Sunday, May 3, 2015

an oil glut without drilling rigs; production, inventories and the fracklog..

we got rid of another 27 drilling rigs this week, the 21st week in a row that the rig count fell from the prior week, the longest and steepest such decline in drilling activity in US history...Baker Hughes reported that the number of oil rigs operating in the US this week fell by 24 to 679, while gas rigs fell by 3 to 222, and miscellaneous rigs working were unchanged at 4, leaving 905 rigs still being operated on May 1st; that's down from 1854 in the same week last year, when 1527 rigs were drilling for oil, 323 were drilling for gas, and 4 were classified as miscellaneous...this week’s totals are also down from the recent peak of 1609 oil rigs that were operating during the week ending October 10th, and the recent peak of 356 gas rigs that were operating during the week of November 11th....all 27 rigs taken out of service this week had been based on land, leaving 868 on land; the offshore rig count was unchanged at 34 and 3 rigs remained on inland waters...of the types of drilling rigs still operating, 699 were horizontal rigs, down from 720 last week and 1247 a year ago, 113  were vertical, down from 212 last week and down from 396 a year ago, and 93 were directional; up from 91 last week but down from 211 a year ago, with the horizontal rig count down from the record 1372 set during the week of November 21st... 

once again, most of the rigs idled had been operating in Texas, where the rig count was down by 13 to 380, with the shutting down of 8 rigs in the Permian Basin and 5 rigs in the Eagle Ford...another 4 rigs that had been operating in the Mississippian were idled, leaving 25, as Oklahoma saw 7 fewer rigs this week...drillers also shut down 2 rigs each in New Mexico and Pennsylvania, while Alaska, Arkansas, Kansas, and Louisiana each saw one rig idled...meanwhile, both Wyoming and North Dakota saw an additional rig added, while the rig counts for California, Colorado, Ohio, Utah and West Virginia were unchanged...

meanwhile, US production of oil rose for the 1st time in three weeks during the week ending April 24th, inching up to 9,373,000 barrels a day, from 9,366,000 barrels a day the prior week, still 4.7% higher than the 8,951,000 barrels per day being produced when oil rigs peaked on October 10th, and up 12.2% from our production of 8,352,000  barrels a day during the 4th week of April last year...on the other hand, our oil imports slipped a bit, falling by 319,000 barrels per day from the prior week to 7.4 million barrels per day during the week of the 24th...according to the weekly Petroleum Status Report (62 pp pdf) from the EIA, our crude oil imports still averaged over 7.6 million barrels per day over the last four weeks, just 0.9% below the same four-week period last year...that's still more oil than we're using, though, because for the week ending the 24th, U.S. commercial crude oil in storage increased by 1.9 million barrels to a new record of 490.9 million barrels, 22.9% higher than the 399.4 million barrels we had stored in the same week last year.. 

the chart below, from Zero Hedge, gives us a good visualization of how our oil production has hardly been affected by the 57% reduction of oil drilling rigs in operation over the past 6 months....the weekly count of operating oil rigs since 2011 is shown in red and indicated on far right logarithmic scale, which in turn is superimposed on a graph of our oil production in thousands of barrels of oil output per day, shown in blue by the inner right scale...we can see that our oil production had continued to rise uninterrupted over the past 4 years, nearly irrespective of the count of oil drilling rigs operating at any point over that time, and has only started to decrease slightly as of the middle of March, while the oil rig count crashed from 1609 in early October to 679 currently...

May 1 2015 oil rig count vs production

furthermore, many of the rigs that have been operation over the past 6 months have not yet even resulted in productive wells, because operators have been deferring completion due to the low price environment...known as the fracklog, these are wells that have been drilled but not yet fracked, sometimes because the oil and gas companies are waiting for a higher price for their product, other times because their budgets don't yet allow for all the wells they've drilled to be completed.....Moody's reports that North American producers have cut their capital spending 41% so far this year, and since fracking a well and putting it into production can account for as much as three-quarters of its total cost, slowing completions has become the way that some companies are reining in their outlays...and as you're all aware, a fracked well has the greatest output during the initial months of its production, and then it quickly falls off, dropping by as much as 80% after 2 if the oil companies believe that prices will be higher in the future, it only makes sense to hold off on that initial rush of oil (or gas) output until prices are higher, rather than sell it now while US prices are still below $60 a barrel and natural gas prices have been just above 20 year lows...according to a March interview with Continental Resource CEO Harold Hamm, about 85 percent of U.S. wells aren't being completed at these prices...

the graphic below, from a recent Bloomberg article titled U.S. Shale Fracklog Triples as Drillers Keep Oil From Market, gives us an idea of just how many wells are in this limbo-like stage, where they have been drilled but not completed...included within that graphic are smallish graphs in turquoise which show the count of uncompleted wells (wells that have been drilled but not fracked) over the period from 2013 to February of this year for each of the major basins that Bloomberg intelligence investigated...they report that as of February, there were 4,731 wells drilled but not yet fracked, and hence not yet producing....the lion's share of those are in Texas, where you can see that 1540 wells in the Permian Basin and 1250 wells in the Eagle Ford have been drilled but have not yet been fracked, representing oil and gas still in the ground that could be quickly produced should the price be right...also note that there are 401 uncompleted wells in Pennsylvania, where this week we learned that the natural gas was being delivered to customers at the lowest price in 19 years, in a state where utilities are required to pass along the producer price of natural gas without a price change...also note that Ohio drillers have built up a fracklog of 324 unfracked wells, which would amount to nearly 22% of the 1482 horizontal wells ever drilled in Ohio since fracking started; that's future production that can't go elsewhere if we enact a severance tax...according to Bloomberg, these totals represent daily production of about 332,000 barrels of crude being left in the ground, effectively stored in the shale, such that if they were all fracked in short order, it would be like adding another Libya to the global oversupply...alternatively, we could just about shut down all the rigs in the country and still see oil and gas production rise for another half year...

fracklog via Bloomberg, April 23

April 2015 Febraury fracklog

otherwise, it's been a quiet news week in the oil patch, with no news of any blockbuster studies or of fiery oil bomb train derailments...the Transportation Department did announce an agreement with Canada to impose tougher safety standards on trains hauling crude, which will require 9/16th-inch steel frames on tankcars rather than the 7/16th-inch frames now in use, and mandate a new braking standard for trains carrying crude, but they are not expected to curb volatility of explosive crude oils such as that from the Bakken, and they’’ll still allow some existing tankers to stay in service through 2025....Sherrod Brown has introduced a bill to address the later, which would charge fees starting at $175 dollars per car for use of those older tankers, then increasing to $1400 over the next two years, which would be offset by tax credits for rail operators switching to newer, supposedly safer cars...we would note, though, that most of those explosive derailments that we covered earlier this year involved those new state of the art Model CPC1232s that already exceed Federal safety standards...


Report: Ashtabula, Youngstown Considered Earthquake Danger Zones - The deadly 7.8 magnitude earthquake in Nepal last weekend was caused by a shift in the earth's tectonic plates, which is a cause of nature. But, some earthquakes apart of a recent investigation by the United State Geological Survey, are one's that top scientists say, are caused by people. “The Department of Natural Resources called us and said we need to investigate why they occur regularly,” says Columbia University's Senior Researcher, Won Young Kim. Kim's study focuses on states like Oklahoma, Texas, and Ohio, who have all reported rare earthquakes in the last few years. In fact, Ashtabula, Ohio reported seismic activity in 2001. In Youngstown, the town was rocked by an earthquake just last year. Experts say, the common denominator is oil and gas drilling. “About a year ago now, in Youngstown, they had a well that was too close to a fault that they didn't know was there,” says Dr. Brian Zimmerman, Department Chair of Geological Sciences at Edinboro University. “It was an ancient fault that would've never moved on its own but when they pumped water into it at high pressure, it started to produce earthquakes.” As soon as the Department of Natural Resources shut down drilling operations in Youngstown, seismic activity ceased. Scientists say these earthquakes are happening in strange places near us because they are located near wells used to inject wastewater. These waters are essential in oil drilling because it pumps deep into the earth, causes rock to break apart and free oil trapped inside. The process is called fracking and that is what natural gas companies want, but in return, we're at risk for an earthquake. ”Right now, there's a lot of discussion about how to best monitor a well,” Dr. Zimmerman says. “{We're working on] having seismic detectors around the well so that if it starts to produce earthquakes, you'll know immediately and that you can stop the frack operation until you can determine what's going on.”

Ohio giving away its oil, gas - Cincinnati Enquirer Editorial -  When it comes to Ohio's oil and natural gas, the state's position with drillers is essentially this: Come on in and take it. Taxpayers don't get their fair share from the state's oil and gas reserves. Ohio does have a tax that drillers have to pay for the oil and gas they remove from the state's energy resources. But it was set up in a different time – more than 40 years ago, when Ohio's production, mainly of oil, was a local, small-scale affair. Known as a severance tax, it's now embarrassingly low, especially when compared to what drillers willingly pay in other states as they seek to exploit shale gas reserves using the technique of hydraulic fracturing. Worse, when the tax was first put in place in 1970, it wasn't tied to market prices. That means that no matter how much drillers are profiting by selling Ohio's oil and gas, the state's taxpayers make the same measly amount. That may have made short-term sense in 1972, but it doesn't make sense 40 years on. Ohio's severance tax is currently one element of the budget battle between Gov. John Kasich and the General Assembly as they debate remaking the state's tax structure. It's possible the severance tax will get shunted to a tax committee. But regardless of how this tax fits in the budget picture, we don't want taxpayers, or lawmakers, to lose sight of the larger problem: Compared to most other energy-producing states, Ohio is giving away its oil and natural gas. That needs to stop. Taxpayers deserve a fair share of the resources they own

Groups opposed to fracking don't want drilling on state-owned land - -- Groups that oppose horizontal hydraulic fracturing, or fracking, gathered outside the Statehouse Tuesday to urge lawmakers to kill a bill they say would make it easier to drill for oil and gas on state-owned land. About 25 people held signs, listened to protest music and otherwise voiced their opinions after visiting legislators and urging them to vote against House Bill 8. "Enough is enough," said Alison Auciello, the Ohio organizer for Food & Water Watch, which has pushed for a statewide ban on fracking. "We are not seeing the promises come to fruition with this industry. What we've seen are accidents, leaks, spills. We've seen man-made earthquakes... They're happening almost on a daily basis, and now the state wants to fast-track fracking on our state lands." HB 8 would speed up state consideration of agreements by property owners who want to join together to tap oil and gas reserves on their lands. HB 8 also includes provisions for the inclusion of state-owned lands in unitization applications, though lawmakers in the House edited language related to state-own lands to include protections for state parks and forests. "It doesn't change state laws that pertain to where hydraulic fracturing can occur," said Rep. Christina Hagan, R-Alliance, primary sponsor of the legislation. She added, "It simply eases the government bureaucracy standing in the way of development." HB 8 passed the House in March on a unanimous vote, with Republicans and Democrats supporting. Deliberations on the bill are under way in the Ohio Senate.

Groups ask for federal review of Ohio injection-well program -  A coalition of environmental and community groups asked a federal watchdog office on Wednesday to investigate alleged legal violations by the state’s injection well approval program. In a letter to the U.S. Environmental Protection Agency’s Office of Environmental Justice, the coalition, coordinated by the Citizens for Health, Environment & Justice, alleges that Ohio’s injection well program disproportionately impacts the state’s low-income Appalachian areas and has failed to meet a federal directive assuring those communities specific safeguards. The groups also charge that affected areas receive “comically inadequate” opportunities for public participation. Injection wells pump wastewater from oil and gas drilling deep inside the earth. Some such wells in Ohio have been linked to earthquakes. According to research by the groups, 75 percent of the 237 active injection wells in Ohio are concentrated in the state’s 32 counties officially recognized as part of Appalachia due to their low-income status. Only 17.4 percent of Ohioans live in those counties. The groups told the office that a 1994 executive order signed by President Bill Clinton required that low-income communities impacted by environmental issues be provided with effective public input and reliable enforcement programs. “With ODNR, it’s everything for the oil and gas industry and nothing for the public. They act just as biased toward the industry as their own secret communications plan revealed them to be,” Teresa Mills, of Citizens for Health, Environmental & Justice, said in a news release. “They treat Appalachian Ohio as the fracking industry’s dumping ground whose people are too poor to resist taking the lion’s share of Ohio’s waste and that from surrounding states.”  

Taxing fracking won't make it safe - The “fracking tax” has been at the center of Gov. John Kasich’s policy for years now, even while local impacts keep piling up. Governor Kasich’s budget bill originally included an income tax cut – one that would disproportionately benefit the wealthiest Ohioans – offset by usage-based taxes. One of those usage-based taxes was an increase in severance taxes on the controversial oil and gas drilling practice more commonly known as fracking. In eastern Ohio, residents have witnessed the impact of leaks, spills, man-made earthquakes, explosions, truck accidents and more from fracking operations. Ohio injects underground an ever-increasing amount of waste from fracking. The waste is rarely tested for radioactivity and not subject to toxicity restrictions or chemical disclosure. Half of the waste disposed of in Ohio is being imported from other states in the region. Ohio officials still haven’t figured out what was in the thousands of gallons of oil and gas waste spilled in two Vienna Township wetland areas and a private pond earlier this month. While many states across the country are recognizing the dangers of fracking, Ohio leaders are debating how much money we can make from it and how that money will be spent. New York banned the practice last year, citing risks that outweigh the potential benefits. Maryland’s legislature just passed a moratorium to halt the practice and allow further study. But, here in Ohio, our leaders are debating how much money the state will require drillers to pay for extracting our natural resources. Governor Kasich wanted an increase, but House Republicans scrapped it.

27 Investigation leads Sen. Brown to propose train-safety law - – Friday, the U.S. Transportation Secretary and his Canadian counterpart made a major call for safer rail tank cars.  Thursday, Senator Sherrod Brown credited WKBN for first reporting safety concerns with those cars, leading to a new law he introduced.The concern is that older cars carrying oil and gas from fracking operations are more likely to explode if the train derails, and kill people near the tracks. WKBN Reporter Amanda Smith spent the day looking through the 35-page law, which is designed to make rail oil cars safer.The law, if passed, would charge fees for companies shipping crude oil in those old cars, starting at $175 dollars per car, per trip, then increasing to $1400 over the next two years.They will get tax credits – for switching to newer, safer cars. “We are pushing the rail companies, the railroads, to take out of service those rail cars that could potentially create safety problems,” Brown said.  The Senator began advocating for rail safety after Smith questioned him for a story that appeared on March 12, showing how millions of gallons of crude oil pass through the Mahoning Valley every week. That report showed that first responders like firefighters don’t know what’s passing through their towns. “We want to make sure whenever a rail car passes through Austintown, or passes through Youngstown, or through any community, that local first responders know when those cars are going through, what’s in those cars and the quanity of what’s in those cars,” Brown said.Two weeks after that story, Brown pressured the federal Department of Transportation to approve safety standards for rail oil tankers. The department approved those rules Friday. Then, Thursday, Brown and 5 other senators, introduced a bill to mandate train companies use those cars.The bill would also create a new federal system for tracking these shipments.

Company president claims explosion was extremely rare - Last month, a pipeline explosion shocked Upper Arlington and is currently under investigation, but the president of the company responsible for the pipeline claims the incident was extremely rare and not likely to occur again. Dan Creekmur, president of Columbia Gas of Ohio, said he is confident in its pipeline system.  Although the explosion is extremely unfortunate, the chance of it happening again is very rare.  As reported by the Columbus Business First, Creekmur said there are questions that still need to be answered regarding the March 21st explosion.  He also explained he does understand that residents want answers and an explanation, but still backs the pipeline system: The pipeline explosion managed to flatten an entire home and cause damages to another.  The gas-leak stretched to neighborhoods located miles away from the blast site.  As of Monday, April 13th, several residents had not been able to return to their homes due to the explosion.  Workers removed debris and pieces of glass from several homes that were severely damaged. Luckily, no one was reported injured.  According to Creekmur, the event is “very isolated” and a “very unusual set of circumstances.” According to Upper Arlington Fire Department officials, countywide protocols were followed regarding the explosion and gas leak.  Dispatchers received a 911 call a 12:46 p.m. on March 21st regarding the smell of natural gas near the residence of 3418 Sunningdale Way about two hours before the home exploded.  The 911 caller explained that Columbia Gas was already at the home attempting to resolve the issue. Two hours after the 911 call, the home exploded and firefighters were dispatched the scene.  Capitan Mark Hollingshead explained that just because a gas company happens to be working at a location, it doesn’t necessarily mean the fire division is automatically dispatched.

Utica and Marcellus well activity in Ohio -- Activity in the Utica Shale formation and Marcellus Shale formation in Ohio have both seen little change when compared to last week’s well update.   .The following information is provided by the Ohio Department of Natural Resources and is through the week of April 25th. Activity in the Utica Shale formation in Ohio has had a few slight changes when compared to last week’s update.  According to this week’s report, 390 wells were drilled (up 10), 219 drilling (down 10), 420 permitted (down 1) and 854 producing (up 7), bringing the total number of wells in the Utica to 1,883 (up 6). The Marcellus Shale in Ohio has zero change reported when compared to last week’s well report. The area is still sitting at 15 wells permitted, 12 drilled, 15 producing and one well drilling. There are a total of 44 wells in the Ohio Marcellus Shale.

Range Resources releases first-quarter results - On Tuesday, Range Resources announced its first-quarter results, which had a couple big highlights. During the first-quarter, which ended on March 31st, Range Resources recorded a few key events and statistics that occurred:

  • -Production volumes reached a record high, averaging 1,328 Mmcfe per day, a 26% increase over the -prior-year quarter.
  • -Unit costs declined $0.53 per mcfe, or 15% compared to the prior-year.
  • -Washington County Marcellus well was brought on line in late April with a 24-hour production rate of 43.4 Mmcfe per day. This is a new record and the highest rate ever for any Marcellus well.
  • -Record Utica well has cumulative production to date of 1.2 Bcf under constrained conditions.
  • -New well in dry gas area of Washington County, Pennsylvania was brought on line in first quarter at a 24-hour production rate of 31.3 Mmcf per day.
  • -An additional long-term LNG sales agreement was signed, bringing total LNG sales agreements to 200,000 Mmbtu per day.

Has Well Productivity Peaked in the Nation’s Largest Shale Gas Play? : The Marcellus shale gas play of Pennsylvania and West Virginia came onto the scene in 2007 in a big way and has grown to become the nation’s largest. It has accounted for much of the growth of U.S. shale gas production, and made up for declines in former shale gas giants like the Haynesville and Barnett plays of Louisiana and eastern Texas. Companies have scrambled to build pipeline infrastructure to connect the Marcellus to consumers in the U.S. northeast. Canadians, once supplied by gas from western Canada, are also looking to the Marcellus (and the much smaller Utica play in Ohio) for future supply; the pipelines that delivered gas to the east might be converted to instead deliver bitumen from the western tar sands. Companies in both the northeastern U.S. and eastern Canada are looking to build LNG terminals to export the shale gas bounty, and the first LNG export terminal on the Gulf coast will open later this year.  The prognosis for the Marcellus is therefore very important, as it is being counted on to supply abundant cheap gas to the northeast and elsewhere for decades to come. One of the big problems in figuring out what is happening with the Marcellus is the tardiness with which the states provide production data to the general public and to data vendors such as Drillinginfo, which I utilize extensively to analyze shale plays. West Virginia provides data in one-year chunks, and won’t release what happened in 2014 until mid-2015. Pennsylvania is somewhat better, releasing data in six-month chunks. In the absence of recent accurate production data, there has been much speculation on Marcellus production using proxies such as pipeline receipts and algorithms to estimate what production might be. Pennsylvania’s recent release of data from the last half of 2014, however, provides an opportunity to take an updated look at the Marcellus, considering that Pennsylvania comprises 85% of Marcellus production.

Rogersville deep shale drilling next for the Huntington area? -  - Fracking operators are cueing up to dive into the deep Rogersville Shale deposit, located beneath eastern Kentucky and parts of southern and west-central West Virginia.  The Rogersville Shale is deeper than the Marcellus and Utica shale gas plays that have created a fracking boom in parts of northern West Virginia. Companies have drilled at least four test wells into the Rogersville. Exxon drilled the first well in Wayne County, W.Va. in 1975. This well is said to be the original source of information leading to the current investigation of the Rogersville Shale. Oil and gas companies have more recently drilled test wells in Putnam County, W.Va., Johnson County Ky., and in Lawrence County Ky. Lawrence County is just across the Big Sandy River from Wayne County, W.Va.Landowners in both states, including Wayne County, WV members of the Huntington-based Ohio Valley Environmental Coalition (OVEC), have been approached by land agents seeking to lease land. This fuels speculation that the current corporate investigation into the Rogersville "could be the beginning of our region's first tight oil play," according to an article in an international oil and gas newspaper. A 2014 U.K. Kentucky Geological Survey report concludes that a "viable petroleum system exists in the Rogersville." West Virginia Oil and Natural Gas Association Executive Director Corky DeMarco told Natural Gas Intel's Shale Daily, "some operators from Kentucky to West Virginia have been busy scooping up deep mineral rights for the Rogersville Shale." According to DeMarco, the formations that include the Rogersville run anywhere from 10,000 to 30,000 feet below ground in West Virginia.

Activist fined $1,000 for violating order to stay off gas sites -- A Susquehanna County judge has fined anti-fracking activist Vera Scroggins $1,000 for getting too close to a natural gas site earlier this year. The money will cover part of the legal fees incurred by the region’s biggest gas driller– Cabot Oil and Gas. The company has repeatedly sought to have her held in contempt of court for violating an injunction to stay off its property. At a court hearing Thursday in Montrose, Scroggins maintained her innocence and hopes to appeal the fine. “[Cabot] had a false witness, who was willing to perjure himself under oath, and the judge found him more credible. I am not willing to pay a fine for something I didn’t do.” If she doesn’t pay within 45 days, she could go to jail. Judge Kenneth Seamans didn’t seem to mind that possibility. “If there’s a fine and she doesn’t pay it, she’s going to jail.” he said. “And I’m going on vacation.”

National Fuel Gas to lower prices -  Bill Clinton was a first-term president and gasoline was selling for $1.24 a gallon the last time natural gas prices were this low. National Fuel Gas Distribution Corp. has announced that the delivered price of natural gas will fall 6.46 percent, effective today. The resulting price is the lowest in 19 years. A typical residential customer — one who uses 90,000 cubic feet of gas annually — will see the monthly bill fall from $61.42 to $57.45. That monthly bill represents a 66 percent decline from August 2008 when the company’s average customer was paying $173.20 a month. What’s changed since the price of gas peaked is the supply of natural gas, said Carly Manino, spokeswoman for National Fuel. “Continued decreases in the market price of natural gas are due in large part to the increasing production in the Marcellus Shale,” the utility said in a statement. “Nearly all of the gas consumed by National Fuel utility customers comes from Northeast-produced shale gas.” By law, Pennsylvania utilities are required to pass along the price of natural gas without a loss or profit.

O&G companies are dropping big money to cancel contracts - With commodity prices still low, oil and gas companies have started to spend their money on terminating drilling contracts rather than going through with the operations. Antero Resources Corp., which has operations in the Utica and Marcellus Shale formations, is one of the companies that has jumped on the cancellation train. According to the company’s earnings report, during the first-quarter, the company spent $9 million to delay or cancel its drilling contracts. However, $9 million isn’t even close to what Antero has spent so far this year to drill a well. During the first-quarter, the company spent $569 million just in drilling and completion costs. The company’s production increased during the first-quarter, but the number of rigs it had dropped from 21 to 11. While Antero’s decision to spend $9 million to cancel contracts may seem like a lot, it could always be worse, which is the case for Whiting Petroleum Corp. While being the largest producer in North Dakota, Whiting spent nearly $27 million just to terminate drilling contracts. As reported by Columbus Business First, areas in North Dakota and Texas that are loaded with oil have been affected more due to commodity prices when compared to areas that are rich in natural gas like Ohio, Pennsylvania and West Virginia.

Study links air pollution in Baltimore, DC to fracking outside Maryland - --Even though Maryland has yet to permit any hydraulic fracturing for natural gas, emissions linked to the controversial drilling technique have been detected in the air in Baltimore and Washington, according to a new study.  In a paper published in the journal Atmospheric Environment, University of Maryland scientists reported finding that levels of ethane, a component of natural gas, rose 30 percent from 2010 through 2013 in air samples taken at a monitoring station in Essex.  A similar spike in ethane levels was detected at a monitor in Washington near Howard University - but not in Atlanta, where there is no fracking occurring in neighboring states. The UM researchers say they couldn't find anything in Maryland that could account for such increases. Indeed, levels of other air pollutants responsible for summertime smog have declined significantly since the 1990s.  But in reviewing air circulation patterns in the Mid-Atlantic region, researchers found that the bulk of prevailing winds reaching Baltimore and Washington passed over areas of Pennsylvania, West Virginia and Ohio where there is widespread drilling for gas."What we’re trying to do is wave a little flag," said Sheryl H. Ehrman, a co-author of the paper and chair of UM's chemical and biomolecular engineering department. "It looks like we’ve got a problem. I think we’ve got a regional issue."The study, which was underwritten in part by the Maryland Department of the Environment, comes as the Hogan administration mulls adopting regulations to allow hydraulic fracturing, commonly called "fracking," in western Maryland.

Fracking Wells Could Pollute The Air Hundreds Of Miles Away - Air pollution from hydraulic fracturing operations can likely travel hundreds of miles, even into states with little or no fracking, a new study has found. The study, published in the journal Atmospheric Environment, looked at hourly measurements of air pollutants like ethane and methane — gases that are found in natural gas — in Baltimore, Maryland and Washington, D.C. between 2010 and 2013. It found that ethane measurements increased by 30 percent between 2010 and 2013 in the region.  The researchers focused on ethane because they couldn’t find enough data for methane emissions during the time period, and ethane is the second-most abundant compound in natural gas. Ethane spikes in Maryland and D.C.’s air isn’t good news for residents of the region: when ethane is breathed in, it can cause nausea, headaches, and dizziness.  But Maryland doesn’t currently allow fracking — former Gov. Martin O’Malley didn’t propose fracking regulations until the end of his term, and the state didn’t have any fracking between 2010 and 2013. So the researchers compared the ethane data to natural gas production in neighboring states atop the Marcellus shale play, including West Virginia, Pennsylvania, and Ohio. By doing so, the researchers found that the ethane emissions they found in Maryland appeared to be coming from these neighboring states’ natural gas operations.  “As shale natural gas production continues to expand, this increasing trend will continue in downwind regions until more efficient control technologies are applied,” the authors write in the study.

The downside of “Drill, baby, drill!”—degraded North American ecosystems --  The number of oil and gas wells drilled within central Canada and central USA has continued to rise, with an average of 50,000 new wells per year since 2000. These wells bring economic benefits and expectations of at least a temporary energy security. However, the benefits also come with a downside: the potential loss or degradation of local ecosystems. Recently, a team of scientists explored this threat, providing the first empirical analysis of the consequences of drilling on our ecosystem. In their new study, high resolution satellite data of vegetation dynamics was combined with industry data and publicly available historical records of oil and gas well locations.  The team first investigated changes in the amount of carbon fixed by plants and then accumulated in biomass. Changes in this process were examined because carbon fixation and accumulation are fundamental to the life cycle on Earth. Analysis revealed that across central North America, oil and gas activity reduced the amount of carbon fixed and accumulated in biomass by ~4.5 Tg of carbon (equivalent to a month of forage for five million animals) or 10 Tg of dry biomass (equivalent to ~6 percent of wheat produced in the region in 2013). The reduction comes largely from the direct removal of vegetation due to construction of the drilling sites and necessary roads. This downward trend will likely persist with continued growth in oil and gas activities. Wildlife habitat and landscape connectivity are two other major ecosystem functions that the team looked at. They estimated that the land area occupied by oil and gas equipment from 2000-2013 is equivalent to the land area of three Yellowstone National Parks. The takeover of this much land can interfere with migratory pathways, alter wildlife behavior and mortality, and increase the likelihood of a disruptive and invasive species infiltrating the ecosystem.

Tar Sands Mining Coming to the Tennessee River Valley?  --  The Alabama Oil & Gas Board has been authorized by the state legislature to create regulations to allow for the strip mining of tar sands in North Alabama. The agency has stated that they will release a draft of these proposed regulations soon, along with a public notice and opportunity for a public hearing to comment on the rules. Tennessee Riverkeeper expects that the Oil & Gas Board will conduct at least one public hearing to solicit comments from concerned citizens and stakeholders, before it issues a final draft of the proposed regulations. No oil sands mining can be conducted in Alabama until The Alabama Oil & Gas Board establishes regulations. However, one local mineral exploration company has already purchased several thousand acres of pristine land in the Tennessee River Valley of northwest Alabama with the anticipation of commencing the mining operation once the necessary operational permits have been issued by the Oil & Gas Board. Companies, including MS Industries and Archer Petroleum, have plans to strip mine large areas of Northwest Alabama near the Tennessee River. Bituminous sands, or tar sands, or oil sands, are a type of unconventional petroleum deposit, that have only recently been considered to be a part of the world’s oil reserves. Tar sands extraction negatively affects the land, air, and water in communities near these mines. The mining of oil sands can release a grim litany of heavy metals including: arsenic, cadmium, chromium, lead, and mercury. The mining of oil sands can also release petroleum-based volatile organic compounds such as: benzene, toluene, ethylbenzene, and xylenes into local groundwater and surface streams.

Florida House passes fracking regulation bill — The House passed a bill Monday to study and regulate fracking, as well as prevent local governments from banning the oil and gas drilling practice. Democrats strongly opposed the bill, saying hydraulic fracturing would put the water supply at risk and the practice should instead be banned. But Republicans said fracking isn’t regulated right now and the bill would ensure that it’s done safely. “This bill puts safety and control mechanisms in order for us as the Legislature and the people of the state of Florida to know what’s being put in the ground,” said Republican Rep. Frank Artiles. “Your vote ‘no’ on this bill is going to allow fracking to go on as the wild, wild West.” . The bill would require the state to study the effects of fracking in Florida, particularly because of its unique geography. Proponents said fracking wouldn’t be allowed until after the study and until the Department of Environmental Protection writes rules for the industry.

Florida Joins Texas And Oklahoma In Attempt To Revoke Local Control Over Fracking --On Monday, the Florida House of Representatives passed a bill that calls for regulation over the fracking industry for the first time. But the bill doesn’t go far enough in protecting the state’s environment from fracking, environmental groups say, and it also severely limits local and regional control over the controversial practice. HB 1205, which has a Senate version scheduled for a hearing on Tuesday, would allow fracking to continue in the state after a study into the controversial process is completed and the the Florida Department of Environmental Protection (DEP) finishes its final rule-making. The bill does not regulate or require public disclosure of chemicals used in fracking wells that are low pressure or use less than 100,000 gallons of fluid, or in fracking-like extraction techniques such as acidization, which dissolves rather than fractures rock.  The section of the bill that lays out the “ban on fracking bans” language states that “to avoid unnecessary duplication, a county, municipality, or other political subdivision of the state may not adopt or establish programs to accomplish the purposes of this section.”  The bill, which passed 82-34 mostly along party lines, is the latest in a string of state-level legislation that purport to regulate the oil and gas industry but actually make it harder for cities and municipalities to take independent action on fracking. Lawmakers in Oklahoma and Texas recently passed legislation effectively banning local control over the oil and gas industry. Authorities and industry leaders in these states are worried that more municipalities might follow the lead of towns like Denton, Texas in instituting a ban on fracking within city limits.

Florida Says “NO” To Frackers — “Today, Florida state legislators responded to the growing movement of Florida voters who are standing up against fracking and the oil and gas industry. By killing two pro-fracking bills that would have allowed new dirty forms of fracking in Florida, and would have also barred local communities from enacting their own local fracking bans, legislators have protected Florida from the public health and environmental risks associated with drilling and fracking. “Just like in New York and Maryland, the science showing the dangers of fracking has won out over the powerful oil and gas lobby. A large coalition of grassroots groups devoted to fighting against fracking have once again showed that voters have a say in ensuring that fracking will not be allowed to contaminate our air, pollute our water, and harm our communities.”

Scientists are more certain than ever that oil and gas drilling are causing earthquakes (AP) — With the evidence coming in from one study after another, scientists are now more certain than ever that oil and gas drilling is causing hundreds upon hundreds of earthquakes across the U.S. So far, the quakes have been mostly small and have done little damage beyond cracking plaster, toppling bricks and rattling nerves. But seismologists warn that the shaking can dramatically increase the chances of bigger, more dangerous quakes. Up to now, the oil and gas industry has generally argued that any such link requires further study. But the rapidly mounting evidence could bring heavier regulation down on drillers and make it more difficult for them to get projects approved. The potential for man-made quakes "is an important and legitimate concern that must be taken very seriously by regulators and industry,"  A series of government and academic studies over the past few years — including at least two reports released this week alone — has added to the body of evidence implicating the U.S. drilling boom that has created a bounty of jobs and tax revenue over the past decade or so. On Thursday, the U.S. Geological Survey released the first comprehensive maps pinpointing more than a dozen areas in the central and eastern U.S. that have been jolted by quakes that the researchers said were triggered by drilling. The report said man-made quakes tied to industry operations have been on the rise. Scientists have mainly attributed the spike to the injection of wastewater deep underground, a practice they say can activate dormant faults. Only a few cases of shaking have been blamed on fracking, in which large volumes of water, sand and chemicals are pumped into rock formations to crack them open and free oil or gas.

Danger in the Heartland: Man-Made Quakes Mark New Hazard Map - There's a new hazard in the Heartland. The U.S. Geological Survey (USGS) recently released a map highlighting the future risk for man-made earthquakes, and up to eight states have an increased chance to see ground shaking. A new preliminary earthquake hazard map shows an uptick in the risk of non-tectonic earthquakes all the way from southern Kansas to north Texas.    In particular, a new corridor spanning from north Texas to southern Kansas stands out in bright red in the GIF to the left.   Azle, Texas, which had no recorded quakes for 150 years, felt 27 tremors from November 2013 to January 2014. The Dallas-Fort Worth Metroplex continues to feel regular earthquakes. As Science Magazine reports, earthquakes hit areas of Kansas bordering Oklahoma 192 times in the last two years; the same counties were only hit twice in the preceding 35 years. For the most part, the scientific community has already reached a consensus that oil and gas operations, more specifically underground wastewater injections, are causing the swarm of earthquakes down the middle of the country -- this new map visualizes that knowledge. These types of earthquakes, as opposed to those in say California, are non-tectonic and independent of large-scale subterranean movement. Rather, earthquakes like the hundreds cropping up over the last couple years result from the disposal of oil and gas byproducts into the ground. “This new report describes for the first time how injection-induced earthquakes can be incorporated into U.S. seismic hazard maps,” Mark Petersen, Chief of the USGS National Seismic Hazard Modeling Project, said. “These earthquakes are occurring at a higher rate than ever before and pose a much greater risk to people living nearby."

Fracking is not the cause of quakes. The real problem is fracking’s wastewater - New earthquake hazard maps show that fracking’s byproducts are clearly to blame for recent swarms of earthquakes plaguing several states.  The maps highlight 17 hot spots where communities face a significantly increased risk of earthquakes, and the accompanying report links the earthquakes to injection wells used to dispose of fracking wastewater. Previous maps did not include earthquakes that are induced by human activities. “We consider induced seismicity to be primarily triggered by the disposal of wastewater into deep wells,” said Mark Petersen, chief of the National Seismic Hazard Project for the U.S. Geological Survey, which released the maps last week.  The earthquake hot spots include portions of Oklahoma, Kansas, Texas, Ohio, Arkansas, Alabama, Colorado and New Mexico. Until recently, many of these states were some of the places in the United States least likely to have an earthquake. But then high oil prices brought in companies eager to exploit ancient seabeds where oil and gas mingle with brine.Hydraulic fracturing, or fracking, extracts far more water from these underground oil-laden rocks than traditional drilling. Currently there is no way to treat, store and release the billions of gallons of wastewater at the surface. Instead, drillers pump the fluid back underground, below groundwater, into wells where it sometimes triggers earthquakes. For instance, in Oklahoma, state records show that companies injected more than 1.1 billion barrels of wastewater into the ground in 2013, the most recent year for which data is available. The following year, Oklahoma had more magnitude-3 earthquakes than California did. The quakes clustered around wastewater injection wells. Oklahoma’s current earthquake rate is now 600 times higher than its pre-fracking rate, which was based on the state’s natural seismicity, the state geological survey said.

Could a Kentucky fracking boom bring quakes?: With Kentucky making a bid for its own fracking boom, the U.S. Geological Survey this week came out with a new study showing the federal agency's scientists are more convinced than ever that drilling waste disposal is causing lots of earthquakes in the central and eastern United States. Oklahoma has in recent years become the earthquake capitol of the United States - not California. Go figure. And scientists are doing just that. The USGS study comes as the Kentucky Geological Survey has been casting a wider net to study any potential induced-earthquakes from oil and gas drilling in eastern Kentucky. So far, the KGS says, there have been no known induced earthquakes attributed to oil and gas drilling -- yet, anyway.

USGS Man made Earthquakes Up 4 000 Percent in NM - Man-made earthquakes in New Mexico, linked to oil and gas exploration, have increased by about 4,000 percent in recent years, according to a new report from the U.S. Geological Survey.  Robert Williams, a geophysicist with the USGS, explains how the millions of gallons of water extracted with oil and gas, and then returned underground through disposal wells, appear to be causing the instability that leads to more earthquakes. "When you inject that water back into a different location in the earth, you're changing the stress conditions of the rocks," says Williams. "It can lead to changes and stresses on the fault, and weaken those forces holding the fault together, which can then cause an earthquake." In the first 13 years of this century, Williams says there were 16 earthquakes measured at magnitude 3.8 in New Mexico compared to only one quake of that size in the preceding 32 years. He says the major spike in quake activity began in 2009, and mirrors major growth in oil and gas development. Williams says the USGS will use its research to help in future forecasting of earthquakes.The report also notes major man-made earthquake increases in Alabama, Arkansas, Colorado, Kansas, Ohio, Oklahoma, and Texas. Williams says last year, Oklahoma, the most active of the states for the first time ever, had more quakes of 'magnitude three' and higher, than California. "For Oklahoma in 2014, there were 585 earthquakes magnitude three and greater," he says. "California had about 200 of that size."

Frack-Happy Texas Shuts Down Earthquake-Prone Injection Wells - Texas is not known for using caution when it comes to oil and gas development. Fracking has swept the state like a hurricane, despite attempts by some environmental and community activists. So it’s kind of startling to hear that the conservative Texas Railroad Commission, which oversees oil and gas operations and has generally been very cordial toward them, has ordered companies operating two wastewater injection wells in Azle, just northwest of Fort Worth, to justify keeping their wells open. The commission has ordered four “show cause” hearings in June, where well operators must show why their permits should not be canceled. It follows a report last week by a team of researchers from Southern Methodist University (SMU) saying that a swarm of earthquakes in the area in November and December 2013, including two magnitude 3.6 quakes, was likely caused by the injection wells activating fault lines millions of years old. The area had previously experienced no earthquakes. According tothe Dallas Morning News, “The Azle study is one of the most in-depth investigations of a Texas earthquake swarm. While earlier reports have linked quakes with wastewater wells based largely on timing and proximity, [study lead author Matthew] Hornbach and his colleagues sought to gain a clearer understanding of what was happening along the faults.”

Saying Mean Things About Fracking Can Get You Sued, Because Texas - The Texas Supreme Court ruled that an oil and gas company can go ahead and sue an anti-fracking activist for defamation, because of course it did. Steve Lipsky is the Parker County homeowner famous for being able to light his water on fire after Range Resources started fracking near his property. He's been very outspoken about his flammable water on Facebook, in the media, the Gasland films and in a civil suit he filed against Range in 2011. His case got tossed and the company counter-sued Lipsky and his wife for $3 million, accusing him of defamation. Lipsky filed a motion to dismiss the suit, but the Texas Supreme Court just ruled that nope, sorry, the case against Lipsky can go forward. In an opinion delivered Friday, Justice John P. Devine wrote that "homeowner Steve Lipsky has portrayed Range as incompetent, even reckless, as a gas producer, thereby injuring the company's reputation."  Sure, there's scientific evidence suggesting that Lipksy's portrayal of Range is a least somewhat justified. But in this lawsuit, Range is the real victim. As Justice Devine explains: Environmental responsibility is an attribute particularly important to those in the energy industry -- none more so than natural gas producers, such as Range, who employ horizontal drilling and hydraulic fracturing in their business. Accusations that Range's fracking operations contaminated the aquifer thus adversely affect the perception of Range's fitness and abilities as a natural gas producer. Sure, Range didn't offer a whole lot of proof that Lipsky's activism actually hurt the company's business, the court acknowledged, but it offered enough to satisfy the court.

UT Poll says Americans back fracking bans by cities -- A majority of Americans and Texans support allowing cities to ban hydraulic fracturing, even if state law otherwise permits it, according to a national online poll released Wednesday by the University of Texas at Austin. The UT Energy poll shows that 58 percent of the people surveyed nationally support giving cities the authority to adopt bans like the one passed by Denton in November and that 53 percent of the Texans participating in the poll support giving city’s that power. In the poll, 25 percent nationally and in Texas disagreed that city’s should be allowed to ban the controversial drilling practice. The poll comes at a time when state lawmakers are seeking to keep other cities from copying efforts like the one mounted in Denton to ban hydraulic fracturing, or “fracking.” “At present, it appears a large majority of Americans think cities should have the right to decide if they want to ban fracking locally,” said UT Energy Poll Director Sheril? Kirshenbaum. The poll surveyed 2,078 people from across the country and has a margin of error of 3 percentage points. The poll also reported that only 44 percent nationally said they were familiar with fracking, and that based on what they knew that 44 percent were against it while 42 percent voiced their support.

Service companies keep cutting as rigs keep falling -- Permian Basin producers again dropped drilling rigs this week, Baker Hughes reported Friday, as service companies announced another round of job cuts. Baker Hughes counted 12 fewer rigs in the Permian Basin, leaving 246 drilling for oil and gas in the region. About 74 percent drill horizontal wells as producers focus on core areas. Nationally, the oil and gas rig count fell by 22 to 932 rigs. Some observers expect the downward march to continue. The regional benchmark Plains-West Texas Intermediate oil price rallied this week — ending Friday at $53.75 per barrel. But it remains less than half the price of last summer amid concerns of oversupply and weak demand. And the largest oilfield services companies continue to lay off thousands more employees in what analysts considered a precursor to layoffs among their smaller competitors. Oilfield services companies are some of Odessa’s top private employers. “The Permian is definitely seeing major rig count reductions and major reductions in both drilling and completion,” said Chris Robart, a managing director with IHS Energy in Houston. “So you are going to see that coming down, the layoffs, in addition to what you are seeing.”

OU researchers must look into better ways of producing oil and natural gas - Editorials - Oklahoma is a state built on oil: in 2013 Oklahoma ranked fifth in the country in crude oil production and accounted for 7.1 percent of gross natural gas production. In fact, the U.S. oil industry has grown rapidly in recent years with the adoption of extraction methods that make it easier to remove oil and gas. But Oklahoma’s increased reliance on oil and gas production has coincided with an unnatural spike in earthquakes occurring across the state. The Oklahoma Geological Survey released its “Statement on Oklahoma Seismicity” on Tuesday that attributes extraction methods involving the injection of wastewater in disposal wells as the likely cause of the majority of recent earthquakes in Oklahoma. As one of the nation’s premier research universities, we call on OU to research the environmental impacts of wastewater injection in the production of oil and gas. We know Oklahoma depends on the oil industry and we know oil and natural gas companies are some of the largest recruiters of OU grads. However, the popularity of petroleum engineering and energy management majors at OU should not hold OU researchers back from investigating. Extraction methods involving the injection of produced water in disposal wells have made oil and gas more readily accessible, but at an apparent high environmental cost. Produced water is “naturally occurring water within the Earth that is often high in salinity and coexists with oil and gas in the subsurface,” according to the Oklahoma Geological Survey report. We implore OU researchers to look into less environmentally traumatic ways to produce oil and gas. We have no illusions that Oklahoma or the U.S. will end its dependence on oil and natural gas anytime soon, but we cannot sit idly by as multiple earthquakes occur daily in our state.

Could Fracking Spark a Modern-Day Dust Bowl? » Oil wells and natural gas may have made individual Americans rich, but they have impoverished the great plains of North America, according to new research.. Fossil fuel prospectors have sunk 50,000 new wells a year since 2000 in three Canadian provinces and 11 U.S. states, and have damaged the foundation of all economic growth: net primary production—otherwise known as biomass, or vegetation.  Brady Allred, assistant professor of rangeland ecology at the University of Montana’s College of Forestry and Conservation, and colleagues write in the journal Science that they combined years of high-resolution satellite data with information from industry and public records to track the impact of oil drilling on natural and crop growth. They conclude that the vegetation lost or removed by the expansion of the oil and gas business between 2000 and 2012 added up to 10 million tonnes of dry vegetation, or 4.5 million tonnes of carbon that otherwise would have been removed from the atmosphere. Put another way, this loss amounted to the equivalent of fodder for five million cattle for one month from the rangelands, and 120 million bushels of wheat from the croplands. This wheat equivalent, they point out, adds up to the equivalent of 13 percent of the wheat exported by the U.S. in 2013.

Oil, gas spill report for April 27 -  The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks. Kerr McGee Oil & Gas Onshore LP reported on April 6 that an active mud tank was overfilled, resulting in a water-based drilling backflow outside of Erie. It is approximated that eight barrels of water-based drilling mud released onto the well pad containment. Kerr McGee Oil & Gas Onshore LP reported on April 6 that in the process of transferring liquids, a vertical tank overflowed due to a manifold valve that washed out. It is approximated that 13 barrels of water-based drilling fluid released onto the well pad containment. Kerr McGee Oil & Gas Onshore LP reported on April 10 that during plugging and abandonment procedures, hydrocarbon impacts were discovered beneath the produced water sump outside of Fort Lupton. It is unknown the amount of condensate spill and produced water that released, but it is approximated to have been less than five barrels.  DCP Midstream LP reported on April 13 that upon the investigation of a leaky valve it was found that soil contained a release of condensate, outside of Longmont. It is approximated that more than a barrel of condensate released throughout the soil.Foundation Energy Management LLC reported on April 16 that leak developed in the stuffer box, outside of Briggsdale. The leak was discovered by a pumper and it was approximated that one barrel of oil spilled.   Kerr McGee Gathering LLC reported on April 16 that during repairs and maintenance historical impacts were discovered outside of Erie. It is approximated that more than one barrel of condensate spilled. Roughly 300 cubic yards of impacted material was removed for disposal at a landfill. Kerr McGee Oil & Gas Onshore LP reported on April 17 that during the deconstruction of a tank battery, a historical petroleum hydrocarbon was encountered beneath the water sump, outside of Platteville. It is unknown the amount of condensate and produced water that was spilled, but it was approximated to be more than one barrel. Whiting Oil & Gas Corp. reported on April 20 a tank overflowed causing a release of produced water, outside of New Raymer. It is approximated that more than five barrels, but less than 100 barrels, of produced water spilled. NGL Water Solutions DJ LLC reported on April 20 that a lightning strike caused the loss of a tank battery, outside of Greeley. It is approximated that less than five barrels of produced water spilled. The facility was shut in an there were no injuries.

Mapping the Dangers of Fracking - Did you know that about 20 percent of U.S. oil and gas reserves and resources are beneath federal public lands? Some of these public lands are next to our most beautiful national parks, including Glacier National Park in Montana, or national forests like George Washington and Jefferson National Forests in Virginia and Shawnee National Forest in Illinois, to name a few. But it can be hard to visualize the scope of the danger that fracking poses to our public lands. That’s why Food & Water Watchcreated a map to help illustrate the vast span of public lands across America, and illuminate where Big Oil and Gas corporations aim to drill and frack through it.The yellow areas are U.S. federal lands. The red areas in the map are where—given inconsistent data—there are oil and gas deposits. Lands in red are where there’s already been a wave of drilling and fracking for oil and gas, or where companies envision fracking before long. The overlapping orange areas are public lands that are either being fracked now, or could be soon. Check out the blue pins to learn about specific public lands and how they’re at risk from fracking. Fracking on public lands such as these is dangerous on many levels: it introduces toxic chemicals to water; it disrupts the habitats of millions of animals, including endangered species; it poses serious risks to human health, such as breast cancer; and it spurs on climate change. The production of oil and natural gas in 2013 from federal public lands led to more than 292 million tons of carbon-dioxide equivalent greenhouse gas emissions, or about what 61 million cars emit in a year.

Idaho creates new laws and rules for oil and gas industry — Idaho is just weeks away from getting a new title: oil- and gas-producing state. Lawmakers and regulators for the last four years have been trying to prepare and earlier this year approved a bevy of laws and rules to keep up with the nascent industry made possible in Idaho with new technologies. Idaho Department of Lands Director Tom Schultz says the state is now similar to other oil and gas states when it comes to fees and operational regulations. Laws passed in 2015 requested by the state agency include making production records public, setting rules for cooperation among companies developing the same pool and setting application fees to cover the state’s cost. Industry-proposed bills also passed. One gives state officials the option to exclude federal lands from a drilling unit.

New federal fracking rules are insufficient, Slocum says - – A new federal rule doesn’t go far enough to protect the environment from the dangers of fracking, Tyson Slocum, director of Public Citizen’s Energy Program, said today. The rule requires companies to disclose most of the chemicals used in the fracking injection process to a website controlled by industry, and requires most fracking waste fluids to be stored in covered metal containers instead of open pits. This rule applies only to fracking on federal lands, which represents just 11 percent of all fracking in the United States.  “The new standards could hardly be more accommodating to the fracking industry, yet the industry is hyperventilating over a handful of woefully inadequate and incomplete disclosure requirements,” said Slocum. Here’s what the rule should say, according to Public Citizen:

  • All chemicals should be disclosed prior to injection with no exceptions for proprietary claims, and they should be posted on a website controlled by the federal government, not the fracking industry.
  • Fracking companies should have to certify that injecting chemicals into the ground won’t contaminate the local water supply.
  • Fracking fluids should be recycled. Companies that use them should be required to process and purify the fracking waste fluids.
  • Companies should be required to conduct seismic surveys prior to drilling and injecting wastewater into the ground. Recent studies have linked wastewater wells to earthquakes.
  • Companies should be required to ensure maximum containment of methane leaks at wellheads. Methane is a greenhouse gas that is 87 times more polluting than carbon dioxide.
  • Any company fracking on federal land should be prohibited from entering into confidential nondisclosure agreements with any party harmed by the fracking process.

2 injured in Wyoming oil facility explosion, fire -— Two workers are injured in an explosion and fire at an oil facility in Converse County. The blast happened just before noon Friday at the Chesapeake Energy facility about four miles north of Douglas. Rob Black with the state Department of Workforce Services says two contractors with Susquehanna Services were pumping fluid out of containers at the time. Black says one worker was life-flighted to a hospital with burns and the other was hospitalized with as-yet unknown injuries. The workers’ identities and conditions weren’t immediately available. Firefighters put out the fire while the workers were evacuated. Sheriff’s officials say state and local officials are investigating. The area around Douglas has seen heavy oil drilling in recent years.

North Dakota: Death Trap? - For the third year in a row, people died on the job in North Dakota than any other state in2015, The Guardian reports. According to an annual report from union federation AFL-CIO, 14.9 fatalities occurred per 100,000 workers—four times the national average and double the amount of work-related deaths in 2007.The death toll is especially concentrated in the energy industry and construction, the report said:The fatality rate in the mining and oil and gas extraction sector in North Dakota was an alarming 84.7 per 100,000, nearly seven times the national fatality rate of 12.4 per 100.000 in this industry; and the construction sector fatality rate in North Dakota was 44.1 per 100,000, more than four times the national fatality rate of 9.7 per 100,000. Other states topping the list of deadliest workforces include Wyoming at 9.5 deaths per 100,000, West Virginia with 8.6 deaths per 100,000, Alaska with 7.9 deaths per 100,000 and New Mexico at 6.7 per 100,000.

North Dakota Legislature OKs state-run rail safety program — The North Dakota Legislature on Monday approved funding for a state-run rail safety pilot program intended to supplement federal oversight of oil train traffic. A House-Senate conference committee had been deadlocked for several days about the proposal, but finally decided to resolve differences and fund the $523,000 program that includes two rail safety inspectors. Senators voted 47-0 to adopt the conference committee compromise Monday, while the House endorsed it 85-4 hours later. The program is part of the Public Service Commission’s $22.2 million budget. The Public Service Commission had requested $972,000 in the next two-year budget cycle to fund the program consisting of two rail safety inspectors and a rail safety manager to supplement inspections by the Federal Railroad Administration. The program had been a campaign platform for Republican Public Service Commissioner Julie Fedorchak when she ran for the position last year. GOP Gov. Jack Dalrymple also had included the funding for the program in his budget to help prevent oil train accidents, like one in his hometown of Casselton that left an ominous cloud over the city and led some residents to evacuate. But House budget writers stripped the funding earlier this month, with many Republicans saying it’s not needed and that it duplicates the federal government’s efforts.

Recent oil train crashes in the US and Canada - Sweeping regulations to boost the safety of trains transporting crude oil, ethanol and other flammable liquids were announced Friday by U.S. and Canadian officials. The long-awaited regulations are a response to a series of oil train accidents in both countries over the last few years that have resulted in spectacular fires that burned for days. Here are some of those accidents:

  • — July 5, 2013: A runaway Montreal, Maine & Atlantic Railway train that had been left unattended derailed, spilling oil and catching fire inside the town of Lac-Megantic in Quebec. Forty-seven people were killed and 30 buildings burned in the town’s center. About 1.6 million gallons of oil was spilled. The oil was being transported from the Bakken region of North Dakota, the heart of an oil fracking boom, to a refinery in Canada.
  • — Nov. 8, 2013: An oil train from North Dakota derailed and exploded near Aliceville, Alabama. There were no deaths but an estimated 749,000 gallons of oil spilled from 26 tanker cars.
  • — Dec. 30, 2013: A fire engulfed tank cars loaded with oil on a Burlington Northern-Santa Fe train after a collision about a mile from Casselton, North Dakota. No one was injured, but more than 2,000 residents were evacuated as emergency responders struggled with the intense fire.
  • — Jan. 7, 2014: A 122-car Canadian National Railway train derailed in New Brunswick, Canada. Three cars containing propane and one car transporting crude oil from Western Canada exploded after the derailment, creating intense fires that burned for days. About 150 residents of nearby Plaster Rock were evacuated.
  • — Jan. 20, 2014: Seven CSX train cars, six of them containing oil from the Bakken region, derailed on a bridge over the Schuylkill River in Philadelphia. The bridge is near the University of Pennsylvania, a highway and three hospitals. No oil was spilled and no one was injured. The train from Chicago was more than 100 cars long.
  • — April 30, 2014: Fifteen cars of a crude oil train derail in Lynchburg, Virginia, near a railside eatery and a pedestrian waterfront, sending flames and black plumes of smoke into the air. Nearly 30,000 gallons of oil were spilled into the James River.
  • — Feb. 14, 2015: A 100-car Canadian National Railway train hauling crude oil and petroleum distillates derailed in a remote part of Ontario, Canada. The blaze it ignited burned for days.
  • — Feb. 16, 2015: A 109-car CSX oil train derailed and caught fire near Mount Carbon, West Virginia, leaking oil into a Kanawha River tributary and burning a house to its foundation. The blaze burned for most of week.
  • — March 10, 2015: 21 cars of a 105-car Burlington Northern-Santa Fe train hauling oil from the Bakken region of North Dakota derailed about 3 miles outside Galena, Illinois, a town of about 3,000 in the state’s northwest corner.
  • — March 7, 2015: A 94-car Canadian National Railway crude oil train derailed about 3 miles outside the Northern Ontario town of Gogama. The resulting fire destroyed a bridge. The accident was only 23 miles from the Feb. 14th derailment.

Enbridge Energy seeks OK for replacement crude oil pipeline across northern Minnesota - Another proposed crude oil pipeline, along with another round of controversy, is coming to northern Minnesota. Pipeline operator Enbridge Energy on Friday asked state regulators for approval to build a $2.1 billion, 337-mile pipeline to replace a 1960s-era Line 3 pipeline. It carries crude oil from Canada to the Midwest, but has a history of ruptures. The Minnesota segment is part of a $7.5 billion project by the Calgary-based company to build a new 36-inch diameter line from Hardisty, Alberta, to Superior, Wis., where Enbridge has a terminal and connections to pipelines serving the Midwest, Gulf Coast and eastern Canada. Like Enbridge’s other big Minnesota pipeline project — the proposed Sandpiper from North Dakota — the Line 3 replacement would pass through Clearbrook, Minn., site of two oil terminals, then turn southeast toward Park Rapids, and finally east to Superior. Although the two lines are on the same route, Enbridge is required to get a separate route permit for Line 3, along with a certificate of need. Earlier this month, an administrative judge concluded that the Sandpiper project is needed. Now that same kind of review — with hearings across the state and reams of written filings — starts for Line 3. The process will take months. In lengthy filings with the state Public Utilities Commission, Enbridge said that growth in western Canada’s crude oil production over the next 15 years will quickly fill the new, expanded Line 3. The company wants to begin construction next year, and finish in 2017. An analysis for Enbridge by consulting firm Muse Stancil said that Canada’s National Energy Board projects a 2.1 million barrel per day increase in production from Alberta’s oil sands by 2030. Enbridge’s Line 3 replacement would carry 760,000 barrels per day.

Traders alarmed oil glut is a strain on West Texas storage tanks (Reuters) – Four-hundred miles from the near overflowing tanks at the U.S. oil hub in Cushing, Oklahoma, a second glut in the Permian Basin of West Texas is pressuring oil prices once again as pipeline disruptions strand millions of barrels in the region. The Permian, the fastest-growing shale play, accounts for about a fifth of the country’s total oil production, and is expected to produce about 2 million barrels of crude a day in May. The region houses over 20 million barrels of crude storage. Stockpiles in the Permian have hit several records in the last four weeks, according to data from industry information provider Genscape. Investors have zeroed in on storage, waiting for declines in weekly inventory data to signal demand is rising or production is beginning to taper off. Stockpiles in Cushing, the delivery point for the U.S. futures contract, hit a record in the week to March 13, and Gulf Coast supply has been robust. Now a Permian backlog shows signs of an even bigger supply glut. Pipeline interruptions next month will compound already high inventories in the region that have grown because production has outpaced takeaway capacity. Crude from the Permian that gets stored in Midland, Texas, awaiting transport to the Gulf Coast, will be diverted to Cushing, where it will add to burgeoning supplies, possibly putting even more downward pressure on crude prices, traders said.

Eagle Ford condensate finds a way out of the country  - The push for exports is about to have a new leader in Eagle Ford as a report from Argus Media claimed that Cheniere Energy will become the first major LNG exporter in the lower 48. In addition, the company plans to also export US condensates from its operations in Corpus Christi, Texas. According to the report, the Houston-based company figures that by 2017, it will begin exporting 200,000 b/d of condensates from its planned greenfield LNG export terminal. The project has a price tag of roughly $1 billion. Cheniere also stated that the capacity could be expanded to 1 million b/d which would move the cost of the facility up to $2 billion. The condensate exports are expected to target Asian markets by arbitraging the WTI-Brent spread. Exports have been the talk of the industry for months now. Late last year, the Commerce Department’s Bureau of Industry and Security, which is the main U.S. export authority, informally encouraged some oil companies to consider exporting the lightly processed form of crude oil called condensate. In November of last year, BHP Billiton Ltd became the first company to announce it would export lightly processed ultra-light U.S. oil without explicit permission from the government. According to Reuters, BHP said it was on firm legal footing because its product was similar to what the agency had already blessed for other companies in a landmark ruling earlier in 2014. Regardless of what these new export ventures mean for the comfort of government abiding exports, it’s all good news for the Eagle Ford Shale play. Cheniere’s condensate products will almost exclusively come from the South Texas fields. Texas Railroad Commissioner Christi Craddick recently gave her support for exports, highlighting the benefits Texas oil and gas production could gain.

U.S. and Canada ready with oil train safety plan – The United States and Canada are expected to present a cross-border plan on Friday to make oil train deliveries safer. For a link to U.S. enforcement actions concerning oil trains, click here. Below is a list of major oil train concerns, past efforts to fix the problem and final measures expected to be announced on Friday.

  • Most existing tankers have 7/16th-inch steel frames
  • Future models are expected to require 9/16th-inch frames plus an additional protective jacket
  • New models will also have hardened fittings and other safety features
  • The retirement plan for existing tankers is not yet known
  • March 11, Canada Transport Minister Lisa Raitt said some existing tankers should be allowed to stay in service through 2025
  • March 24, oil industry executives asked the White House to endorse a retirement schedule longer than a decade
  • April 3, the National Transportation Safety Board suggested a five-year plan for retiring older tank cars
  • Federal regulators are not expected to curb volatility of crude oil train cargo
  • April 1, North Dakota limits vapor pressure for oil train crude to 13.7 pounds per square inch
  • February 2014, three oil companies were fined $93,000 for wrongly classifying their cargo
  • Besides those sanctions, federal officials have not mandated controls on volatility
  • A U.S. Energy Department study of volatility is at least many months from completion

The New Keystone XL Pipeline: Jordan Cove -- A quiet cove at the edge of the Pacific Ocean is heir apparent to the raging debate over the Keystone XL pipeline. With a massive natural gas terminal and its own power plant, the pipeline that’s proposed to end at Coos Bay is slated as one of the next lavish investments in our nation’s continuing commitment to fossil fuels that propel the climate crisis.   Forget the compelling mantra of “energy independence.” That goal has driven the engine of mining, drilling and pumping across the coal, oil and gas fields of America ever since the Arab oil embargo of 1973. Who would disagree that we should be less-dependent on foreign oil? It drains our balance of payments, precipitates wars, and feeds the specter of terrorism. For energy independence, we sacrificed American landscapes, waterways, and communities from permafrost at Prudhoe Bay to BP blowouts on the Gulf Coast, not to mention the scourge of Appalachian mountaintop removal and the fracking of gas in pockmarked well-fields poisoning groundwater from Colorado to Pennsylvania.  But now, in a move that could define the phrase “bait-and-switch,” the mantra is “export” by corporations that will profit more by selling home-grown fuel abroad than by selling it here. For export at Jordan Cove we would slice a pipeline swath through whole mountain ranges and enclaves of ancient forests for 230 miles from the West’s interior drylands to the Pacific. Crossings will put 400 streams at risk including Oregonians’ cherished waters of the Klamath, Umpqua, Coquille and Rogue Rivers—all vital to endangered salmon and steelhead trout. Coos Bay fingers through more acreage than any other West Coast estuary between the Columbia River and San Francisco. Water here pulses with Pacific tides that nourish commercial and sport fisheries renowned for generations, but 5.6 million cubic yards would be dredged from those rich waters and fertile wetlands for the berth of one gas-tanker alone. It’s a lot to give up so that the industrial-military engine of China can thrive.

Oil-Fund Outflows Bode Ill for Prices - WSJ: Money is pouring out of a popular investment tied to the oil market, a sign that a monthlong crude-price rally may be running out of gas. Exchange-traded funds that invest in U.S. oil futures, including the $3.1 billion United States Oil Fund USO -0.46 % LP, have registered about $2.7 billion of investor outflows this month, according to investment bank Macquarie Group Ltd. MQG 0.66 % That reverses an inflow that started in January as oil prices tumbled. These ETFs took in roughly $6 billion this year through mid-March, when the U.S. oil benchmark hit a six-year low, according to Macquarie. Traders and analysts are closely watching weekly production and demand data for signs that the global glut of crude oil that sent prices swooning last year may be shrinking. They are also watching the ETF trends closely, because they say crude prices are vulnerable to a pullback following a 32% run-up since March 17. ETF buying “created a bottom in March,” said Olivier Jakob, managing director of Swiss consulting firm Petromatrix GmbH. If investors “all exit at the same time, then it will also put pressure on the market.” A renewed drop in oil prices could inject fresh uncertainty into global markets. Last year’s plunge upended economic forecasts, government budgets and corporate earnings as oil producers struggled to stay afloat and consumers pocketed fuel savings. Crude prices on the New York Mercantile Exchange remain more than 45% below their June 2014 high, settling Friday at $57.15 a barrel, and global markets are watching for signs that the market has bottomed.

A Rundown Of The EIA’s Latest Energy Predictions -- Last week the U.S. Energy Information Administration (EIA) released its Annual Energy Outlook 2015 (AEO2015). The report presents updated projections for U.S. energy markets through 2040 based on six cases, defined as follows:

  • 1. Reference — Real gross domestic product (GDP) grows at an average annual rate of 2.4% from 2013 to 2040. North Sea Brent crude oil prices rise to $141/barrel (bbl) (2013 dollars) in 2040.
  • 2. Low Economic Growth — Real GDP grows at an average annual rate of 1.8% from 2013 to 2040. Other energy market assumptions are the same as in the Reference case.
  • 3. High Economic Growth — Real GDP grows at an average annual rate of 2.9% from 2013 to 2040. Other energy market assumptions are the same as in the Reference case.
  • 4. Low Oil Price — Light, sweet (Brent) crude oil prices remain around $52/bbl (2013 dollars) through 2017, and then rise slowly to $76/bbl in 2040 while OPEC increases its liquids market share from 40% in 2013 to 51% in 2040
  • 5. High Oil Price — Brent crude oil prices rise to $252/bbl (2013 dollars) in 2040 while OPEC’s market share declines to 32%.
  • 6. High Oil and Gas Resource — Estimated ultimate recovery (EUR) per shale gas, tight gas, and tight oil well is 50% higher and well spacing is 50% closer than in the Reference case. Tight oil resources are added to reflect new plays or the expansion of known tight oil plays, and the EUR for tight and shale wells increases by 1%/year more than the annual increase in the Reference case to reflect additional technology improvements.

U.S. crude stocks build less than expected as Cushing draws - EIA – U.S. crude inventories rose last week to hit a record high for the 16th straight week but the build was smaller than expected as supplies at the Cushing, Oklahoma, oil hub declined for the first time since November, data from the Energy Information Administration (EIA) showed on Wednesday. Crude stockpiles rose 1.9 million barrels to 490.91 million in the week to April 24, compared with analysts’ expectations for an increase of 2.3 million barrels. Crude stocks at Cushing, the delivery point for U.S. crude futures, fell 514,000 barrels, the EIA said. The decline at Cushing was the first since Nov. 28, according to EIA data. U.S. crude for June delivery extended gains after the EIA report and was up $1.40 at $58.46 a barrel at 11:05 a.m. EDT (1505 GMT), after posting a fresh 2015 peak at $58.55. Brent June crude was up $1.06 at $65.70, having reached a 2015 peak at $65.92. Industry group the American Petroleum Institute (API) reported a crude build of 4.2 million barrels on Tuesday. “The under 2 million-barrel build is less than half of what the API had prepped the market for, so not surprisingly we’re getting higher price action here,”

Crude Spikes After First Cushing Inventory Draw Since November (charts) For the first time since November 2014, Cushing saw an inventory decline (-514k) last week. This has promopted a spike up to yesterday's highs in WTI Crude. The total inventgory build was 1.9mm bbl (less than the expected 3.2mm bbl) but continues the record streak to 16 weeks. Cushing "Draw"... But total inventories rose for the 16th week in a row... WTI shot up to run yesterday's stops near $58...

U.S. shale firms revive hedging as oil rebounds, may vex OPEC -- U.S. oil producers are rushing to take advantage of the rebound in oil markets by locking in prices for next year and beyond, safeguarding future supplies and possibly paving the way for a rebound in production. The flurry of hedging activity in the past month will help sustain producers’ revenues even if oil markets tumble again, which is bad news for OPEC nations, such as Saudi Arabia, that are counting on low prices to stunt the rapid rise of U.S. shale and other competitors. Oil drillers are racing to buy protection for 2016 and 2017 in the form of three-way collars and other options, according to four market sources familiar with the money flows. In some cases, that means guaranteeing a price of no less than $45 a barrel while capping potential revenues at $70. U.S. crude futures traded just below $60 a barrel on Thursday.  Pioneer is considering hedging out to 2017, chief executive Scott Sheffield told Reuters. The company says it may add more rigs in the Permian Basin this summer and has already hedged 90 percent of this year’s production and 60 percent for 2016. “You can do pretty decent three-ways, but you don’t want to give up a bunch of upside,” Sheffield said last week. A three-way collar involves buying a put option, which sets a floor for prices and selling a call option at a higher strike price, which caps gains in case of a rally but yields income that serves to offset the cost of the put options. In addition, the company sells another out-of-the-money put as well, which lowers the overall cost of the transaction but exposes the producer to greater risk if prices drop too low.

US oil and natural gas rig count drops by 27 to 905 -   Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 27 this week to 905 amid depressed oil prices. Houston-based Baker Hughes said Friday that 679 rigs were seeking oil and 222 explored for natural gas. Four were listed as miscellaneous. A year ago, 1,854 rigs were active. Among major oil- and gas-producing states, Texas lost 13 rigs; Oklahoma lost seven; New Mexico and Pennsylvania were each down two; and Alaska, Arkansas, Kansas and Louisiana were each down one. North Dakota and Wyoming each gained one rig. California, Colorado, Ohio, Utah and West Virginia were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

Weekly US oil rig count falls by 24, marking 21 consecutive declines: US crude oil futures closed Friday's session down 48 cents at $59.15 per barrel after weekly data from oilfield services firm Baker Hughes showed U.S. drillers continued to draw down the number of rigs exploring for oil. The oil rig count fell by 24 to a total of 679, down from 1,527 at the same time last year. The report marked the 21st consecutive week that energy firms took more rigs offline than they added. Brent was down 37 cents at $66.42 a barrel by 2:38 p.m.  It rose to a 2015-peak of $66.93 on Thursday and increased 21 percent in April. West Texas Intermediate traded as high as $59.90 a barrel before settling. Read MoreTraders see crude oil going to $65—but not higher Oil prices eased off 2015 highs on Friday as the dollar strengthened and after Iraq said its crude oil exports hit a record in April. Brent and U.S. crude rallied between 20 and 25 percent in April, helped by a weaker dollar and bets that a global supply glut would ease, following the June-to-January sell-off that halved prices from above $100 a barrel. News that Iraq's oil exports rose in April to a record 3.08 million barrels per day from 2.98 million bpd in March served as a reminder of ample supply in the market.

Crude Bounces After Oil Rig Count Decline Slows - Oil prices have tumbled this morning ahead of the Baker Hughes rig count data but algos bounced them after the pace of oil rig count decline slowed further. For an unprecedented 21st week in a row, the US total rig count declined this week (down 27 to 905).  Oil rigs fell 24 to 679 for the fastest total collapse in rig counts in history (down over 57% in 21 weeks). This is a faster pace of decline than the previous week for total rigs but a slower pace of decline for oil rigs.

How Shale Is Becoming The Dot-Com Bubble Of The 21st Century - As I review the financials of one of the largest shale producers in the United States, Whiting Petroleum (WLL), I can’t help but notice the parallels to the .COM era of 1999 which, to some extent, has already returned to the technology and biotech sectors of today. Back then, the faster you burned cash to capture customers regardless of earnings to drive your topline, the higher your valuation. The theory was that after capturing the customers (in energy today, it is the wells) spending would slow and so would customer additions allowing companies to generate cash. By the way, a classic recent case is none other than Netflix (NFLX) which, in the past was exposed for accounting gimmicks that continue even today. It is still following this path of burning cash for the sake of customer additions, while never generating any cash in its entire existence.  Cash was plentiful in 1999 so it could always be raised as the Federal Reserve began its easy money era creating a series of bubbles for the next 15 years. Does this sound familiar to what is occurring now? It will end the same way and that process has already started as currency wars heat up and our economy grinds to a halt proving QE does not, in fact, create wealth (temporary yes for the 1%, short term, until POP) but instead it destroys it by distorting asset prices, misallocating investments, and ultimately creating an equity crash.We just witnessed this in energy, as all the economic stats that distorted the real underlying economic weakness in the economy led energy producers to overproduce while easy money fueled it and expanded speculation in the futures market. Back in 1999 did the internet companies adapt their business models? Some which still survive today did, but most went bankrupt. The parallels here with energy are simply stunning as most E&P companies need to spend well over their operational cash flow in order to not only grow but to replace the wells that are producing tied to depletion. Money is free right? Well we are witnessing the first stages now and it may not last, as junk bond investors in energy can attest.

Invest in Oil & Gas Drilling | Patriot Energy: Accredited Investor Status:* I certify that I had individual income over $200,000 (or joint income with my spouse of more than $300,000) in each of the past two years and reasonably expect to reach the same level in the current year, AND/OR I have an individual net worth in excess of $1,000,000.

Witnessing A Fundamental Change In The Oil Sector - The U.S. oil production decline has begun.It is not because of decreased rig count. It is because cash flow at current oil prices is too low to complete most wells being drilled.The implications are profound. Production will decline by several hundred thousand barrels per day before the effect of reduced rig count is fully seen. Unless oil prices rebound above $75 or $85 per barrel, the rig count won’t matter because there will not be enough money to complete more wells than are being completed today. Tight oil production in the Eagle Ford, Bakken and Permian basin plays declined approximately 111,000 barrels of oil per day in January. These declines are part of a systematic decrease in the number of new producing wells added since oil prices fell below $90 per barrel in October 2014 Deferred completions (drilled uncompleted wells) are not discretionary for most companies. Producers entered into long-term rig contracts assuming at least $90 oil prices. Lower prices result in substantially reduced cash flows. Capital is only available to fulfill contractual drilling commitments, basic costs of doing business, and to complete the best wells that come closest to breaking even at present oil prices.Much of the new capital from junk bonds and share offerings is being used to pay overhead and interest expense, and to pay down debt to avoid triggering loan covenant thresholds. Hedges help soften the blow of low oil prices for some companies but not enough to carry on business as usual when it comes to well completions. The decrease in well completions provides additional evidence that the true break-even price for tight oil plays is between $75 and $85 per barrel. The Eagle Ford Shale is the most attractive play with a break-even price of about $75 per barrel. Well completions averaged 312 per month from January through September 2014 when WTI averaged $100 per barrel (Figure 2). When oil prices dropped below $90 per barrel in October, November well completions fell to 214. As prices fell further, 169 new producing wells were added in December and only 118 in January.  Bakken break-even prices are higher at about $85 per barrel. Well completions averaged 189 per month from January through September 2014. In November, only 80 new producing wells were added. In December and January, 123 and 114 new wells were added, respectively. Orders for rail cars used to transport oil decreased by 70% in the first quarter of 2015 compared with the fourth quarter of 2014.

Low Oil Prices Could Destabilize Financial System -- Could the rising levels of debt in the oil industry contribute to destabilization in the financial system?The collapse in oil prices has forced drillers to turn to debt markets to keep their operations going. According to theWall Street Journal, there has been $86.8 billion in new debt issued so far in 2015, a 10 percent increase over last year.  But that trend is not necessarily new. The oil industry has relied on debt for quite some time, but the dramatic fall in oil prices has put a bright spotlight on the practice. The Bank for International Settlements concluded in a March 2015 report that outstanding debt in the oil and gas sector has reached $2.5 trillion, a massive increase over the $1 trillion in debt in 2006. All of that debt could put extra pressure on companies to continue to produce flat out, as cash flows are critical to meet debt payments. Ironically, however, the incentive to continue to produce as much as possible could merely exacerbate the period of depressed oil prices. That could prevent oil markets from stabilizing. “[I]f the need to service debt delays a pullback in production, a lower price may act more slowly to balance supply and demand,” BIS concludes.  What is interesting is the willingness on behalf of Big Finance to lay out the cash for strapped companies. BIS finds that loose monetary policy since 2008 has contributed to the debt-fueled investment boom in oil and gas. Debt issuance in the oil and gas sector has increased by 15 percent per year since 2006, rising much faster than other sectors.

Poll: Oil prices to stay weak for at least a year -- Oil is likely to stay relatively weak for at least the next year, a Reuters poll forecast on Thursday, suggesting a slowdown in oil production in the United States will not be enough to offset a global supply glut. Reuters monthly survey of 32 analysts predicted North Sea Brent crude would average $60 a barrel in 2015, up 80 cents from the projection in last month’s survey. The North Sea crude oil benchmark has averaged around $56 a barrel so far this year. Brent prices collapsed to a low just above $45 in January from a high above $115 a barrel, and have recovered gradually over the last three months to trade close to $66 by Wednesday’s close. The price crash has forced some exploration companies to stop drilling for oil and the number of rigs operating in the United States has fallen for 20 weeks in a row to its lowest since 2010, data from oil services company Baker Hughes show. But global inventories are so high, with U.S. crude oil stockpiles at an all-time record, that the market will stay weak for some time, the Reuters poll forecasts. And U.S. oil production will be “more robust than expected,” Frank Klumpp, an analyst at LBBW, said. While a few analysts see crude output slipping in the second half of this year, most believe that ample supplies, and the chance of extra Iranian volumes hitting the market if sanctions are lifted mid-year, will keep prices under pressure.

New Saudi King Consolidates Power To Maintain Current Oil Policy -- Less than four months into his reign, Bloomberg reports that Saudi Arabia’s King Salman is consolidating power with a major reshuffle of succession lines and government officials. "The new king has proved consistent in his determination to elevate members of his close family to key positions," noted one analyst. As the world’s top oil exporter plays a more prominent role in the region’s power struggles, it apears Salman wants family close. Oil policy is unlikely to change, notes Bloomberg's Julian Lee, as this brings younger men into top government positions, paving way for transfer of power to new generation of princes.

The great Saudi cash burn - There were those who said it would never happen. Then there were those who said it wouldn’t matter even if it did happen. And there were those who recognised Saudi Arabia was probably panicking about the prospect of a destabilising cash burn situation as soon as the term Saudi America became a thing.  But, as the FT reports on Friday, Saudi cash burn is now not only a big thing, it’s an accelerating big thing: The central bank’s foreign reserves have dropped by $36bn, or 5 per cent, over the past two months, as newly crowned King Salman bin Abdulaziz Al Saud dips into the rainy-day fund and increases domestic borrowing to fund public-sector salaries and large development projects.  Which speaks, err, literal volumes about the near-record amount of crude Saudi is currently pushing into the market. As JBC Energy reported today: JBC Energy’s assessment for OPEC crude output in April sees this having jumped to 30.9 million b/d, up 125,000 b/d from March. The uptick comes mostly due to higher Saudi Arabian production and a partial Libyan recovery, and thus brings the average of the last two months some 1.2 million b/d higher compared to Mar-Apr 2014. The very high levels of production in the world’s top crude exporter for March were not a one-off as the Kingdom continues to produce near record levels. The logical explanation is that Saudi Arabia is engaged in a race to the bottom with US shale producers, and is now prepared to throw everything it has at the market just to ensure it is the last man standing when everything settles down. Most would say the sheer size of reserves ($708bn) means the Kingdom has a good chance of achieving this objective in the long run. But, as Olivier Jakob of Petromatrix noted this week, we must also be conscious of the power shuffle going on within the Saudi leadership:

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