it appears that the international corporate trade deals are moving forward again, after last week's setback...initially, Boehner's planned Tuesday re-vote on the defeated trade adjustment assistance (TAA) bill was abandoned after consulting with Obama, and plans at midweek were to postpone the House vote on the issue for 6 weeks, so as to coincide with the July 30th expiration of the Highway Trust Fund authorization...that's because in helping defeat the TAA on Friday, Pelosi never said that she intended to stop TPA (trade promotion authority, aka "fast track"), but rather slow it down, and gave indications that Democrats would be willing to allow fast track on trade in exchange for a long term highway funding bill...however, on Thursday, when the national news media was preoccupied with coverage of the Charleston church shooting, the House took a vote on a stand alone version of TPA, which the House Rules Committee had attached to H.R.2146, an uncontroversial police and firemen retirement bill the night before...with 28 Democrats joining all but 50 Republicans, that fast track bill was passed by a 218 to 208 margin and sent to the Senate..
now, as you'll recall, the Senate defeated just such a stand-alone fast track bill a bit over a month ago, and then turned around and passed it when the TAA, a displaced worker assistance bill, which Republicans tended to oppose, was coupled with it...so now, for this House fast track bill to pass the Senate, at least a handful of the Senate Democrats who originally voted against a stand alone TPA will have to switch their votes to for it, and to do that they must be convinced that the TAA bill that they wanted will pass separately....there are at least two ploys being discussed to achieve that; one would be to link TAA with the bill extending the African Growth and Opportunity Act (AGOA) for 10 years; the AGOA, first passed 15 years ago, allows favored African exports, such as clothing and textiles, to enter the US mostly duty-free, and it is usually renewed with broad bi-partisan support...another possibility would be to couple TAA with a reauthorization of the Export-Import Bank, which finances and insures foreign purchases of US goods, many from Democratic states, and which the Republicans have blocked up until now...presumably, if one or both of these carrots could be dangled in front of the Democrats, enough of them would snap at that lure such that both the House passed stand alone TPA and a TAA bill combined with one of these other trade bills could pass the Senate...then, the TAA bill, with whatever it's attached to, would have to go back to the House for a vote, where it is assumed that a bill with mostly Democrat party initiatives could pass easily, assuming Boehner's co-operation...
within hours of the House passage of the TPA bill, Senate Majority Leader Mitch McConnell filed a cloture motion on it, meaning it could come up for a vote as early as Tuesday...however, it's questionable whether Democrats would switch their votes merely on an assurance from McConnell and Boehner that the bargain chip TAA would be allowed to pass; the trustworthiness is just not there...for instance, Washington Sen. Maria Cantwell voted for fast track earlier based on a promise that the Senate would reauthorize the Export-Import Bank, providing financing needed for foreign Boeing jet purchases; that hasnt happened, and it could thus be a case of "once burnt, twice shy" for Senators who would otherwise allow themselves to be compromised...so we can hope that there is at least enough bad blood among our congresscritters to at least slow this thing down...nonetheless, now that Obama has opportunistically switched parties and has become a Republican, it appears that with a majority of his party in both houses he should eventually be able to push his corporatocratic agenda through...from there, we're probably less than a year away from ramping up exports of our oil and gas to the 11 other countries on the Pacific rim that will be signatories to the TPP (Trans-Pacific Partnership), and then to the rest of the world, as soon as similar treaties can be signed with them...
meanwhile the ongoing reduction in working drilling rigs nearly stalled this week, as the rig count as reported by Baker Hughes was only down by 2 to 857, with oil rigs down 4 to 631, gas rigs up 2 to 223, and miscellaneous rigs unchanged at 3...that's still an unprecedented 28 straight weeks of less drilling each week than the one before it, but we wouldn't be surprised if that reverses itself soon and drillers begin to add more rigs than they idle, especially if oil prices rise or even stay as stable as they have been...contract US oil prices were within 50 cents of $60 a barrel this week, and they've generally been within a few bucks of that price since mid-April, so the incentives to start or stop drilling haven't changed much recently, and we'd think that all of the rigs that were working plays that were unprofitable at $60 should have been shut down by now...the 857 rigs that were running this week is now down by 1001 from a year ago, and 914 of those shutdowns were in the oil patch..
on net, there was one less horizontal rig and one less vertical rig in operation in the US this week than last, leaving 662 horizontal, 100 vertical, and 95 directional rigs running at week end, down from 1250 horizontal, 380 vertical, and 228 directional rigs that were in operation a year earlier...two oil rigs working offshore in the Gulf were idled this week; that left 825 land based, 27 offshore, and 5 rigs on inland waters remaining, which was down from 1784 land based, 59 offshore rigs, and 15 rigs on inland waters a year ago...north of the border, Canadian drillers added 9 rigs, all land based, with their oil rigs up 6 to 74 and their gas rigs up 3 to 62.
five states saw rig reductions this week; Louisiana down by the 2 offshore to a total of 69, New Mexico, down by 2 to 43, Oklahoma, down by 2 to 105, Wyoming down 1 to 21 and Ohio down 1 to 20...on the other hand, drillers in Utah added 2 to bring their total to 8, and 4 states added one each: Alaska, now at 10, Illinois now at 3, North Dakota now with 77, and Pennsylvania with 47...rig counts in all other states, including Texas, were unchanged, but that doesn't mean they were stagnant; based on the counts from the districts, Texas saw at a minimum 5 rigs shut down, and 5 rigs started elsewhere in the state...
there were also only modest decreases in our oil output and stocks this week as well...US field production of crude oil slipped by 21,000 barrels per day from the record output of last week to an average of 9,589,000 barrels per day during the week ending June 12th; however, that's still 13.8% above the 8,428,000 barrels per day output we saw during the second week of June a year ago...our oil stocks fell too, as they normally do at this time of year...our inventories of crude oil in storage were lower for the 7th consecutive week, falling by 2,676,000 barrels to 467,927,000 barrels; but again, that's still 21.1% higher than the 386,348,000 barrels we had stored a year ago, and the highest stocks ever for the 2nd week of June over 80 years of EIA record keeping...meanwhile, with US refineries still running at 93.1% of their operable capacity, our crude oil imports rose by 444,000 barrels per day, or 6.7%, from an average of 6,623,000 barrels a day last week to 7,067,000 barrels per day in this report....that's still below last year's pace, though; according to the weekly Petroleum Status Report (62 pp pdf), our crude oil imports averaged 6.9 million barrels per day over the last 4 weeks, which is now per 5.3% below the same four-week period last year....
Ohio lawmakers punt on drilling tax hike, send issue to study committee -- Unable to reach agreement on raising the state's oil and gas severance tax, Ohio legislative leaders said Tuesday they're sending the issue to a study committee. With time running out for lawmakers to pass a new two-year budget plan, House and Senate leaders said they agreed to have a proposed Ohio 2020 Tax Policy Study Commission review a severance tax hike and report on its findings by Oct. 1. So the budget, which must be in place by the end of this month, will go forward without a severance tax. Lawmakers have talked for years about raising taxes on oil and gas fracking, which has been accelerating in eastern Ohio. The debate has pitted Republican Gov. John Kasich and the Ohio Senate, supporters of a tax hike, against the oil and gas industry, whose position is supported by the Ohio House.. "We've never had everybody in the same room together," Senate President Keith Faber said, when asked why lawmakers haven't been able to reach agreement so far. "Putting everybody in the same room together, I think, will lead to fruitful negotiations."
GOP axes John Kasich's oil & gas tax from budget - – Republican lawmakers say they won't add a tax on oil and gas obtained through fracking into the state budget as Gov. John Kasich asked. In February, Kasich asked for a 6.5 percent tax on oil and gas at the fracking well head and 4.5 percent tax on natural gas and liquids obtained downstream. That was higher than the 2.75 percent tax the governor suggested last year. Twenty percent of the tax revenue would have gone to counties with wells and the rest would have helped pay for an income tax cut. House Republicans stripped the fracking tax from their version of the state's two-year budget. Kasich, who is fundraising for a potential presidential bid, complained through a spokesman about the alternate tax plans offered by fellow Republicans, saying they could dismantle Ohio's recovery. On Tuesday, Ohio Senate President Keith Faber, R-Celina, and House Speaker Cliff Rosenberger, R-Clarksville, said they will not add a tax to the two-year state budget, which the Senate plans to vote on this week. Both said there wasn't enough time to agree on a fracking tax before the June 30 deadline for passing the budget. Instead, they created a task force with lawmakers and members of the Kasich administration to discuss options, which likely would include a fracking tax hike. A report from the task force would be due Oct. 1. Ohio currently taxes the industry at 20 cents per barrel of oil — one of the lowest taxes in the country.
Ohio GOP creates panel to discuss energy drilling taxes - Throwing their hands up on any chance of reaching a deal for this budget, Republican legislative leaders today announced creation of a committee to negotiate a possible increase in taxes on Ohio’s new age of oil and natural gas drilling. A report from the study would be due on lawmakers’ desk by Oct. 1. “Today we have a choice — to hold that dialogue, move forward with an unfinished policy in the budget, and fight it out in conference committee or to continue the process outside of the budget and work toward a meaningful compromise during the next three months,” Senate President Keith Faber (R., Celina). House Speaker Cliff Rosenberger (R., Clarksville), who has been adamant that a severance tax hike would not be in the budget, said the committee will allow for an “open and frank discussion” at once with the industry, both legislative chambers, and Gov. John Kasich’s office. Senate Finance Committee plans to unveil another round of changes today to its proposed $71.3 billion, two-year spending plan, but has put off a final committee vote until Wednesday. A full Senate vote could come Wednesday or Thursday. Mr. Kasich has made multiple attempts to increase the severance tax on hydraulic fracturing, or “fracking,” wells with much of the revenue to pay for additional income tax cuts. Mr. Kasich had included his latest proposal in his budget, but House Republicans stripped it from the measure before sending its version of a budget to the Senate. The Senate has continued to negotiate with the industry.
Another stall on fracking tax - Columbus Dispatch: Ohio Senate President Keith Faber says he and his colleagues can’t include a new severance-tax package in the biennial budget they’re working on because the June 30 budget deadline looms, and they’ve run out of time after a month and a half of negotiation with the oil and gas industry. Now, legislative leaders promise, just give them three more months to ponder it and they’ll produce a deal that the industry will accept. That would be more convincing if Gov. John Kasich hadn’t been pleading with lawmakers and the industry on the same issue for three years. Over and over, Kasich has made the case that Ohio’s severance tax, far lower than those in other shale-drilling states, should be raised, to give Ohioans a fair return for the natural resources being sucked out of Ohio for the profit of mostly out-of-state companies. Over and over, he has been rebuffed by lawmakers protecting the industry, which rejects any reasonable tax and, by the way, contributed about $1.4 million total to legislators and other state candidates in the past election cycle. There’s little reason to think that they’ll put Ohioans first this time. Faber and House Speaker Cliff Rosenberger plan to establish a commission to study the issue. Any Statehouse veteran recognizes this as a time-honored evasion tactic, and despite Faber’s assertion to the contrary, this looks like a three-month extension of three years of delay. The commission, which will be a subgroup of a larger tax-reform committee, will have three House members (two Republicans and one Democrat), a like complement of Senate members
Kinder Morgan seeks shippers for $4 billion pipeline from Ohio to Gulf Coast for Utica Shale liquids -- A Texas pipeline company is seeking shippers to send natural gas liquids from Ohio and Pennsylvania to the Gulf Coast. Kinder Morgan Inc., based in Houston, is seeking drilling companies through Sept. 15 for its Utica Marcellus Texas Pipeline, a $4 billion project that will stretch 1,100 miles. The open season for signing up began Wednesday with the announcement by subsidiary Utica Marcellus Texas Pipeline LLC. The pipeline would run from Ohio’s Harrison and Tuscarawas counties to Natchitoches, La., and then to Mont Belvieu, Texas. The plans call for abandoning and converting 964 miles of existing pipelines operated by Kinder Morgan’s Tennessee Gas Pipeline Co. from Ohio to Louisiana to transport liquids including ethane, propane and butane from the Utica and Marcellus shales. That would alter 24-inch and 26-inch lines. The plans would require construction of 202 miles of new 20-inch pipeline from Louisiana to Texas. The new pipeline will provide a connection to the petrochemical industry on the Gulf Coast and to a Kinder Morgan dock for export. About 120 miles of new liquid pipelines would be built in Ohio, Pennsylvania and West Virginia, along with a liquids storage facility in Tuscarawas County. It would take liquids from at least three processing facilities in eastern Ohio.
Democracy Day event elaborates on charter for Athens County - Advocates for turning Athens County into a charter government argued that it would give power back to residents and allow the county to impose standards on the oil and gas industry similar to what Athens City Council passed in 2013. Those standards have yet to be tested as no oil- or gas-drilling activity has occured in the city of Athens. Democracy Day at the Shade Community Center on Saturday featured a variety of speakers and panels, and was sponsored by the local activist group Democracy Over Corporations, the Appalachian Peace and Justice Network, and a variety of local businesses. A heavy focus of the event was the Athens County Bill of Rights Committee's proposal to voters this November for turning Athens County into a charter government. A similar proposal is underway in Meigs County and several others throughout Ohio. Currently, only Summit and Cuyahoga counties are charter governments in Ohio, with the rest being statutory. A panel speaker, Nancy Pierce, explained that a charter would not change the way Athens County government is set up, but it would give the county board of commissioners the ability to make law, and it would allow citizens the right to petition initiatives and referendum. She pointed to Chapter 47 of the city of Athens municipal code, enacted by City Council in 2013, that calls for the imposition of various fees and controls on companies looking to conduct horizontal hydraulic fracturing oil-and-gas drilling business within city limits. The city's code includes fees for monitoring for groundwater contamination and air pollution, control over industry trucks such as weight limits, and the funding of insurance premiums for liability concerns. The proposal does include a Bill of Rights for the county that would seek to ban fracking activities, McGinn said, but it is set up to allow for what's known as severability, so that if that portion or any portion is struck down by a court, for instance, the rest of the charter remains intact. "If part of it is thrown out for some reason, the other parts will stay," he said.
Fracking and water: Quantity, not just quality, a concern - Even in a water-rich state like Ohio, growing water use for fracking could strain water reserves, according to new research from the FracTracker Alliance, a non-profit organization that compiles data, maps and analyses about the impacts of the oil and gas industry. FrackTracker compared the oil and gas industry’s water use within southeastern Ohio’s Muskingum Watershed Conservancy District (MWCD) to residential use in that area, which covers roughly 20 percent of Ohio. Residential water use includes families’ home use, but excludes water for agricultural, industrial and other purposes. FracTracker found that the oil and gas industry’s use ranged from 11 to 18 percent of the residential amount. If current trends continue, the industry’s water use could rise to 25 percent of the residential amount within just a year or two, reported Ted Auch, Great Lakes program coordinator for FracTracker. Although much of the area is rural, Auch said the growing water demands are cause for concern, because those demands might ultimately limit the region’s ability to respond to periods of drought, climate change or other events. Industry sources dismissed concerns about southeastern Ohio’s water supplies. Local authorities are not worried now, although they note that ongoing management is needed.
Utica and Marcellus well activity in Ohio - Activity in the Utica and Marcellus Shale formations in Ohio have seen some changes compared to last the well activity update. The state’s severance tax, on the other hand, seems to have made no progress. Governor John Kasich is hopeful about his severance tax being passed by legislation, but legislation is taking its sweet time when it comes to doing so. During an interview, Gov. Kasich explained there has been “virtually no progress made” towards the tax. The Governor’s tax would increase what companies operating in the Utica Shale formation pay to drill. A large portion of the revenue generated from the tax would be allocated to funding Gov. Kasich’s proposed income tax cut.The following information is provided by the Ohio Department of Natural Resources (ODNR) and is through the week of June 13th. Activity in the Utica Shale formation in Ohio has caused a few slight changes in comparison to last week’s update. The ODNR reported 428 wells were permitted, 401 drilled, 904 producing, 25 inactive, 24 in final restoration and 3 abandoned. This brings the total number of wells in the Utica to 1,932. The Marcellus Shale in Ohio remains unchanged from last week’s well report. The area is still sitting at 15 wells permitted, 11 drilled and 16 wells producing. There are a total of 44 wells in the Ohio Marcellus Shale.
Marcellus permit activity in Pennsylvania -- The Marcellus Shale formation in Pennsylvania saw quite a bit of action over the last week, along with some good news for housing in the Marcellus Shale region in the state. Pennsylvania’s state impact fee has always brought in revenue for the communities and municipalities that are impacted by Marcellus Shale operations, and this year housing throughout the region will be receiving serious improvements thanks to the fee. The Pennsylvania Finance Agency is now issuing a Request for Proposals for projects that will benefit and upgrade housing in the Marcellus Shale. Funding for the projects will come directly from the 2014 Marcellus Shale impact fees, which includes $5 million from 2014 wells, drilled or active. It also includes “Marcellus Shale impact fee funds provided to municipalities that exceeded a certain percentage or dollar amount set by law. The following information is provided by the Pennsylvania Department of Environmental Protection and covers June 8th through June 14th. New: 26 - Renewed: 11 Top Counties by Number of Permits Elk: 10 - Lycoming: 8 - Susquehanna: 7 - Bradford: 5 - Westmoreland: 2
Communities can do little to keep PennEast pipeline out - In Moore Township, where farmers tend miles of uninterrupted fields against the backdrop of Blue Mountain, residents pride themselves on their commitment to a pastoral way of life. So when PennEast Pipeline LLC proposed a 108-mile natural gas pipeline that would cut through seven miles of the township, residents made their dissatisfaction known. They planted signs in their yards and peppered supervisors with phone calls and emails, imploring them to stop it. Moore supervisors didn’t need any convincing. The last thing they want is a pipeline that would “come up over the mountain,” cross the historic Appalachian Trail and pass near the Hokendauqua Creek, a popular trout fishing spot among locals. “It will permanently leave a scar on the land that will never go away,” Supervisor Richard Gable said. “It’s going to affect a lot of people.” But as they looked at options, Moore supervisors learned there is little they can do. “Can we prevent them from coming through the township? The answer is no,” supervisors Chairman David Tashner Sr. told residents at a township meeting in October. Moore Township isn’t alone. Twenty-six municipalities from Wilkes-Barre to Mercer County, N.J., could be affected. Of about 845 properties, nearly 200 are in Northampton County, according to PennEast.
Bradford County might join lawsuit against gas companies: Commissioners concerned about growing problem of large deductions from royalty checks - marcellus.com: – Bradford County might join one of the lawsuits that have been brought against gas companies for allegedly taking large, unfair deductions for post-production costs from local landowners’ royalty checks, the Bradford County commissioners announced Thursday. “We have instructed our solicitor to look at all the different lawsuits” that have been brought against gas companies for taking unreasonably large deductions for post-production costs from Bradford County landowners’ royalty checks, Doug McLinko, chairman of the Bradford County commissioners, said at the commissioners’ meeting on Thursday. “We are strongly considering joining one of the lawsuits” as a plaintiff, he said. Bradford County has leased the gas rights to over 900 acres of land that it owns, McLinko said. The county would join one of the lawsuits not only to “protect the county going forward” from large deductions being taken from its royalty checks, but to show support for property owners who are having “very unreasonable deductions” taken from their royalty checks,” McLinko said. Currently, the county is receiving royalty payments on over 90 acres of land that it owns in West Burlington Township and in the Wyalusing area, said Bradford County Chief Clerk Michelle Shedden. The royalty payments that the county receives come from Chesapeake Energy Corp., she said.
What happened to 160000 fracking jobs? Under Wolf, the numbers change - Last week Pennsylvania changed the way it counts jobs associated with the Marcellus Shale industry. Somehow Pennsylvania lost 160,000 gas industry jobs overnight. What happened? Did drillers flee at the specter of a new tax on production? Not quite. Although companies have been laying off workers and cutting costs– lackluster market conditions don’t explain this shift. Instead, it was a decision made under Governor Wolf’s new administration. Last week the state Department of Labor and Industry quietly changed the way it tracks employment in the Marcellus Shale industry. “Those numbers were a joke,” says John Hanger, Wolf’s secretary of planning and policy. ”The errors were so glaring, they had to be changed.” Wolf’s predecessor Tom Corbett, a Republican, often credited drillers with supporting more than 200,000 Pennsylvania jobs. “We were very uncomfortable with some of the misrepresentations under the past administration,” says labor department spokeswoman Sara Goulet. As StateImpact Pennsylvania has previously reported, the way the state reported gas jobs had been repeatedly questioned over the years by independent economists. Roughly 30,000 people work directly in six “core” oil and gas industry jobs. But starting in 2011, the labor department began publishing a monthly booklet called Marcellus Shale Fast Facts, which showed about 200,000 other jobs in 30 “ancillary” industries. This figure included every road construction worker, trucker, and steel worker in Pennsylvania– whether they had ties to the gas industry or not. The two numbers (core and ancillary) were often added together by industry boosters, who then claimed the Marcellus Shale supported a quarter-million jobs statewide. In its new analysis, the labor department credits the gas industry with 89,314 jobs during the third quarter of 2014. The figure includes direct jobs and those in related industries.
Is The Rogersville Shale The Next Shale Formation to be Fracked? - Members of the Ohio Valley Environmental Coalition gathered the public Monday night in Westmoreland, near Huntington, to discuss the Rogersville Shale. The forum was designed to inform the public of a newly discovered shale formation, the Rogersville Shale. The shale is concentrated in Calhoun, Roane, Jackson, Kanawha, Putnam, Lincoln, Wayne and Cabell counties in West Virginia, but also extends into Kentucky. Dianne Bady is with the Ohio Valley Environmental Coalition. "There is a lot of interest on the part of oil and gas companies in the very deep Rogersville shale formation that underlies parts of eastern Kentucky and western West Virginia," Bady said. The forum featured presenters who have been affected by the influx of fracking in the northern Marcellus Shale region of West Virginia, each with a different story about what fracking has done to their community. Bady says they just want to inform and educate before things begin to change because of the new shale discovery. "Before this part of the state is turned into a major oil and natural gas production area and transformed into something that looks nothing like it does now that people in the area ought to know what’s going on and have a say in what kind of economic development we want to see in this part of the state," Bady said. Marilyn Howells is from Wayne County and has already received a letter about purchasing her mineral rights. She says just wants people in the region to think about what fracking could mean and to make sure to consult others before making a decision.
W.Va., Va. coalition takes a stand against natgas pipeline -— A coalition of environmental and conservation groups in West Virginia and Virginia announced its opposition Thursday to the proposed 550-mile route of a natural gas pipeline. The position represents a shift for the Allegheny-Blue Ridge Alliance, which was formed last September as an “information coalition” on the development of the Atlantic Coast Pipeline. “We now have decided to broaden our role and adopt the policy” of opposing the pipeline’s route, the alliance’s chairman, Lewis Freeman, wrote in an email. The alliance cited a number of reasons for its opposition, including fears over water safety, the sensitive mountainous terrain it would cross and the potential harm to habitat of protected plants and animal species. The pipeline also would carve up portions of the Monongahela and George Washington national forests, as well as the Appalachian Trail, the alliance said. The route for the pipeline is “not in the best interest of the public good of the affected communities and citizens of Virginia and West Virginia,” the alliance said in a news release. The pipeline is being proposed by Dominion Resources, Duke Energy and other partners. It would begin in Harrison County, West Virginia, and stretch through Virginia and North Carolina to Robeson County, near the South Carolina border.
Fracking to blame? Alabama earthquakes occurring near shale-gas developments - -- More than a dozen minor earthquakes have struck western Alabama’s Greene County since November. The area is near the Black Warrior Basin, where thousands of hydraulic fracturing natural gas wells have been operating in recent years. The Associated Press reported Sunday that Greene County has had 14 notable yet inexplicable seismic events since November 20, starting with a magnitude 3.8 quake 10 miles northwest of Eutaw. The latest was a magnitude 3.0 earthquake on June 6. "It is interesting that recently there has been more activity there than in the last four decades," Geological experts are now using a seismic monitor to gather information on the quakes in hopes that they can understand the exact cause. Some wonder if hydraulic fracturing, or fracking, in the area is the source of unusual seismic activity, as the oil and gas extraction process has been the cause of quakes in other areas of the United States, including Oklahoma and Ohio. Nick Tew, Alabama’s state geologist, told AP that no oil or gas is currently being produced in the area where the quakes occurred in Greene County, and so there has been no recent wastewater disposal either. Tew is the head of both the Geological Survey of Alabama and theState Oil and Gas Board of Alabama, the latter of which regulates drilling operations in the state. Tew was the former head of American Geosciences Institute, an organization that downplays fracking risk, and vice-chairman of the Interstate Oil and Gas Compact Commission. He currently serves on the National Petroleum Council.
Feds seek to separate fact from fiction in earthquakes caused by gas wastewater injection - Yes, injection of wastewater from fracking operations and oil recovery deep into the earth is causing earthquakes in the central United States. No, fracking wells are not directly causing the earthquakes. That’s a message from the U.S. Geological Survey as it seeks to battle misconceptions from a study released in January that concluded that humans were responsible for minor earthquakes in eight states. In the last six years, the number of earthquakes with a magnitude of 3 or larger has risen dramatically. Such quakes averaged 24 per year from 1973 to 2008. From 2009-2014, such earthquakes shot up to 193 per year. That latter period coincides with the spread of natural gas recovery by hydraulic fracturing, or fracking, in parts of the the U.S. More specifically, it coincides with a method of disposing of saltwater and chemicals from gas and oil operations by injecting them deep underground, below aquifers that may provide drinking water.“This process increases the fluid pressure within fault zones, essentially loosening the fault zones and making them more likely to fail in an earthquake,” the U.S. Geological Survey said in a recent news release titled “Six Facts about Human-Caused Earthquakes.” “When injected with fluids, even faults that have not moved in historical times can be made to slip and cause an earthquake if conditions underground are appropriate.” The federal agency said earthquakes caused by wastewater injection have been found in Ohio, Alabama, Arkansas, Colorado, Kansas, New Mexico, Oklahoma and Texas.However, the service notes that in many locations the wastewater being injected does not come from fracking wells. For example, in Oklahoma, the source of most wastewater is from oil wells. But near Youngstown, Ohio, and Guy, Arkansas, where injection was placed as the cause for earthquakes, the wastewater was made largely of spent hydraulic fracturing fluid.
Wastewater disposal is triggering more earthquakes, study finds - The number of earthquakes taking place in the United States is on the rise, and humans are causing at least some of them by drilling for shale gas and oil and, more likely, by using deep injection wells to dispose of drilling fluid. That’s the word from the U.S. Geological Survey, which put out a report this month after studying the increase in seismic activity in Ohio and other states were shale drilling is taking place. “The central United States has undergone a dramatic increase in seismicity over the past six years,” the USGS found. The number of earthquakes of magnitude 3.0 or larger has increased from about 24 per year between 1973 and 2008, to about 193 per year between 2009 and 2014, researchers said. The busiest year was 2014, when drilling was still going strong and low oil and gas prices had only begun to slow the growth of new wells — there were 688 earthquakes registering 3.0 or more on the Richter scale that year, the USGS reports. So far, 2015 is busy as well, with 430 such temblors reported in the central United States through the end of May. “In the United States, fracking is not causing most of the induced earthquakes. Wastewater disposal is the primary cause of the recent increase in earthquakes in the central United States,” the report stated.
Study: Mega injections of wastewater triggers more quakes --- The more oil and gas companies pump their saltwater waste into the ground, and the faster they do it, the more they have triggered earthquakes in the central United States, a massive new study found. An unprecedented recent jump in quakes in America's heartland can be traced to the stepped up rate that drilling wastewater is injected deep below the surface, according to a study in Thursday's journal Science that looked at 187,570 injection wells over four decades. It's not so much the average-sized injection wells, but the supercharged ones that are causing the ground to shake. Wells that pumped more than 12 million gallons of saltwater into the ground per month were far more likely to trigger quakes than those that put lesser amounts per month, the study from the University of Colorado found. Although Texas, Arkansas, Kansas and other states have seen increases in earthquakes, the biggest jump has been in Oklahoma. From 1974 to 2008, Oklahoma averaged about one magnitude 3 or greater earthquake a year, but in 2013 and 2014, the state averaged more than 100 quakes that size per year, according to another earthquake study published Thursday. Since Jan. 1, the U.S. Geological Survey has logged more than 350 magnitude 3 or higher quakes in Oklahoma. Studies have linked the increase in quakes to the practice of injecting leftover wastewater into the ground after drilling for oil and gas using newer technologies, such as hydraulic fracturing. Recent studies have linked the damaging 2011 magnitude 5.7 quake that hit Prague, Oklahoma, to a nearby high-rate injection well. Unlike other studies, this new University of Colorado study looked at 18,757 wells that were associated with earthquakes within 9 miles of them and the nearly 170,000 that didn't have any quake links. Looking for the difference between the two groups, researchers determined that it was how much wastewater was pumped and how fast, said lead author Matthew Weingarten.
Studies bolster North Texas earthquakes' links to oil, gas activity - Energy company attorneys have called a recent study linking North Texas earthquakes with oil and gas activity “incomplete,” “misleading” and “flawed.” Texas regulators have also questioned the research, telling The Dallas Morning News that evidence of human-triggered quakes in Texas is “anecdotal” and not “widely accepted.” But two new scientific papers buttress findings from the earlier study, which was led by researchers at Southern Methodist University and published in April in the journal Nature Communications. A paper published Thursday in the journal Science reports an “unprecedented” surge in earthquakes in Texas, Oklahoma and other central states. It blames oil and gas operations. “We think the study produces clear evidence that the earthquake rate change is not natural,” said Matthew Weingarten, a doctoral candidate in geology at the University of Colorado, Boulder, and the study’s lead author. Weingarten and his colleagues at the university and at the U.S. Geological Survey concluded that the entire increase in earthquake rates in Texas and nearby states was associated with fluid injection wells. The SMU study concluded that wastewater disposal wells likely triggered a series of earthquakes west of Fort Worth in 2013 and 2014. TheScience study concluded that wastewater wells are more than 1.5 times as likely as other types of injection wells to be associated with quakes. Wells that inject more than 300,000 barrels of wastewater per month, known as high-rate injection wells, were disproportionately associated with ground shaking. One of the wells linked with the Fort Worth-area earthquakes averaged approximately 369,000 barrels per month from June 2009 through September 2013, according to the Nature Communications study. The Fort Worth Basin has one of the highest concentrations of active disposal wells in the country, with some areas in the basin containing five wells per 2-square-mile area, the study reported.
More oil, gas drilling causing more earthquakes: Study: A dramatic increase in the rate of earthquakes in the central and eastern US since 2009 is associated with fluid injection wells used in oil and gas development, a new study has claimed. Advertisement: Replay Ad Ads by ZINC The number of earthquakes associated with injection wells has skyrocketed from a handful per year in the 1970s to more than 650 in 2014, according to University of Colorado Boulder doctoral student Matthew Weingarten, who led the study. The increase included several damaging quakes in 2011 and 2012 ranging between magnitudes 4.7 and 5.6 in Prague, Oklahoma, Trinidad, Colorado, Timpson, Texas, Guy and Arkansas, researchers said. "This is the first study to look at correlations between injection wells and earthquakes on a broad, nearly national scale," said Weingarten. "We saw an enormous increase in earthquakes associated with these high-rate injection wells, especially since 2009, and we think the evidence is convincing that the earthquakes we are seeing near injection sites are induced by oil and gas activity," Weingarten said. The researchers found that "high-rate" injection wells - those pumping more than 300,000 barrels of wastewater a month into the ground - were much more likely to be associated with earthquakes than lower-rate injection wells. Injections are conducted either for enhanced oil recovery, which involves the pumping of fluid into depleted oil reservoirs to increase oil production, or for the disposal of salty fluids produced by oil and gas activity, said Weingarten.
'Frac' is newest four-letter word - The newest four-letter word seems to be “frac.” And if you believe local media, it is the cause of contaminated drinking water, earthquakes, and cracks in buildings and swimming pools. And even though studies regarding hydraulic fracturing prove these claims to be false, the uninformed continue to report nonsense. You may think a royalty owner supporting hydraulic fracturing is odd. Minerals have no value until they’re brought to the surface. In order to monetize assets contained in these tight oil/gas formations, hydraulic fracturing is necessary. It’s not a new process. It has been done safely for decades. Contaminated drinking water is not caused by hydraulic fracturing. It could be a result of wellbore integrity or naturally occurring gas in shallow formations. Following a study looking at dozens of cases of suspected contamination, Ohio State University geochemist, Thomas Darrah, stated that “fracking was not to blame, that it was actually a well integrity issue”. An easy fix. The idea of “induced seismicity” or doing something to cause an earthquake is intriguing. But, earthquakes are not caused by hydraulic fracturing. Studies have shown they could be caused by water injection wells. From Stanford geophysicist Mark Zoback — “These microseismic events [from hydraulically fracturing a well] affect a very small volume of rock and release, on average, about the same amount of energy as a gallon of milk falling off a kitchen counter.” That’s hardly an 8.2 on the Richter scale.
Editorial: Fracking op-ed was signed by public officials, but penned by big oil - With its Republican legislative allies facing criticism that they had robbed a North Texas town of its powers, the oil and gas industry settled on a PR move in late May that fought fire with fire: enlist local officials from a handful of Texas communities to lend their names to an opinion piece praising the new, high-profile law that quashed a North Texas town’s ban on fracking. In the opinion piece, versions of which have appeared in at least seven newspapers, including the San Antonio Express-News and the American-Statesman, officials from Karnes City, Pleasanton, Midland and Lubbock argue that, with the recently signed law, “lawmakers got it right by relying on fact-based information to develop a balanced solution for Texas.” The law clarifies that oil and gas regulation is the exclusive jurisdiction of the state. It was a response to a November referendum in Denton, in which 59 percent of voters chose to ban fracking, a method of natural gas extraction, within city limits. In a twist that left local-control-minded Republican policymakers, including the governor, facing accusations of hypocrisy, killing the Denton measure fast became a legislative priority, one spurred by gas industry lobbying. Through a public information request, the Statesman learned that the opinion piece was shopped around by the Joint Association Education Initiative, which is paid for by oil and gas associations and producers. The Joint Association’s work is paid for by the Texas Oil and Gas Association, the Texas Alliance of Energy Producers, the Texas Pipeline Association and a handful of other associations and nonprofits.
What does Texas do with 945 million gallons of wastewater a day? - Freshwater is a colossal commodity to the frac operations throughout Texas. Texas now produces nearly 3 million barrels per day of crude oil and condensate – more than Mexico or Kuwait. But it must deal with more than 10 times this much water produced daily, according to Baker & Hostetler LLP. Recently, Baker Hostetler, one of the nation’s largest law firms, published a report to detail the ongoing problem of wastewater from hydraulic fracturing operations. For years, treating oily, salty water was too expensive. Now, technological, improvements, economic factors and regulatory incentives to reduce freshwater use, produced water may turn from a nuisance into a valuable commodity. A single large Eagle Ford frac job can require as much as 11.5 million gallons of water. Baker Hostetler noted that this is enough water to submerge a one-acre plot of land under more than 30 feet of water. That’s literally tons of water to treat, but a few different methods have been implemented to suppress fresh water use. Thankfully, water treatment technology has advanced over the years, and costs are now a fraction of what they were in the early years of the most recent boom. In addition, some companies may even be able to purify the water to drinking-level quality at a cost still comparable to that at which major Texas cities such as San Antonio have recently acquired freshwater supplies. Baker Hostetler referenced Apache Corporation, which now has produced water recycling operations in several of its Permian basin operations. The company now recycles all produced water from its Barnhart operations and no longer uses freshwater for hydraulic fracturing operations in that area.
UT-Arlington Study Links Fracking To Groundwater Contamination - Yesterday’s News Roundup told you about the puckering sound coming from Fort Worth’s Range Resources, a gas drilling company facing an $8.9 million fine from Pennsylvania’s Department of Environmental Protection. (The agency said the drilling company’s repeated failure to repair a gas well led to groundwater contamination.) When gas drillers began pushing hard for lax regulation on urban drilling, they claimed loudly and proudly that their industry had never contaminated groundwater. When local residents complained about their water wells going bad after drilling started nearby, the gas industry denied responsibility. Residents who sought a legal remedy found themselves facing a team of industry lawyers ready to wage courtroom war for no matter how long it took or how much it cost. Residents who were lucky enough to settle out of court signed nondisclosure agreements. Now comes a University of Texas at Arlington study that says fracking chemicals have caused “widespread” groundwater pollution in the Barnett Shale. “This study suggests the Environmental Protection Agency is taking a ‘see no evil’ approach to fracking water pollution,” said Earthworks Policy Director Lauren Pagel. “The University of Texas, working independent of the oil and gas industry, found evidence of widespread groundwater pollution connected to fracking. The EPA, working for years with the oil and gas industry to study the same issue, managed not to find that evidence in its study released earlier this month. Perhaps that’s because President Obama’s ‘all of the above’ energy policy requires favoring oil and gas over the clean, renewable energy our communities and water really need.” UT-Arlington and Inform Environmental LLC collaborated on the study, surveying 550 wells in the Barnett Shale.
'Alarming' study shows dangerous water along Barnett Shale: What's being called one of the most comprehensive groundwater studies ever done in the U.S. was published Wednesday, and, according to the lead scientist, some of its findings are "incredibly alarming." The tests were performed over the past two years in the Barnett Shale and purport to show a growing link between fracking and groundwater contamination. The study is published in the trade journal Environmental Science and Technology. Dr. Zac Hildenbrand, one of the lead authors of the study who collaborated with the University of Texas at Arlington, collected samples from 550 water wells in 13 counties along the Barnett Shale."When you find a BTEX compound with a chlorinated compound with an anti-corrosive agent all in the same water well, it's pretty shocking evidence that there's been a problem," said Hildenbrand. "The only industry that uses all of those simultaneously is the oil and gas industry." The study is quick to point out that it does not establish fracking as a source of contamination, but it does provide a strong association. "The conclusion we can make is where there is more drilling there is more abnormalities in the water," Hildenbrand said.
Cancer-Causing Chemicals Found In Drinking Water Near Texas Fracking Sites - Scientists have found elevated levels of cancer-causing chemicals in the drinking water in North Texas’ Barnett Shale region — where a fracking boom has sprouted more than 20,000 oil and gas wells. Researchers from the University of Texas, Arlington tested water samples from public and private wells collected over the past three years and found elevated levels of heavy metals, such as arsenic. Their findings, released Wednesday, showed elevated levels of 19 different chemicals including the so-called BTEX (benzene, toluene, ethyl benzene and xylenes) compounds. Heavy metals are toxic when ingested, and BTEX compounds are considered carcinogenic when ingested. Exposure to BTEX compounds is also associated with effects on the respiratory and central nervous system. The study found elevated levels of toxic methanol and ethanol, as well. The researchers were clear that they had not determined the source of the metals and chemicals. However, they noted that “many of the compounds we detected are known to be associated with [fracking] techniques,” and said the data support further research on the potential of fracking contamination. According to the study, published in Environmental Science & Technology, chemical leaks can occur when well casings fail. Some estimates show this happens in approximately 3 percent of new gas well operations, but the researchers point out that recent data indicate well casing failure rates closer to 12 percent within the first year of well operation.
Evacuations but no injuries after pipeline ruptures in Texas - — Authorities say no one is injured after a natural gas pipeline ruptured in rural South Texas, sparking a massive fire that prompted the evacuation of nearby homes. DeWitt County Emergency Operations Center spokeswoman Peggy Fonseca says an Energy Transfer Partners pipeline ruptured near Lindenau around 8 p.m. Sunday. Fonseca said early Monday that the gas had been rerouted and the fire is extinguished. She says seven homes were evacuated but that no one is injured. Residents will be allowed to return home after safety inspections are completed. Energy Transfer Partners spokeswoman Vicki Anderson Granado says the company will investigate the cause of the rupture. The Victoria Advocate reported that the blaze could be seen from 20 miles away.
Pipeline company investigates explosion - In the 62 years she has lived in DeWitt County, the heart of Eagle Ford Shale country, Dorothy Arndt had never seen anything like Sunday’s pipeline explosion, and she hopes she never does again. The air felt like an oven when she stepped outside in her nightgown. “The heat knocked me back,” Arndt, 84, said. “I looked across the way, and I saw a huge, huge ball of fire.” Cattle broke through the fence trying to escape the heat, the asphalt road bubbled and power lines melted, cutting electricity to 130 homes after a natural gas pipeline ruptured about 8:15 p.m. Sunday west of Cuero. Officials with Energy Transfer Partners and the Texas Railroad Commission have not determined the cause of the explosion, which shot flames hundreds of feet into the air through a 42-inch steel pipe. One of seven households remained under a mandatory evacuation order Monday afternoon, and the farm-to-market road remained closed. Eastern DeWitt County is laced with gas transmission pipelines. In the area where Energy Transfer Partners’ line ruptured, there are three other pipelines, including one for crude transmission owned by Victoria Express Pipeline, according to information from the Texas Railroad Commission.
Photos of ruptured oil pipeline provide clues of spill cause — Photos of the pipeline that spilled oil on the Santa Barbara coast show extensive corrosion and provide clues about the cause of the rupture, experts said. Corrosion visible around the crack, coupled with wear documented inside the pipe, led Robert Bea, a civil engineering professor emeritus at the University of California, Berkeley, to believe the pipe burst during a pressure spike when the operator restarted pumps that had failed the morning of the May 19 spill. The pictures released to The Associated Press on Monday under a California Public Records Act request show the 6-inch tear that spewed up to 101,000 gallons of oil, polluting beaches and killing hundreds of birds and marine mammals. Plains All American Pipeline has declined to discuss the cause of the spill while it’s being investigated by federal regulators and local, state and U.S. prosecutors. The pipeline operator has apologized for the spill and is paying cleanup costs that have exceeded $60 million. Bea said the photos provided by Santa Barbara County show about 10 percent of the pipe’s outer wall had deteriorated from corrosion. A test conducted for the company two weeks before the spill showed up to 45 percent of the pipe’s interior wall was gone. Bea calculated that with the walls at least half corroded, the pipe would have failed during a restart when the pressure surged to a reported 700 pounds per square inch. What alarmed Bea was that an external examination of the pipe in three other areas showed up to 74 percent of the pipe wall had deteriorated. “I don’t think I’d want to start pumping crude through this existing pipeline,” he said. “I’d just replace the whole pipeline. I wouldn’t try to patch it.”
Oil, gas spill reports for June 15 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks. Noble Energy Inc. reported on June 9 that historical impacts were discovered beneath a water vault during a facility upgrade outside of LaSalle. It is approximated that less than five barrels of produced water released. It was determined that the cause of the leak was equipment failure. Bonanza Creek Energy Operating Company LLC reported on June 9 that piping on a heater treater was corroded, outside of Briggsdale. About 15 barrels of produced water released. Carrizo Niobrara LLC reported on June 9 that a mist of oil and water was released after a jet pump sustained a cracked nipple, outside of New Raymer. The wind carried the release onto an adjacent pasture. It is approximated that less than 100 barrels released. DCP Midstream LP reported on June 8 that a leak originated from a pipeline, outside of Kennesburg. EOG Resources reported on June 3 that an electrical contractor broke the sight glass on the oil phase of a treater, outside of Grover. Approximately five barrels of oil sprayed from the treater, before the sight glass could be isolated. PDC Energy Inc. reported on April 19 that during plugging and abandonment procedures, a historic release was discovered beneath a produced water vessel, outside of Eaton. It is approximated that less than five barrels of oil spill, condensate spill and produced water spill released..
This Land Was Made for You and Me … And Fracking? - For most people, the image of a fracking rig is probably not the first thing that comes to mind when they think about public lands. In Colorado, we think of rushing rivers, majestic mountains, colorful wildflowers, and fish and wildlife. But a new Bureau of Land Management (BLM) Resource Management Plan (RMP) could open nearly 7 million acres of BLM-managed federal mineral estate in eastern Colorado to fracking—with little input or oversight from the very Colorado residents who stand to lose the most if the BLM allows the extreme oil and gas extraction process on these lands. If the agency’s plans for Colorado follow a pattern that’s played out in RMPs elsewhere in the western U.S., fracking is most assuredly on the table. This week in Colorado, the BLM launched a scoping process—a “big picture” project evaluation designed to inform the public and solicit feedback before the agency drafts the RMP for Colorado’s Front Range. Sadly, BLM’s public process seems fatally flawed from the start. The seven scheduled hearings are far removed from the majority of Coloradans who will be affected by the new plans. For example, the BLM failed to schedule a scoping hearing in Denver, the state’s most populous city, which gets 40 percent of its drinking water from the South Platte River Basin, comprising some 280,000 acres of land under consideration by the BLM. In addition, Denver’s thriving tourism, fishing and microbrew industries rely on the water from these lands and would be jeopardized by inappropriate land uses such as fracking. The closest hearing to Denver was inconveniently scheduled for 5:30 p.m. in Golden, which is not easily accessible via public transit and is a 25-minute drive from downtown Denver in the mellowest of traffic.
Regulate Like it's 1988: Senate Committee's Plan to “Modernize” Oil and Gas Calls for a Return to 1980’s Standards - Despite technological advances and increasing use of techniques like hydraulic fracturing in the past few decades, the oil and gas industry is subject to regulations enacted in the 1980’s. In March, the Bureau of Land Management (BLM) released a much-needed complement to the existing rules, which have not been updated since 1988. In response to growing public concern about fracking, the BLM’s final rule, Oil and Gas; Hydraulic Fracturing on Federal and Indian Lands, provides minimum standards for all states to follow, including: best practice requirements in construction of wells, protecting water supplies, managing flow back in environmentally responsible ways, and providing public disclosure of the chemicals used in the processes. The BLM’s fracking rule is a definite step in the right direction, but it’s not sufficient to protect our public lands or the communities that rely on them. On June 9, the Senate Committee on Energy and Natural Resources met to discuss Senator Murkowski’s broad energy bill that will, according to her, “modernize our energy policies.” However, the BLM’s minimal rule is apparently too modern for members of the Committee, because — under the guise of “reform”— two proposed bills that would return the new regulations back to 1988 standards have been introduced. First, Senator Hatch of Utah proposed Senate bill 15, “Protecting States' Rights to Promote American Energy Security Act,” which would grant individual states complete control over oil and gas industry regulations. Then, Senator Murkowski sponsored Senate bill 1230, which would require the BLM to enter into a memorandum of understanding (MOU) with a state if the Governor of the state requests. The MOU’s would allow the state to have control over the regulations, negotiating and compromising the minimum federal standards, rather than strictly following the BLM requirements.
Gas line explodes in Bellevue; 2 'significantly burned' — Fire officials say two people have been “significantly burned” in a gas-line explosion at a building under construction in Bellevue. Lt. Richard Burke said the victims were being transported to Harborview Medical Center. Hospital spokeswoman Susan Gregg said two men were being treated. A 45-year-old man was in satisfactory condition and a 36-year-old man was in serious condition. Gregg said they will be transferred to an intensive care unit. Burke said the explosion occurred Thursday morning when a large-diameter natural gas line fractured during the construction.
Growing oil train traffic is shrouded in secrecy - The railroads are moving 40 times more oil now than in 2008 due to an oil boom in the Bakken formation of North Dakota. Bakken crude oil contains high concentrations of volatile gas, with a flashpoint as low as 74 degrees Fahrenheit. Derailments and explosions have occurred around North America since the oil boom began, including a 2013 catastrophe that killed 47 people in rural Quebec. This has prompted emergency responders to call for more information from railroad companies about oil train traffic patterns and volumes. The railroads mostly have refused; they say that releasing that information could put them at a competitive disadvantage. Which is why Smith decided to find out for himself. “It’s pretty hard to hide an oil train,” he said with a chuckle. Last year, Smith launched the first Snohomish County Train Watch. He organized 30 volunteers to take shifts counting trains around the clock for a week. In their first week of watching oil trains, the group collected more information about oil train traffic than the railroads had given Washington in the three years the trains have come here. State officials say Smith’s data is helpful but insufficient. They say they shouldn’t have to rely on citizen volunteers to get critical information in case of disaster. Dave Byers, the head of spill response for the state’s Department of Ecology, said his team needs the information to plan area-specific response plans to protect the public and keep oil from getting into the environment. Oil train traffic shows no signs of slowing, which adds to the state’s sense of urgency. The oil industry wants to build five new terminals in Washington to move crude oil off trains and onto ships.
In North Dakota’s Bakken oil boom, there will be blood -- Jebadiah Stanfill was working near the top of an oil rig at a bend in the Missouri River in North Dakota. Jolted by a deafening boom in the distance, he swung around from his perch and saw a pillar of black smoke twisting into the sky.Less than a mile away, another rig had exploded. “There’s men over there!” a worker below him shouted. Stanfill descended to the ground and hopped into the bed of a red pickup driven by a co-worker. Bruce Jorgenson, a manager overseeing the work of Stanfill and his crew, jumped into the passenger seat, and they raced to the explosion. A few minutes later, they reached the burning rig and pulled up next to Doug Hysjulien, who was wandering in a valley and clutching the front of his underwear. The rest of his clothes were gone. “They’re over there,” Hysjulien shouted, pointing toward the fiery rig. “Go help the other boys. They’re worse.” Stanfill sprinted until he spotted Ray Hardy, who had been hurled into a patch of gravel. His skin was charred black and peeling. His nails were bent back, exposing the stark white bones of his fingers.“How many people were on the rig?” Stanfill asked Hardy.“He’s over there,” Hardy responded, gazing toward a field near the rig. Stanfill scrambled over a berm and waded through knee-high wheat until he found Michael Twinn, lying on his back naked and seared. His hair was singed and his work boots had curled up in the heat. He cried out in agony.“The derrick man’s dead! The derrick man’s dead!” Twinn screamed. “They were beyond burned,” Stanfill recalled. “Nothing but char. The smell of flesh burning. ….”
Debunked: The Bakken doesn't burn THAT bright --In recent years, news reports following the Bakken oil boom claimed that due to the amount of gas being flared into the atmosphere, the rural skies of western North Dakota shined as bright as metropolitan areas such as Chicago and Minneapolis. A recent study has debunked this finding, however, finding that the satellite photos comparing the light emitted from flared gas and city lights did not use solid science. The study, conducted by the University of North Dakota Energy and Environmental Research Center and the John D. Odegard School of Aerospace Sciences, concluded that the satellite technology used to take these pictures measured heat, not light. The study states, “These images are misleading in that they give the uninformed public the idea that flares are literally lighting up many square miles of prairie countryside, creating visible light similar to large metro areas. So does the sky in western North Dakota light up like a million-person metropolis? A casual drive on any evening through counties of the Bakken oil play shows otherwise.” According to The Bakken Magazine, Associate Professor of UND’s Department of Earth System Science and Policy Xiaodong Zhang said, “We looked at the satellite imagery and then from the imagery, we were able to develop a method to detect and quantify a flare in terms of its temperature, size and how much methane it’s burning.”
The Dark Side Of The Shale Bust -- The fallout of the collapse in oil prices has a lot of side effects apart from the decline of rig counts and oil flows. Oil production in North Dakota has exploded over the last five years, from negligible levels before 2010 to well over a million barrels per day, making North Dakota the second largest oil producing state in the country. But the bust is leaving towns like Williston, North Dakota stretched extremely thin as it tries to deal with the aftermath. Williston is coping with $300 million in debt after having leveraged itself to buildup infrastructure to deal with the swelling of people and equipment heading for the oil patch. Roads, schools, housing, water-treatment plants and more all cost the city a lot of money, expected to be paid off with revenues from oil production that are suddenly not flowing into local and state coffers the way they once were. Williams County Commissioner Dan Kalil says that a lot of unemployed people who flocked to North Dakota are left in the wake of the bust, something that the local government has to sort out. “We attracted everyone who had failed in Sacramento, everyone who failed in Phoenix, everyone who failed in Las Vegas, everybody who had failed in Houston, everyone who failed in Florida,” “And they all came here with unrealistic expectations. And it’s really frustrating for those of us left to clean up the mess.” The massive increase in drilling brought a huge wave of cash and people to once sleepy towns, fueling a boom not only in oil, but also in violent crime, prostitution, and drug trafficking. Output is still only slightly off its all-time high of 1.2 million barrels per day, which it hit in December 2014. But more declines are expected with drillers pulling their rigs and crews from the field. Rig counts in North Dakota have fallen to just 76, as of June 12, far below the 130 or so that state officials believe is needed to keep production flat.
North Dakota's oil production has peaked – North Dakota’s crude oil output has peaked, according to the latest production data published by the state government, as the slump in prices takes its toll. The state produced 1.17 million barrels per day (bpd) in April, down from a peak of 1.23 million in December, the Department of Mineral Resources (DMR) reported on Friday. The former rapid growth in production has stalled and current output is no higher than it was in September 2014.In the seven months between February and September 2014, output increased by 233,000 bpd, while in the seven months from September 2014 to April 2015, output actually edged down 18,000 bpd. Prices are by far the most important cause of the downturn, according to state regulators, followed by tax changes, tougher flaring rules and new regulations on oil conditioning to remove the most volatile components from the crude and make it safer to transport (“Director’s Cut” June 2015). Falling production comes as no surprise: the number of rigs drilling for oil in the state has declined by more than 60 percent since September. Unlike production numbers published by the U.S. Energy Information Administration and the Railroad Commission of Texas, North Dakota’s figures are based on well records rather than estimates and are subject to only small revisions in subsequent months.
Oil field job cuts cross 150,000 -- Job slashing from the oil bust reached a staggering 150,000 at the end of May, according to energy recruiting firm Swift Worldwide Resources. In a recent Fuel Fix publication, Swift elaborated that when compared globally, the United States has seen the “the fastest and steepest decline.” Layoffs have slowed dramatically as oil prices have just begun to regain some footing and companies have adjusted accordingly. The recruiting firm tracks both public and non-public data, and it is possible the industry’s layoffs surpass what the UK-based company has estimated, Swift CEO Tobias Read said in the report. “Where data is not publicly available we have kept our ear to the ground and made assumptions based on likely impact,” Read stated. “Our assumptions remain conservative and the likelihood is that total job losses probably substantially exceeds Swift’s forecast.” Large cuts in the energy industry have made news for the first two quarters of 2015. Halliburton cut 9,000 jobs in six months and reported a loss of $643 million in Q1 of 2015. Schlumberger reported even deeper cuts that tallied around 11,000 in efforts to reduce personnel employment 15 percent when compared to the third quarter of 2014. Some analysts believe the worst is over, and by the end of the year, the US could see a stout recovery. Analysts tend to agree that a slowdown in non-OPEC production, led by U.S. shale producers, and unrest in the Middle East and North Africa, particularly Iraq, would support prices this year.
Small U.S. frackers face extinction amid drilling drought - Oil field work was coming in fast when GoFrac doubled its workforce and equipment fleet at the beginning of last year, just one of hundreds of small oil service companies thriving on the revival of U.S. drilling. Founded in November 2011 with a loan of around $35 million, the Fort Worth, Texas-based company was by 2014 making nearly that much in monthly revenues, providing the crews and machinery needed by companies including ExxonMobil (XOM.N) to frack oil and gas wells from North Dakota to Texas. Executives flew to meetings across the country in a Falcon 50 private jet, and entertained customers at their suite at the Texas Rangers baseball stadium in Arlington. The firm would soon move into a 22,000-square-foot office on the 12th floor of Burnett Plaza, one of Fort Worth's most prestigious office buildings. Eighteen months on, however, without work and unable to meet monthly loan payments, GoFrac has closed its doors, its ambitions gutted by a steep dive in oil prices. Of the 550-odd employees on the payroll at the beginning of this year, only six remain. At GoFrac's only remaining outpost, a small warehouse and 40-acre gravel yard in Weatherford, 30 miles west of Fort Worth, its huge fleet of sand haulers, chemical blenders and pressure pumps that months before were being used to frack U.S. oil and gas wells, sit idle in long rows, waiting to be sold.
Expect A Wave Of Consolidation In The Oil Industry -- As stated previously, asset monetization by small E&P operators will start in earnest in the second half of this year out of cash flow necessity. Most, if not all, smaller market capitalization companies, public or private, are still free cash flow negative (operating cash flow less capital expenditure) and only a few of the larger ones are now, or will be, based on guidance. The point is, with volumes languishing (and probably poised to decline) tied to a flat oil futures price curve and with economics marginal at $60 per barrel, many E&P operators find themselves running through hedges in 2015 and still in need to finance their already reduced capital spending. With Wall Street unwilling to lend anymore and prospects of fall credit line redeterminations looming, further reducing liquidity, it is likely small E&P operators will turn to either mature producing asset sales or, more likely, to undeveloped assets which require more capital spending. We are seeing this being factored into stock prices as we speak, as small cap E&P valuations have collapsed to 4-6 times the Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) from 6-8X EV/EBITDA. This not only reflects solvency risk but also the natural course of bringing assets to a price more in line with their underlying sale value.Wall Street is famous for getting public prices at levels that magically make deals happen and, with better funded E&P companies trading at substantial premiums vs. the leveraged ones, this is what is occurring. Take the collapse of Goodrich Petroleum (GDP) as a prime example as to what is now taking place and what will continue through the latter half of this year. Here is a company with $100million in liquidity but who continues to be free cash flow negative on current strip pricing in 2015 & 2016. However, it has a capital spending budget of $100 million for 2015 and 2016 and a free cash deficit of $60 million-$80 million in each of 2015 and 2016 depending on asset price assumptions. To plug the hole it hopes to sell its Eagle Ford assets this year.
The Shale Industry Could Be Swallowed By Its Own Debt - Bloomberg Business -- The debt that fueled the U.S. shale boom now threatens to be its undoing. Drillers are devoting more revenue than ever to interest payments. In one example, Continental Resources Inc., the company credited with making North Dakota’s Bakken Shale one of the biggest oil-producing regions in the world, spent almost as much as Exxon Mobil Corp., a company 20 times its size. The burden is becoming heavier after oil prices fell 43 percent in the past year. Interest payments are eating up more than 10 percent of revenue for 27 of the 62 drillers in the Bloomberg Intelligence North America Independent Exploration and Production Index, up from a dozen a year ago. Drillers’ debt ballooned to $235 billion at the end of the first quarter, a 16 percent increase in the past year, even as revenue shrank. The problem for shale drillers is that they’ve consistently spent money faster than they’ve made it, even when oil was $100 a barrel. The companies in the Bloomberg index spent $4.15 for every dollar earned selling oil and gas in the first quarter, up from $2.25 a year earlier, while pushing U.S. oil production to the highest in more than 30 years. “There’s a liquidity issue, and you start looking at the cash burn,” Watters said. Debt Continental borrows at cheaper rates than many of its smaller peers because its debt is investment grade. S&P assigns speculative, or junk, ratings to 45 out of the 62 companies in the Bloomberg index. “Our cash flow easily covers interest costs, and we expect to continue maintaining our investment-grade credit rating as commodity prices recover,” Almost $20 billion in bonds issued by the 62 companies are trading at distressed levels, with yields more than 10 percentage points above U.S. Treasuries, as investors demand much higher rates to compensate for the risk that obligations won’t be repaid, data compiled by Bloomberg show.
OilPrice Intelligence Report: Oil Gloom Spreading To Natural Gas Market: The oil glut is having a knock on effect on natural gas drilling across the United States. The U.S., the largest natural gas producer in the world, is starting to see its gas boom come to an end. Natural gas prices have fallen by half within the past year, down below $2.90 per million Btu. Much of that can be attributed to the record level of production in 2014, which brought welcome relief to northeastern states that dug out from a brutal winter and a spike in natural gas prices. Storage levels dropped to their lowest in years. While many analysts predicted similar price spikes for winter 2015, it wasn’t to be. The boom that occurred in 2014 allowed for storage levels to build up sufficiently so that this past winter didn’t raise any problems. Now, with production still elevated, market watchers are raising questions about the opposite problem: too much supply. Storage levels are starting to build up, and could be well above the five-year average within just a few months. Prices are already extraordinary low, and more output would depress them even further. It seems the gloom from the oil markets is spreading to natural gas. On the other hand, the same dynamic that is rebalancing oil is also true for gas. Rig counts have declined along with prices. But importantly, a lot of natural gas is produced in association with oil, so when oil drillers cut back production, gas production will also fall. After all, the drillers of oil and gas tend to be the same people. In that sense, natural gas production will take a hit because of the oil glut.
Cowboyistan: Harold Hamm's hope of crude oil exports -- “Cowboyistan” could produce more than enough petroleum to justify the exporting of light, sweet crude, according to Continental Resources CEO and oil mogul Harold Hamm. Earlier this week, the U.S. Energy Information Administration’s 2015 Energy Conference was held in Washington, D.C. Hamm was one of the numerous speakers and promoters there to voice the reasoning behind exporting American-produced petroleum, according to a recent report from SNL. Promoting the operations of Cowboyistan –which includes North Dakota’s Bakken Shale and Texas’ Eagle Ford Shale and the West Texas Permian shale—Hamm claimed we are more than ready as a nation to begin exports. “Only in America” could Cowboyistan happen, Hamm said, because of the “three Rs: rigs, rednecks and royalties.” If it were its own country, Cowboyistan would rank seventh in the world for crude production and account for 50 percent of the world’s crude oil production growth,” Hamm stated. “Reserves? We rank right up there with the Saudis, with 250 million barrels of proved reserves.” However, the problem, as Hamm noted, is America’s refining capacity. “We’re a threat to OPEC,” Hamm said, arguing that there is 3.2 million barrels per day of light, sweet refining capacity overseas that is in danger of being shut down because it is unable to access crude oil. In addition, over a fourth of all refining capacity in America is foreign owned and was purchased to handle heavier crudes in order to set up new exports markets from Venezuela, Canada, Saudi Arabia and Mexico.
Don't Believe The Hype On U.S. Shale Growth -- There is a popular narrative going around that I want to address in today’s article. Last November, OPEC chose to defend market share against the surge of supply from U.S. shale producers, and in doing so the fall in the price of crude oil accelerated. A look at the U.S. rig count shows the swift impact to U.S. shale drillers in the aftermath of that meeting: Rig counts went into free-fall after it became clear that OPEC was not interested in propping up the price of oil for the benefit of rapidly expanding shale oil producers. While that approach hurt OPEC’s income in the short term, it also immediately impacted rig counts in the shale oil fields. But — and here is the narrative — shale oil producers continue to make gains in production even as rig counts have been slashed because they are becoming more and more efficient There is some truth to the narrative. Yes, oil production has continued to grow even though rig counts have plummeted. The week before OPEC’s meeting last November, the number of rigs drilling for oil stood at 1,574. Oil production that week was 9.1 million bpd. Today, with the rig count at 642, production is 9.6 million bpd — a gain of just over half a million bpd. Yes, producers are getting better at squeezing oil and gas from these shale formations. And natural gas production has indeed continued to expand for years despite a sharp drop in the rigs drilling for gas.But oil production isn’t expected to follow the same pattern as natural gas. The gains are already slowing as a result of the drop in rig counts. There have been some weekly declines recently, and the Energy Information Administration (EIA) is projecting a 91,000 bpd drop over the next month. Bloomberg put together a nice graphic showing the expected impact in the country’s shale oil basins:
Guesswork, inconsistency nag U.S. shale oil accounting - – Steep downward revisions to oil and gas reserves at the end of this year are likely to increase scrutiny of how energy companies tally future barrels – a process that has become more opaque with the rise of shale drilling. The revisions due in December will reflect a deep plunge in crude prices and should not come as a surprise for investors who have been pouring billions of dollars into U.S. oil companies betting that crude prices will recover. But investors may not fully appreciate other risks stemming from the wide variety of methods companies use to estimate and vet their reserves, or economically-recoverable oil and gas. Reserves have long underpinned company stock prices. Reserve growth is used at companies, including ConocoPhillips as a component of the chief executive’s compensation. Yet there is plenty of uncertainty in the industry as measuring unconventional resources such as shale oil is a young science and there is no uniform process for reserve reporting, geologists, investors and lawyers say. In contrast to financial reporting, the U.S. Securities Exchange Commision does not require outside auditing for reserves. That leaves the process “a little opaque” according to Stewart Glickman, director of energy research at S&P Capital IQ in New York. A Reuters analysis of public filings by companies in the Dow Jones U.S. Oil and Gas index reveals a wide variety of practices used to report them.
The EPA says It's Ok to Drink Your Fracking Water - The US Environmental Protection Agency (EPA) often plays the enemy to oil and gas corporations. But a recently released report paves the way for fracking like no government document has before. Here's what you need to know. Fracking, or "hydraulic fracturing" as it's more formally known, is a process for extracting more oil and gas out of the earth. By pushing a mix of water, chemicals, and sand down into the ground, it increases the pressure and sends additional oil and gas up. But most environmentalists have long believed that fracking is more sinister than a simple replacement process. From earthquakes to methane leaks to water table contamination, some think fracking gets away too easy on the environmental front. But at least on water contamination, one of fracking's most controversial and damaging potential effects, this EPA report flags no foul. After an extensive analysis, the EPA reports that fracking "has not led to widespread, systematic impacts on drinking water resources." But what about the flaming water? As the video below shows, fracking does affect some water — and the EPA makes sure to caveat its findings, accordingly. But the Agency also notes that these instances were few and far between compared to the number of fracking operations, and that some of these instances have less to do with the fracking process and more to do with improper implementation.
After EPA Fracking Report, Stanford to the Rescue...Sort Of - Just days after the US Environmental Protection Agency issued its long-awaited fracking report, Stanford University announced that it would undertake a comprehensive research effort aimed at resolving several areas of concern in the natural gas industry. However, part of the aim is to grow the global market for natural gas, which doesn’t seems seem like a particularly sustainable way to address the core issues raised in the EPA fracking report. Stanford’s work will be conducted through a new program called the Natural Gas Initiative (NGI), and the university issued a press release last Friday describing NGI’s first crop of research efforts. The press release focuses on one issue in particular, that being fugitive emissions or methane leaks. A Stanford research team is already at work on developing faster, cheaper, and more effective ways to detect methane leaks from natural gas fields, using a combination of infrared imaging (for now by helicopter, but we’re guessing drones in the future) and software that can recognize plumes. That’s all well and good, but fugitive emissions are a problem all up and down the natural gas supply chain, including the nation’s aging network of local distribution pipes in cities. We’ll be waiting to see how NGI proposes to tackle that end of the problem. In the meantime, NGI’s other leadoff areas of focus should set off some red flags. One of the new research initiatives will support the lobby for increasing US exports of natural gas to Europe and Asia. Natural gas exports are a huge issue for communities that will host the brunt of new transportation, storage, and processing facilities. No word yet on what research NGI is planning in that regard.
Document shows Canadian government has been fully aware of tar sands dangers (NRDC) – A document recently released under Canada's access-to-information law reveals that Canadian government officials have been aware of the proliferation of contaminants associated with tar sands mining even as they continues to promote industry expansion with minimal regulation. The January 2015 briefing note discusses findings from a tar sands monitoring report published in December 2014 describing dangerous concentrations of iron and cadmium in Alberta's wetlands and of phosphorous and nitrogen in the Athabasca River. In addition, increased concentrations of polycyclic aromatic hydrocarbons (PAH) in the toxic tailings ponds near tar sands strip mines are raising PAH levels in the atmosphere, which can lead to human health concerns like DNA damage and impaired development. The briefing note also highlights serious declines in species that rely on old forest habitat, which has been decimated by mining operations. Yet even with the knowledge furnished by this briefing note, the Canadian government has continued to promote the expansion of the tar sands industry, particularly through its support for tar sands pipelines like Keystone XL and Energy East. Almost a year ago two Alberta First Nations and the University of Manitoba released a report detailing high levels of carcinogens found in local species, including moose and muskrat, which have been traditionally harvested by First Nations for centuries. This and other studies have documented increased rates of cancers in communities like Fort Chipewyan that are located near or downstream from tar sands mining. A 2009 report from the Alberta Cancer Board determined that certain cancers, including extremely rare forms, had a 30 percent higher rate of incidence between 1995 and 2006 than would normally be expected. In February 2014, NRDC released its own fact sheet summarizing the scientific research documenting increases in air and water pollution and cancer rates linked with tar sands mining. Other communities have independentlyreported odors and emissions neartar sands mining that were causing headaches, dizziness, diarrhea, nausea, and difficulty breathing. [more]
Government trying to fast-track fracking without public consent - The Government is attempting to fast-track fracking by doing away with the need for the public to be consulted before test drilling goes ahead. The changes, which have been quietly put out to public consultation, mean the advice of local residents would no longer be sought in the early stages of most new oil and gas developments. The proposals have been strongly criticised by campaign groups, who say the Government is increasing the risk of pollution by relaxing the environmental scrutiny given in the early stages of hydraulic fracturing – where pressurised chemicals are used to break up rocks to release oil or gas. The changes will sidestep the need for public consultation in England by changing the way permits are allocated for the exploration phase of a site’s development – during which tests are carried out on the site using conventional drilling techniques to determine how much oil or gas is present. Under the proposed new permit regime, the Environment Agency will no longer visit the site and conduct a thorough environmental audit before drawing up a set of tailored requirements for the exploration company. Instead, it will create a one-size-fits-all permit based on a set of rules that will be awarded to oil and gas companies showing they can meet the criteria. The Government has placed fracking, which in the US has been linked to earthquakes and water and air pollution – at the heart of its energy strategy. Whitehall wants to speed up the development of the fledgling industry by making it quicker and cheaper for companies to start work. The proposed permit changes relate to the waste created by drilling, well testing and the use of acid to clean the borehole.
For Oil Price, Bad Is The New Good -- Lately, oil prices have gone up when they should have gone down. In the last week, OPEC decided not to cut production and the two major energy agencies reported that the world over-supply problem is getting worse. Brent futures increased from $62 to $65. Bad is the new good. The expected bad news on Friday, June 5 that OPEC would not cut production was skillfully cloaked in positive statements about growing demand. On Monday, June 8, Brent opened at $62.69 and rose to $65.70 over the next two days. On Tuesday, June 10, the EIA published its monthly Short-Term Energy Outlook (STEO) that showed that the production surplus responsible for low oil prices had increased in May to almost 3 million barrels per day (bpd). Production fell by 106,000 bpd but consumption fell more by 156,000 bpd (Figure 2). Oil prices rose $2.19 per barrel based on that good news. On Thursday, June 11, the IEA came out with its Oil Market Report. The message was the same. The production surplus for the first quarter of 2015 was the highest in a decade at 1.85 million bpd and, obviously, the highest since the oil price crisis began in June of last year (Figure 3). The oil-price crisis occurred because supply (production) exceeded demand (consumption) beginning in the first quarter of 2014 (Figure 4). That situation has persisted. First quarter 2015 supply was about the same as fourth quarter 2014 but demand was lower, not a good thing. There is optimism about demand but what is that based on? It’s based on increased vehicle miles travelled in the United States. There is optimism about decreased U.S. rig counts but U.S. production has increased. The EIA estimates that tight oil production will decline by 91,000 bopd in July but that is more than balanced by new lower Tertiary production in the Gulf of Mexico. There is optimism because there have been inventory withdrawals in the U.S. but those always occur at this time of year. I agree with all of this optimism but it is basically well-informed sentiment. The hard data is that we have a production surplus in the world that is getting worse, not better–unless the data from IEA and EIA is somehow unreliable.
Oil Demand Weaker Than Many Expect -- Although I disagree with the vast majority of the bear calls that have existed all year (all of which were documented as being false, by the way) one thing stands out as a red flag: demand. The reliance on strong demand to justify increased supply, as is the case with OPEC, is one example. The other is US producers using stronger demand to draw down inventory while keeping production flat. I still expect production to decline in the second half of this year in the US, by the way. However, the sudden surge of US production in fall last year was, in part, due to prices remaining elevated but also the industry’s reliance on messaged economic data that showed a stronger US economy on the surface, but weaker underlying activity. The weaker activity finally surfaced in quarter one this year and in the current quarter, even though GDP is about to get messaged again through seasonally adjusting the data. The point is that the oil industry believed the economic data and media hype about a strong economy and thus kept pumping. The broad weakness in commodities is a reflection of that false reality, with the stronger dollar helping to weaken things further. What should be cautioned against is continued reliance on demand pull as a means to balance the market in an economy built on bubbles and debt. It simply won’t last as, once again, the false reality will be exposed. I do think demand for gasoline in the US and Asia (remember that in winter, weak Asian demand was all the rage as the reason why oil must fall) is up strongly, but will it last is the question. The most likely scenario is that it will wane at some point in 2015 and as the economic false realities get “popped” as the equity bubble bursts, demand will eventually fall. In the US, by that time, supply will likely be falling tied to depletion.
Cheaper prices spur U.S. gasoline demand -- Strong growth in demand for refined fuels such as gasoline and diesel is helping to rebalance the global oil market, according to most observers. “Recent oil market strength … stems partly from unexpectedly strong oil demand growth,” the International Energy Agency explained in its June monthly oil market report. In the first quarter of 2015, global oil consumption was 1.7 million barrels per day higher than in the prior-year period. “In particular, gasoline prices have found support from robust U.S. demand, leading to a surge in crack spreads,” according to the IEA. But if there is a consensus that demand is rising more quickly than predicted at the start of the year, there is fierce debate about whether growth is being driven by economic recovery, cheaper fuel prices or a combination of the two. And there is a mystery about why the consumption of gasoline is growing more strongly than diesel. In one camp are those, myself included, who attribute a big part of the increase in fuel demand to the sharp drop in fuel prices since the middle of 2014. . In the other camp are those who insist consumption is largely insensitive to prices and that the increase is being driven by other factors including economic recovery and a rebound in U.S. construction. This is the classic economists’ view that fuel demand is insensitive to price changes in the short term and is mostly driven by changes in incomes, employment and economic activity. In practice, of course, fuel demand is driven by a combination of price and income factors. Economy-related factors are generally more important in the short and medium term. But the sensitivity of fuel consumption to price shifts is not zero.
A year after the crash, oil markets risk more trouble ahead -- A year on from the start of one of the biggest oil price crashes in history, the driving force behind the slide remains intact: there is still too much crude. While output continues to grow, the economic outlook has darkened in top energy consumer China, where oil demand has been one of the few bright spots in the market. Add to the mix record output by the Organization of the Petroleum Exporting Countries (OPEC) and the possibility of a return of Iranian crude exports, and further price turbulence looks almost certain. Oil prices began a seven-month rout this time last year that took Brent crude futures from $116 (£74) per barrel to around $45 by January. While prices have crawled up since, there are few signs yet that OPEC’s strategy of keeping output high in a bid to drive out competitors, such as U.S. shale oil, is doing enough yet to change market fundamentals.. “The real bearish change is OPEC production that has risen from 29.79 million barrels per day (bpd) last year to over 31 million bpd. I think this is the most significant fundamental change of the last 12 months,” said PVM oil analyst Tamas Varga. U.S. Energy Information Administration (EIA) data published this month shows that global petroleum oversupply, or production versus consumption, has more than doubled to 2.6 million bpd since the end of the second quarter last year.And more oil may yet come to the market. Major powers and Iran are trying to agree on a nuclear compromise by the end of the month that could allow a lifting of sanctions that have reduced Iran’s crude exports to under 1 million bpd, down from 3 million bpd in 2011. Should Iranian oil return before the end of the year, traders said that would prevent a seasonal drawdown in stocks that usually happens in the fourth quarter, preventing a re-balancing of the market.
Crude Oil Prices Jump Following Stockpile Report - Oil prices jumped on Wednesday after a new industry report showed a bigger-than-expected fall in U.S. oil stockpiles. The American Petroleum Institute reported a 2.9 million barrel decrease in U.S. oil stocks for last week. Prices could rise further after the closely watched U.S. Energy Information Administration is released on Wednesday afternoon. Analysts polled by The Wall Street Journal expect a decline of 1.3 million barrels. Brent crude for August delivery rose 2.4% to $65.25 a barrel on London’s ICE Futures exchange. Trading was on the New York Mercantile Exchange, and West Texas Intermediate futures for July were trading up 2% at $61.16 a barrel. Analysts at Commerzbank told Fox Business that the EIA data is “expected to show the seventh consecutive weekly decrease in U.S. crude oil stocks. If this turns out to be of a similarly high level to that reported by the API, it would lend support to oil prices.”
Biggest Glut In Recorded Crude-Oil History Taking Shape -- The world is on the brink of the longest-lasting oil glut in at least three decades and OPEC’s quest for market share makes it almost unavoidable, according to Bloomberg. Oil supply has exceeded demand globally for the past five quarters, already the most enduring glut since the 1997 Asian economic crisis, International Energy Agency data show. But as Wolf Richter warns, if Iran and world powers reach an accord on the Islamic Republic’s nuclear program by their June 30 deadline, we’ll be watching the most magnificent oil glut ever building up into next year. “The market is flooded with oil and everyone is desperate to sell quickly, so you have a price war,” OPEC, which produces about 40% of global oil supply, announced on June 5 to “maintain” output at 30 million barrels per day for the next six months. Six days later, the IEA’s Oil Market Report for June clarified that “Saudi Arabia, Iraq, and the United Arab Emirates pumped at record monthly rates” in May and boosted OPEC output to 31.3 million barrels per day, the highest since October 2012, and over 1 MMbpd above target for the third month in a row. OPEC will likely continue pumping at this rate “in coming months,” the IEA said. “We have plenty of crude,” explained Ahmed Al-Subaey, Saudi Aramco’s executive director for marketing while in India to discuss with Indian oil officials supplying additional oil. “You are not going to see any cuts from Saudi Arabia,” he said. Saudi Arabia produced 10.3 MMbpd in May, its highest rate on record. So forget the long-rumored decline of Saudi oil fields. For Saudi Arabia, it’s a matter of survival. It has cheap oil, and it won’t be pushed into the abyss by high-cost, junk-bond-funded, eternally cash-flow-negative producers in the US. It will defend its market share, and it can do so profitably.
Crude Slides On Cushing, Gasoline Inventory Build - Following last week's major inventory draw (and last night's less than expected API-reported inventory draw), DOE reports a 2.68 million barrel draw (slighlty less of a draw than expectations of 2.79 million barrels). End products saw inventories rise considerably more than expected (Gasoline +460k vs -800k exp) and Cushing saw a build (+112k vs -850k exp.). Oil prices dropped on the news despite a very modest drop in production (-0.2%). While the overall inventory saw a draw, Cushing and Gasoline saw notable builds... The reaction is clear...
Oil up third day on dollar slump, U.S. crude draw data - Oil prices settled up for a third straight day on Thursday, boosted by a slipping dollar and reports that data showed a draw in crude this week at Cushing, Oklahoma, the delivery point for U.S. crude futures. The dollar fell to a one-month low against a basket of currencies .DXY after the Federal Reserve disappointed investors anxious for a clearer signal on a U.S. rate hike. The euro also got a boost from hopes for a positive end to the Greek fiscal crisis. [FRX/] Market intelligence firm Genscape reported a draw of about 870,000 barrels of crude at Cushing in the week to Tuesday, according to market sources who saw the data. Between Friday and Tuesday alone, some 1.2 million barrels were drawn. On Wednesday, the U.S. Energy Information Administration (EIA) also cited the first weekly build in Cushing inventories since mid-April. Oil still ended off the day's highs, pressured by lingering doubts about demand a day after U.S. government data suggested the recent strength in crude consumption may not hold.
US oil rig count falls for 28th straight week - The US oil rig count fell yet again last week. The latest data from driller Baker Hughes showed that the number of oil rigs in operation fell by four to 631, the lowest since August 6, 2010. The combined count of oil and gas rigs fell by two to 857, the lowest level since January 17, 2003. This is the 28th straight week of a decline. Last week, the number of oil rigs in operation fell by seven to 635, the lowest count since August 6, 2010. The combined count fell by nine to 859. Even with the plunge in the rig count, US oil production has continued to surge. But that is forecast to change. According to the Energy Information Administration's latest short-term outlook, oil output hit a peak in May, and will likely decline until early 2016. Following the data, West Texas Intermediate crude was down more than 1%, near $59.42 a barrel. Here's the latest chart showing the plunge in the rig count:
Rig count falls again, marking 7 months of declines: Baker Hughes - Crude oil fell more than 1 percent on Friday, the first decline after three days of gains, as worries over the Greek fiscal crisis, weaker oil products prices and pre-weekend profit taking undercut the market. Gasoline and diesel's proxy, heating oil, led the oil complex lower, sliding about 3 percent as concerns about their high refining margins over crude prompted those who had been bullish on such products to close out some positions. U.S. crude for July closed down 84 cents, or 1.39 percent, at $59.61 a barrel. Brent crude for August slipped $1.20 to $63 a barrel. Oil prices were little changed after oilfield services firm Baker Hughes reported its weekly rig count fell again last week, extending the decline in exploration to a seventh month. The number of rigs exploring for oil in the United States fell by 4 last week to a total of 631. This time last year, U.S. drillers had 1,545 oil rigs online.
OilPrice Intelligence Report: BP Claims Tectonic Shift Underway In Energy: Last year may have been a “watershed” moment for world energy consumption. That assessment comes from BP’s just released 2015 Statistical Review, which provides a roundup of the global energy picture as well as future projections of supply and demand. BP says that a “tectonic shift” is underway, and 2014 may have been the year in which we all look back and see it as a pivotal moment for energy markets. Global supplies continue to climb, and the U.S. has produced a massive amount of oil and gas from shale. OPEC is producing at elevated levels and so is Russia. Non-OPEC energy, largely made up of US shale, has undermined the influence of OPEC, a shift that could last many years. An era of energy abundance could be here to stay. But it is on the demand side that a potential revolution is taking place. BP notes that 2014 saw shockingly slow rate of growth in global demand for energy, expanding by a mere 0.9 percent. And a lot of that boils down to China, which saw its demand for energy grow at its slowest rate since the end of the last century. At the same time, renewable energy is the fastest growing source of new energy supply. Global greenhouse gas emissions also expanded at the slowest level since 1998. Taken altogether, we are living in a time that is seeing huge changes in energy flows, and 2014 could have been the inflection point.In a separate report, the International Energy Agency (IEA) says that global demand is picking up in response to lower oil prices. It revised upwards its expectation for demand growth this year by 300,000 barrels per day. It now expects the world to consume an additional 1.4 million barrels per day in 2015. However, the agency did not say that demand growth would be sufficient to spark a major rebound in prices, citing ongoing excess in supplies.
The World Is Facing Its Longest Oil Glut in at Least Three Decades - The world is on the brink of the longest-lasting oil glut in at least three decades and OPEC’s quest for market share makes it almost unavoidable. Record-Breaking Glut Oil supply has exceeded demand globally for the past five quarters, already the most enduring glut since the 1997 Asian economic crisis, International Energy Agency data show. If the Organization of Petroleum Exporting Countries were to keep pumping at current rates it would become the longest surplus since at least 1985 by the third quarter, the data show. There are few signs the 12-nation group will cut back. Saudi Arabia, OPEC’s biggest member, will probably increase production to intensify pressure on U.S. shale drillers, Goldman Sachs Group Inc. predicts. OPEC’s supplies may be swollen further this year if Iran reaches a deal with world powers to ease sanctions on its exports, Commerzbank AG says. “It seems to be taking longer for the oil surplus to clear, and, even without the return of Iran, IEA data indicates it could last for the rest of the year,” . “Any expectations the oversupply will be gone by 2016 don’t look justified at this stage.” OPEC pumped 31.3 million barrels a day in May and will probably continue to pump around that level “in coming months,” the IEA said in a report on June 11. The agency doesn’t forecast OPEC production. Global Oversupply Producing at that level would imply a global oversupply of 1 million barrels a day in the third quarter and 600,000 barrels in the following three months, according to IEA projections for global demand and non-OPEC supply compiled by Bloomberg. That would be the eighth consecutive quarterly surplus, exceeding the current record of six quarters from 1997 to 1998.
No, BP, the U. S. did NOT surpass Saudi Arabia in oil production -- Even the paper of record for the oil industry, Oil & Gas Journal, got it wrong. With the release of the latest BP Statistical Review of World Energy, media outlets appeared to be taking dictation rather than asking questions about which countries produced the most oil in 2014. If they had asked questions, they would have ended up with a ho-hum headline announcing that last year Russia at 10.1 million barrels per day (mbpd) and Saudi Arabia at 9.7 mbpd were once again the number one and number two producers of crude oil including lease condensate (which is the definition of oil). The United States at 8.7 mbpd remained in third place. It turns out that oil according to the BP definition includes something called natural gas liquids which includes lease condensate--very light hydrocarbons that come from actual oil wells and are included in the oil refinery stream--and natural gas plant liquids which come from natural gas wells and include such things as ethane, propane, butane and pentanes. Only a small portion of natural gas plant liquids are suitable substitutes for oil. Production of natural gas plant liquids in the United States has grown rapidly as a result of increasing exploitation of natural gas in deep shale deposits, so-called shale gas. These liquids are useful, but they are not oil and only displace oil in a minor way. Moreover, their energy content is around 65 percent that of crude oil and so counting barrels of natural gas plant liquids as equivalent to oil is doubly misleading. The second question media outlets could have asked is whether natural gas plant liquids can be sold as oil on the world market. The answer is a resounding "no." In fact, major exchanges accept neither natural gas plant liquids nor lease condensates as satisfactory delivery for crude oil. If what you're selling cannot be sold on the world market as crude oil, then it's not crude oil.
Russia, Greece Ink Pipeline Deal As Gazprom Boosts Ukraine Bypass -- Two weeks ago, in “Greece Breaks America’s Heart, Will Sign MOU With Russia For Gas Pipeline,” we highlighted comments from Greek Energy Minister Panagiotis Lafazanis which indicated that Athens was prepared to sign an MOU with Russia on the Turkish Stream pipeline. As a reminder, The Turkish Stream will allow Gazprom to bypass Bulgaria by piping gas through Turkey, then through Greece, Serbia, and Hungary straight to the Austrian central hub. Washington urged Greece to spurn the Russians and support an alternative pipeline plan designed to let the EU tap into Caspian gas via a series of connecting pipelines running from Azerbaijan to Italy. The Greeks, seeing no need to view the two pipeline projects as competitors, indicated that they would be open to supporting both. “Greece is no one’s property,” Lafazanis said, adding that Athens would “move based on its national interests.” As is becoming more apparent by the day, the country’s “national interests” are clearly not aligned with the rest of Europe and to the extent Gazprom would be willing to advance Greece a portion of the projected revenues from its portion of the pipeline, Athens interests very clearly align with Moscow’s which is why no one should be surprised that Greek energy officials indicated Thursday that the MOU was a done deal. WSJ has more:
The Russian Pipeline Waltz - This is an eventful period for EU-Russia gas relations. Six months ago Russian President Vladimir Putin surprised the energy world by dismissing the long-prepared South Stream project in favour of Turkish Stream. Like South Stream, Turkish Stream is intended to deliver 63 billion cubic metres (bcm) of gas per year through the Black Sea to Turkey and Europe by completely bypassing Ukraine from 2019. Yesterday, during the St. Petersburg International Economic Forum 2015, Gazprom unexpectedly signed a set of Memorandums of Intent with the European gas companies E.ON, Shell and OMV. These plan for the construction of two additional gas pipeline strings along the Nord Stream pipeline system that connects Russia and Germany through the Baltic Sea. This project would double the current capacity of Nord Stream from 55 bcm per year to 110 bcm per year. Both Turkish Stream and an expanded Nord Stream indicate that Russia does not intend to abandon its position in the European market (by for example shifting attention to Asia). As illustrated in the figure below, current EU-Russia gas trade is based on three key axes: the Nord Stream pipeline, the Yamal-Europe pipeline through Belarus and the pipeline system crossing Ukraine. Of these three routes, only the Ukrainian gas transportation system is not controlled by Gazprom.
OilPrice Intelligence Report: Iran Woos Oil Companies Ahead Of Nuclear Deadline: Iran is reportedly readying a collection of contract terms that it thinks will be very attractive to international oil companies weighing whether or not to invest in Iran’s oil and gas sector. We have heard this story before, but Iranian officials have provided more clues into their thinking. While not yet officially public – pending a final agreement with the West over its nuclear program that leads to the removal of sanctions – Iran says that it will pay companies more if they produce more, and Iran may even be prepared to offer production-sharing agreements. That is something that the government has long been opposed to since it technically allows for part ownership of sovereign oil by international companies. But for financial reasons, that is exactly what oil companies want, since it allows them to book more reserves, which boosts their share prices. Iran also wants international companies to enter into joint ventures with the state, and share technology. With the deadline for the nuclear negotiations now just about two weeks away, the extensive work that Iran’s oil ministry has done to prepare these new contract terms is a testament to the country’s resolve and desire to see the negotiations with the West culminate in a comprehensive deal. Iran is desperate to see its oil and gas sector freed from sanctions, which would allow it to potentially ramp up output by an additional 1 million barrels per day.
Iran Holds Out Improved Oil-Contract Terms - WSJ: Iran is prepared to offer longer-term and more-profitable contracts to international oil and gas firms but expects substantive partnerships with Iranian companies, said oil-ministry officials, signaling how the cloistered country will try to entice billions of dollars in energy investments after any nuclear deal. The contract outline, which Iran has discussed with foreign companies but not yet released in its entirety, would pay companies more for boosting production, last longer and encourage joint ventures from the earliest stages of field development, said Ali Kardor, the vice president for investment and finance at the National Iranian Oil Co. The companies will also be expected to share more technology and management expertise with their Iranian partners. “They will have the incentive to produce more, and to transfer the technology,” Mr. Kardor said. Attention has focused on Iran’s oil and gas reserves, the fourth-largest and biggest in the world respectively, as negotiators from Iran and six world powers appear to be closing in on a deal that would lift international sanctions on Iran in exchange for controls on its nuclear program.
Softly, softly, India's influence rises in crude oil – Almost unnoticed, India is starting to exercise increasing influence on crude oil markets in Asia. The South Asian nation has doubled imports to almost 4 million barrels per day (bpd) in the past decade, in the process overtaking Japan, Germany and South Korea to become the world’s third-biggest importer behind China and the United States. Its importance to the outlook for crude oil over the next decade becomes even more apparent in the light of slowing demand growth in China, the likelihood of at best steady consumption in much of the developed world and declining demand in Japan. Two recent events underscored the importance that India is assuming in Asian crude oil markets: the visit by a senior official of Saudi Arabia’s state oil giant and talks between Indian refiners and Iraq over filling strategic storage. The main news from the visit of Ahmed Al-Subaey, Saudi Aramco’s executive director for marketing, to New Delhi last week was that the kingdom is ready to boost output in coming months to meet rising global demand. That was information useful to market players, but what wasn’t discussed in public was what the Aramco executive was talking about with the Indian oil officials he met. It doesn’t require much imagination to conclude that the Saudis are interested in expanding their relationship with India, given it is becoming the main driver of crude demand growth in Asia, something Al-Subaey acknowledged.
Venezuela Oil Loans Go Awry for China - WSJ: —As Venezuela’s economy totters thanks to low oil prices and years of mismanagement, a Chinese government-owned bank is badly on the hook. China Development Bank has lent nearly $37 billion to Venezuela since 2008, helping to prop up the regime of Hugo Chávez and his successor, Nicolás Maduro, while becoming one of the Latin American nation’s biggest creditors. Venezuela says China has pledged billions more. CDB’s plan was simple. In return for its largess, Venezuela would send China millions of barrels of crude each year. Since the middle part of the last decade, the bank has doled out tens of billions in similar loans to energy companies and governments in other oil-producing countries to help secure resources for China’s expanding economy. In Venezuela, the strategy has gone awry. In recent months, CDB has extended loan maturities and eased repayment terms, allowing the country to send it less oil than agreed and to pay bolivars instead of hard currency into a mutual-development fund intended to finance projects there. As other investors flee amid triple-digit inflation and social unrest, Venezuela has become more dependent on CDB.“It shocks many when China issues major loans to Venezuela, considering that the situation there is increasingly precarious, but there would indeed seem to be an ongoing commitment,” The Caracas government said in January that China pledged $20 billion in new investment in housing and infrastructure, mainly via CDB. Neither the bank nor Chinese government officials have confirmed that transaction.
“Earth First! We’ll Drill the Other Planets Later” -- And after we run out of methane hydrates in 600 years? Guess what: Titan Has More Oil Than Earth