the front of the train was able to break off from the wreck with the locomotive and pull several of the tank cars away from the fire. It was the third CN rail train wreck in as many weeks. On Feb. 14, another crude oil tank car train jumped the tracks at a point about 30 kilometres north of Gogama. And then just last week, a third CN train derailed in Hornepayne. For people who have been in a tiny railroad town like Gogama all their lives, it suddenly hammered home the message that something wasn't right.
Derailments put oil train expansion in the crosshairs — After a BNSF Railway oil train derailed and burst into flames Thursday near Galena, Ill., at least one community group has asked the U.S. Army Corps of Engineers to suspend permits for rail expansions along the upper Mississippi River. Of the 70 oil trains a week that leave North Dakota’s Bakken region for coastal refineries, more than half of them funnel through a roughly 400-mile stretch from Minnesota’s Twin Cities to the Quad Cities on the Illinois-Iowa border. BNSF and Canadian Pacific haul both crude oil and ethanol on both sides of the Mississippi River, and the region has become a bottleneck. BNSF alone plans to spend more than $780 million in Minnesota, Wisconsin and Illinois this year to add new track and improve signal systems. Because the projects affect wetlands along the river, the railroads must seek permits under the federal Clean Water Act. And as elsewhere in the country, the permitting process has become a primary tool of community and environmental groups to slow or stop the growth of such rail shipments. After Thursday’s derailment, Citizens Acting for Rail Safety, a group based in LaCrescent, Minn., sent a letter requesting that the corps’ St. Paul District hold off on approving any rail project permits until investigators determined the cause of the derailment and two others since early February.
As crude oil trains rumble through Wisconsin, DNR challenged over rail expansion - Following a fiery train derailment last week in Galena, Illinois, near the Wisconsin border, the Department of Natural Resources is facing a legal challenge over a wetland filling and bridge permit to facilitate more crude oil shipments through the state. The suit says the DNR did not conduct a full environmental impact statement when it granted the permit to Burlington Northern Santa Fe Railway (BNSF) for a second set of tracks through the La Crosse River Marsh. More than 40 oil trains now rumble through the state each week from North Dakota, many with more than 100 tank cars. Some pass through Sauk, Columbia and Jefferson counties. Petitioners are asking the La Crosse County Circuit Court to reverse a permit granted last month and force the DNR to do a more thorough analysis under the Wisconsin Environmental Policy Act (WEPA), a 1972 law that required sound decision-making by state agencies. “As we have seen with recent derailments like the one that happened in Galena, last Thursday, today’s rail traffic is much riskier than a few years ago,” said Ralph Knudson of Citizens Acting for Rail Safety in a statement. “The marsh project being considered is one of a series of projects intended to facilitate even more traffic flow.”
Hennepin County seeks to halt rail traffic by buying key property in Crystal -- Hennepin County jumped in Tuesday to try to thwart two railroad giants from rerouting freight and oil trains through Crystal into the heart of Minneapolis. The County Board directed its staff to buy the central chunk of property where the railroads want to build a connector for trains hauling oil from North Dakota’s Bakken fields. North Suburban Towing Inc. and Thomas Auto Body & Collision currently rent and operate businesses on the site at 5170 W. Broadway in Crystal and had been told to prepare to move. Now they might not have to. County Board Member Mike Opat, who represents the area, said staffers are in exclusive negotiations with the property owner. “I’m confident that we will be able to” buy it, Opat said. BNSF and Canadian Pacific tracks now cross each other in Crystal, but do not connect. With a connector, the trains would slow to 25 miles per hour to turn, a maneuver that could paralyze five intersections in Crystal and Robbinsdale at once. The mile-long trains would continue along Theodore Wirth Park and across Nicollet Island on the Mississippi River, at the edge of downtown Minneapolis. Golden Valley, New Hope and Plymouth also would see more traffic and heavier trains if the connector is built. The county’s goal in acquiring the land would be to prevent the railroads from using their substantial federal powers to take property. Opat said he believes the county’s purpose in acquiring the property — public safety — would supersede the railroads’ authority.
Pipelines or Rail for Fossil Fuels are False Choices - The so called “train bombs” are gaining public attention, mainly due to the media reporting. We have to keep in mind the first rule of reporting news – If it bleeds, it leads. A train derailment with a spectacular fireball is more “entertaining” than a pipeline leak. Transport of fossil fuels by rail is more expensive than transport via pipeline. Due to the cost considerations of rail or pipelines it is obvious the industry would prefer to use a pipeline. The frequency of news reporting around rail accidents involving fossil fuels has put the public in “scare mode” with every train being looked at as a potential disaster. This works to the industry’s benefit in proposing more and more pipelines.The nation has more than 185,000 miles of liquid petroleum pipelines, nearly 320,000 miles of gas transmission pipelines, and more than 2 million miles of gas distribution pipelines. OPS regional offices inspect interstate pipeline systems and intrastate facilities under direct Federal jurisdiction to determine operator compliance with pipeline safety regulations. These facilities include certain municipal and master meter gas systems that by State law are not subject to State regulation or intrastate pipelines in States where the state agency is not participating in the program.However, pipeline operators are responsible for reporting leaks, spills or other accidents to OPS. The data used to compile reports comes largely come from accident/safety-related condition reports submitted by gas and hazardous liquid pipeline operators and annual reports submitted by gas pipeline operators which include information on miles and types of pipelines. In other words – the industry self-reports.OPS only know of accidents/leaks/spills if an inspector happens to be at the right place at the right time, an operator reports it or the “event” is too big to miss. This calls into question the accuracy of statistics and reports. There is a high probability that there are more pipeline “events” than are being reported. Additionally because majority of pipelines are located underground, leaks could go undetected for years.
Time to call them Obama trains -- There was another oil train derailment this week – this time near Galena, Illinois – producing another explosion and smoke cloud that’s being plastered all over the media. It was the third such derailment in three weeks. Left-wing activists have taken to using the term “bomb trains” and are now blaming public officials for not seeking regulatory retribution for the derailments from the oil industry. Which is certainly convenient, for them, I suppose.They think the answer to oil train derailments is to stop producing oil. But really, it’s President Barack Obama who has created this situation for them to exploit. Not so much because the administration has balked at tougher regulations for oil-by-rail shipments, as Reuters reported recently, but because Obama’s intransigence on energy infrastructure has created a shipping bottleneck that has left our rails overrun. The reason for this is that pipeline infrastructure wasn’t in place to take oil from plays like North Dakota’s Bakken oil fields and bring it to market. So, while we’ve been waiting for the pipelines to catch up, oil producers have relied on rail. We badly need alternatives, but that’s where the environmental zealots come in. Led by our zealot-in-chief Barack Obama they’re intent on ensuring that pipeline infrastructure can’t catch up. It’s not just Obama’s intransigence on the Keystone XL pipeline. While the 100,000 barrels per day of capacity that pipeline would be important infrastructure for the North Dakota oil fields, it’s not a silver bullet that would solve this problem. But the blockade on Keystone is symbolic of the larger fight over pipelines. The Sandpiper line, which would run from Tioga, North Dakota, through Minnesota down to Wisconsin is currently being blocked by activists in Minnesota. A pipeline taking oil from the Bakken north into Canada will likely face the same obstacles from the federal government that the Keystone pipeline has. The activists don’t want pipelines, but they also gleefully report every new oil train derailment, leveraging them into calls for action on further restrictions to oil production.
America is literally on fire: How out-of-control oil spills are destroying our population centers - It’s a good bet that someplace in North America is on fire right now, raging so out of control that officials have to let it burn itself out. And it happened because highly flammable oil was placed on a train for shipping, and something went drastically wrong. Because so much oil is transported by rail these days, the probabilities of catastrophe have elevated significantly. We haven’t ruined a major population center yet only through dumb luck; and we haven’t cracked down on this treacherous practice only because of the enormous power of the industry. Last Thursday, 21 oil tanker cars derailed near Galena, Illinois, and five of them burned for three days. Firefighters gave up combating it because of the intensity of the heat. Tanks tumbled into a bank along the Mississippi River, threatening the Upper Mississippi National Wildlife and Fish Refuge. The EPA said the fire posed an “imminent and substantial danger” to the river. On Saturday, another train caught fire near Gogama, Ontario, damaging a bridge and sending five tank cars into the water. A similar train fire occurred on Feb. 14 near the Ontario town of Timmis, and on Feb. 16 in the almost perfectly named town of Mount Carbon, West Virginia. In all, over the past five weeks there have been five crude oil train derailments, threatening ecosystems and human health. You can follow all the “action” at the DOT-111 Reader. The industry estimates that 9,500 carloads of oil moved along rail lines in 2008. In 2014 that number jumped to 500,000 carloads, transporting 15 billion gallons of crude. By some estimates that could double this year. Moreover, harder-to-reach oil, from the Bakken shale of North Dakota to the tar sands of Alberta, Canada, is more flammable and explosive, igniting at much lower temperatures, according to U.S. regulators.
Chesapeake Energy Sees History Repeating Itself -- Despite its best intentions, Chesapeake Energy can’t seem to catch a break. The company was on the wrong side of natural gas when its price plunged in 2012, and the situation appears to be repeating itself after the price of oil plummeted. Now Chesapeake Energy expects, once again, to announce a big asset writedown in the first quarter. In its annual report, Chesapeake Energy laid out a number of risk factors to the business, as it does each year. Most of the risks are probably both familiar and obvious to investors. For example, the company said oil and gas prices could go down or it might drill dry holes, both of which would impact earnings results. Other risks are only familiar to investors based on the company’s history. One of those ghosts from Chesapeake’s past is apparently about to haunt the company again. The company stated in this year’s annual report that “We expect to write down the carrying value of our oil and natural gas properties in 2015 if commodity prices remain low.” It noted that it is required under accounting rules to write down the carrying value of its oil and gas assets if capital costs exceed the quarterly ceiling limit, which is based on average commodity prices as of the first day of the month over the trailing-12-month period. Given where prices are now, a writedown is coming, and not for the first time. Per the annual report: Such writedowns can be material. For example, in 2012, we reported a non-cash impairment charge on our oil and natural gas properties of $3.315 billion, primarily resulting from a 10% decrease in trailing-12-month average first-day-of-the-month natural gas prices as of September 30, 2012, as compared to June 30, 2012, and the impairment of certain undeveloped leasehold interests. That writedown came at a bad time for the company as its cash flow was dropping and its debt was far too high. Chesapeake Energy was forced to take a number of steps to fix its balance sheet, including selling assets at fire-sale prices. However, it survived, and the balance sheet is now the strongest it has been in the company’s history.
U.S. oil production still surging - Econbrowser: The EIA is now reporting that U.S. field production of crude oil averaged almost 8.7 million barrels a day in 2014. That’s up 1.2 mb/d from 2013, and is only 0.9 mb/d below the all-time U.S. peak in 1970. Production of oil by means of fracturing shale and other tight formations is the main reason. The EIA drilling productivity report estimates that production from the Permian, Eagle Ford, Bakken, and Niobrara– the main tight oil producing areas– was 1 mb/d higher in 2014 compared to the previous year. I used that estimate to update my graph of U.S. production by source. The tight oil story is pretty dramatic. And it seems to be continuing. The February drilling report estimates production from those 4 regions will be almost 0.3 mb/d higher this month than it was in December. That’s leading to record levels of U.S. inventories. How much longer will production keep going up? Much of the new production can’t be profitable at current prices, and the number of drilling rigs operating in the tight oil areas has fallen 12% since September. That presumably means less than a 12% reduction in production from new wells, for two reasons. First, it is the least promising new prospects that will be cut first. Second, there has been a learning curve improving productivity of new wells. Average oil production per rig (in barrels per day) across Permian, Eagle Ford, Bakken, and Niobrara, January 2007 to January 2015. Data source: EIA. Working against these is the fact that production from existing wells continues to decline. But at the moment, it seems further adjustments on the part of drillers will be necessary in order to bring the supply of oil in balance with the demand.
Oil Price Faces Another 20% Drop Due To Contango Math -- Want to know where oil prices are headed? You need to understand the economics of the floating storage play, Soc Gen says. As we noted on Friday, retail investors looking to be the next Jed Clampett havepiled into the U.S. Oil fund over the past several months, presumably unaware of the extreme contango in the market. That said, it’s not just retail investors who are itching to dive in. Here’s Soc Gen: The motivation to buy it [is] widespread and not always based on traditional market analysis – consumers [are] keen to lock in lower prices with their newly expanded credit lines, due to the decline in the notional value of their existing hedges. Endowments and Sovereign Wealth Funds (SWFs) [are] under pressure to use the “opportunity” to claw back recent losses.. At its core, the trade is simple: A trader buys physical oil now at a low price, and simultaneously sells paper forward at a high price, thus locking in a profit margin. If this profit margin is higher than the cost of fixing a vessel to store it on, the trade works, and it should happen. Although, as Reuters notes, “the capacity of U.S. commercial oil storage tanks has expanded by a third since 2010,” the global stock increase is set to be nearly 3 times bigger than during the last oversupply period (in the aftermath of the crisis). Given that floating storage was used in 2008-2009, it’s likely that cheaper on-land storage capacity will dwindle necessitating the use of crude carriers this time around as well.
US May Run Out Of Oil Storage Space As Soon As June -- On Sunday, we noted that the economics of the floating storage play could spell further declines for crude prices. With a global stock increase that’s some 3 times larger than that which occurred during the last period of oversupply, expect cheap, on-land storage to prove inadequate necessitating the use of VLCCs. According to Soc Gen, determining how far the front end of the curve would have to fall in order for traders to arbitrage the difference between buying and storing physical oil and selling paper forward is a good indicator for where prices may find a floor: ...the bank is looking for the front end of the curve to fall until the contango is wide enough to make the floating storage play enticing. The example Soc Gen uses shows that Brent needs to see ~$49 before the trade is sufficiently profitable. The takeaway, we noted, is that storage availability and contango should be taken into account when considering the future direction of oil prices. With production still climbing despite the decline in rig count, it seems supply may, in short order, outstrip storage capacity for as the following two charts show, crude storage capacity in the US is now at 60% and is set to be completely exhausted by June:
Goldman Blames Weather For Stronger Oil Prices, Sees WTI Sliding Back To $40 -- As we noted over the weekend when we showed a simple contango math calculation by SocGen according to which storage costs imply another 20% drop in Brent prices, now none other than Goldman - which has been oddly bearish on oil over the past few weeks - says that its Brent forecast remains at $40/bbl for two simple reasons: i) the global inventory glut is set to resume and ii) it's the weather's fault there has been a slowdown in the crude build-up.
The oil price: Dead cat rally | The Economist -- STRONG demand and tight supply have stoked a rise in the oil price. Last week, it reached more than $60 for Brent (the benchmark price for North Sea oil) and $50 for West Texas Intermediate, the main American price. Last year’s downward slide seems over. Goldman Sachs, a bank which was forecasting oil at $40 for the next two quarters, now says the risk is “skewed to the upside”, meaning that the likely price is higher. Some of the factors behind this bounce are temporary. Unrest in Libya and sandstorms in Iraq have hit production. America had an unusually cold winter, and Brazil has a drought, boosting demand. But these disruptions will pass—or in Libya’s case cannot get much worse. OPEC production is likely to recover. The cartel of oil-exporting countries shows no sign of flinching from its decision last year to keep market share by maintaining production. A short period of pain now, the body’s Gulf masterminds reckon, is better than a drawn-out one. But if the aim is to dent non-OPEC production, it is proving an elusive goal. Production is up in Russia and Brazil, and continuing even in Nigeria. Most importantly, lower prices are not crippling American production of “light tight” oil from the shale beds of North Dakota, Ohio and other places. The least profitable drillers are going bust—but others are ploughing ahead. The price of labour and equipment is plummeting, and finance is still abundant. More productivity gains lie ahead, with better fracking and horizontal-drilling techniques.
Crude Pops & Drops As API Reports Unexpected Inventory Draw - Against expectations of a 4.75 million barrel build, API reported an estimated inventory draw of 404,000 barrels - potentially ending the 8 week build streak if DOE confirms (following last week's huge DOE-reported 10,303 million barrel build). The initial reaction of the machines was a jerk higher, perfectly tagging $49.00, before tumbling back into the red.
Oil slides as supply balloon grows: A government report showing an increase in already-record crude supplies fanned speculation the market is setting up for a selloff that could take oil prices to a new cycle low. West Texas Intermediate futures fell below $48 per barrel after the morning report, but bounced back to close just slightly lower at $48.17, down 12 cents. Futures for Brent, the international benchmark, traded higher, just below $58 a barrel. Crude oil supplies rose 4.5 million barrels in the last week to 448.8 million—a ninth week of gains and an 80-year high, according to the Energy Information Administration. Oil stored at Cushing, Oklahoma, the physical delivery point for WTI futures, rose by 2.3 million barrels to 51.5 million."It says a lot of the world's oversupply is finding its way to storage in North America," Compared to this time last year, crude oil inventories are over 20 percent higher." Many oil analysts expect another violent selloff in crude this spring. Some project that to take WTI closer to the $40 level or lower, carving a new bottom for prices. WTI's recent closing low was $44.53 per barrel on Jan. 29, before moving higher during February. Production of U.S. oil last week rose to a multidecade record of 9.37 million barrels a day, from 9.32 million the week earlier. Weekly data show oil production has consistently surpassed 9 million barrels a day since November in the longest stretch since the 1970s. "It says prices are going to remain under pressure," said Lipow, who expects oil to retest its recent low and head to $40 before the next selloff is over.
Crude Price Battered After Another Huge Inventory Increase - The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 4.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 448.9 million barrels, the ninth consecutive week of a higher total than at any time in at least 80 years. In a Tuesday update to its Short-Term Energy Outlook, the EIA lowered its forecast 2015 average price per barrel of West Texas Intermediate (WTI) crude oil from $55.02 to $52.15 and raised its forecast for the yearly average price for a barrel of Brent crude from $57.56 a barrel to $59.50. The continuing builds in crude oil storage are identified as the reason for the wider differential between the two benchmark crudes. Total gasoline inventories decreased by 200,000 barrels last week, but they remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the EIA’s measure of consumption) averaged over 8.7 million barrels a day for the past four weeks, up by 2.8% compared with the same period a year ago. Distillate inventories increased by 2.5 million barrels last week but remain in the lower half of the average range. Distillate product supplied averaged 4.1 million barrels a day over the past four weeks, up by 12.8% when compared with the same period last year. Distillate production averaged 4.8 million barrels a day last week, up about 200,000 barrels a day compared with the prior week’s production.
Bigger Than Expected Inventory Build & Record Production Sparks WTI Slump To 6-Week Low -- An initial kneejerk higher after last night's surprise API inventory draw is long forgotten as USD strength (and no signs of global growth returning) has dragged WTI Crude back to $48.01 - its lowest in almost 5 weeks... As traders awaited today's DOE inventory/production report, it appears expectations were that there will be a 4.75 million barrel build, notably divergent from API's print... and sure enough DOE printed 4.512 million barrels - the ninth weekly build in a row. That immediately sent WTI tumbling beloiw $47.50 on heavy volume. Storage concerns grow as Cushing rose a greater-than-expected 2.32mm barrels and production hit a new record high at 9.366 mm b/d.
The U.S. Has Too Much Oil and Nowhere to Put It - Seven months ago the giant tanks in Cushing, Okla., the largest crude oil storage hub in North America, were three-quarters empty. After spending the last few years brimming with light, sweet crude unlocked by the shale drilling revolution, the tanks held just less than 18 million barrels by late July, down from a high of 52 million in early 2013. New pipelines to refineries along the Gulf Coast had drained Cushing of more than 30 million barrels in less than a year. As quickly as it emptied out, Cushing has filled back up again. Since October, the amount of oil stored there has almost tripled, to more than 51 million barrels. As oil prices have crashed, from more than $100 a barrel last summer to below $50 now, big trading companies are storing their crude in hopes of selling it for higher prices down the road. With U.S. production continuing to expand, that’s led to the fastest increase in U.S. oil inventories on record. For most of this year, the U.S. has added almost 1 million barrels a day to its stash of crude supplies. As of March 11, nationwide stocks were at 449 million barrels, by far the most ever. Not only are the tanks at Cushing filling up, so are those across much of the U.S. Facilities in the Midwest are about 70 percent full, while the East Coast is at about 85 percent capacity. This has some analysts beginning to wonder if the U.S. has enough room to store all its oil. Ed Morse, the global head of commodities research at Citigroup, raised that concern on Feb. 23 at an oil symposium hosted by the Council on Foreign Relations in New York. “The fact of the matter is, we’re running out of storage capacity in the U.S.,” he said.
Cushing Crude Build Concerns Send WTI To $47 Handle -- Traders are citing Genscape data on Cushing crude storage builds and the re-opening of the Houston Ship Channel (enabling more crude imports into PADD 3) for taking away the overnight hope/hype in WTI and dragging it back to a $47 handle. It appears the June deadline continues to loom large.
Record U.S. Oil Glut May Fill Storage, Cut Prices -- A record surplus in U.S. crude inventories may soon strain the nation’s storage capacity, renewing a slump in prices and curbing its output, according to the International Energy Agency. The IEA boosted estimates for U.S. oil production this year as cutbacks in drilling rigs have so far failed slow its output. Crude inventories threaten to fill tanks, with the nation’s largest oil-storage hub in Cushing, Oklahoma 70 percent full, the agency said. The IEA raised its 2015 estimate of global oil demand by the most since it was introduced in July. “Stocks may soon test storage capacity limits,” said the Paris-based adviser to 29 nations in its monthly market report. “That would inevitably lead to renewed price weakness, which in turn could trigger the supply cuts that have so far remained elusive.” Oil has rallied about 20 percent in London over the past two months as U.S. drillers idled an unprecedented number of rigs in response to the biggest price collapse since 2008. Crude slumped 61 percent from June to January after OPEC signaled it would leave shale producers and other suppliers to deal with a global glut. West Texas Intermediate crude, the U.S. benchmark, fell $1.69, or 3.6 percent, to $45.36 a barrel at 11:17 a.m. on the New York Mercantile Exchange. Brent, the international benchmark, dropped $1.02 to $56.06 a barrel. Both grades are heading for weekly declines.
The Truth About U.S. Crude Storage: Despite the popular narrative that we keep hearing, the U.S is not running out of crude oil storage. Yet there are those who are predicting that oil prices are going to fall to $20 or $30 a barrel, pointing to the crude oil storage numbers and suggesting that we are near maximum capacity and therefore a price collapse is imminent. (Although Goldman Sachs did some backpedaling on their forecast this week). The argument goes something like this: : US running out of room to store oil; price collapse next? At first glance, the argument seems to be pretty straightforward. But let’s dig into the data a bit. Admittedly, if you look at the storage numbers in the nation’s most important oil storage hub (and the price settlement point for West Texas Intermediate on the New York Mercantile Exchange) in Cushing, Oklahoma, it’s easy to form the impression that storage is filling up and an oil price crash is inevitable: Any time someone claims that we are nearly full on crude oil storage, I ask them to quantify that. “Highest levels in 80 years” isn’t quantified. You could be at the highest levels in 80 years and only 10% full. And in the graphic above, one thing that is missing is how much storage volume is actually available at Cushing. The answer is 71 million barrels (with more storage under construction). So even if inventories there continued to build at the recent pace, it would be nearly four months before Cushing would actually be full. But, there are several mitigating factors that minimize this possibility.
Rig count keeps falling: Producers laid down more rigs this week as the fallout from lower oil prices continued to slow drilling across the U.S. Data from oil field services company Baker Hughes showed the number of rigs chasing crude oil fell by 56 to 866 this week, its lowest level since March of 2011. The count has now declined for 14 consecutive weeks, according to Baker Hughes data. Combined, both oil and gas rigs fell by a total of 67 to 1,125. Rigs chasing natural gas fell by 11 to 257 and miscellaneous rigs were unchanged at two. The rig count has fallen sharply as producers have cut back on drilling and other expenses due to lower crude oil prices. Last week, the oil rig count fell by 64 to 922. Analysts have watched the figures closely hoping that a slowdown in drilling activity would lead to less production and stem the tide of crude oil that has pushed supply past demand. But despite a significantly lower rig count, production has yet to show signs of much decline. In its most recent weekly report released Wednesday, the U.S. Energy Information Administration estimated that U.S. production hit its highest level in decades, about 9.4 million barrels per day, in the week ending March 6.
Rig Count Drops For 14th Week In A Row, Fastest Rate In 29 Years -- For the 14th week in a row, the US rig count fell 67 rigs to 1125, (a 5.6% drop to 41.4%, bigger than March 09's previous record 14-week decline of 41%). The decline in rigs continues to track the lagged oil price perfectly but has shown absolutely no impact on production levels as firms push for cashflows in a race to the bottom. As one analyst rightly noted, while rig counts continue to drop, companies are high-grading (shifting to more efficient wells), "the real thing that needs to change is U.S. production and that is not happening at the moment." April WTI Crude tested $45.01 before the data and bounced very modestly on the data.
US oil and natural gas rig count drops by 67 to 1,125 — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. fell by 67 this week to 1,125 amid depressed oil prices. Houston-based Baker Hughes said Friday that 866 rigs were seeking oil and 257 exploring for natural gas. Two were listed as miscellaneous. The count is down from 1,809 rigs active a year ago. Among major oil- and gas-producing states, Texas lost 37 rigs, Louisiana declined by seven, Oklahoma was down five, North Dakota and Ohio four each, New Mexico and Wyoming three apiece, Colorado two, and Alaska, Kansas and Utah by one each. West Virginia gained one rig. Arkansas, California and Pennsylvania were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.
US crude settles at $44.84 per barrel; down 4.7% - U.S. crude settled at $44.84 per barrel on Friday's session, dropping $2.21 or 4.7 percent. The settle marks the lowest close since Jan. 28. Oil futures were little changed after the pace of rig reductions in U.S. oilfields slowed moderately in the last week, according to data from Baker Hughes. The number of rigs exploring for oil in the United States fell by 56, compared with a 64-rig reduction in the prior week. Total U.S. oil rigs stood at 922, compared with 1,461 at the same time last year. Canadian drillers took 65 rigs offline in the last week, Baker Hughes reported. U.S. crude earlier fell more than 4 percent after the International Energy Agency said that a global oil glut is building and U.S. oil production shows no signs of slowing. The IEA, which advises industrialized countries, said in its monthly report that the United States may soon run out of empty tanks to store crude, which would put additional downward pressure on prices.U.S. crude finished Friday's session down $2.21 at $44.84. Brent crude fell $2.16 to $55.13.
The US Oil Bust Just Got Worse - Wolf Richter - The price of oil did today what it has been doing for a while: it waits for a trigger and plunges. As I’m writing this, West Texas Intermediate is down 4.4%, trading at $44.99 a barrel, less than a measly buck away from this oil bust’s January low. It’s down over 20% from the peak of the most recent sucker rally. US oil drillers have been responding by slashing capital expenditures, including drilling, in a deceptively brutal manner. In the latest week, drillers idled 56 rigs that were classified as drilling for oil, according to Baker Hughes. Only 866 rigs were still active, down 46.2% from October, when they’d peaked at 1,609. In the 22 weeks since, drillers have taken out 743 rigs, the most dizzying cliff dive in the data series, and probably in history: You’d think this sort of plunge in drilling activity would curtail production. Eventually it might. But for now, the industry has focused on efficiencies, improved drilling technologies, and the most productive plays. Drillers are trying to raise production but with less money so that they can meet their debt payments. Thousands of wells have been drilled recently but haven’t been completed and aren’t yet producing. This is the “fracklog,” a phenomenon that has been dogging natural gas for years. So US oil production hit another record of 9.366 million barrels per day for the week ended March 6, according to the Energy Information Administration’s latest estimate. This chart shows how the rig count (red) has plunged while production (black) continues to soar: But demand is not living up to the level of production and imports. As an inevitable result, US crude oil inventories are piling up. Excluding the Strategic Petroleum Reserve, crude oil stocks, according to the EIA, rose by 4.5 million barrels in the latest reporting week, to a record 448.9 million barrels. A more modest rise than in prior weeks, but the ninth week in a row of increases. Crude oil stocks are now 78.9 million barrels, or 21.3%, higher than at this time last year. Note the beautiful spike: So when is US storage capacity going to be full? That event would cause all sorts of havoc in the oil markets, including a terrible plunge in price. With no place to put their oil, some production companies would have to turn off the tap and leave the oil in the ground. That would bring production down in a hurry, but it would add to the pent-up supply, the “fracklog,” thus dragging out the bust even further.
Everyone Is Guessing When It Comes To Oil Prices -- Predicting and diagnosing the trajectory of oil prices has become something of a cottage industry in the past year. But along with all of the excess crude flowing from the oil patch, there is also an abundance of market indicators that while important, tend to produce a lot of noise that makes any accurate estimate nearly impossible. First there is the oil price itself. The crash began last summer, and accelerated in November. Since then, predictions for oil prices for 2015 have been all over the map – from Citigroup’s $20 per barrel, to T. Boone Pickens’ prediction of a return to $100 per barrel. OPEC’s Secretary-General even said prices could shoot up to $200 in the coming years as a result of overly drastic cutbacks and a failure to invest in new production. With those estimates at the extremes, most analysts think prices will continue to seesaw within a rough band of $40 to $70 for the rest of the year. Aside from oil prices, the weekly measurement of the number of rigs still in operation has become one of the most watched indicators out there. Weekly rig counts from Baker Hughes have sparked the Twitter hashtag #Rigcountguesses, to which energy analysts post their predictions. For the week ending March 6, another 75 oil and gas rigs were pulled from operation, taking the total down to 1,192. That is the lowest level in years, and 43 percent lower than its 2014 peak. A new metric that has popped up in recent weeks is the level of available storage. Excess oil has been stashed in storage tanks around the world, but government data suggests that storage space is starting to run low. The EIA says that about 60 percent of total U.S. storage is filled, a jump from 48 percent a year ago. Regional figures are higher, for say, the East Coast (85 percent). Cushing, Oklahoma could begin to run out of space this spring. Another key number to keep in mind is the number of drilled but uncompleted wells out there. There are an estimated 3,000 wells that have not been completed as producers wait for prices to rebound. Instead of storing oil in tanks, simply holding off on finishing a well can allow drillers to “store” oil in the ground. Once completed, however, the backlog of wells will push down prices.The most important indicator for trying to figure out where prices are going is actual levels of oil production. In the face of spending cut backs, drops in rig counts, and ongoing price pressure, oil production continues to defy gravity. Output continues to climb. At the end of February, the U.S. was producing 9.3 million barrels per day, up 10 percent since prices began crashing in June 2014, and even up 2 percent since the beginning of 2015. Low prices have yet to cut into the trend line, but will have to at some point soon.
The Oil Glut And Low Prices Reflect An Affordability Problem -- For a long time, there has been a belief that the decline in oil supply will come by way of high oil prices. Demand will exceed supply. It seems to me that this view is backward–the decline in supply will come through low oil prices. The oil glut we are experiencing now reflects a worldwide affordability crisis. Because of a lack of affordability, demand is depressed. This lack of demand keeps prices low–below the cost of production for many producers. If the affordability issue cannot be fixed, it threatens to bring down the system by discouraging investment in oil production. This lack of affordability is affecting far more than oil products. A recent article in The Economist talks about LNG prices being depressed. LNG capacity ramped up quickly in response to high prices a few years ago. Now there is a glut of LNG capacity, and prices are far below the cost of extraction and shipping for many LNG suppliers. At least temporary contraction seems likely in this sector. If we look at World Bank Commodity Price data, we find that between 2011 and 2014, the inflation-adjusted price of Australian coal decreased by 41%. In the same period, the inflation-adjusted price of rubber is down 58%, and of iron ore is down 59%. With those types of price drops, we can expect huge cutbacks on production of many types of goods.
The Real (and Troubling) Reason Behind Lower Oil Prices -- I am obsessed with how the top tier of finance has undermined, rather than fueled, the real economy. Ruchir Sharma, head of emerging markets for Morgan Stanley Asset Management and chief of macroeconomics for the bank, posited a fascinating idea: the major fall in oil prices since this summer may be about a shift in trading, rather than a change in the fundamental supply and demand equation. Oil, he says, is now a financial asset as much as a commodity. The conventional wisdom about the fall in oil prices has been that it’s a result of both slower demand in China, which is in the midst of a slowdown and debt crisis, but also the increase in US shale production and the unwillingness of the Saudis to stop pumping so much oil. Sharma rightly points out, though, that supply and demand haven’t changed enough to create a 50% plunge in prices. Meanwhile, the price decline began not on the news of slower Chinese growth or Saudi announcements about supply, but last summer when the Fed announced that it planned to stop its quantitative easing program. Sharma and many others believe this program fueled a run up in asset buying in both emerging markets and commodities markets. “Easy money had kept oil prices artificially high for much longer than fundamentals warranted, as Chinese demand and oil supply had started to turn back in 2011, and oil prices have now merely returned to their long-term average,” says Sharma. “The end of the Fed’s quantitative easing has finally pricked the oil bubble.” If this is the case, the fact that hot money could have such an effect on such a crucial everyday resource is worrisome. And the fact that the Fed’s QE, which was designed to buoy the real economy, has instead had the unintended and perverse effect of inflating asset prices is particularly disturbing. I think that regulatory attention on the financialization of the commodities markets will undoubtedly grow; for more on how it all works, check out this New York Times story on Goldman’s control of the aluminum markets. Amazing stuff.
Low oil prices: Who are the losers? - As we are repeatedly told, every consumer is a winner because lower oil prices mean that it is cheaper to drive and fly, to ship goods, and to buy fuels and feedstocks for industrial production. Aggregate savings would be enormous: selling some 4.5 billion tons of annual global crude oil output at half price saves about $1.7 trillion, more than 2 percent of the world’s economic product. But for the governments of oil-producing countries, now led by the United States and with Canada the fifth-largest producer, that is also $1.7 trillion less to be taxed in order to cover the ever-higher burden of non-discretionary spending on social support and health care. Of course, having more disposable income, the consumers, including those in oil-producing countries, could save some of those sudden gains and stimulate parts of the economy with the rest. And on a state, provincial, or local level those savings are not so appealing to the residents of Oklahoma or Alberta, or to the inhabitants of some of Norway’s or Mexico’s coastal towns, where oil companies are already pulling back, cancelling rig contracts, postponing new developments, and letting some workers go, and where a longer spell of low prices would bring higher unemployment and lower house prices, to say nothing of rising budget deficits. And here is a quote from a recent message I received from Oklahoma: My oldest friend signed a lease in Osage county in August. It had 50 working wells. He was going to rebuild them and then do some horizontal drilling. But now, he can’t afford to do anything but band-aid the existing pumps and hope prices go up enough to service his debt. None of the oil folk are in a position to stop the pumping, therefore it’s exacerbating the supply. They’re going to pump or go broke. It’s a weird oil field cash-flow psychosis. It’s happened before.
Imbalance in Crude Oil Price Will Even Out Soon: OPEC Chief - -- The global crude-oil market will return to balance in the second half of this year as demand growth picks up and high-cost producers trim output amid lower prices, OPEC Secretary-General Abdalla El-Badri said. Consumption in 2015 will increase by 1.2 million barrels a day after rising more slowly than expected last year by less than 1 million barrels a day, El-Badri said Sunday at a conference in Manama, Bahrain. Crude has lost half its value since June, raising risks for suppliers with comparatively high costs of production. The U.S. is idling rigs and delaying wells even as it pumps oil from shale and other deposits at the fastest pace since 1983. Cheaper crude is a boon to countries such as China and India that rely on energy imports, and OPEC’s decision on Nov. 27 to maintain production rather than sacrifice market share has added to the glut. “If we made a cut in the November meeting, then we would have needed to make another cut in January, and then we would need another cut in June as supply will keep increasing from non-OPEC,” El-Badri said. Non-OPEC supply has grown by 6 million barrels a day since 2008 while production by members of the Organization of Petroleum Exporting Countries has remained at about 30 million barrels, he said. Brent oil futures, a benchmark for more than half of the world’s crude, dropped 0.2 percent today to $59.62 a barrel in London.
$1trn oil, gas projects could be cancelled over oil price slump - ArabianBusiness.com: The steep fall in energy prices will hit investment in oil and gas projects worldwide and the industry may cancel about $1 trillion of planned projects globally in the next couple of years, a senior Saudi Aramco executive said on Monday. "Challenges during down cycles are more complicated today than before...At this moment the global industry is poised to potentially cancel about $1 trillion in capital funding," Amin Nasser, senior vice president for upstream operations at the Saudi oil giant, told a conference in Bahrain. Speaking to reporters later, Nasser said the $1 trillion figure included projects that might merely be delayed, not just those that could be cancelled outright. "What we've heard from the industry is that there is $1 trillion of planned projects that will be dropped or deferred over the next couple of years because of what's happening," he said, without elaborating on the source of that estimate.
Oil Producers Could See "Regime Change": Bloomberg -- As we’ve noted previously, the US-Saudi joint effort to force the Kremlin into cutting Assad loose (the end goal of course being to install a government that will acquiesce to mainlining Qatari natural gas through Syria straight into Europe thus breaking Gazprom’s stranglehold), has resulted in a bit of collateral damage for the world’s less geopolitically important oil producing countries (take Venezuela for instance, where collapsing crude prices have exacerbated an already abysmal scenario, leading to, among other tragic outcomes, a shortage of soap and condoms). Bloomberg suggests that the destabilization of already fragile political and economic situations could lead, in short order, to “regime change” across oil producers: The large petrostates are varying degrees away from the Weberian ideal of the rule of law. That could spell trouble. Low oil prices threaten the ability of these inefficient, sometimes corrupt states to service their debts and may curtail the government spending that keeps the masses content. This may in turn ignite demands for a fairer distribution of these dwindling oil proceeds and, possibly, regime change.
The big drop: Riyadh’s oil gamble - FT.com: It was October 7, and the price of oil had been falling precipitously since June. Everybody wanted to know when Saudi Arabia would take charge and stem the plunge. “Of course you’re going to cut production,” declared one guest. “What makes you think we’re going to cut?” the Saudi official replied. The throwaway remark, recounted by one of the attendees, reverberated across markets. It was the first sign that Saudi Arabia would not come to the oil market’s rescue, shattering long-held assumptions about the kingdom’s oil policy and shaking up a world energy order in place for decades. During periods of instability, the Saudis have adjusted their production to restore balance. But last year, as concerns about oversupply escalated, the kingdom changed tack and refused to act as the oil market’s safety net. Cutting output, Saudi Arabia believed, would only help its rivals — and it was time to take a stand. A month later, with crude still falling, Saudi Arabia strong-armed its Opec peers into supporting its decision not to intervene in the market. Mr Naimi would later describe this moment as “historic”. Armed with $750bn in foreign exchange reserves, Saudi Arabia led a battle against high-cost producers — from the US to Brazil and Russia — betting that a period of lower prices would force them to cut their output. The tactic might hurt revenues in the short term, the reasoning went, but it was necessary to protect market share for the long term. The move had a huge and immediate impact. The budgets of big oil exporting countries were thrown into disarray. Energy companies had to tear up their investment plans. Financial markets were rocked. The shift in Saudi oil policy that was crystallised between June and October has been the subject of intense speculation. Some suspected it was rooted in geopolitics: one theory held that the Saudis, acting under US influence, deliberately sought to undermine rivals Russia and Iran. But a close examination of Saudi actions suggests an unexpected series of global political events and — crucially — a misreading of the market were the driving forces behind Riyadh’s gamble.
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