NB: as i experienced a three day internet outage this weekend and am still behind on my other work, i will not have time to summarize the past week’s highlights, but will still post the weekly news links below…
one story that received little coverage that i had intended to write about was that of the Oklahoma Supreme Court decision opening the gas and oil companies to lawsuits for damages caused by earthquakes; the oil industry argued that all such disputes should be resolved by the Oklahoma Corporation Commission, a state regulatory agency stacked with industry insiders...of the industry metrics i normally track, US field production of crude oil was virtually unchanged, falling by just 9,000 barrels a day, our imports were up by 748,000 barrels per day from last week to 7,513,000, and our inventories of crude oil in storage rose for the first time in 9 weeks, up 2.4 million barrels to 465.4 million barrels, which puts our stockpiles at a level 20.9% higher than the last week in June last year....the rig count was released Thursday, a day early because of the holiday, and showed an increase of 3 rigs from last week, with oil rigs up 12 to 640, gas rigs down 9 to 219, and miscellaneous rigs unchanged at 3...i'll save the pdfs for that report and will hopefully incorporate the details in next week's coverage...
Ohio judge dismisses Broadview Heights lawsuit by residents - Yesterday – in time for the July 4th celebration of American Independence and democracy – the Cuyahoga County Court dismissed a class action lawsuit filed by residents of Broadview Heights to protect their inalienable right to local self-government. The suit was filed against the state of Ohio and the oil and gas industry, as fracking is being forced into communities without their consent. In November 2012, Broadview Heights residents, with 67% of the vote, adopted a Community Bill of Rights codifying their right to local, democratic self-governance, and rights to water and a healthy environment – banning fracking as a violation of those rights. In June 2014, two oil and gas corporations sued the City to overturn the bill of rights, claiming it violated their corporate “right” to frack. When City residents attempted to intervene, they were denied by the judge, who indicated residents had no legal interest in the case. In deciding the outcome of the case this spring, the judge agreed with the corporate frackers: that their claimed right to frack claimed “right” to frack was superior to the rights of the people of Broadview Heights. The will of the people, as expressed through their democratically adopted bill of rights, was nullified by the judiciary. Yesterday’s decision in the class action lawsuit further reveals what more and more people are coming to realize: our existing structure of law denies local, democratic self-governance, it denies communities the authority to protect themselves from fracking, and it denies communities the authority to protect their water and the natural environment. The judge, refusing to hear oral arguments and refusing to speak to the democratic rights of human beings, focused solely on the authority of the state and corporations to disregard the will of the people. He ignored arguments the citizens made that were based on the Ohio Constitution's guarantee that empowers the people to terminate unjust laws. It appears as if the people of Broadview Heights do not exist under the law.
Charter amendment in Columbus sought to ban fracking -- A group of environmentalists wants to change the Columbus City Charter to ban fracking or any other oil and gas drilling in the city. But if the city’s petition process doesn’t stop them, recent court rulings likely will. Carolyn Harding and other organizers seeking what they call the “Columbus Community Bill of Rights” turned in their petition for a charter change on Thursday with 13,587 signatures. If 8,956 of them are from registered Columbus voters, and the group followed the city’s petition rules correctly, the measure would be on the November ballot. “This is what democracy looks like!” Harding and the other activists shouted as they turned in the petition. However, the Ohio Supreme Court has ruled in similar cases that cities do not have the right to regulate oil and gas drilling because a state agency, the Ohio Department of Natural Resources, already regulates it. “There’s a good chance court will side with the industry,” Harding said, comparing her fight to the push for same-sex marriage. “We’re not naive.” Though she helped organized the petition drive, Harding lives in Bexley and cannot vote on the measure or sign the petition. Community Bills Of Rights have passed in several other cities in Ohio, including Broadview Heights, where on Thursday a Cuyahoga County judge, citing the state’s “sole exclusive authority” to regulate drilling and the Ohio Supreme Court ruling, dismissed a class-action lawsuit that sought to keep fracking out of that city.
County board agrees to seek moratorium on injection wells - The Athens County Commissioners agreed Tuesday to request a moratorium on new oil-and-gas fracking waste injection wells in Ohio. The move expresses the frustration by the Commissioners that with each new injection well approved in Athens County by the Ohio Department of Natural Resources, the board has requested a public hearing and been ignored. The moratorium request was proposed by members of the anti-fracking group, the Athens County Fracking Action Network (ACFAN), who cited other counties in the state impacted by fracking waste injection taking the same step, including Trumbull County in Northeast Ohio. The political thinking behind the move is that if enough counties join with similar resolutions, lawmakers in the Ohio General Assembly might be pressured into paying attention to this issue. Through the first quarter of 2015, Athens and Trumbull counties were No. 1 and No. 3, respectively, for having fracking waste injected. Athens County sits at the top, with nearly 1.1 million barrels of waste injected this year, more than 1 million of which came from out-of-state. The ODNR Division of Mineral Resource Management, which enjoys sole oil-and-gas regulatory authority in Ohio, is unlikely to pay any mind to the resolution if and when a new injection well permit application is submitted.
Tax the fracks - Toledo Blade --As Gov. John Kasich prepares to sign the new state budget, he should not be quick to let off the hook those feckless lawmakers — mostly of his own party — who have rejected one of his most important budget proposals: a reasonable and necessary increase in state severance taxes on oil and natural-gas production.Oil and gas drilling has continued to increase substantially in northeast Ohio shales in recent years, because of increased reliance on the extraction method known as hydraulic fracturing, or fracking. Yet producers still pay ancient, absurdly low tax rates to remove the state’s nonrenewable natural resources. State taxpayers — and especially the residents of affected communities — must endure the detrimental effects of fracking without receiving an adequate economic benefit. For nearly three years, Governor Kasich has called for increases in state severance taxes on oil and gas that would do no more than place Ohio in the middle of the pack among states that are major producers. But lawmakers in thrall to Columbus’ politically powerful fossil-fuel lobby — and its generous campaign contributions — have disdained the governor’s proposals in favor of inadequate measures, or none at all.The oil and gas industry warns of huge losses of jobs and economic activity if the state were to tax them fairly. Such threats are ludicrous: If producers want to exploit Ohio’s resources for big private profit — and they do — they won’t achieve that goal by packing up and moving to Pennsylvania or Michigan. Under Governor Kasich’s proposal, severance taxes would be pegged to market conditions, up or down, rather than mere volume. Leaders of the Republican-controlled state House and Senate say they want to place the issue of the severance tax before a tax policy “study” committee that will negotiate with oil and gas producers and report to lawmakers by Oct. 1. There is nothing left to study or negotiate.The committee dodge is a transparent effort by these leaders to evade accountability for their refusal to act. Their delay should fool no one.
Using bad tank cars? Then pay a fee, Brown proposes - Sen. Sherrod Brown wants shippers using tank cars that have been linked to fiery train derailments to pay fees that would be used to reroute train tracks, train first responders and clean up spills. Brown has proposed fees that start at $175 per car for those using the DOT-111, a tank car that federal regulators have warned hazardous-material shippers against using. The fees would pay to clean up hazardous-material spills, to move tracks that handle large volumes of hazardous material and to hire more railroad inspectors. Brown’s bill earmarks about $45 million over three years to train first responders near rail lines that carry large quantities of hazardous material. Earlier this year, federal regulators tightened rules on newly manufactured tank cars but did not require shippers to immediately remove the old cars. “(The rule) probably didn’t go far enough,” Brown said on Tuesday at the site of a 2012 derailment and explosion near the state fairgrounds. “If it’s a threat to public safety, they probably need to be off the rails.” The federal rule will phase out or require retrofitting of thousands of the oldest tank cars that carry crude oil by 2018. Another wave of the oil-carrying tankers would have to change by 2020. Some of the tank cars that aren’t carrying crude oil would not be replaced or retrofitted until 2025. Brown’s proposal calls for a tax credit for companies that upgrade their tank cars to the new federal standard in the next three years.
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. The combination of fracking and horizontal drilling has made drilling in Ohio’s deep shale profitable, particularly in the eastern and southastern parts of the state, which sit over the Marcellus and Utica shale plays. Horizontal drilling bores down to and then outward from a “kick-off point” under a well pad through shale layers thousands of feet beneath the surface.
USGS fracking report says up to 9.7 million gallons of water used in eastern Ohio's Utica shale wells - Water use in oil and gas wells in eastern Ohio's Utica shale region is among the highest in the nation, according to new research from the U.S. Geological Survey. The study provides what the agency says is the first comprehensive nationwide data on water used during hydraulic fracturing. The general consensus: Fracking "uses large amounts of water, though not as much as many have suspected in some areas," says the study, which is set to be published in the Water Resources Research academic journal.Not surprisingly, water usage is highest in the country's seven main shale plays, which include the Utica and Marcellus plays of Appalachia and areas of Texas, Oklahoma, Arkansas, Louisiana and Mississippi. Perhaps surprisingly to some, North Dakota's Bakken oil formation, which has seen some of the most activity in the country during the study's January 2011 to August 2014 timeframe, is not among the highest users of water. That's because the Bakken's geology often calls for the use of gel-based fracking fluids, the USGS says, which use less water.
USGS says the Utica uses A LOT of water --New research says Ohio’s Utica Shale in the eastern part of the state is one of the top water consuming areas in the nation. According to the U.S. Geological Survey (USGS), its new study provides the first comprehensive nationwide data on water used during fracking. As reported by the Columbus Business First, “The general consensus: Fracking ‘uses large amounts of water, though not as much as many have suspected in some areas,’ says the study, which is set to be published in the Water Resources Research academic journal.” It’s no shocker that the data shows the nations seven major shale plays are the regions that use the most water. The shales included in the U.S.’s top seven include the Utica and Marcellus located in the Appalachian region, along with plays found in Texas, Oklahoma, Arkansas, Louisiana and Mississippi. However, it is surprising that North Dakota’s Bakken oil formation does not fall into the high water usage category. While the region has seen large amounts of activity, especially during January 2011 and August 2014 when the USGS conducted its study, its water usage is low. The reasoning for this is due to the Bakken’s geology. It often calls for gel-based fracking fluids rather than water, said the USGS. According to the Columbus Business First, “Most of the wells in the Utica and other shale formations that recorded high uses of water are horizontally drilled, a process that uses more water than wells that are vertically or directionally drilled and tracked. And although horizontal drilling and fracking make most of the headlines, last year 42 percent of wells were drilled vertically or directionally. Those wells require less than 2,600 gallons of water per well. The Utica and other shale plays, by contrast, require from 2.64 million to 9.67 million gallons of water per well.”
'Zero chance' fracking caused Michigan earthquake, scientist says - A 3.3 magnitude earthquake that occurred in rural Calhoun County on Tuesday, June 30, was not related to fracking, according to a Western Michigan University geoscientist. "No, no, no," saidChristopher Schmidt, WMU professor emeritus of geosciences. "There is no chance in the world of that. There is no fracking in that area and no deep disposal wells. There's zero chance it's related to fracking." Class II wells are those associated with oil and gas development. Here is a key to the well types: BDW: Brine Disposal Well, for disposal of waste fluids associated with oil and gas drilling and production, including hydraulic fracturing flowback water; WIW: Water Injection Well, for injection of water for enhanced oil recovery (i.e., flooding of an oil field to push unrecovered oil toward production wells); GBD: Gas & Brine Disposal (for disposal of waste fluids and unusable gas); OTI : Other Injection.Michigan Department of Environmental Quality. Scientists, including those at the U.S. Geological Survey, recently have connected an increase in seismic activity to high-pressure injection wells used to dispose of wastewater that is the byproduct of fracking. The link has been seen in Colorado, Texas, Arkansas, Oklahoma and Ohio.Don Blakeman, a geophysicist with the USGS also said Tuesday the latest quake is unlikely related to fracking."I wouldn't jump to that conclusion," he said.Tuesday's quake occurred around 11:42 a.m. near Tekonsha and about seven miles northeast of Union City, near Tekonsha, according to the U.S. Geological Survey. It occurred less than two months after a 4.2 magnitude earthquake on May 2 near Galesburg, in neighboring Kalamazoo County. That quake also was unrelated to fracking, scientists say.
'I don't think you can say never' — The debate continues; Did fracking cause quake — On Tuesday several geologists told FOX 17 the quake centered north of Union City had no chance of being related to fracking. "This is not related to fracking, as far as I know, and my colleagues that know better about where the wells are have assured me that there is no underground storage of waste water in this region,” said Chris Schmidt, a professor with Western Michigan University’s geology department. Schmidt said the quakes follow a pattern, believed to be a fault line. What he doesn’t know is why the sudden flare in seismic activity.Ted Auch, a biogeochemist and great lakes program coordinator with the national non-profit environmental group Frac Tracker Alliance, says it’s impossible to completely rule out fracking as a probable cause. “I don’t think you can say never, I don’t think you can say always,” Auch said. “I would not side with those who say this is absolutely not associated with it.”Frak Tracker Alliance has been compiling data and case studies for several years in states like Ohio and Pennsylvania where fracking and recent abnormal quake activity has become common, according to Auch. Auch said the location of the most recent quake epicenter in relation to nearby horizontal oil and gas wells and high volume hydraulic fracking wells is close enough to lead him to believe the notion can’t be ruled out.
Ahead of Possible Oil and Gas Fracking in Kentucky, Seismic Monitoring Begins -- As natural gas speculation increases in the Rogersville Shale in eastern Kentucky, scientists are beginning research into the region’s existing seismic activity. Right now, several test wells have been drilled into the Rogersville, which is thought to cover 4 million acres in Kentucky and West Virginia. The results of those test wells are confidential, but if the reserves prove profitable, companies could begin drilling large-scale oil and natural gas wells in the formation.Tapping the Rogersville will also involve hydraulic fracturing, or fracking. Fracking is used to extract oil and gas from deep below the earth; the practice includes injecting water and chemicals miles underground. The dirty water is eventually discarded in deep disposal wells. In some oil and gas drilling areas, numerous earthquakes have been recorded, and scientists are becoming more confident that these quakes are linked to the industry. That’s why Kentucky seismologist Seth Carpenter said it’s important to establish a baseline for Kentucky’s seismic activity. The Kentucky Geological Survey has begun a project to measure small earthquakes—the kind that are usually undetected by people living nearby. “As these oil and gas activities happen using unconventional methods—if they start to produce earthquakes for example—we would be able to see a change between how things were before these activities started and after the oil and gas activities started,” he said.
Rogersville Shale drilling may bring economic boost - A dollar and 24 cents. That's the amount the price of 1,000 cubic feet of natural gas will have to increase before industry experts expect West Virginia's natural gas industry to explode. As of press time, the price of 1,000 cubic feet of natural gas was at $2.76. Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said when the price per 1,000 cubic feet reaches $4 or more, gas companies currently drilling in the area - including Lawrence County, Kentucky, across the Big Sandy River from Wayne County - will likely make the trip over the border. "The price of gas today is probably the limiting factor," DeMarco said about why, as of now, only one test well is operating in the area, in Putnam County near Hometown, West Virginia. "The reason everyone is concentrated on the western part of the Marcellus and Utica shales is because in addition to the price of gas, they can sell off other hydrocarbons produced from drilling such as ethane, butane, propane, isobutane. The gas stream has more value than just the price of gas. At its current price, unless we create more supply in the United States, it is not conducive to major exploration. We got so much of the commodity in this country that we don't have enough outlets."
Drilling Begins in Long-Term WVU Study on Natural Gas | West Virginia PBS (podcast) Drilling is set to begin in West Virginia in what is being billed as the first long-term field study of shale drilling for natural gas. The drilling is part of the Marcellus Shale Energy and Environmental Laboratory, which was launched in 2014 by West Virginia University. Its partners in the five-year, $11 million project include Ohio State University and the U.S. Department of Energy. WVU says scientists will study the process from beginning to end. Concerned residents and environmental groups worry because the Northeast well pad is at the Morgantown Industrial Park-- located just up the hill from the Monongahela River, and just 1500 feet upstream from the city’s drinking water intake. But researchers and industry professionals alike say risks are low at this drilling pad because of the expected oversight. “This is actually probably going to be the safest well in the world,” Since the project began, scientists have been monitoring baseline air, noise, light and water at the site. Those assessments will continue through the life cycle of the project. The much-criticized drilling process called fracking has opened vast reserves of natural gas. WVU scientists say since originally drilled in 2011, the site in Morgantown provides the majority of the natural gas consumed by local residents.
At New Vrindaban In West Virginia, Hare Krishnas Abandon Religion, Environment In Favor Of Fracking Profits In the years following the 1966 creation of the International Society for Krishna Consciousness (ISKCON) by Swami Prabhupada it seemed the Hindu based religious movement must be based in Southern California. That’s an understandable assumption with enough orange-robed Krishna’s selling religious tracts and recruiting members at LAX alone by the 1970s to warrant references in both movies Airplane I and II. But those SoCal Krishna’s were only there to collect the money needed by leaders to build their home temple, and a palace for Prabhupada, outside the remote West Virginia town of Moundsville, WV called New Vrindiban. The Hare Krishna fund drive approached so many hundreds of millions of travelers passing through LAX during the ’70s, ’80s and the ’90s that California passed a 1997 law targeting the Hare Krishna’s, that banned cash donations from the airport completely. The sums of money the Krishna’s were pulling in from LAX over the years was apparently large enough for them to fund a 13 year legal battle against the ordnance, where the California Supreme Court ruled finally against them in 2010. By the time of the verdict ISKCON likely didn’t care nearly as much as it had; not with millions in tax-free cash from the sale of gas rights and royalty payments pouring in. At that point Chevron was well underway fracking on Krishna land, pouring chemicals and water deep into the ground to reach billions of gallons of natural gas from the Marcellus Shale formation below. That seemed like an interesting enough contradiction for a group dedicated to providing unspoiled land for protected cows and strict principles of purity. We visited New Vrindiban in April where we were the only non-Indian guests filling the visitors lodge during their visits to the compound with families and friends.
State issues $95,000 penalty against Sunoco Logistics for wastewater spills - Sunoco Logistics is facing a $95,366 civil penalty related to a series of wastewater spills during construction of a portion of the company’s Mariner East pipeline in southwestern Pennsylvania. The civil penalty, outlined in a consent decree issued by the state Department of Environmental Protection on June 12, said the spills occurred between June and November 2014 in Westmoreland, Allegheny and Washington counties. According to the consent decree, Sunoco failed to stabilize areas “at various locations along the Mariner East pipeline” and “allowed sediment laden runoff from locations along the Mariner East pipeline to discharge into waters of the Commonwealth.” Sunoco must also pay $1,012 to the Washington County Conservation District and $894 to the Allegheny County Conservation District. Sunoco Logistics, which is headquartered in Philadelphia, operates pipeline networks throughout the country.
Drillers to submit electronic records on fracking chemicals to Pa. DEP -- Pennsylvania will require shale gas companies to disclose electronically the chemicals they use in hydraulic fracturing in a new state-run database by next summer. Department of Environmental Protection Secretary John Quigley said the department will end its partnership with FracFocus, an independent online catalog of fracking records, and develop what he considers a more comprehensive and user-friendly online database. “Our goal is to have a reporting tool that will provide ... much more downloadable and searchable information than FracFocus,” Quigley said. The state will require operators to submit fracturing records electronically by March 2016. The database will start around June 2016, he said. “We're not quite there yet, but we're well down the path,” Quigley said. He plans to eventually integrate the records into a mapping system. Computer users would be able to click on a dot on a map and see all of the information for that well, including fracking chemicals used, inspection records and production reports submitted to DEP, Quigley said. “It's going to be a comprehensive data set on oil and gas data in Pennsylvania,” he said.
Bill would prohibit drillers from paying smaller royalties -- Sponsors of a Pennsylvania bill that would prohibit natural gas producers from paying landowners a smaller royalty fraction than the minimum share required by a 1979 law are hoping that this time simple will mean success. During the last legislative session, a more wide-ranging royalty owner protection proposal collapsed. But Rep. Garth Everett, a Lycoming County Republican, believes the bill he introduced last week with 38 co-sponsors from both parties, will have a better second act — if his party’s leaders give it a chance. “I removed some of the things that they found very difficult to live with,” Mr. Everett said. “Hopefully this time I will be able to get enough support in my caucus to go to our leadership and say, ‘I know you might not love this bill but I think we should have an opportunity to run it.'” House Bill 1391 establishes that the one-eighth — or 12.5 percent — minimum royalty defined by the 1979 Guaranteed Minimum Royalty Act is the true floor for what landowners can be paid for their share of natural gas extracted from their property. Companies frequently deduct from royalty checks expenses for things like compression, transportation and marketing that add up after gas is produced from a well head. Many leases require landowners with a royalty stake in the well to share those post-production costs, while other leases are silent on the matter or forbid it. The issue inflames leaseholders who have seen royalty checks already diminished by low commodity prices shrink even further with the deductions for post-production costs. Lawsuits have been filed to fight deductions that royalty owners claim violate their lease terms or amount to fraud.
Editorial: Public deserves more information on drilling-related health complaints- The Pennsylvania Department of Health’s own documents show the agency is falling down on the job when it comes to fracking-related health complaints. Department officials should take this seriously, since it’s their duty to protect the public health. A recent Associated Press report shows the department gave little attention to some 87 separate complaints from residents and workers who feared they had been exposed to chemicals used in hydraulic fracturing, or “fracking,” a technique used to remove natural gas from deep underground. Documents the AP obtained through a right-to-know request showed that when these citizens, mostly from drilling areas in southwestern or northeastern parts of the state, sought advice from the department, agency workers collected scant information, sometimes failed to follow up, and in at least one case got the information wrong. Among those seeking the department’s help were physicians. One case involved a woman and her 6-year-old son who were picking berries near a well site and ended up in the path of a moist spray waste from the well’s condensate path. The two began coughing and felt shaky. Neither the DOH nor the Department of Environmental Protection offered testing or advice, though the DOH suggested the mother see a doctor. She had no insurance and did not seek treatment. The AP quoted a toxicologist with the Centers for Disease Control and Prevention, who treats patients exposed to fracking chemicals in southwestern Pennsylvania, as “appalled” at the departments’ response. “They should have called 911,” Dr. David Brown said. The documents also include records of calls from workers concerned about OSHA violations at well sites and toxic chemicals melting their boots.
It’s Official: New York Bans Fracking --New York State officially banned fracking today by issuing its formal Findings Statement, which completed the state’s seven-year review of fracking. “After years of exhaustive research and examination of the science and facts, prohibiting high-volume hydraulic fracturing is the only reasonable alternative,” said New York’s Department of Environmental Conservation Commissioner Joe Martens in a statement. “High-volume hydraulic fracturing poses significant adverse impacts to land, air, water, natural resources and potential significant public health impacts that cannot be adequately mitigated. This decision is consistent with DEC’s mission to conserve, improve and protect our state’s natural resources, and to enhance the health, safety and welfare of the people of the state.”The Findings Statement concludes that “there are no feasible or prudent alternatives that adequately avoid or minimize adverse environmental impacts and address risks to public health from this activity.” Two groups heavily involved in the campaign,New Yorkers Against Fracking and Americans Against Fracking, praised the decision.
New York makes fracking ban official -- New York state regulators put the finishing touches Monday on the state’s highly controversial ban on hydraulic fracturing. The administration of Gov. Andrew Cuomo (D) filed its 43-page findings statement for the ban Monday, saying fracking is too harmful to the environment and public health to be allowed. “After years of exhaustive research and examination of the science and facts, prohibiting high-volume hydraulic fracturing is the only reasonable alternative,” Joe Martens, head of the Department of Environmental Conservation, said in a statement. “High-volume hydraulic fracturing poses significant adverse impacts to land, air, water, natural resources and potential significant public health impacts that cannot be adequately mitigated.” Cuomoapproved the ban in December, seven years after the state first put a moratorium on the practice. The natural gas industry has long pressured New York to allow fracking, since it sits atop the gas-rich Marcellus Shale that has turned neighboring Pennsylvania into the second-largest gas producer in the country. But Cuomo didn’t budge, even after a report earlier this month from the federal Environmental Protection Agency failed to find “widespread, systemic” harm to drinking water from fracking. New York is the only state with significant gas resources to ban fracking.
New York State officially bans use of fracking, cites environmental concerns - New York State has officially banned the use of hydraulic fracturing to extract natural gas, citing its potential impact on health and the environment. The state has long had a de facto ban on the practice, known as fracking, which has unlocked vast quantities of natural gas and natural gas liquids from the Marcellus and Utica shale fields in neighbouring Pennsylvania and Ohio. In a statement released Monday, the state’s Department of Environmental Conservation spelled out a number of concerns associated with shale gas development – including the impact on ground water and surface water from leaks and spills, and air pollution from increased truck traffic. It concluded there are “unavoidable adverse environmental impacts” and “significant uncertainty” remaining regarding the level of risk to public health that would result from permitting high-volume hydraulic fracturing in New York. And hence, Governor Andrew Cuomo officially prohibited the practice.New York’s decision comes less than a month after the U.S. Environmental Protection Agency released a long-awaited study that found no evidence of widespread adverse effects on drinking water from fracking. While the oil and gas industry embraced the study’s results, the federal agency hedged its findings, saying the lack of evidence did not necessarily mean an absence of risk.
New York bans fracking, ending 7-year review - New York formalised its ban on high-volume hydraulic fracturing for natural gas on Monday, concluding a seven-year environmental and health review that drew a record number of public comments. "After years of exhaustive research and examination of the science and facts, prohibiting high-volume hydraulic fracturing is the only reasonable alternative," Department of Environmental Conservation Commissioner Joe Martens said in announcing the decision. "High-volume hydraulic fracturing poses significant adverse impacts to land, air, water, natural resources and potential significant public health impacts that cannot be adequately mitigated." In its decision, the DEC noted that more than 260 000 public comments were submitted on its environmental impact study and proposed regulations, an unprecedented number. The agency said most of the comments urged it to severely restrict or prohibit fracking. New York is the only state with significant natural gas resources to ban fracking, which has allowed other states to tap huge volumes of gas trapped in shale formations deep underground. The technology has produced new jobs, created economic growth and reduced energy prices but has triggered concern that it could pollute air and water, cause earthquakes and pose long-term health effects that aren't yet known. While environmental groups praised the ban, drilling proponents have said the decision was based on politics rather than on science.
State finalizes natural gas fracking ban, starts clock for legal challenges - A state ban on natural gas hydrofracking announced last December was made official Monday by the Department of Environmental Conservation in a step that now opens up the decision to legal challenges by pro-fracking forces. In a 43-page statement, DEC Commissioner Joe Martens wrote that potential risk to public health, the environment and wildlife from opening up the state's Southern Tier to fracking — which relies on a high-pressure blend of water, chemicals and sand injected deep underground to break up gas-bearing rock formations — was too uncertain to control safely. DEC's statement finalizes a ban announced in December by Martens and acting Health Commissioner Howard Zucker, with the backing of Gov. Andrew Cuomo. Fracking opponents welcomed the state's final word, while a lawyer with the drilling industry criticized it for ignoring state law that calls for safe development of energy resources. "The findings statement is an exercise in contradictions," said industry lawyer Tom West. He said it ignored earlier DEC reports that fracking can be safe "if properly regulated" and the decision "runs roughshod" over private property rights and legal obligations to promote energy development. "Once again, the landowners of the Southern Tier are the true losers, since they no longer can develop their correlative rights and they cannot trust this administration," West said. He said potential legal challenges remain "uncertain at this time." The state head of the American Petroleum Institute pointed to a U.S. Environmental Protection Agency study of hydrofracking issued. Pro-fracking advocates said EPA found fracking to be safe, but opponents said it was not clear-cut and ignored New York studies. API Regional Director Karen Moreau called the state ban a "moratorium on New York's economic opportunity ... New York remains idle while thousands of families in New York's Southern Tier have their hopes for economic opportunity dashed by the governor's decision."
17 We Are Seneca Lake Defenders Read Pope's Encyclical While Being Arrested --In an act of civil disobedience, 17 gas storage protesters led by former Reading Center resident Reverend Jane Winters, formed a human blockade shortly after sunrise this morning at the north entrance of Crestwood Midstream on Route 14. The participants, from ten counties across New York State, included members of Jewish, Catholic, Protestant and Islamic faiths.All 17 were arrested shortly before 8 a.m. by Schuyler County deputies, taken into custody, charged with trespassing, and released.The blockaders held banners that said “People of Faith Against Crestwood: Because Creation,” and “The Climate is a Common Good,” which references Pope Francis’ recent encyclical letter on climate change. Protesters were reading aloud from the Pope’s encyclical at the time of their arrest. When the arresting officer ordered them to drop the document, they sang and prayed.None of the protesters this morning had been previously arrested as part of the We Are Seneca Lake movement, which opposes Crestwood’s plans for methane storage expansion in lakeside salt caverns and which has been ongoing since October 2014. The total number of arrests now stands at 296 in the eight-month-old civil disobedience campaign.Crestwood’s methane gas storage expansion project was approved by the Federal Energy Regulatory Commission last October in the face of broad public opposition and unresolved questions about geological instabilities, fault lines, and possible salinization of Seneca Lake, which serves as a source of drinking water for 100,000 people.
Before Gas Cavern Explodes Crestwood Implodes -- If Crestwood’s Ginormous Gas Bomb is not approved soon, the hedge funds that own most of Crestwood may have to foreclose on their secured debt. If Crestwood used it’s proposed Thermobaric Bomb at Watkins Glen as collateral to secure its bonds (why wouldn’t it ?), the bond holders (a Conn HF etc) will end up owning the leaky salt cavern in a reorganization. The DEC is wise to tread cautiously, since Crestwood is an increasingly iffy financial proposition = and would be a poor counter-party/ no show in the event of a major accident: the DEC would have to clean up the mess/staunch the leaks, and pick the body parts out of the conifers. But as opponents nervously wait for the judge, Crestwood was hit Sunday with a double-barreled whammy. First, the powerful storm system that swept the region caused serious flooding in Reading, raising the specter of how such a storm would affect the site of the 88-million gallon LPG storage project. Reading’s overwhelmed drainage system made it obvious the additional brine ponds to store many millions of gallons of ultra-salty water would have probably overflowed, creating a fast-moving mélange of brine and rainwater cascading downhill into an already too-salty Seneca Lake. The second whammy came in a well-documented column on Crestwood’s finances by Watkins Glen journalist Peter Mantius. Mantius revealed that the value of two of Crestwood’s financial arms have been sliding downward as fast as brine on a steep slope, losing half a billion dollars in stock market value in a free-fall since September. This fiscal revelation is particularly important because lack of financial resources and inadequate disaster insurance are key elements in getting governments to sign on to urge the DEC to deny a permit. In the event of brine running down the hill, a propane truck rollover and spill, or a railroad car derailment off the trestle spanning Watkins Glen gorge, Crestwood doesn’t have the money to restore what it has destroyed.
Train Carrying Toxic Gas Derails In Tennessee, Catches Fire; Thousands Evacuated -- Remember when oil pipelines were at risk of spilling and as a result the progressive movement decided it would be far safer to transport US oil by train, because supposedly trains are so much safer for the environment (not to mention profitable for Warren Buffett), only to lead to a record surge in oil-carrying train accidents and derailments? Well, not even the most hardline of environment-friendlies could have anticipated what happened overnight in Blount County, Tennessee after a freight train derailed carrying flammable and poisonous material caught on fire on Wednesday night, leading to the evacuation of as many as 5000 residents from their homes. Unlike most crude incidents in the recent past, however, this time it was not a Buffett train. According to the Blount County Sheriff’s Office, a CSX train carrying liquid petroleum, a highly flammable and toxic gas, derailed and caught on fire at Mt. Tabor Road at Old Mt. Tabor Road around midnight. As WATE reports, hundreds of people relocated to the Foothills Mall until they are able to go home. The Red Cross also set up shelter at Heritage High School for residents. Officials told WATE 6 On Your Side a shelter will be open at 233 Curry Avenue for displaced pets. Evacuations could last between 24 and 48 hours, according to deputies. Seven law enforcement officers from the Blount County Sheriff’s Office and surrounding were treated due exposure to the fumes. CSX representative Lee Miller apologized to residents in a meeting at Heritage High School. He said environment and hazmat crews are on site “working diligently” to get the situation taken care of. He estimates residents will be able to come home Friday morning.
5,000 evacuated in Tennessee after train crash releases toxic fumes —More than 5,000 people in eastern Tennessee have been evacuated after a freight train carrying “highly flammable and toxic gas” derailed and caught fire on Thursday morning. Seven firefighters have been taken to hospital after breathing in fumes from the blaze, while a 1-mile evacuation zone has been put in place around where the train came off the tracks. “They are receiving treatment in the emergency room at Blount Memorial Hospital. At the time, some of them were pretty close to the scene of the derailment, while others were knocking on doors and evacuating residents,” said a Blount County Sheriff’s spokeswoman, Marian O’Briant who was speaking to NBC News. Officials have put the number evacuated at 5,000; however, other sources are saying the figure is nearer to 1,200. “Evacuation time could last anywhere from 24 to 48 hours, but we'll get word out as soon as we can,” O’Briant added. The train was traveling from Cincinnati to Waycross, Georgia, which is about 80 miles (129km) northeast of Jacksonville. However, it never reached its final destination after it left the tracks near Maryville, 17 miles (27km) south of Knoxville. Two shelters have been opened in the local area to help those who have temporarily been displaced, a local official said. The train was carrying liquefied petroleum gas and acrylonitrile – a product used in the manufacture of plastics. The United States Environment Protection Agency says that if the substance is inhaled in large quantities, it can cause membrane irritation, headaches and nausea. O’Briant added that three cars were currently on fire, but it is unknown whether the blaze is under control. The emergency services have not reported any serious injuries.
The Latest on Train Derailment: 5,000 Evacuated in Tennessee - ABC News: Several law enforcement officers were hospitalized after a CSX train car carrying a flammable substance derailed and caught fire in eastern Tennessee. Blount County Sheriff's Office spokeswoman Marian O'Briant says 10 law enforcement officers had to be taken to the hospital early Thursday because they breathed in fumes. In a statement, CSX says the train car was carrying acrylonitrile, a hazardous material used in a variety of industrial processes including making plastics. Officials in Maryville, Tennessee, say an evacuation is expected to last at least until Friday, after a CSX train car carrying the flammable and toxic substance derailed and caught fire. They also asked nearby residents not to drink well water for now. At a Thursday news conference, Blount County Mayor Ed Mitchell said CSX will provide bottled water to residents at a local middle school. Maryville City Manager Greg McClain added that there's no indication yet whether well water has been affected by the incident. He also advised evacuees to make plans to be away from home at least for Thursday night. About 5,000 people in the area were evacuated along with several businesses.
Plan for Fracking's Waste Pits Could Save Millions of Birds - In parched Jim Wells County, Texas, the glistening pits brimming with oil and gas waste appear to be an inviting refuge for birds seeking a hospitable place to find water and rest. But the pits offer anything but sanctuary–and safety––for birds. They are filled with oily sludge or liquid contaminated with toxic chemicals used by drillers to frack wells in the booming oil and gas fields of south Texas. County Deputy Hector Zertuche, the local environmental crimes officer, said the pits become deadly traps for birds. "The birds see these pits and come in and before they know it are covered in oil or chemicals," he said. "It's a bad deal." So Zertuche said he applauds a recent proposal by the U.S. Fish and Wildlife Service to strengthen laws that will protect birds from the oil and gas waste pits as well as from flares that burn off unwanted gas from well sites. The federal agency announced last month that it is considering the creation of rules that more strictly protect birds––some of them listed as threatened or endangered––from waste pits, flares and two other hazards: electric transmission lines and cell towers. The nearly century-old Migratory Bird Treaty Act generally affords protections to more than 1,000 species of birds from these hazards, because operators of the facilities are expected to mitigate threats. The goal of the new rules will be to more specifically require operators to employ the best available methods to protect birds.
Water Use for Fracking Has Skyrocketed, Stressing Drought-Ridden States - Fracking operations in the U.S. have gotten thirstier in the last 15 years, consuming more than 28 times the water they did a mere 15 years ago. A new study by the U.S. Geological Survey (USGS), in partnership with the American Geophysical Union, shows that not only has the number of such operations grown as fracking has expanded its reach and improved technology has allowed drilling in harder to reach locations, but individual wells are consuming more water as well. The median amount of water consumed by a single fracked well grew from 177,000 per oil and gas well in 2000 to more than 4 million gallons per oil well and 5.1 gallons per gas well in 2004. That’s far more than the 671,000 gallons a year used by a conventional or vertical well. In the 52 out of 57 watersheds with the highest average water use, more than 90 percent of the wells were involved in horizontal drilling in shale gas areas. Water consumption within a watershed where fracking takes place varied considerably, depending on the geology of the region and the location of the oil or gas deposit. Some operations in southern Illinois used as little as 2,600 gallons per well, while others in Pennsylvania, Ohio, Montana, Colorado, Arkansas and Texas used as much as 9 million gallons. The shale formations that coincided with watersheds where the most water was used for fracking operations including Eagle Ford and Barnett with watersheds located in Texas, Haynesville-Bossier above watersheds in Texas and Louisiana, Arkansas’ Fayetteville, Oklahoma’s Woodford, Tuscaloosa with watersheds located mainly in Louisiana and Mississippi, and the eastern Marcellus and Utica shale plays with watersheds in parts of Ohio, Pennsylvania, West Virginia and New York.
Injection Well Explodes Near Hammon - - An injection well caught fire Friday and exploded, sending flames and a big column of smoke shooting into the sky. It happened in Hammon in far Western Oklahoma. It's hard to believe from watching the video, but fortunately nobody was hurt. "Just like a can of pork and beans on a stove,” Leedey Fire Chief Tony Morelan said. “Eventually it is going to blow up." It did, and a News 9 camera was rolling. Just moments before fire crews were spraying down the tank with water trying to cool it down and keep it from exploding, but their efforts were just no match for the heated pressure. "It's probably not as dangerous as it was since the well has been shut in,” Corporation Commission oil and gas inspector Kyle Ivey said. Ivey was staked out across the street. His eyes did not leave the rolling smoke and temperamental flames in front of him. While the biggest threat had just passed, it was still very dangerous, and Ivey was making sure the situation was contained and posed no threat to anyone or to the environment. Inside the tanks is a mixture of oil and water. However, this wasn't the first explosion. Just hours before people who live nearby were shook. "I really thought someone had driven their car into our house,” Kim Brewster said. “That's how loud it was." "It was just engulfed in flames,” she said. “There was a man in the building and he came running out. I'm assuming he's one of the guys who works there.” He wasn't hurt and neither was anyone else. It's not the first time folks in western Oklahoma have been rattled like this, but it sure packs quite the punch when it happens. "We've got lots of oil and gas activity and that goes along with it,” Ted Thomason said. Early indications were lightning may have sparked the first explosion, but the exact cause is still under investigation.
Oklahoma court rules earthquake victim can sue oil companies - (Reuters) – An Oklahoma woman who was injured when an earthquake rocked her home in 2011 can sue oil companies for damages, the state’s highest court ruled on Tuesday, opening the door to other potential lawsuits against the state’s energy companies. Oklahoma has experienced a dramatic spike in earthquakes in the last five years, and researchers have blamed the oil and gas industry’s practice of injecting massive volumes of saltwater left over from oil and gas drilling. The state saw nearly 600 quakes of magnitude 3.0 or greater in 2014, compared to just one or two per year prior to 2009, according to the Oklahoma Geological Survey. Oil production in Oklahoma has doubled in the last seven years, in part because drillers can dispose of vast amounts of saltwater found in oil and gas formations relatively cheaply by injecting it back into the ground. . That practice is separate from hydraulic fracturing or “fracking,” which has been linked to some smaller quakes but is not believed to be causing Oklahoma’s tremors. Oklahoma, home to major energy companies including Chesapeake Energy Corp., Devon Energy Corp., and Sandridge Energy Inc., has already tightened regulations on injection wells. The state is considering tougher rules , and lawsuits would further boost costs for energy companies. Falling rocks injured Sandra Ladra’s legs when a 5.0-magnitude quake toppled her chimney in 2011. She has sued two Oklahoma oil companies, New Dominion LLC and Spess Oil Company, which operate injection wells near her home in Prague, Oklahoma.
Citizens Can Sue Fracking Companies for Earthquake Damage, Says Oklahoma Supreme Court - Oklahoma almost never used to have earthquakes. But in the last six years they’ve increased so much that last year the state surged past California as the most seismically active state in the continental U.S. Prior to 2009, the state averaged two quakes of greater than 3.0 magnitude annually. By 2014 that number had soared to 585, up from 109 in 2013. The culprit? Scientists are convinced it’s the wastewater injection wells that have accompanied the explosion of fracking in that state during the same time period. Now the Oklahoma Supreme Court has cleared the way for citizens to sue the oil and gas companies responsible for the wells. In a 7-0 decision, with two justices not voting, the court said that Sandra Ladra, a resident of Prague, Oklahoma, which was hit by a 5.6 magnitude earthquake on Nov. 5, 2011, could seek injuries for injuries she suffered in that tremor. “On November 5, 2011, Appellant was at home in Prague, Oklahoma watching television in her living room with her family when a 5.0 magnitude earthquake struck nearby,” reads Ladra’s complaint. “Suddenly, Appellant’s home began to shake, causing rock facing on the two-story fireplace and chimney to fall into the living room area. Some of the falling rocks struck Appellant and caused significant injury to her knees and legs, and she was rushed immediately to an emergency room for treatment. She claims personal injury damages in excess of $75,000.” The industry said that the Oklahoma Corporation Commission, which regulates the oil and gas industries and tends to be very friendly toward them, should deal with these cases. The state supreme court disagreed. “The commission, although possessing many of the powers of a court of record, is without the authority to entertain a suit for damages,” the court found. “Private tort actions, therefore, are exclusively within the jurisdiction of district courts.”
In Oklahoma, Fracking Companies Can Now Be Sued Over Earthquakes --If you live in Oklahoma, and you’ve been injured by an earthquake that was possibly triggered by oil and gas operations, you can now sue the oil company for damages. That’s the effect of a rulingby the Oklahoma Supreme Court, which on Tuesday rejected efforts by the oil industry to prevent earthquake injury lawsuits from being heard in court. Instead of being decided by juries and judges, the industry was arguing that cases should be resolved by the Oklahoma Corporation Commission, a state regulatory agency. The state’s high court rejected that argument. “The Commission, although possessing many of the powers of a court of record, is without the authority to entertain a suit for damages,” the opinion reads. “Private tort actions, therefore, are exclusively within the jurisdiction of district courts.” The ruling is a win for Sandra Ladra, the woman at the center of the lawsuit. Ladra claims that on Nov. 5, 2011, she was watching television with her family when a 5.6 magnitude intraplate earthquake struck, causing huge chunks of rock to fall from her fireplace and chimney. Some of the rocks fell onto Ladra’s legs and into her lap, causing what the lawsuit describes as “significant injury.” Ladra claimed $75,000 in damages against Tulsa-based oil and gas company New Dominion LLC, and Cleveland, Oklahoma-based Spess Oil Co. for allegedly causing the earthquake. According to the lawsuit, the companies directly caused the earthquake through wastewater injection, a common process in which oil companies take the leftover water used to drill wells and inject it deep into the ground. Tuesday’s ruling by the state Supreme Court does not say whether the oil companies are in fact responsible for the earthquake, much less the injuries Ladra sustained. It does, however, give Ladra the opportunity to make her case before a judge and a jury, instead of the Oklahoma Corporation Commission, which is run by three elected Republican commissioners.
Frackquake Madness!: 35 Fracking Earthquakes Rock Oklahoma in a Week - — Historically speaking, Oklahoma used to be a place where almost no palpable earthquakes happened at all — but hydraulic fracturing, a.k.a. “fracking” has changed all that now.Between the dates June 17 and June 24, 2015, Oklahoma was jolted by 35 earthquakes greater than magnitude 3.0 due to fracking and fracking wastewater injection activities the Oklahoma Geological Survey (OGS) has confirmed — this, in a state that experienced less than two such quakes per year before 2009.The sketchy episode comes only two months on the heels of the implementation of new regulations in the state that prevent operators and waste disposers from injecting wastewater “below the state’s deepest rock formation, believed to be one of the main causes of the quakes,” Reuters reported.The Oklahoma Corporation Commission (OCC) regulates all oil and gas activities in the state, and had a strong and vocal response to last weeks unprecedented episode.Matt Skinner, a spokesman for the OCC told Reuters, “There’s been a huge increase. That’s a game-changer,” insinuating that OCC may need to implement even more rules in an effort to deescalate the frequency and force of the tremors — an shaky situation that has many residents in Oklahoma downright concerned.Homes have been rattled and damaged to the tune of tens of thousands of dollars, and worrying regulators is the stark fact that some of last weeks quakes stretched beyond rural oilfield areas and shook homes and businesses along fault-lines in metropolitan, and heavily populated Oklahoma City.
Environmentalists clash with Business Coalition at energy summit - An energy summit organized by the New Mexico Business Coalition drew noisy protests from environmental and clean energy advocates on Wednesday. The summit — sponsored primarily by oil and gas companies active in New Mexico, such as Chevron and Mack Energy Corp. — aimed to inject more “common sense” into a local debate over the future of the coal-fired San Juan Generating Station near Farmington while highlighting the benefits of New Mexico’s energy industry, Business Coalition President and founder Carla Sonntag said in an opening address. The summit, at the Sheraton Hotel in Uptown, also aimed to “balance” public debate in the face of aggressive environmentalist efforts to distort facts, she said. “We need a constructive conversation — a common sense, level-headed approach,” Sonntag said. “The other side is generally not interested in compromise, but rather in an all-or-nothing approach.” Sonntag showed a video of some environmental protests in New Mexico, and said a recent study by the Business Coalition showed more than 120 groups are working to impose an “extremist” environmental and clean energy agenda on the state.. “We want to counter the screaming and the yelling and all the other nonsense that goes on,” she said.
Oil, gas spill reports for June 28 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks. Encana Oil & Gas (USA) Inc. reported on June 24 a buried load line at the bottom of water tank broke after high groundwater caused the water tank to float, outside of Erie. It is approximated that less than a 100 barrels of produced water released. About 12 barrels of the spill were contained within the berm. Noble Energy Inc., reported on June 19 that a flowline for a well developed a leak, outside of Kersey. The leak surfaced in the landowners field. It is approximated that less than five barrels of condensate were released. Foundation Energy Management LLC reported on June 17 that a leak developed in a flowline, outside of New Raymer. The leak released about four barrels of fluid, both produced water and oil released. Foundation Energy Management LLC reported on June 17 that during minor contamination clean up, historical contamination was discovered outside of Frederick. The full extent of the release is still being examined. Kerr McGee Oil & Gas Onshore LP reported on June 16 that water based drilling fluid overflowed from a storage tank, after a storage tank valve was left open, during surface casing drilling operations outside of Fort Lupton. It is estimated that less than 100 barrels of drilling fluid were released. Great Western Operating Company LLC reported on June 15 that an empty hose filled with fluid and kicked itself out of a half round tank, releasing a spill outside of containment, during a fluid transfer, outside of Brighton. It is estimated that nine barrels of fluid released. Kerr Mcgee Gathering LLC on June 12 that during the transfer of liquids from a condensate tank, the produced water sump overflowed, outside of Brighton. The spill released about two barrels of produced water and one barrel of condensate onto the ground surface outside of containment. Kerr McGee Oil & Gas Onshore LP reported on June 10 that petroleum hydrocarbon impacts were discovered beneath the produced water sump, following construction activities outside of Milliken. It appeared that there was no indication of a leak in a dumpline or produced water sump. It is unknown the volume of condensate and produced water that released, but it is approximated to have been less than five barrels.
Oil train traffic down on BNSF lines in Minnesota, Wisconsin -- New documents show BNSF Railroad is hauling fewer crude oil trains through Minnesota and Wisconsin than it was last winter. BNSF now averages 25 unit trains per week along its line that follows the Mississippi River from the Twin Cities to Illinois, according to a report released Friday by the Wisconsin Department of Emergency Management. That’s down from an average of 36 reported in September, a drop of about 25 percent. A report filed with the Minnesota Department of Homeland Security shows somewhat smaller reductions on the BNSF east-west line through Minnesota. BNSF reported a slight uptick on its line through Southwest Minnesota. BNSF spokeswoman Amy McBeth said “volumes on routes can change for various reasons, including the market and maintenance activity occurring on the railroad.” The reduction is likely a temporary response to falling oil prices and is happening across networks, according to Oil Change International, a clean energy advocacy group that tracks the petroleum industry.
Fracking in the Bakken comes with a high human cost -- The United States has surpassed even Saudi Arabia in oil and gas production, in part because of fracking technology, which allows energy companies to reach oil and gas deposits they could never access previously. One of those deposits lies in the Bakken oil fields, which stretches 170 square miles from North Dakota to Montana and into Canada . An estimated 7.4 billion barrels of undiscovered oil are sitting under the U.S. portion of the Bakken, and thanks to fracking, the industry now has the technology extract that oil. Workers have flocked to the Bakken for jobs with six-figure salaries that don’t require advanced degrees. But a new investigation from Reveal, a public radio program from the Center for Investigative Reporting, finds that those high-paying jobs come with a high price. In the first comprehensive analysis of its kind, Reveal found that, on average, a worker dies about every six weeks from an accident in the Bakken, with at least 74 deaths in the oil fields since 2006. Jennifer Gollan, a reporter with Reveal, led the investigation. She says that the top energy firms may be championing speed over safety — something that was seen in September 2011 after a well owned by Oasis Petroleum exploded in North Dakota . “The supervisor on this well was congratulated for working quickly and setting a new drilling record” months before the explosion, says Gollan. “She went on to call this record-holding well a ‘pace-setter.'” Oasis offered workers daily bonuses of $150 for drilling quickly — those who drill slower and safer are only offered $40 a day. “Safety is tantamount at Oasis,” spokesman Brian Kennedy told Gollan. “Bonuses should not have been paid, and we regret that they were.” The day before the explosion in 2011, Gollan says a crew of four men were brought on site to get the well to produce more oil. According to documents from the Occupational Safety and Health Administration (OSHA), a supervisor had pumped heavy salt water into the well to prevent volatile gases from escaping before the crew set to work the next day. But the well wound up erupting into a fireball.
Bakken tax trigger saves oil companies $120 million per well - A significant number of wells have been completed while North Dakota’s small oil tax trigger was in effect, says Tax Commissioner Ryan Rauschenberger. According to the Bismarck Tribune, the small tax trigger ends at the end of June and throughout its duration, oil companies completed close to 600 wells. The small trigger, which went into effect February 1 due to low oil prices, reduced the extraction tax from 6.5 percent to 2 percent. For each well completed during this period, oil companies saw an average tax savings of roughly $120 million. However, the tax break only applies to the first 75,000 barrels produced. Although oil companies will benefit from the decreased tax rate, Raschenberger said the state will still be able to collect approximately $1 billion in oil revenue over the next two years. As reported by the Tribune, Raschenberger stated that a variety of factors other than the tax break provided incentive for companies to hydraulically fracture the wells, such as the state’s one-year deadline to complete wells after drilling along with reduced service costs. At the end of April, there were about 950 wells drilled but left uncompleted, according to the North Dakota Department of Mineral Resources. This will be the last time the small tax trigger is implemented. Earlier this year the Legislature discontinued it in favor of a sweeping oil tax reform that will reduce the extraction tax rate from 6.5 percent to 5 percent. The new oil tax rate goes into effect January 1 and will be applied to all wells.
Statoil to test CO2 well stimulation in the Bakken - Utilizing carbon dioxide (CO2) as an energized fracturing fluid is a common practice in Canada. In the United States, however, introducing new methods of enhanced oil recovery and well stimulation usually requires a global oil player to lead the charge. As reported by Hart Energy’s E&P Magazine, Statoil has a reputation for being open to embracing new and innovative technologies to tackle the big challenges facing the industry. Later this year, Statoil will pursue expanding such innovations and begin stimulation tests on its Bakken acreage using a CO2 enhanced oil recovery method to determine if the process is as promising as its modeling indicates.. According to a Statoil-issued release, the test will be conducted at a well site approximately 15 miles outside of Williston, North Dakota. The trial will evaluate the possible production uplift while reducing the amount of water used in a large, multistage hydraulic fracturing operation. The test will be a step toward the company’s overall goal of increasing the efficiency and sustainability of its unconventional drilling operations in the Bakken, Eagle Ford and Marcellus regions. As a means to increase the chances of success, Statoil has sought out a partner company for its well stimulation program. The CO2 test is one of several projects being pursued under its Powering Collaboration initiative, the technology partnership between Statoil and GE that seeks to accelerate the development of sustainable energy solutions.
California Oil Industry’s Wastewater Saga Adds New Twist --Problems with the oil industry’s disposal of billions of gallons of briny wastewater and the state’s botched permitting process continue to ripple through California, from the industry’s hub in Kern County to the state capital and now to the courtroom. A lawsuit filed on June 3 in the U.S. District Court for the Central District of California alleges that Governor Jerry Brown (D) conspired in 2011 with oil companies operating in the San Joaquin Valley, in Kern County, to oust the state’s oil regulator and replace her with an official who would be more lenient in approving wastewater-disposal permits. California’s oil industry — the nation’s third largest — produces more water than oil. For every barrel of oil that is pumped out of the ground, roughly 15 barrels of salty, chemical-laden water travel up the borehole. Most of the water is reinjected underground — some into the oil reserves — to maintain pressure in the field, and a lesser quantity is reinjected into aquifers that are supposed to be too salty or deep to be useful for drinking water. In the last few years, however, a U.S. Environmental Protection Agency investigation revealed that protected aquifers were being used as waste dumps. The lawsuit alleges more than negligence. Called a RICO lawsuit, the case alleges collusion between state officials and two of the largest oil companies, Chevron and Occidental. The lawsuit is brought by a group of Kern County farmers who claim that salty oilfield wastewater poisoned one of the plaintiff’s cherry orchards. After Elena Miller — former oil regulator at the Division of Oil, Gas, and Geothermal Resources (DOGGR) — was fired in November 2011, the rate of approvals for new injection wells soared under the new appointee, from the typical 50 permits a year to 1,575 permits in 2012 alone, the lawsuit claims.
'Another 10 years': Guadalupe dunes still recovering from oil spill - As cleanup proceeds in the 101,000-gallon oil spill from a ruptured pipeline near Refugio State Beach in Santa Barbara County, workers in San Luis Obispo County have continued to quietly toil in a two-decade-long effort to clean up millions of gallons of oil that leaked in the Guadalupe oil field. Like the Santa Barbara spill, this one also reached the ocean, although most of the contamination was onshore, saturating a large area of the Guadalupe-Nipomo Dunes in the southwestern corner of San Luis Obispo County. Cleanup and restoration work on what was considered one of the nation’s worst oil spills is expected to continue at the Guadalupe dunes for at least another 10 years — serving as a warning that oil spill remediation is a long and complex process. Two decades into the work, the Guadalupe cleanup continues to present a challenge for regulators and site owner Chevron. They want as much of the toxic oil removed as possible, but massive excavations damage the sensitive ecosystem of the dunes, which are home to several rare and endangered species such as the snowy plover, California red-legged frog and the La Graciosa thistle. “There are always environmental trade-offs in projects like this.” The 2,700-acre oil field was an active oil field from 1946 to 1994. During that time, millions of gallons of an oil called diluent leaked from rusty pipes and settled into the sand dunes. Diluent is similar to kerosene and was used to thin the heavy crude oil produced in the field. The field was originally owned and operated by Union Oil of California, often called Unocal.
State issues toughest-in-the-nation fracking rules - State officials on Wednesday formally adopted new rules governing hydraulic fracturing in California, setting in motion some of the toughest guidelines in the nation for the controversial oil extraction practice. The oil and gas agency also released its environmental impact report that concluded fracking could have “significant and unavoidable impacts” on a number of fronts, including air quality, greenhouse gas emissions and public safety. The regulations, which lawmakers approved in 2013, require oil companies to expand monitoring and reporting of water use and water quality, conduct broad analysis of potential engineering and seismic impacts of their operations, and comprehensively disclose chemicals used during fracking and other operations. The full implementation of the law comes as the Division of Oil, Gas, and Geothermal Resources — the agency charged with enforcing the rules — faces increasing criticism from lawmakers over its failure to adequately oversee oil and gas operations. The fracking regulations are the product of SB 4, authored by Fran Pavley (D-Agoura Hills). The landmark legislation greatly expands the volume of information about oil operations that will be publicly available. Implementation of the new law has also exposed impacts of oil production operations on air and water, drawing the attention of the state agency charged with protecting those resources.
How Corporate Media Whitewashed The EPA’s Fracking Study - (ANTIMEDIA) The EPA released findings of its study on the impact of fracking on drinking water resources, but derelict reporting by corporate media has utterly failed the public. Several mitigating factors in the purported “landmark” investigation have been so blatantly and conspicuously ignored by mainstream press that it is arguable the true findings haven’t been disclosed at all.To be fair, some outlets do, indeed, cover the ostensible facts about the EPA’s study in noting that fracking does pose a small, but non-systemic risk to the water supply. This is evidenced in the New York Times: “Fracking Has Not Had Big Effect On Water Supply, EPA Says While Noting Risks,” or the technically correct but misleading headline from NPR: “EPA Finds No Widespread Drinking Water Pollution From Fracking.” Some, however, seem to have altogether eliminated what didn’t suit their agenda, as the Washington Times touts: “EPA: Fracking Doesn’t Harm Drinking Water” or Politico’s: “EPA: Fracking’s No Big Threat To Water.”Indeed, all of these outlets have two major things in common: they’re all correct and yet they all leave out critical information necessary to properly assess the EPA’s findings.There are notable conclusions by the EPA in its “Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources,” which should not be understated. “From our assessment, we conclude there are above and below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources,” states the report. However, these mechanisms did not lead to any evidence of “widespread, systemic impacts” on those resources. As many suspected, the contamination found was due to water withdrawals in areas or times of low water availability, fracking chemical and wastewater spills, drilling directly into underground resources, subterranean migration of such fluids and gas (as was discovered recently in a study published in PNAS), and inadequate treatment of wastewater.
Flagging the Lies of Big Oil’s Frackers on the 4th of July -- Big Oil’s frigging frackers are wrapping their shameless profiteering in our flag. In shale fields across the country, you’ll see fracking rigs festooned with Old Glory, and they even paint some of their rigs red, white, and blue. This ostentatious patriotic pose is part and parcel of the industry’s cynical PR campaign to convince you and me that its assault on our health, water, air and economic future should be mindlessly saluted, rather than questioned. ENERGY INDEPENDENCE! is their deafening cry—this shale gas boom, they exclaim, will free America from dependence on foreign producers. “Oh say can you see [through the frackers’ big lie?]” One who has peeked behind their star spangled curtain is investigative digger Joel Dyer, editor of the Boulder, Colorado Weekly. What he uncovered is “one of the biggest scams ever perpetrated on America.” Far from independence, we’re going to get the pollution and other problems, but foreigners will get the energy, for the gas extracted from our fractured land is destined for the export market. How do we know that? First, because the industry and its government enablers admit it in their internal communications. But, secondly, guess who’s paying for the fracking of America? Dyer cites reports by Bloomberg news that China has pumped over $5 billion into the US drilling “boom”—not only so it can export the energy back to their people, but especially so the Chinese can “redeploy the best U.S. practices and technologies” back to China. Other foreign owners fracking us are Japan ($5 billion invested so far), India ($3.5 billion), France ($4.5 billion), as well as multi-billions more from Korea, England and even Norway.
Shale Drillers' Safety Net Is Vanishing - The insurance protecting shale drillers against plummeting prices has become so crucial that for one company, SandRidge Energy Inc., payments from the hedges accounted for a stunning 64 percent of first-quarter revenue. Now the safety net is going away. The insurance that producers bought before the collapse in oil -- much of which guaranteed minimum prices of $90 a barrel or more -- is expiring. As they do, investors are left to wonder how these companies will make up the $3.7 billion the hedges earned them in the first quarter after crude sunk below $60 from a peak of $107 in mid-2014. “A year ago, you could hedge at $85 to $90, and now it’s in the low $60s,” said Chris Lang, a senior vice president with Asset Risk Management, a hedging adviser for more than 100 exploration and production companies. “Next year it’s really going to come to a head.” The hedges staved off an acute shortage of cash for shale companies and helped keep lenders from cutting credit lines, many of which are up for renewal in October. With drillers burdened by interest payments on $235 billion of debt, $89 billion of it high-yield, a U.S. regulator has warned banks to beware of the “emerging risk” of lending to energy companies.Payments from hedges accounted for at least 15 percent of first-quarter revenue at 30 of the 62 oil and gas companies in the Bloomberg Intelligence North America Exploration and Production Index. Revenue, already down 37 percent in the last year, will fall further as drillers cash out contracts that paid $90 a barrel even when oil fell below $44.
The Coming Financial Apocalypse For U.S. Shale - With the price of both Brent and WTI hovering around $60 per barrel, the short to medium term outlook for oil remains uncertain, owing to the persistent oversupply in the global market. Investment firm Goldman Sachs has even bearishly predicted $55 per barrel in 2020. With OPEC unwilling to reduce its production levels, and a worsening economic crisis in Greece , the near term outlook of oil remains mostly pessimistic despite reduced U.S. domestic crude stockpiles. The World Bank has even predicted that the global economy would grow at 2.8 percent this year, down from the 3 percent predicted back in January. Does this mean that sustained low oil prices will result in financial apocalypse for the oil sector ? The equity market has been one of the biggest saviors for troubled oil companies, almost 25 of whom have reportedly raised capital of more than $8.3 billion in order to repay their rising debt. Big oil companies such as Exxon Mobil, BP, Total, Statoil and Chevron have raised around $31 billion in debt between January and February 2015.However, there are some investment firms and trade pundits that expect a rebound in oil prices thanks to increased global demand and declining U.S. production. It was expected that mergers and acquisitions would be the best bet for oil industry when most companies were shying away from investing in new projects and reducing their drilling costs. However, that hasn’t happened in earnest yet. As a recent PWC report stated, the number of M&A deals in the U.S. oil and gas industry during the first quarter of 2015 was less than the last quarter of 2014. Things are not looking that good for the U.S. shale industry either as several drillers are using a substantial part of their revenues to pay off interest. According to a recent Bloomberg report, Continental Resource Inc, a company that has a large share in North Dakota’s Bakken Shale, is spending a huge part of its revenues on interest payments, spending as much as Exxon Mobil, a company almost 20 times larger.
Shale Drillers About To Be "Zero Hedged" As Loss Protection Expires - In many ways, the US shale industry is emblematic of why failing to normalize monetary policy after seven years of largesse can be extremely dangerous. As discussed at length in these pages and then subsequently everywhere else, access to cheap cash via capital markets allows otherwise insolvent producers to keep drilling even as prices collapse, creating what are effectively zombie companies (to use Matt King’s words) on the way to delaying the Schumpeterian endgame and embedding an enormous amount of risk in HY credit by flooding the market with supply just as demand from investors (who are delirious from hunger after being starved of yield by the Fed) peaks and secondary market liquidity continues to dry up. This dynamic has served to create a supply glut in a number of industries and has suppressed commodity prices in a self-feeding deflationary loop. Thanks to SEC rules on how drillers are required to value their reserves, producers are effectively forced to overstate the value of their O&G businesses by nearly two-thirds, which can lead unsophisticated investors who don’t bother to read the 10K fine print to believe that the businesses are healthier than they actually are.Furthermore, the next round of revolver raids for the industry isn’t due until October, meaning investors may also believe the industry has easier access to liquidity than it actually does.
FDIC Sounds Alarm On Insolvent, "Zero Hedged" Oil & Gas Producers -- On Thursday, we outlined how America’s heavily indebted E&P companies are about to be “zero hedged” when the downside protection that accounted for some 15% of Q1 revenue for nearly half of North American O&G operations rolls off. In short, the hedges that had, until now anyway, helped to forestall a terminal cash crunch are set to expire, which will have the knock-on effect of making it more difficult for the companies to maintain crucial credit lines with banks. As discussed yesterday, the payments from the hedges were the last line of defense for a sector that has been kept afloat in part by artificially suppressed borrowing costs and investors’ hunt for yield. These otherwise insolvent companies have tapped wide open equity and credit markets allowing them to keep producing, which in turn has contributed to the very same depressed prices and global deflationary supply glut that bankrupted the sector in the first place. Now, even the regulators (who are, as a rule, always behind the curve when it comes to assessing risk) are “sounding the alarm bells”. WSJ has the story: U.S. regulators are sounding the alarm about banks’ exposure to oil-and-gas producers, a move that could limit their ability to lend to companies battered by a yearlong slump in prices. The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. are telling banks that a large number of loans they have issued to these companies are substandard, said people familiar with the matter, as they issue preliminary results of a joint national examination of major loan portfolios. The substandard designation indicates regulators doubt a borrower’s ability to repay or question the value of the assets that back a loan. The designation typically limits banks’ ability to extend additional credit to the borrowers. The move could add an extra obstacle to companies struggling with high debt loads amid lower prices for the oil and natural gas they produce. Banks have been flexible with troubled energy companies to avoid triggering a flood of defaults and bankruptcy filings, but regulatory pressure could force them to tighten the purse strings.
U.S. Supreme Court rejects BP, Anadarko over Deepwater Horizon spill penalties - – The U.S. Supreme Court on Monday rejected bids by BP Plc and Anadarko Petroleum Corp to avoid penalties under federal pollution law in connection with the 2010 Gulf of Mexico oil spill. The high court left in place a June 2014 ruling by the New Orleans-based 5th U.S. Circuit Court of Appeals, which said the companies were liable for civil penalties under the federal Clean Water Act. The April 20, 2010, Deepwater Horizon drilling rig explosion and Macondo oil well rupture killed 11 workers and caused the largest offshore environmental disaster in U.S. history, polluting large parts of the Gulf, killing marine wildlife and harming businesses. BP could face a maximum penalty of $13.7 billion under the Clean Water Act. Anadarko says it could be required to pay more than $1 billion. U.S. District Judge Carl Barbier in New Orleans has not yet imposed penalties, but has ruled that BP was grossly negligent and that 3.19 million barrels of oil were spilled.
After Years Of Litigation, BP Agrees To $18.7 Billion In Claims And Penalties For Historic Oil Spill -- In simultaneous press conferences in Alabama, Louisiana, Mississippi, and Florida, the attorneys general of the states most directly impacted by the massive 2010 BP spill announced a “global deal” to settle years of litigation with the oil giant for a total of $18.7 billion. The settlement, largely split between the five Gulf Coast states, includes $6.8 billion to Louisiana, $3.25 billion to Florida, $2.3 billion to Alabama, $2.2 billion to Mississippi, $750 million to Texas, and $5.5 billion in Clean Water Act penalties. “Today, I am pleased to say that after productive discussions with BP over the previous several weeks, we have reached an agreement in principle that would justly and comprehensively address outstanding federal and state claims, including Clean Water Act civil penalties and natural resource damages,” U.S. Attorney General Loretta Lynch said in a statement. “BP is also resolving significant economic claims with the impacted state and local governments.” Lynch said the agreement in principle would be worked into a consent decree, which would then undergo a public comment period. “If approved by the court,” she said, “this settlement would be the largest settlement with a single entity in American history.”
BP to pay $18.7 billion in Deepwater Horizon legal settlement - BP, the federal government, and five Gulf of Mexico states announced an $18.7 billion (£12 billion) settlement Thursday that essentially ends much of the legal wrangling over the massive Deepwater Horizon oil spill in 2010. It is the nation's largest legal settlement over an environmental disaster. .The historic accord with Louisiana, Alabama, Mississippi, Texas, and Florida still needs the signature of US District Judge Carl Barbier of New Orleans. The deal comes five years after the Deepwater Horizon spewed some 3.2 million barrels (about 134 million gallons) of oil into the Gulf of Mexico, bringing with it long-lasting environmental consequences. "If approved by the court, this settlement would be the largest settlement with a single entity in American history; it would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come," said US Attorney General Loretta Lynch in a statement. Under the the plan, BP will pay about $7.1 billion (£4.6 billion) to the US and the five gulf states to compensate for damage to natural resources. Another $5.5 billion (£3.5 billion) will go the federal government as a payout for Clearwater Act violations. Almost $5 billion will go directly to the states as compensation for economic losses, and another $1 billion to local governments in the area. The settlement in the wake of a two-year trial is expected to be paid out over nearly two decades and brings to about $40 billion (£25.6 billion) the costs BP has incurred due to the underwater spill that was shown live on television. The oil conglomerate has paid more than $4 billion in criminal fines and spent about $14 billion in a three-month effort to contain the spill.
"Gulf states reach $18.7 billion settlement with BP over oil spill" -- Officials in Florida, Alabama, Mississippi and Louisiana announced an $18.7 billion settlement with BP on Thursday that resolves years of litigation over the 2010 Gulf of Mexico oil spill.The settlement announcement comes as a federal judge was preparing to rule on how much BP owed in federal Clean Water Act penalties after millions of gallons of oil spewed into the Gulf. Individual states also were pursuing litigation. Most of those penalties were to be distributed among the states for environmental and economic restoration projects along the Gulf Coast. The settlement money will be used to resolve the Clean Water Act penalties; resolve natural resources damage claims; settle economic claims; and resolve economic damage claims of local governments, according to an outline filed in federal court Thursday morning.Update: from the BP website: The principal payments are as follows:
- BPXP is to pay the United States a civil penalty of $5.5 billion under the Clean Water Act (CWA) – payable over 15 years.
- BPXP will pay $7.1 billion to the United States and the five Gulf states over 15 years for natural resource damages (NRD). This is in addition to the $1 billion already committed for early restoration. BPXP will also set aside an additional amount of $232 million to be added to the NRD interest payment at the end of the payment period to cover any further natural resource damages that are unknown at the time of the agreement.
- A total of $4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states.
- Up to $1 billion will be paid to resolve claims made by more than 400 local government entities.
US has more oil spills than you think -- The US has more oil spills than we thought and the number doubled after production increased six years ago. Richard Stover, PhD, and the Center for Biological Diversity counted nearly 8,000 significant incidents, between 1986 and 2014, in records of the pipeline safety administration. By “significant” they mean causing injury, death, damages exceeding $50,000 in value, a loss of 5 barrels of highly volatile substances, 50 barrels of other liquids or there was an explosion. There have been more than 500 human deaths and 2,300 injuries through-out that period. The number of plant and animal casualties is much higher. Though most pipeline failures occur where there is a long history of development, they occur through-out the Lower 48. Texas is the worst offender, with 1657 incidents. California had 621 and 48 deaths. The leading causes of incidents are excavation damages (24.3%), corrosion (18.2%) and equipment failure (17.1%). Kristen Monsell, from the Center for Biological Diversity said the possibility of a spill “doubles after a pipeline is 20 years old.” In the case of the recent Santa Barbara spill, for example, “the pipeline was 28 years old” and had corroded to the point the wall was only 1/16 of a inch thick.
Obama Administration Deals Blow To Shell’s Arctic Drilling Plans - In what’s been called a “major blow” to Shell’s Arctic drilling plans, the Obama administration released a new permitting decision Tuesday which found that, due to wildlife protections, the company can’t simultaneously bore two wells into the Chukchi Sea. The oil company appears undeterred, saying it still intends to drill. The Department of Interior’s Fish and Wildlife Service sent what’s called a Letter of Authorization to Shell, saying the company’s two drilling rigs must maintain a buffer of at least 15 miles between them in order to minimize the number of Pacific walruses and polar bears that could be harmed by exploratory drilling activities. Right now, the rigs are proposed to operate simultaneously only nine miles apart. The new requirement aligns with existing regulations under the Marine Mammal Protection Act to protect marine species from harassment and displacement by industrial noise, but poses a significant restriction to Shell because the well sites identified in the company’s drilling plan lie well within 15 miles of each other. As a result, Shell must reassess its plan for simultaneous operations of its two contracted drilling rigs, since only one of its wells can be drilled at a time. Shell had planned for simultaneous well drilling this summer because such operations can only proceed before sea ice begins to form during the Arctic autumn. Tuesday’s action by FWS halves the rate at which Shell will be allowed to drill its exploratory wells this summer, should it secure its remaining outstanding federal permit for drilling operations from the Bureau of Safety and Environmental Enforcement.
Polar Bears and Walruses Are Spoiling Shell’s Arctic Drilling Plans - Royal Dutch Shell’s Arctic oil exploration plans have been dealt a major blow after the Obama administration cited wildlife protections that prevent the company from drilling two wells into the Chukchi Sea this summer.The US Fish and Wildlife Service issued a letter spelling out details of a 2013 regulation, highlighting that companies could not place two drilling rigs within 15 miles of each other, Reuters reported. This was put in place to protect animals in the area — walruses, polar bears, and other mammals — that are sensitive to the sound of drilling activity. Walruses, for example, are said to plunge into the sea during drilling, endangering the population.The letter forces Shell to reevaluate its intention of using two drills off Alaska, which are currently about nine miles apart. The company hadplans to invest $1 billion in its Arctic project this year, adding to the $6 billion the company has already spent over the past eight years. Shell told Fuel Fix that the company intends to move ahead with its plan: “We are evaluating the letter of authorization issued today and will continue to pursue the 2015 program,” said Shell spokesman Curtis Smith. “That includes drilling in the Chukchi Sea once open water permits.”
Arctic Drilling Future Now Rests On One Well - Royal Dutch Shell is nearing a start to drilling in the Arctic, but has run into some hiccups. The U.S. government decided that Shell cannot actually drill both of its wells in the Chukchi Sea as planned. The Interior Department said that doing so would run afoul of its rules that protect marine life. According to those regulations, which were issued in 2013, exploration companies cannot drill two wells within 15 miles of each other. Shell had planned to drill two wells in the Burger prospect within a 9 mile range. Environmental groups hoped that the Interior Department would throw out Shell’s drilling plan altogether, owing to the fact that the environmental assessment the agency conducted was based on the two-well drilling plan, according to Jennifer Dlouhy of Fuel Fix. Shell reiterated that it would move forward with drilling the lone well in the Arctic this year, having committed around $1 billion for the program. Shell announced that it expects to be able to begin drilling by the third week in July after sea ice has melted sufficiently. Shell is still awaiting one last federal permit before it can begin drilling, and it is also awaiting the arrival of its second drilling rig in Alaska. Separately, several oil companies recently announced that they were putting their Arctic plans on ice. A joint venture between Imperial Oil, ExxonMobil, and BP decided to shelve plans for exploration in the Canadian Arctic. They had permits that will expire in 2019 and 2020, and the group says that they will not be able to drill before then. More research is needed and since the companies are running out of time, they have decided to suspend work and lobby the Canadian government for an extension. Last year Chevron decided to suspend its plans to drill in the Beaufort Sea after the collapse in oil prices made doing so unattractive. The move by Imperial and its partners likely puts any significant drilling in the Canadian Arctic on hold indefinitely. As such, Arctic drilling in North America will come down to Shell’s one well in the Chukchi Sea.
150,000 oil and gas jobs lost worldwide - Since oil prices began their dramatic decline last summer, over 150,000 jobs in the oil and gas industry have been cut across the globe, according to a recent report from oil and gas job services company Swift Worldwide Resources. As reported by Rigzone, the Swift report states that the United States witnessed the “fastest and steepest decline” of oil and gas jobs and that the North Sea offshore market had been “hit hard” as well. Swift CEO Tobias Read noted that while the job cuts are affecting direct employees, contractors are generally the first to be laid off and aren’t accounted for in typical layoff statistics. In the report, Read said, “The contractor market in the oil and gas sector is a huge silent community which comprises upwards of 100,000 professional-grade workers and similar skills.” The report found that in international markets controlled by state-owned oil companies, there has been a significant slowdown of new projects, and more layoffs can be expected. Of these markets, Southeast Asia has yet to be hit with substantial layoffs, but shipyards in Korea, China and Singapore are expected to be impacted. The Middle East has continued on a sustainable path, though job creation has slowed. The majority of cuts made by major operators has been in the upstream sector, but many of the cuts have been “done sympathetically through accelerated early retirement programs.”According to Petro Global News, the continued volatility of oil prices combined with the slide in rig counts has caused oil and gas companies to play it safe and pause hiring plans. A survey conducted by Rigzone showed that 51 percent of hiring managers around the world said they have slowed hiring efforts over the course of the past three months. Another 13 percent of the survey’s participants reported the implementations of hiring freezes during the current quarter.
Far from over: 11,000 jobs on the chopping block -- Even with the promising signs that the oil slump is subsiding, oil and gas workers in Oklahoma may suffer another wave of job cuts by the year’s end. A News on 6 report on Wednesday stated that 11,000 Oklahomans working in the oil and gas industry could lose their jobs by the end of 2015. The economic research company Region Track stated that petroleum producers In Oklahoma will most likely experience a 38 percent cut in revenue this year compared to the record level profits of 2014. Oklahoma has already seen 5,400 jobs slashed due to the crashed price of oil prior to the 11,000 expected. In addition, the state also suffered a rig reduction from the November high of 172 to 105 last week, according to data from Baker Hughes. 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. Worldwide, job cuts from the oil bust reached a staggering 150,000 at the end of May, according to energy recruiting firm Swift Worldwide Resources. However, 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.
The Response Of Employment To Changes In Oil And Gas Exploration And Drilling- Kansas City Fed - During early summer of 2014, oil prices exceeded $100 per barrel, and many industry analysts expected prices to remain at that level for some time. However, oil prices began to decline in July, and were down more than 50 percent by the beginning of 2015. Although the response was delayed by a few months, exploration and drilling for oil and gas dropped significantly, with rig counts down 49 percent by the end of April 2015. Exploration and drilling may decline further depending on when oil prices settle and for how long. In energy-producing states, exploration and drilling in the oil and gas sector - and economic activity more broadly - are vulnerable to energy price declines, with smaller and less-diversified states expected to be the most exposed. The net effects of price declines are not obvious. When oil prices fall, consumers likely have more money to spend on other goods and services. However, oil- and gas-producing states have a larger share of employment in the oil and gas sector, and falling oil prices can thus directly decrease employment. For example, when energy prices collapsed in 2008-09, employment in energy-producing states fell, partially reversing the strong performance of those states through the early stages of the Great Recession. In subsequent years of the recovery, growth in the global oil supply - mostly from U.S. production - coupled with declining global demand for oil, led to the price of oil falling by over 50 percent in the second half of 2014, with potential negative effects on oil- and gas-producing states.
OilPrice Intelligence Report: Oil Prices Under Pressure From All Sides: The British government led by Prime Minister David Cameron has embraced fracking and shale gas development in a way that much of the rest of Europe has not. With fracking blocked in France, Scotland, Bulgaria, Romania, the Czech Republic, and Germany, among others, the shale gas revolution has not spread to Europe. That left the U.K. as one of the remaining countries that could spark shale development. The setback for Cuadrilla now throws that into doubt. The negotiations over Iran’s nuclear program are coming down to the wire. With the June 30 deadline a few days away, both the U.S. and Iranian diplomats have signaled their willingness to work into the early days of next month in order to complete the historic agreement. There are conflicting signs emerging from talks, however. A senior U.S. official who spoke on the condition of anonymity said on June 25 that a path exists for a “very good” deal with Iran, although some issues have yet to be overcome. The remarks would seem to suggest that the parties are making progress. However, earlier this week, the Supreme Leader of Iran, Grand Ayatollah Khamenei, dug in deeper with harsh words on the state of the negotiations. He appeared to take a tougher line, demanding the removal of sanctions on the same day that a deal is signed, something that the U.S. would likely balk at. Khamenei also emphasized his opposition to allowing international nuclear inspectors into the country, and said that the decade-long freeze on Iran’s nuclear program was unacceptable. Khamenei’s comments threw cold water on the state of play, and it is hard to see how those demands can be reconciled with the positions of the P5+1 nations.
Oil Markets Offer Few Easy Answers - Atlanta Fed (video) When it comes to energy markets, easy answers are scarce. Did you think oil prices would plummet nearly 60 percent in late 2014 and early 2015? And why have gasoline prices suddenly shot back up this spring? Pump prices could have risen lately for numerous reasons, but no simple answers exist. As for the first question, few experts foresaw such a dramatic drop in oil prices because "it's almost impossible to predict," Laurel Graefe, Atlanta Fed Regional Economic Information Network (REIN) director, said at a May 18 presentation. Speaking at the Atlanta Fed's first ECONversations event held before a live audience, Graefe discussed oil price swings and their effects on the broader economy. A central theme of her remarks: global oil prices are the product of an endlessly complex mix of economic, geopolitical, psychological, and other forces. History clarifies things History, however, brings some clarity. For instance, Graefe described similarities between conditions today and a major oil price decline in 1986. In both cases, she explained, increases in oil supplies were an important factor in pushing down prices. Thirty years ago, energy companies tapped offshore oil fields in Alaska and the North Sea, and Saudi Arabia also increased output. More recently, technological advances such as hydraulic fracturing, or fracking, allowed drillers to reach pockets of oil deep underground in the United States. U.S. oil production soared. The larger supply, coupled with lower demand because of global economic weakness, helped lower oil prices, Graefe said.
Oil prices settle into new equilibrium: Kemp -- Benchmark crude oil prices have barely moved for more than two months, implying the market has found a temporary equilibrium after the enormous price shock in the second half of 2014 and early 2015. Over the last 30 trading days, the range between the highest and lowest closing prices for front-month Brent futures has been just $4.50 per barrel. The highest close for the front-month futures contract was at $66.54 per barrel (May 21) and the lowest was $62.01 (June 29). The trading range is the smallest since the shock began in June 2014, and down from a peak of almost $40 per barrel in early January 2015. In dollars per barrel, the range has been narrow by the standard of the last decade. Even in percentage terms, which allow for differences in outright prices, the market has been quiet. The trading range has been around 7 percent over the last 30 days, down from almost 40 percent at the start of 2015. The price stabilization implies the market believes $60-65 per barrel will gradually bring supply and demand back into balance, which seems sensible. The low variability in prices is also helping anchor short- and medium-term expectations for producers and consumers at around the current level.
Chart of the day: US oil output increased to a 44-year high in April, just slightly below November 1970 peak -- The Energy Information Administration released monthly oil production today for April and here are some of the highlights of that report:
- 1. Despite low oil prices that averaged $54.45 per barrel in April, US oil production topped 9.7 million barrels per day (bpd) in April and reached the highest level of domestic crude oil output in 44 years, going back to April 1971 (see chart above).
- 2. US monthly oil output has been higher than April’s daily average of 9.701 million barrels in only seven other months, all in late 1970 and early 1971, placing April of this year as the 8th highest month of oil production in US history.
- 3. The all-time peak monthly US oil production took place in November 1970, when output averaged 10.044 million barrels per day. April’s daily production average of slightly more than 9.7 million barrels is just 343,000 barrels (and 3.4%) below US peak oil production.
- 4. Note in the chart that there was a gradual, four-decade decline in US crude oil that took place between the early 1970s and about 2009, and during that time domestic production fell roughly in half, from 10 million bpd in 1971 to only about 5 million bpd in 2009. Thanks to the shale revolution, America’s oil production is now almost back to the 1970 peak level of 10 million bpd, and it only took a little more than six years for the bonanza of shale oil to almost completely reverse the 40-year decline!
EIA Data Still Doesn’t Add Up -- As initially pointed out by Peakoilbarrel.com in a recent article, discrepancies between actual data for oil production in Texas vs. what the EIA claims are so stark it’s almost scary. How this can be overlooked by the mainstream media as well as by most of the broker community is even more alarming. Further, how the U.S. oil industry fails to catch it and question it given that their livelihood is tied to it is even scarier. Using the data plotted on the Texas RRC website, combined with the knowledge that Bakken production has been flat to declining, makes us wonder how in the world the EIA can not only restate monthly production higher recently, starting in March, but expect over a 700,000 barrels per day (B/D) overall increase for 2015. Using the IEA's own data off their website on page 7 of their June monthly report, in Texas they expect a 2015 increase of 400,000 B/D (3592 vs. 3164 in table below) alone. Historical data through May shows production essentially flat from March to May ( 3675 vs.3609) as well as in 1Q15 to 2Q15 (3614 vs. 3602). The EIA's data below shows a ramp of 200,000 per day from Dec to April with a slight decline latest month which is even worse.EIA Texas Production (thousands of barrels per day) Comparing these figures with Texas RRC figures off their website, the differences are startling. First, the chart below clearly shows the trend through 4/1/15 as being flat to down, as production nosedived in April by nearly 15 percent, compared with the previous month, and 15 percent from end of 2014.Yes, these numbers bounce around but, plotting the monthly data below, the trend is clearly down, not up. So the first question is: what prompted the EIA to boost expectations recently, starting in March, when the data is clearly flat in the largest region of EIA growth expectations?
U.S. crude oil stockpiles rise for first time since April - EIA – U.S. crude oil inventories rose last week for the first time since April, while gasoline stocks decreased unexpectedly, data from the Energy Information Administration (EIA) showed on Wednesday. Crude inventories rose 2.4 million barrels to 465.4 million in the week to June 26, compared with analysts’ expectations for a decrease of 2 million barrels. U.S. crude imports rose last week by 748,000 barrels per day to 6.94 million bpd. A rise in imports after Tropical Storm Bill disrupted Houston-area shipping the previous week had been expected by some analysts and EIA data showed crude stockpiles in the Gulf Coast region rose 3.9 million last week. “The crude build was definitely a surprise as was the Cushing build,” “The gasoline draw implies demand has picked up, so it presents a mixed set of numbers.” Crude stocks at the Cushing, Oklahoma, delivery hub rose by 123,000 barrels, EIA said. Crude futures initially extended losses after the EIA data. U.S. August crude was down $1.62 at $57.85 a barrel at 11:07 a.m. EDT (1507 GMT), having traded from $57.73 to $58.98. Brent August crude was down $1.09 at $62.50, having swung from $62.34 to $63.35. Refinery crude runs fell by 1,000 bpd, EIA data showed. Refinery utilization rates rose 1 percentage point to 95 percent of capacity.
Crude Crashes To $56 Handle - 10-Week Lows -- Following today's record production and renewed inventory build, it appears the $57 to $62 range of the last 3 months is about to be tested ... especially as Kerry et al. assure the world an Iran deal is "very very close" and they are working "very very hard." WTI (Aug) is now trading with a $56 handle - its weakest since mid-April...Charts: Bloomberg
U.S. oil rig count rises for first time since December - U.S. oil drilling this week increased for the first time after 29 weeks of declines, data showed on Thursday, the strongest sign yet that higher crude prices are coaxing producers back to the well pad. The oil rig count rise of 12 to 640 followed a six-month slump in activity that reduced the number of active rigs from a peak of 1,609 in October to a nearly five-year low last week, energy services firm Baker Hughes Inc said in its closely followed report. Baker Hughes issued the report a day early this week due to the U.S. Fourth of July holiday on Friday. Experts had expected the rig count to bottom out soon and then rise later in the year. “We believe about 100 rigs could be added to the U.S. rig count between now and year-end,” analysts at Evercore ISI, a banking advisory firm, said in a report this week, noting “The bottom is passing and the upturn is arriving.”
U.S. oil rig count jumps up by a dozen, the first increase in 2015 - The amount of U.S. rigs drilling for oil increased for the first time this year after 29 consecutive weeks of declines. The number of actively drilling oil rigs jumped by 12 this week after several weeks of small decreases, which had indicated the streak of rigs being taken offline was nearing its end. The overall rig count, however, only grew by three rigs, because nine rigs drilling mostly for gas were taken out of service, according to data from oil services provider Baker Hughes. That is a switch from last week when three oil rigs were lost, but the gas-focused rigs increased by five. There were no major shifts in certain parts of the country. The rig count increased by three in Texas’ Eagle Ford Shale and grew by just one in the Permian Basin, according to the Baker Hughes count. The first increase in oil rigs this year comes in the same week that oil prices took their biggest single-day dip in two months on Wednesday, in response to increased U.S. inventories and another production hike from members of the Organization of the Petroleum Exporting Countries. The U.S. benchmark for oil had hovered around $60 a barrel since late April, but closed Wednesday at $56.96 per barrel, the contract’s lowest price since April 22 and its largest loss since a rout April 8 removed $3.56 per barrel.As for the rig count, the total U.S. count is at 862 this week, according to Baker Hughes, while the oil rigs count jumped to 640 rigs. The number of active oil rigs has still plummeted by 969 rigs since the peak of 1,609 in October.
The Current Oil Price Slump Is Far From Over -- The oil price collapse of 2014-2015 began one year ago this month (Figure 1). The world crossed a boundary in which prices are not only lower now but will probably remain lower for some time. It represents a phase change like when water turns into ice: the composition is the same as before but the physical state and governing laws are different.* For oil prices, the phase change was caused mostly by the growth of a new source of supply from unconventional, expensive oil. Expensive oil made sense only because of the longest period ever of high oil prices in real dollars from late 2010 until mid-2014. The phase change occurred also because of a profoundly weakened global economy and lower demand growth for oil. Monetary policies following the 2008 Collapse produced the longest period of sustained low interest rates in recent history. As a result, capital flowed into the development and over-production of marginally profitable unconventional oil because of high coupon yields compared with other investments. Prolonged high oil prices caused demand destruction. This also allowed the expansion of renewable energy that could compete only at high energy costs. Concerns about global climate change and its relationship to burning oil and other fossil energy threatened the future interests of conventional oil-exporting countries. OPEC hopes to regain market share from expensive unconventional oil and renewable energy, and to renew demand for oil through several years of low oil prices. Oil prices must inevitably rise as unconventional production peaks over the next decade and oil-exporting countries increasingly consume more of their own oil. Politically driven supply interruptions will inevitably punctuate the emerging new reality with periods of higher prices.For now, however, we have crossed a boundary and notions of normal or business-as-usual should be put aside.
OilPrice Intelligence Report: Bearish Signs For Oil From Europe: Each week we look at the level of crude oil located in U.S. storage tanks around the country, which offers a glimpse into the inner workings of production and consumption levels. After peaking earlier this spring, U.S. crude inventories have undergone successive weeks of drawdowns, indicating slowing production and higher demand from consumers. In Europe, however, the story is different. Crude storage is reaching a multi-year high at the trading hub of Amsterdam-Rotterdam-Antwerp, known as ARA. In fact, storage levels have spiked since the beginning of the year to 60.6 million barrels in June. European storage is growing so rapidly because a lot of oil coming from Africa is having trouble finding interested buyers, forcing it into storage. Growing storage levels in the U.S. pushed down oil prices earlier this year, and the same could hold true for European storage. That points to a persistent glut in global oil markets, with production exceeding demand by around 2 million barrels per day according to IEA estimates. Even if some of that supply can get soaked up by extra demand, there is a lot of oil sitting idle in tanks right now. That means oil prices likely won’t jump in the near term because the markets will need to work through the excess sitting in storage first. While inventories are drawing down in the U.S., a group of companies are proposing increased storage along the U.S. Gulf Coast. Magellan Midstream Partners and LBC Tank Terminals are proposing a $95 million oil storage facility near Houston. The facility would be able to hold around 700,000 barrels of crude and would be connected to existing distribution infrastructure. If it moves forward, the site could be completed by 2017. Magellan’s project would greatly expand storage along the Gulf Coast, helping refiners access and store product.
OilPrice Intelligence Report: Top 4 Reasons Oil Is Headed Back Down -- The big news from the U.S. this week was new data that showed that the weekly rig count…actually increased. That’s right, after 29 consecutive weeks of rig count declines, the industry may have finally hit bottom and could be on its way back. For the first time in seven months the U.S. saw additional rigs added into operations. Baker Hughes reported that an additional 12 oil rigs came into service for the week ending on July 2, although natural gas rigs declined by 9, for a net gain of 3 rigs. The data is evidence of ongoing efficiency gains and resilience on behalf of shale drillers. Despite oil prices still 40 percent lower than they were a year ago, many companies are still drilling. The positive rig count figures add more softness to the markets, as it signals a possible return of new drilling while the global glut in oil has yet to substantially subside. Then again, there were plenty of other reasons to feel pretty pessimistic this week about oil prices. Astonishingly, the Greek debt crisis has continued to drag on, surprising many that the parties involved were unable to come to terms despite Greece’s default on IMF payment and the government’s decision to call for the closure of banks and the stock market. The past week also saw gyrating fluctuations in the two main stock market exchanges in China. The Shenzhen Composite and the Shanghai Composite have skyrocketed over the past year, perhaps too far and too fast. By June, cracks finally started to form. Over the past week the two exchanges have lost nearly 30 percent and 25 percent of their values, respectively. Moving onto another developing story that could have negative consequences for oil markets – the Iran negotiations. There is still quite a bit of disagreement over how fast Iran can bring oil back online, but the Wall Street Journalreported that Iran has put together an armada of oil supertankers and it is ready to resume trade with the West if a deal is sealed. NITC, a private Iranian shipper, revealed that it has stitched together a fleet of 42 supertankers over the last few years, the largest fleet in the world.
US overtakes Russia as top oil and gas producer, report says -- The United States has overtaken Russia as the biggest oil and natural gas producer in the world, in what one economist has described as “a changing of the guard of global energy suppliers." Bloomberg reported Wednesday that U.S. oil production rose to a record 1.6 million barrels a day last year, according to BP’s Statistical Review of World Energy. Natural gas output also soared, which inched America ahead of Russia as a producer of the two combined. “We are truly witnessing a changing of the guard of global energy suppliers,” BP Chief Economist Spencer Dale said in a presentation on the data Wednesday, Bloomberg reported. “The implications of the shale revolution for the U.S. are profound.” The BP report also shows China’s energy demand is growing at the slowest pace since the Asian Financial Crisis in the 1990s as the communist nation suffers a slowing of its economy and tries to reduce its reliance on heavy industry, Bloomberg reported. In the United States, the report finds that the oil and gas boom has changed the economy, allowing manufacturing to return as the country produced about 90 percent of the energy it consumed last year.
The newest US export may leave Russia with excess gas - Excess shale gas from U.S. fields is poised to flood into Europe and ruin Putin’s day. Vladimir Putin has been having an iffy year. His not-so-secret military adventure in Ukraine has gotten bogged down in an ugly stalemate. Thanks to Western sanctions and falling oil prices, the Russian economy is tanking. And now there's a new conundrum for the shirtless wonder to tackle — one that's trapped in subterranean rock formations along the Eastern U.S. What's trapped there is a bunch of natural gas, which, thanks to fracking, has created an unprecedented boom in America's gas supplies. Now some of the excess may for the first time be heading to Europe, where Russia has been a dominant supplier. (Insert GIF of Putin cursing, "Oh, frack.") Experts say cheap U.S. supplies could undercut Russian gas in price by as much as 40 percent, hitting Russia's treasury while also stiffening Europe's backbone should Russia ever threaten to cut off its gas. Indeed, there's enough gas getting fracked to shift the balance of power, potentially restoring some U.S. clout over global energy prices with geopolitical impact. American influence likely won't be huge, but even the ability to nudge natural-gas markets would be a big step away from decades of learned energy helplessness. Already, with its shale fields doing so strongly, the U.S. has enough gas to supply Canada and Mexico via pipelines. Liquefied natural gas, or LNG, exports from both the U.S. and Australia will produce a gas glut by 2020 if current projections hold — possibly even sooner. Russia, meanwhile, faces erosion of its stealth gas monopoly in Europe, having inadvertently set the stage for its own comeuppance the way monopolists often do. Its state-owned gas behemoth Gazprom has long asked for top dollar in the form of gas contracts linked to oil prices, opening the door for potentially cheaper LNG. And Europe — spooked by the war in Ukraine and its reliance on Russian gas — has been getting ready to handle more LNG imports. "Russia will not want [a price war], but it's inevitable,"
OPEC: Global market share hits 12-year low - Thanks to U.S. shale oil output, the Organization of Petroleum Exporting Countries’ share of the global crude market has hit a low not seen for over a decade, reports Bloomberg News. The organization’s global oil market share in 2014 dropped to 41.8 percent, down from 43.3 percent seen the year prior, according to OPEC’s Annual Statistical Bulletin. The downward slide is the lowest crude market share OPEC has seen since 2003. Of the total output reduction, Libya was responsible for over half. Production growth in U.S. shale oil fields resulted in OPEC ditching its long-held position of balancing world market prices last November. Rather, following Saudi Arabia’s lead, the group opted to maintain output levels, placing pressure on companies with high operating costs to cut production levels as the global supply glut grew. Last year the group’s 12 member countries combined produced 30.68 million barrels per day. Saxo Bank A/S analyst Ole Sloth Hansen told Bloomberg, “The OPEC policy is probably the only option they have. U.S. shale is now the swing producer.” Last year, OPEC members completed the most wells since 2008, and the increase from 2013 was the largest in 10 years in terms of percentage. But fighting in Libya, between the state government and an Islamist-backed regime, drastically reduced the nation’s output and consequently, overall OPEC output. Due to the persisting conflict Lybia’s production dropped 52 percent, down to 480,000 barrels per day, causing oil revenue to decline 66 percent from the previous year. According to the OPEC bulletin, OPEC members’ combined sales last year tallied in at $964.64 billion, a 13 percent decline. The group’s exports to Asia also declined last year by 541,000 barrels per day and shipments to North America dropped by 312,000 barrels a day. Iranian crude sales to Europe and Asia also declined due to international sanctions, dropping by 8.7 percent. To read OPEC’s Annual Statistical Bulletin, click here.
Have the Saudis miscalculated the impact of lower prices on US production? -- In 2014 the Saudis could no longer accept the loss of crude oil market share as the North American production levels shot up sharply over a three-year period. The Saudi response was quite rational. Rather than cutting production to support crude oil prices, the Saudis announced that production will remain the same. In private they were planning to actually increase production in order to meet rising domestic demand as well as to regain market share. The idea was to put a squeeze on the high-cost North American oil firms, halting production growth and ultimately getting prices back into a more profitable range. Other OPEC nations reluctantly agreed to play along. CNN (November, 2014): - One motivation is to squeeze higher-cost producers in North America, including the booming U.S. shale industry that has reshaped the global energy landscape. OPEC is betting lower oil prices will force U.S. producers to throw up the white flag and cut back on production because they won't be able to turn a profit. "The gauntlet has been thrown down for Western Hemisphere producers like Brazil, Canada and the United States," So far the results have been less than what the Saudis had hoped for. After a bounce from the lows, crude oil has been trading in a relatively tight range, with WTI futures fluctuating around $60/bbl. How is this price stability possible when the common wisdom was that oil prices below $70/bbl will force most US producers to close shop and North American production would collapse? After all we've seen a spectacular decline in active oil rig count. The answer has less to do with rigs that have been taken offline and more with the technology that remains. In fact after the inefficient rigs have been shut, US rig count is starting to stabilize.The remaining equipment is achieving record efficiency levels. The charts below show new-well oil production per rig. From multi-well padding (multiple wells in a single location) to superior drill bits, technology is helping to keep production levels high. Well completion costs and the speed of drilling have improved to levels many thought were not possible. With the inefficient rigs mothballed, the remaining capacity it now quite lean. It seems that $60/bbl can now sustain a good portion of current production capacity and even turn a profit.
OPEC oil output hits 3-year high in June on Iraq -Reuters survey - – OPEC oil supply in June has climbed to a three-year high due to record or near-record output from Iraq and Saudi Arabia, a Reuters survey found, underlining the focus of the group’s top exporters on market share. The boost from the Organization of the Petroleum Exporting Countries puts output further above its target of 30 million barrels per day (bpd) and comes despite outages in Libya and Nigeria that curbed supplies. OPEC supply has risen in June to 31.60 million bpd from a revised 31.30 million bpd in May, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants. The group has raised output by more than 1.3 million bpd since it decided in November 2014 to defend market share rather than prices. A final deal between world powers and Iran over Tehran’s nuclear work could add to supplies. “If sanctions were to be eased, additional oil from Iran would flood onto the already oversupplied oil market,”
Is Saudi Arabia Leaving The U.S. Behind For Russia? -- The news from the recent St. Petersburg Economic Forum, which took place from June 18 to 20, inspired a torrent of speculation on the future direction of energy prices. But the real buzz at the conference was the unexpected but much publicized visit of the Saudi Deputy Crown Prince, as an emissary of the King. The Prince, who is also his country’s Defense Minister, carried the royal message of a direct invitation to President Putin to visit the King, which was immediately accepted and reciprocated, with the Prince accepting on behalf of his father. It would be news enough that the unusually high level delegation from a long-time ally and protectorate of the U.S., like Saudi Arabia, was visiting a Russian sponsored economic conference, in a country sanctioned by the U.S. Some saw this well publicized meeting as the first sign of an emerging partnership between the two greatest global oil producers. If the warmth of the meeting was any evidence, it seems likely that Russia, a non-OPEC producer, might come a lot closer to the fold. That could mean that, at the very least, Russia would have a voice in the cartel’s policy decisions on production. And if so, it would be a voice on the side of stable but rising prices.
As Saudis Keep Pumping, Thirst for Domestic Oil Swells - WSJ: —Saudi Arabia is poised to break records for oil production this summer, analysts said, as domestic-energy needs soar during its scorching summer and the holy month of Ramadan and threaten its ability to ramp up exports. Saudi Arabia has said it produced a near-record 10.3 million barrels a day in May, a mark that industry observers said could increase to 11 million barrels this summer as air-conditioning use increases with temperatures reaching 110 degrees Fahrenheit. The country has the ability to produce 12.3 million barrels a day for 90 days, but it has never pumped this much. Saudi output averaged 9.22 million barrels a day from 2006 to 2014, according to the U.S. Energy Information Administration. Most of its oil is exported. For the past three years, Saudi domestic energy demand has been rising by about 8% due to an expanding population and new construction and large-scale projects. More than 25% of the country’s crude is consumed domestically by cars, planes, homes and businesses, a figure that rises in the summer and is almost double what the kingdom used in the early part of the last decade. The kingdom’s population has increased 17% since 2005, faster than most developed countries. At this pace, the kingdom would have to start importing oil by 2030, Citigroup Inc. C -0.56 % has predicted, a once unthinkable prospect for the linchpin of the world’s oil market. Khalid al-Falih, the current chairman and former chief executive of the kingdom’s state-owned oil company, Saudi Arabian Oil Co., known as Saudi Aramco, said in 2011 that, if left unchecked, domestic energy consumption would rise to 8.2 million barrels of oil a day by 2030. Other analysts are doubtful Saudi Arabia would need to import oil. But in a country where subsidized crude still powers most homes and businesses, and a gallon of gasoline costs less than a bottle of water, Saudi Arabia’s ravenous energy appetite is starting to strain the kingdom’s oil infrastructure and hamper its capability to throttle up exports. In order to tap into reserves, the kingdom will need to extract more heavy crude, which requires large investments to sustain.
POLL-Iran oil exports could jump by 60 pct in a year - Iran will increase its oil exports by up to 60 percent within a year if it can agree a nuclear deal with world powers bringing an end to sanctions, a Reuters survey of analysts said on Wednesday. A poll of 25 oil analysts from leading banks and brokerages forecast Iran would be able to raise crude oil output by between 250,000 and 500,000 barrels per day (bpd) by the end of this year and boost sales abroad by up to 750,000 bpd by mid-2016. That would push the Islamic Republic’s total crude oil output to around 3.6 million bpd, its highest for four years, and would inflate Iranian exports by around 60 percent at a time when world markets are already likely to be oversupplied. But the Reuters survey said it would take time for Tehran to raise output as nuclear inspectors verified Iran’s compliance with the terms of any deal and sanctions were removed slowly. “It will take a few months before Iran can start to export at full blast,” said Swiss energy markets analyst Olivier Jakob.
Oil Faces Steep Downside Risk From China’s Stock Market - Oil markets face a lot of downside risk – high crude oil inventories in both the U.S. and Europe, resilient production from U.S. shale, increasing output from OPEC, a nuclear deal with Iran, the turmoil in Greece – but one has not yet percolated through the markets just yet: the possibility of economic cracks in China, the largest oil importer in the world. China’s economic growth has been cooling in recent years, with 2014 marking its slowest GDP growth rate in a quarter century. But that doesn’t signal anything is amiss. It is entirely unsurprising that the world’s second largest economy cannot keep up such a blistering rate of expansion. However, deeper warning signs are starting to emerge. Part of that has to do with the extraordinary run up in China’s stock market over the past year, which is increasingly looking like a bubble starting to pop. The Shanghai Composite, an index of all stocks traded on the Shanghai Stock Exchange, had spiked by 40 percent so far this year and has doubled from mid-2014, and the Shenzhen Composite surged by a jaw dropping 90 percent since the beginning of 2015. But the retreat could be on. China’s Shanghai Composite has plummeted over the past two weeks, falling around 25 percent. Fears that the bubble is popping appear to be spreading. Since June 12, the two exchanges have seen $2 trillion in market capitalization go up in smoke. What happens next is unclear, but if China leans more towards a “hard” rather than “soft landing,” that would have negative repercussions for energy markets. Dangers from China’s volatile stock market come on top of some warning signs about Chinese energy demand. A new report from the Australian government raises concerns over China’s tepid demand for LNG, of which Australia is one of the world’s top producers. China’s LNG consumption was expected to grow by more than 50 percent between 2014 and 2016, but “downside risks appear to be growing,” the report finds.