Sunday, December 13, 2015

oil and gas prices tank again, oil exports on the table, global rig counts, and Fault Lines: Earthquake State

in the aftermath of last Friday's OPEC meeting, oil prices crashed to a 7 year low on Monday and continued falling from there, while natural gas prices fell below $2 for the first time since early 2012 on forecasts of continued warm weather...we'll start by including 18 months charts on both, so the numbers will have some perspective...

the first graph shows the past year and a half track of the January contract price per barrel of the US benchmark oil, West Texas Intermediate (WTI), when it's stored at or contracted to be delivered to the oil depot in Cushing we noted last week, oil prices fell from over $41 a barrel to $39.97 a barrel after the Friday OPEC meeting, which confirmed their oil production status quo...apparently after thinking about what OPEC was doing over the weekend, traders came back and sold, driving the price down an additional 6% to $37.65 at the close on Monday... oil prices then inched up by 20 cents on Tuesday but fell again to close at $37.16 a barrel on Wednesday, even after a bullish EIA release on Wednesday showed a surprisingly large drawdown of US oil stocks...oil prices then slid again on Thursday, after the International Energy Agency (IEA) said it expected oil prices to remain low until 2017 due to an ongoing oversupply of oil exacerbated by Iran’s return to the global oil the wake of that advice to consuming nations, and with a new report out that OPEC pumped more oil in November than in any month since late 2008, exceeding the ceiling they set last Friday, oil prices continued to fall Friday and were at $35.36 a barrel when this screenshot was taken at 7 PM, although they reportedly closed at $35.62...U.S. oil prices last settled this low in February 2009 and are very close to an 11 year low, while international oil prices as benchmarked by Brent crude fell to $37.93 a barrel, a price not seen since December 2008...

December 11 2015 crude oil

the next graph shows the 18 month track of the contract price for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in January at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which has become the benchmark for setting natural gas prices across the US... this contract for natural gas closed last week at $2.186 and tumbled to close at $2.067 on Monday as part of a broad commodity selloff led by oil...its price stayed within a half a cent of that for the next two days, until the release of the Weekly Natural Gas Storage Report by the EIA on Thursday... that report showed our working supply of natural gas in underground storage at 3,880 billion cubic feet, off just 76 billion cubic feet from the prior week, at a time of year when gas supplies are expected to be drawn down faster...those supplies were also still near the all time peak of 4 trillion cubic feet we saw a few weeks back, and 15.3% above the 3,366 billion cubic feet of gas stored in the same week last year...that drove the price for gas to $2.015 mmBTU at the close Thursday, and that hangover, combined with forecasts for record warm temperatures in the eastern US for the weekend and days following, finally drove the price to the $1.980 mmBTU close you see below...moreover, spot prices in New York, which are normally higher than the contract price, plummeted below $1/mmBtu for most of the day, and Marcellus shale pipeline gas prices traded as low as 48 cents/ stranded natural gas in Pennsylvania has become like zucchinis in summer; everyone has too much, and they just can't give it away...

December 11 2015 natural gas

the last time we looked at gas prices, we were looking at contract prices for December; and at that time that price was around $2.15 per of those December contracts expired the next week, three business days prior to the beginning of December...since that time, the quoted price for natural gas has been referencing this January contract, which had been trading between 10 and 15 cents higher than December gas, not unusual because natural gas demand is typically highest in while the media is correct in saying that this is the lowest price for natural gas since early 2012, the contract that was trading at that time was for delivery in April...there is no time in our recent fracking history when January gas ever traded this fact, we have to go back 22 years to find January natural gas as low as $2.01 per mmBTU...

Oil Exports and the Budget Bill

the oil exports rider to the Omnibus budget bill that we alerted you about a few days ago is still unresolved, but it looks from here like it will be part of the final package…here's how we got here: with no Federal budget passed for the Federal fiscal year 2015 beginning October 1st, Congress avoided a government shutdown on September 30th by passing a stop-gap bill that kept the government running until December addition to the regular budget bill that funds all the discretionary spending the government undertakes, there was also a package of so-called tax extenders, such as tax breaks for Puerto Rican rum, a tax exemption for NASCAR tracks, and more than 40 other similar provisions that Congress manages to renew every year but are not part of the code, that had not been pushed through yet, so far this the budget and the tax breaks were taken up together as an omnibus spending and tax package this week, and although it's still a few weeks early, such a package is like a Christmas tree for congresscritters, because it must pass, and the President must sign it, and thus they can hang just about anything they want to push through on it that would ordinarily not see the light of day as a stand alone bill...

early on, there were a lot of unreasonable and nonsense propositions added to this year's Omnibus bill, especially by the far right in Congress, such as defunding air and water pollution control, preventing Obama from easing ties with Cuba, deregulating the financial industry, repealing parts of Obamacare, and so forth...negotiations between the Administration and the leadership of both parties weeded much of that out by Friday, but they were still unable to pass a complete bill that everyone could agree to, so at the last minute on Friday they passed a "continuing resolution" to keep government agencies open until Wednesday of this week, by which time they hope to finish it and go home for the holidays...while the provisions dismantling Obamacare and defunding Planned Parenthood have been removed, the repeal of the 40 year old ban on oil exports is still included, and it appears Democrat votes for that provision can be garnered if the Republicans agree to indexing the Child Tax Credit and to extend the solar and wind tax credits for as long as five years...from here, it looks like a deal will be cut, and oil exports and the environmental degradation that go with them will be part of the final package...and we can't imagine that Obama would veto a budget bill and risk shutting down the government just to have the final say on that single matter...

The Latest Oil Data from the EIA

this week's oil stats from the US Energy Information Administration don't add up...they show a large jump in oil imports, an insignificant decrease in oil production, a small but significant decrease in oil used by refineries, and a large drawdown of our oil that was in storage...checking our oil exports for the week, they appear to be unchanged, but the weekly data given looks like estimates and are probably an inaccurate representation of what might have any rate, our field production of crude oil slipped to 9,164,000 barrels per day in the week ending December 4th, a decrease of 38,000 barrels per day from the production rate of 9,202,000 barrels per day during the week ending November 27th...while this week's oil output was below that of most weeks during November, it was above every week but one in September and October, and it was half a percent above the 9,118,000 barrels per day output in the same week last year, when most oil drillers were still running a large fleet of drilling rigs...

in addition, during the week ending the 4th, US imports of crude oil rose to an average of  8,021,000 barrels per day, an increase of 274,000 barrels per day from the previous week and only the third time our imports of oil have topped 8 million barrels per day this year....this week's oil imports were 4.6% higher than the 7,668,000 barrels per day we imported in same week a year ago, and brings our 4 week average of imports up to 7.5 million barrels per day, which the weekly Petroleum Status Report (62 pp pdf) tells us is unchanged from the same 4 week period last year...

meanwhile, the amount of crude used by our refineries fell by 151,000 barrels per day to an average of 16,652,000 barrels per day during the week ending December 4th; that was after a big jump of 423,000 barrels per day during the week ending November 27th, and it's still at a refinery throughput level a bit above last December 5th's 16,627,000 barrels per day, as the US refinery utilization rate fell to 93.1%, down from 94.5% last week...oddly, though, both production of gasoline and production of distillate fuels (diesel fuel and heat oil) rose, with gasoline output up by 117,000 barrels per day to 9,869,000 barrels per day, and output of distillates up by 60,000 barrels per day to 5,228,000 barrels per day...that boosted our week ending supplies of gasoline by 786,000 barrels, as supplies of gasoline rose from 216,867,000 barrels as of November 27th to 217,653,000 barrels as of December 4th, which kept gasoline inventories right near the top of the average range for this time of year...with so little consumption of heat oil, distillate fuel inventories jumped by almost 5 million barrels, rising from 144,415,000 barrels as of November 27th to 149,413,000 as of December 4th, which also left distillate fuel supplies in the upper half of their normal range for this time of year...

now, here's what doesn't make sense: even though our imports of crude were up by 274,000 barrels per day and our refinery usage of crude was down by 151,000 barrels per day, the EIA data for our inventory of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, fell by 3,569,000 barrels to 485,856,000 barrels as of December 4th, the first drop in 11 weeks, after our inventories of crude rose by more than 1.1 million last week, when imports were lower and refineries used more oil...while that's a discrepancy, it's not a concern, as oil inventories are usually drawn down near year end to avoid extra taxes anyhow, and the oil we had in storage this week was still 27.6% higher than the 380,789,000 barrels we had stored at the first weekend in December last year...and its still the most oil we ever had stored anytime in December in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored any time of year before this year...moreover, the EIA was out with a report this week that indicated that the import protection provided by our strategic and commercial stocks is currently at 450 days...

Latest US Rig Counts

there were 28 fewer rigs drilling for oil and gas in the US the week ending December 11th, the largest one week drop since we shut down 29 rigs in the week ending October 2nd....Baker Hughes reported that their count of active oil rigs fell by 21 to 524, and active gas rigs fell by 7 to 185, leaving a total of 709 rigs working at the end of the week, which was down from a total of 1893 rigs that were in use in the same week a year ago, with oil rigs down by 1022 from 1546, and gas rigs down by 161 from 346...two more Gulf of Mexico rigs were shut down this week, leaving the offshore count at 23, down from 60 a year earlier...

both horizontal and vertical rigs were shut down this week, while the number of directional rigs was unchanged from last week's 64, which was still down from the 196 directional rigs that were in use the 2nd week of December last year...15 horizontal rigs were stacked this week, leaving 554, well less than half of the 1367 horizontal rigs that were working a year ago...13 more vertical rigs were pulled down, leaving 91, down from 330 a year earlier...

of the major shale basins, the Permian of west Texas again took the largest hit, with 13 rigs stacked, still leaving 204, which was down from 548 last year at this time...4 rigs were pulled out of Ohio's Utica shale, leaving 16, down from 50 a year ago...2 rigs were pulled from both the Williston basin of North Dakota and from the DJ-Niobrara chalk of the Rockies front range, leaving the Williston with 58, down from last year's 188, and the Niobrara with 23, down from last year's 60...and Oklahoma's Arkoma Woodford, Arkansas's Fayetteville, and Louisiana's Haynesville each saw one rig idled; that left the Arkoma Woodford with 8, up from 5 last year, the Fayetteville with 3 rigs, down from last year's 6, and the Haynesville with 27, down from last year's 43...meanwhile, the Granite Wash of the Oklahoma-Texas panhandle region saw one rig added, but with 14 rigs working, they were still down from the year ago 57, while two rigs were added in Oklahoma's Cana Woodford, which now has 37, down from 43 a year ago...

the Baker Hughes state count tables show that Texas saw the greatest rig reduction, as their net count was down by 9 to 324, which was down from 872 a year earlier...both Ohio and New Mexico were down by 4 rigs; Ohio down to 15 from last year's 47, and New Mexico down to 36 from last year's 101...North Dakota was down 2 rigs to 58, which was down from 179 a year earlier, and Colorado was also down 2 to 25, and down from 68 a year earlier...Alaska, Arkansas, Utah, West Virginia and Wyoming all saw 1 rig pulled out, that left Alaska with 11, up from 10 a year earlier, Arkansas with 3, down from last year's 9, Utah with 3, down from last year's 23, West Virginia with 13, down from the year ago 33, and Wyoming with 21, down from the year ago the meantime, two states saw 1 rig added this week; Pennsylvania, with 30 rigs, is still down from the year ago 54, while Oklahoma with 85, is still lower than last year's 211 active rigs..

Global Rig Counts

this week also saw the monthly release of the global rig count for November, which unlike the weekly count, is an average of the number of rigs running in each country for the month, rather than the month end total...November saw an average of 2,047 rigs drilling for oil and natural gas around the globe, which was down from 2,086 rigs in October and down from the 3,670 rigs that were in use in November of last year...the lions share of the rigs that were pulled during the month came from the US, which saw 31 fewer rigs in November, and saw their total rig count average drop from 1925 last November to 760 with this addition, the Canadians saw a net reduction of 6 rigs from October, and with an average of 178 rigs deployed during the month, they were down from the 421 rigs in use in Canada in November of last year...

the Middle East region saw an increase in drilling activity for the 4th month in a row, as their active rig count rose by 16, from 403 in October to 419 in November, with 59 of those active drilling offshore in the Gulf region, up from 54 offshore in October and 45 offshore a year ago, as the total active rig count the Middle East is up from the 403 rigs being used in the region in November a year ago....Egypt saw the largest increase, up 5 rigs to 45, but that was still down from the 53 rigs that were drilling in Egypt last November...Oman saw an increase of 4 working rigs, from 68 in October to 72 in November, and they're up from the 58 rigs deployed in the country a year ago...Abu Dhabi in the United Arab Emirates also added 4 rigs in November; they're now running 52, up from 37 a year earlier…the Kuwaitis added 3, bringing their count back up to 43, the same number they had in use last November, while the Saudis added 2 rigs to bring their total active drilling rig count up to 127, from the 102 rigs that were drilling in the Kingdom last November...the only rig reductions in the region were in Pakistan, where they idled 2 and now have 21, down from last November's 22, and in Qatar, where their 5 active rigs were down from last month's 6 and down from the year ago 9...

meanwhile, the Latin American countries saw a reduction 10 rigs, after shedding 27 rigs in October, as the region averaged 284 rigs in November, including 52 offshore, down from a total of 375 rigs, including 83 offshore rigs, in November of 2014....Colombia saw the largest pullback in November, down 5 rigs to 15, which was down from 48 rigs that were in use in Colombia a year ago...Argentina idled 4 rigs; they're now running 101, down from 104 in November of last year...Bolivia was the only Latin American country to see an increase in drilling, as they added two rigs, now have 7 working, the same as they had a year ago at this time...

elsewhere, the Asia-Pacific region had 208 drilling rigs working in November, down from 213 in October and down from 255 last November...the most notable change in the region was in India, where they reduced their 110 rigs to 105, which was down from 117 rigs a year ago, while Australia idled 2 rigs, leaving 14,down from 20 a year earlier...the total count of rigs drilling in Africa was down by 3 to 90, which was down from the 142 rigs that were working on the continent in November a year earlier...Angola, down 3 to 9, was the only African nation with a rig variance greater than 1, as Angolans were down from 13 rigs a year ago...lastly, the rig count in Europe was unchanged from October at 108, and down from 149 a year ago, as the United Kingdom idled two offshore rigs, leaving them with 12 offshore, down from last year's 17, while Poland added 4 rigs to bring their count up to 12, up from 7 a year earlier, and were the only truly European country to see a year over year drilling increase, although Sakhalin island, a Russian island north of Japan, is included in the European count, and was up from 7 rigs last year to 8 now....note that Iran, Russia, and China are not included in Baker Hughes international data, although China's offshore, with 28 rigs active in November, is...

Al Jazerra Fault Lines: Earthquake State

this past week i was afforded the opportunity to pre-screen "Earthquake State" a new episode from the Fault Lines documentary series on Al Jazeera America, which will be airing nationally for the first time you all know, Oklahoma has serious man-made earthquake problem, and it's been getting worse...from an average of less than two magnitude 3 earthquakes per year before 2009, the number of earthquakes of such magnitude rose to 109 in 2013, to 585 in 2014, and to over 2 per day this year...if we include the smaller magnitude quakes that are generally not noticed on the surface, their year to date earthquake count has now topped 5,000, making Oklahoma the most seismically active spot on the was that situation that prompted Al Jazeera investigative journalist Josh Rushing and the Fault Lines TV crew to head to Oklahoma this summer to cover the story...

we know these quakes are caused by injection wells; as such induced seismicity has been documented by several USGS studies and was included in the USGS seismic hazard model for 2014, a once every six year 14.4 MB PDF Tome from the USGS, which we covered in detail when it was released....the Al Jazeera take on this Oklahoma story was interesting, but for my purposes, i would have preferred to have seen some detail on how the injected water causes the quakes in that state, ie, what's the formation that's typically targeted with injection wells, as how it's laid out in that area in such a way that the water pressure from the injection wells causes slippage of the underlying bedrock...i've seen such diagrams on at least two Ohio manmade earthquakes, and i think understanding how these quakes take place, and how certain we can be that it is the injected water or fracking pressure that caused the quake, would be important to advancing public understanding of what is going on...for instance, in the case of the Poland, Ohio quake, you can line up the formation being fracked with the exact location and depth of the earthquake that happened at the same time, which removes all doubt that the water injected at high pressure has caused these quakes...the connection is not just a smoking gun; it's like watching in slow motion as a bullet travels through the air to it's target...

at any rate, what Fault Lines failed to cover about the technical nature of the induced seismicity, they made up for in covering the politics behind why so little has been done up till now to stop these takeaway from watching this Fault Lines episode is that Oklahoma politics is worse than i thought, and as you all know by now, i usually think it's worse than it is...nothing that would impede the oil industry had ever been discussed in the state legislature; and that we see Conoco and Halliburton are imprinted in large raised letters into the rotunda of the Oklahoma statehouse just about sums why...Oklahoma Governor Mary Fallin and other authorities claim they're waiting to see the science, but they cut the budget of the Oklahoma Geological Survey, the state agency responsible for that science, down from $50, 2013, the state seismologist, Austin Holland, who was attached to the University of Oklahoma, put his signature on a statement with USGS scientists linking earthquakes to the state's injection wells; he was immediately called into a meeting with the university president David Boren and the notorious billionaire oilman Harold Hamm, who warned him to watch how he says things...since Hamm was a major contributor to the University, and Boren was on the board of directors of his oil company, Holland was forced to back down and remained silent, at least until the time the Al Jazeera team arrived...he is prominently featured in this episode, and to his credit, understood his situation well enough that he resigned in August, with Al Jazeera TV crews still on the scene...thus as this episode wraps up, Holland is packing up his books to leave, the lights in his office and the broom closet where the ancient server is housed are turned off, and Oklahoma, the most seismically active state in the country, is left without a state seismologist as the earthquakes rumble on...

so FYI, here's a minute and a half preview of the show that will be on tonight at 9 EST...and here's a gadget where you can type in your zip code and find all the channels that it will air on in your'll get to see a major earthquake occur during the first 8 minutes of filming..


AEP Dumps ALEC to Help States Implement Clean Power Plan, Expedite Renewable Energy - It appears that nearly everybody wants to disassociate itself from the American Legislative Exchange Council (ALEC), a conservative lobbying group that fights climate change policies. Its latest departure? American Electric Power (AEP), one of the nation’s largest utilities. If that wasn’t bad enough for ALEC, AEP said in it’s announcement it will be shifting its focus to working with states to comply with the Obama Administration’s landmark climate rule, the Clean Power Plan. “AEP will not be renewing its ALEC membership in 2016,” AEP spokeswoman Melissa McHenry told The Guardian. “We reviewed our memberships and decided to reallocate resources to other areas of focus including working directly with the states and other stakeholder groups on issues like the Clean Power Plan.” The power company said that “there are a variety of reasons for the decision,” but at least part of the decision stems from the lobbying group’s controversial stance on climate change. “We have long been involved in the reduction of greenhouse gas emissions,” AEP said. While AEP was originally critical of the U.S. Environmental Protection Agency’s (EPA) proposed Clean Power Plan, a spokeswoman told The Guardian that “AEP supports the EPA’s amended plan and the expansion of renewables in general.”

OU, county looking at doing more injection well monitoring -- Employees at Ohio University conducting water-quality monitoring near injection wells under contract with the Athens County Commissioners have finished their first round of baseline testing and have asked the commissioners to approve testing at additional locations. Baseline water testing has been a primary goal for area residents concerned about the potential impact of the oil-and-gas horizontal hydraulic fracturing waste being dumped in the county via deep underground injection. Jennifer Bowman, environmental project manager at the OU Voinovich School for Public Affairs, said the commissioners provided enough funding to baseline test nine different locations with 10 samples, one being a duplicate. The county contracted with the school to do the testing for $15,637.  “But we really need to have additional sites. We can’t just have one sample around an injection well and make any sort of conclusion about the water quality.” The school is working with property owners in the area of the injection wells to conduct the sampling studies, and Bowman said residents expressed interest from all over the place but there was only funding for so many tests. OU is now approaching outside organizations for funds to do additional groundwater samples, she said.  “Who knows where or if and when any contamination will happen to drinking groundwater sources, right? So we wanted to do a baseline sampling of groundwater,” she said, pointing out that these aquifers go about 200 feet deep while fracking wastewater is injected down 2,000 feet. “That’s one of the big questions, if or when or how this water that’s being injected deep underground will contaminate drinking water at the surface.” This is why establishing a baseline now is important, she said.

Waterless fracking: is it worth the cost? - Traditional fracking techniques include injecting a mixture of water and sand, commonly referred to as “brine,” at a high pressure into the earth to fracture the rock, which then allows the oil or natural gas to flow to the surface.The large quantity of water used during the fracking process has raised public concerns, but a number of companies have recently experimented with alternative fracking techniques. Chesapeake Energy Corporation collaborated with EV Energy Partners, GasFrac Energy Services, and others to experiment fracking an Ohio oil well using liquid butane and mineral oil, instead of the traditional water technique.The waterless fracking technique injects a mixture of 75% liquid butane and 25% mineral oil into the pipes at a high pressure in hopes to release the oil and gas deep underground. The alternative fracking technique sparked optimism that the liquid butane method would substitute the millions of gallons of water used during the hydraulic fracturing process and an opportunity to maximize Ohio’s Utica shale play. However, the test has yet to be proven successful and has a high price tag of $22 million compared to the typical costs of well drilling at $7 million.Although the waterless technique was not an instant success, the industry is looking for advancements that not only reduce the amount of water used, but also optimizes and increases Ohio’s oil and gas production.

Ohio's Harrison County is No. 1 for Utica oil; Belmont County is tops for natural gas, new report says  - Harrison County is Ohio’s top oil-producing county from the Utica Shale in the third quarter of 2015, according to new production data from the Ohio Department of Natural Resources. Ohio really has four counties producing oil: Harrison, Carroll, Guernsey and Noble. Production falls off dramatically after those four counties. Locally, Stark County produced 1,785 42-gallon barrels of oil and Portage County produced 51 barrels of oil. For natural gas, Belmont County is No. 1 in Ohio. The state’s 10 top-producing natural gas wells are all in Belmont. Eight belong to Rice Energy and two to Ascent Resources Utica. The Belmont total for the quarter is 76.5 billion cubic feet of natural gas. Stark County produced 40 million cubic feet and Portage County produced 10 million cubic feet. Drilling in the Utica Shale is starting to decline because of low commodity prices, said Shawn Bennett of the Ohio Oil and Gas Association.  Oil production grew by only 2 percent from the previous quarter and natural gas grew by 10 percent, he said.

Broad Run Expansion Brings Record Marcellus And Utica Production -- In fall of 2014, in an elevator in downtown Denver, I overheard two energy professionals lamenting at the time what they thought were weak oil, gas, and NGL prices. One commented to the other, "keep calm and frac on," and I thought to myself: "This will not end well."  Here we are, more than a year later, and -- as this week has demonstrated, with every energy equity and commodity screen bleeding red -- the correction is not over. Too much fracking on has only contributed to the problem of oversupply.  Last Thursday, December 3, 2015 total Marcellus and Utica shale production hit a new all-time high at 18.7 Bcf/d using a Genscape interstate pipeline flow sample for PA, WV, and OH. As has been the case in 2015, Northeast production has mostly moved sideways as the market has been waiting for new pipeline capacity. New capacity is what ushered in this new record as the Momentum Midstream Stonewall gathering system went into service on December 1 and is now delivering about 700 MMcf/d into Columbia Gas (TCO) in Braxton County, WV. At the same time, the TCO Broad Run meter flipped from receiving 100 MMcf/d from Tennessee Gas Pipeline (TGP) to TCO and is now delivering about 300 MMcf/d to TGP as shown below. As the Broad Run meter shows, there has been a swing of about 400 MMcf/d in flows at that meter. While the Stonewall meter shows 700 MMcf/d delivered to TCO, several other production meters on TCO dropped when Stonewall started service. In addition, the ETC Northeast gathering system started service the same day as Stonewall and is moving incremental volume to TCO and Dominion in WV. If we look at TCO production receipts we see about a 400 MMcf/d increase week-over-week as a result of Stonewall and Broad Run coming into service - see below.

Drilling's down in Pa. as natural gas supplies mount — A “perfect storm” of plentiful oil and natural gas, falling prices and forecasts for a warmer-than-average winter is taking a toll on the oil and gas industry in Pennsylvania. Production from the Marcellus Shale continues to increase, but demand isn’t keeping pace, and falling prices are discouraging new investments and new jobs in what has been a booming industry in Pennsylvania. Natural gas production in the state has grown from more than 977 billion cubic feet in 2008 to more than 2.1 quadrillion cubic feet in 2014. “Production actually may be down a little bit this year. There are companies that are deciding that there’s no use giving their products away,” said Lou D’Amico, president and executive director of the Wexford-based Pennsylvania Independent Oil & Gas Association, representing more than 950 oil and gas producers, drillers, support companies and others. The price for 1,000 cubic feet of gas in September was $3.53, compared with more than $13 in 2008, according to the U.S. Energy Information Administration. “Some of us wonder why anybody is still drilling anything,” said D’Amico, of Saegertown. Producers are still drilling new wells, but not as many as during the early Marcellus boom. So far this year, 745 new oil and gas wells have been drilled into the Marcellus or Utica shales in Pennsylvania, compared with 1,372 in 2014 and 1,960 in 2011, the peak year for new wells, according to the Pennsylvania Department of Environmental Protection.

Pennsylvania sues gas driller over 'deceptive' leases - Pennsylvania's attorney general sued one of the nation's largest producers of natural gas on Wednesday over claims it cheated at least 4,000 landowners who signed drilling leases with the company. Oklahoma City-based Chesapeake Energy Corp. tricked landowners into signing industry-friendly leases in the early years of the Marcellus Shale drilling boom and then improperly deducted post-production expenses from their royalty checks, according to the lawsuit filed in Bradford County. Chesapeake, the nation's No. 2 gas producer, engaged in a "bait and switch scheme" with landowners, said the lawsuit, which seeks tens of millions of dollars in restitution as well as civil penalties. Chesapeake denied the claims."We strongly disagree with Attorney General (Kathleen) Kane's baseless allegations and will vigorously contest them in the appropriate forum," Chesapeake spokesman Gordon Pennoyer said. Landowners in the Marcellus Shale - a deep rock formation that holds the nation's largest known reservoir of natural gas - have been complaining for years about Chesapeake's business practices, and a settlement agreement between the driller and thousands of landowners is pending. Kane is seeking to modify the civil settlement so that her own lawsuit can go forward. A landowners group hailed the lawsuit.  "It looks like it's going to provide relief to a lot of lessors, people who have been cheated out of what was due them, and hopefully without attorneys' fees and without having to fight for it."

Attorney General Sues America’s Biggest Frackers For Scamming Land Owners - The frackers are getting sued again, this time by the Pennsylvania Attorney General, for scamming lease holders on their royalty payments. Why are we not surprised ? Have you sued a gashole lately ? What are you waiting for ? Pennsylvania’s attorney general sued one of the nation’s largest producers of natural gas on Wednesday over claims it cheated at least 4,000 landowners who signed drilling leases with the company. Oklahoma City-based Chesapeake Energy Corp. tricked landowners into signing industry-friendly leases in the early years of the Marcellus Shale drilling boom and then improperly deducted post-production expenses from their royalty checks, according to the lawsuit filed in Bradford County. Chesapeake, the nation’s No. 2 gas producer, engaged in a “bait and switch scheme” with landowners, said the lawsuit, which seeks tens of millions of dollars in restitution as well as civil penalties.

Attorney general files royalties lawsuit against Chesapeake Energy - The state attorney general has filed a lawsuit that seeks millions of dollars in restitution from Chesapeake Energy Corp. after the company allegedly underpaid gas royalties to landowners. Attorney General Kathleen Kane alleged the company “engaged in deceptive conduct in securing fracking leases” from landowners in the state “as part of a rush to lock up acreage in the Marcellus shale region.” As of the end of 2014, the company had 835 active wells in Pennsylvania, including 12 in Beaver County, according to the Department of Environmental Protection. The lawsuit is the result of an extensive investigation by the attorney general and seeks restitution for thousands of landowners in the state who signed leases with Chesapeake. Kane alleged that Chesapeake has been accused of similar tactics in other states, as well. “This lawsuit should serve as notice that we will not allow our residents to be exploited,” she said. According to Kane, Chesapeake representatives obtained gas leases and promised landowners a certain amount in royalties but then delivered a lower amount once the wells started producing gas. The company also allegedly took deductions for post-production expenses from royalty checks even though landowners’ contracts contained language prohibiting those deductions.

One Of The Country’s Largest Fracking Companies Cheated Landowners Out Of Millions, Lawsuit Alleges -  If allegations put forward this week are true, one of the nation’s largest fracking companies may have to pay millions in Pennsylvania for underpaying royalties to landowners.Chesapeake Energy Corporation and others connected with their operations in Pennsylvania allegedly defrauded thousands of landowners, including seniors, Pennsylvania’s Attorney General Kathleen G. Kane charged in a lawsuit filed Wednesday. The attorney general is seeking restitution for at least 4,000 victims, mostly from northeastern counties of Bradford, Sullivan, and Cayuga — rural communities located on top of the Marcellus Shale, the largest producing shale gas basin in the United States. The number of affected parties could grow as many more victims are likely to come forward, said Jeffrey Johnson, deputy press secretary for the state attorney general. “We expect that number to grow significantly,” because any Pennsylvania resident “who has signed [a lease] with Chesapeake … would be covered under this lawsuit,” he told ThinkProgress.Chesapeake Energy, based in Oklahoma, denies the allegations. “We strongly disagree with Attorney General Kane’s baseless allegations and will vigorously contest them in the appropriate forum,” said Gordon Pennoyer, Chesapeake Energy director of strategic communications, via email.The state attorney general accuses Pennsylvania’s largest producer of natural gas of negotiating leases promising royalties that then went underpaid, according to court documentation, which alleges that defendants took deductions from landowners’ royalties even though leases contained language prohibiting those deductions. Johnson said fines could be in the “tens of millions.”

Royalty Pain: Pennsylvania AG Sues Chesapeake, Contends Landowners Underpaid - The Pennsylvania attorney general’s office filed suit against Chesapeake Energy Corp. on Dec. 9, accusing the Oklahoma company of deceptive conduct in securing fracking leases and later underpaying Marcellus Shale royalties.The suit says Chesapeake engaged in a self-dealing scheme that resulted in reduced royalty payments to landowners. Under the terms of landowners’ leases, Chesapeake could only make deductions from royalties for costs paid to non-affiliated third parties. The suit contends that Chesapeake failed to disclose that its deductions, which lowered royalty payments, were actually for expenses paid to affiliated companies.  “This alleged conduct amounts to a ‘bait-and-switch,’” said Pennsylvania Attorney General Kathleen G. Kane. “Pennsylvania landowners were deceived in thousands of transactions by a company accused of similar conduct in several other states. This lawsuit should serve as notice that we will not allow our residents to be exploited.”  Chesapeake has repeatedly faced royalty-related suits, including cases filed in Texas, Pennsylvania, Ohio, Oklahoma and Arkansas. The company has also been served subpoenas by the U.S. Department of Justice, U.S. Postal Service and various states seeking information on its royalty practices. The suit seeks civil penalties of $1,000 for every violation of the state’s Unfair Trade Practices and Consumer Protection Law and $3,000 for violations involving anyone 60 years of age or older.  The suit does not specify an overall dollar amount it is seeking. The attorney general also wants Chesapeake frozen out of the Marcellus—including exploring, drilling, extracting, gathering, transportation or sale of gas—until the company makes good on any court-ordered awards and penalties. “The gas gathering agreements between Chesapeake Energy and its midstream unit were not negotiated at arm’s length,” the suit says. “Thus resulting in a scheme of artificially inflated and/or unreasonably excessive post-production costs to be passed on to Pennsylvania landowners.”

Billions of Barrels of Oil Vanish in a Puff of Accounting Smoke -- In an instant, Chesapeake Energy Corp. will erase the equivalent of 1.1 billion barrels of oil from its books. Across the American shale patch, companies are being forced to square their reported oil reserves with hard economic reality. After lobbying for rules that let them claim their vast underground potential at the start of the boom, they must now acknowledge what their investors already know: many prospective wells would lose money with oil hovering below $40 a barrel. Companies such as Chesapeake, founded by fracking pioneer Aubrey McClendon, pushed the Securities and Exchange Commission for an accounting change in 2009 that made it easier to claim reserves from wells that wouldn’t be drilled for years. Inventories almost doubled and investors poured money into the shale boom, enticed by near-bottomless prospects. But the rule has a catch. It requires that the undrilled wells be profitable at a price determined by an SEC formula, and they must be drilled within five years. Time is up, prices are down, and the rule is about to wipe out billions of barrels of shale drillers’ reserves. The reckoning is coming in the next few months, when the companies report 2015 figures. The rule change will cut Chesapeake’s inventory by 45 percent, regulatory filings show.

Pittsburg: Proposed WesPac oil-by-rail shipping terminal is dead — A controversial plan that had generated fierce local opposition to convert a moribund PG&E tank farm into a massive regional oil storage facility is dead after the company proposing the project backed out, company officials confirmed Wednesday. WesPac Midstream LLC’s proposed Pittsburg Terminal Project no longer makes economic sense, a company official said, because of the major drop in oil prices nationally and a glut in the oil market. It’s a situation uncertain to reverse in the future, said Art Diefenbach, WesPac’s Pittsburg project manager. “With the lower oil prices, we couldn’t finalize potential agreements with customers, and we couldn’t drag things out,” Diefenbach said. There was a huge demand when the project was first proposed in 2011, he said, with higher oil prices as recently as June 2014. But that demand has leveled out, and a quick turnaround is considered unlikely, Diefenbach said. Others agree. At the ongoing United Nations climate conference in Paris, Fatih Birol, executive director of the International Energy Agency, said, “When we look at 2016, I see very few reasons why we can see growth in the prices.” The end of the project was cheered by opponents; there were many, including the local Pittsburg Defense Council, other local individuals and regional environmentalists. Reasons for opposition were myriad, critics said, ranging from the threat of an explosion at the terminal to prospective ground pollution issues to the vapors from the storage tanks, as well as promoting fossil fuels over greener forms of energy.

Researchers work to fingerprint hydrofracking water quality:  Project SWIFT (Shale-Water Interaction Forensic Tools) was launched during spring 2012 by researchers in the Department of Earth Sciences in SU's College of Arts and Sciences in response to the public debate over hydraulic fracturing in New York State. Project SWIFT is the first project of its kind in the state. "Last fall, there seemed to be daily news stories focused on the public debate over fracking and water quality," says Gregory Hoke, assistant professor of earth sciences and co-founder of Project SWIFT. "Lacking in the debate was independent data about natural water quality. I thought we could help fill the void, by collecting water quality data and putting it on the web so that communities can make informed decisions based on an independent, objective data source." Hoke and Associate Professor Laura Lautz worked with their colleagues Professor Donald Siegel, and Assistant Professor Zunli Lu to launch the project, which is jointly funded by The College of Arts and Sciences and SU's Office of the Provost. The project aims to:

  • establish a baseline for groundwater quality across New York State's Southern Tier before hydrofracking begins;
  • determine chemicals typically found in fracking waste water by testing samples of flow-back water obtained from Pennsylvania;
  • develop geochemical fingerprinting tools and a model protocol that can be used to analyze and monitor water quality in areas with potential for shale gas drilling; and
  • create a publicly available water quality database that communities and stakeholders can use to make informed decisions about hydrofracking.

New York State AG pushes for oil train restriction — State Attorney General Eric Schneiderman wants a federal agency to close a loophole that he says allows highly flammable crude oil to be shipped by rail. He filed a petition for rulemaking this week with the federal Pipeline and Hazardous Materials Safety Administration that would require all crude oil transported by rail in the United States to achieve a vapor pressure — a measurement of the oil’s explosiveness and flammability — of less than 9 pounds per square inch. The crude-oil trains pass through the North Country on their way from North Dakota to the Port of Albany, where the oil is stored and shipped out. Ticonderoga was the site of a massive oil-train protest this past summer, when hundreds of demonstrators from Vermont environmental groups occupied the Amtrak Station in memory of victims of the horrific Lac-Mégantic, Quebec, catastrophe, where a derailed train burst into flames, destroyed the downtown and killed 47 people.

Top New Hampshire officials oppose pipeline -- Opposition to a proposed pipeline that would cross 17 New Hampshire towns is growing, at least among the state’s top elected officials. New Hampshire Public Radio reports that Republican Sen. Kelly Ayotte told constituents Tuesday that she opposes the project because her questions haven’t been adequately answered. The next day, Democratic Gov. Maggie Hassan told the station the project should not move forward if the company doesn’t address the concerns of affected communities. U.S. Rep. Annie Kuster, also a Democrat, went further, calling the pipeline a “bad deal for New Hampshire.” U.S. Rep. Frank Guinta, a Republican, followed with his opposition on Thursday. Democratic Sen. Jeanne Shaheen has called for more transparency in the process. The pipeline would carry natural gas into the region from Pennsylvania.

FERC accepts application for controversial natural gas pipeline - A federal commission will begin looking in earnest at a plan for a natural gas pipeline that’s drawn controversy in southern New Hampshire, after officials ruled that the application is complete. The Federal Energy Regulatory Commission issued the notice Monday formally accepting a Nov. 20 application for the Northeast Energy Direct project, which it must do for a project to continue in the review process. FERC is the sole federal commission responsible for approving or rejecting the project based on factors including need. The review process is expected to take about a year. Anyone wishing to become an intervenor in FERC’s review of the project has until Jan. 6 to file a request with FERC, according to the notice. Being an intervenor gives a person or group a legal status to be recognized as a party in the proceedings, the notice said. People may also participate without party status by filing comments on the project with FERC on its website, and referring to docket number CP16-21-000, according to the notice.

Does the US Government Actually Regulate Pipelines? - While global leaders meet in Paris at the COP21 climate talks in an effort to rein in global greenhouse gas emissions, the fossil fuel industry continues with business as usual. In far west Texas, that means a proposal for a controversial high-pressure natural gas transmission pipeline in a state that already boasts 431,997 miles of pipelines - enough to stretch to the moon and most of the way back to earth. The additional 143-mile-long, 42-inch-diameter Trans-Pecos pipeline will be built right through the heart of Texas' starkly beautiful and remote Chihuahuan Desert, as Truthout previously reported. The aim of the pipeline is purportedly to deliver natural gas from Texas to Mexico, where it is, in theory, in high demand. Plans are currently in the works for the pipeline, which would be larger in diameter than the infamous Keystone XL pipeline. Construction supplies are stockpiled, and in some areas, trenches for the pipeline have already been dug.  However, those in opposition to the pipeline say the Federal Energy Regulatory Commission (FERC) is not complying with the National Environmental Policy Act in relation to pipeline construction. Advocates also assert that FERC is not giving thorough consideration to the prospect of not allowing the pipeline to be constructed - particularly in the fragile ecosystem where it is currently proposed. FERC has a reputation of effectively rubber-stamping every pipeline that comes its way, and that reputation is well earned, given that it has, technically, never disallowed a pipeline. The FERC "process [is] designed to produce a 'yes' in the end," Excelerate Energy CEO Rob Bryngelson said. "You may have to tweak your project ... [but] it's designed to get a 'yes.'"

Pipeline operator won’t be penalized for explosion - Energy Transfer Company will not be fined for a pipeline explosion that occurred in DeWitt County in June. A 46-page report from the Railroad Commission of Texas attributes the cause of the pipeline rupture to a bending overload that placed the bottom of the 42-inch pipeline under pressure, causing a fracture along the weld. No violations were identified by the state oil and gas regulator, according to the report. The Texas Commission on Environmental Quality did not find any violations on the company’s part either, said commission spokeswoman Andrea Morrow. The explosion occurred about 8 p.m. June 14 and shot flames hundreds of feet into the air. The fire could be seen from 50 miles away. The heat from the flames melted electric lines, cutting off power to 130 homes. Sixteen people were evacuated from homes near the explosion, according to the report. No one was injured in the incident, which caused $500,000 in damage. Energy Transfer Company reported to the Texas Commission on Environmental Quality that as much as 165,732 pounds of volatile organic compounds may have burned before the company was able to isolate the line. The natural gas released resulted in an estimated $900,000 loss.

High seas would thwart Straits oil spill response -- Imagine an oil slick quickly growing through the Straits of Mackinac from a rupture of the 62-year-old, twin pipelines known as Line 5 traversing the bottom of where Lakes Michigan and Huron connect. Now imagine oil spill response boats from the pipeline operator and U.S. Coast Guard moored at the docks, taking no action for hours, or even a day or more as the slick mixes and spreads in the often turbulent waves. That scenario is a real possibility if a Line 5 spill were to occur in bad weather, according to the U.S. Coast Guard and the pipeline owner’s contracted spill responder. Under high wave conditions, crucial offshore spill containment response might have to be put off for hours, or even days because of unsafe boating conditions, the responders say. That would delay the deployment of spill-containing boom, or the use of skimmers to remove oil from the water’s surface. And that would allow the ecological calamity to spread. “When you get above 3-, 4-, 5-foot seas — definitely at 5 feet — you are beyond where you can safely deploy these things and have them do any good,” said Jerry Popiel, incident management adviser for the Coast Guard’s 9th District, which includes the Great Lakes. And those conditions aren’t infrequent in the Straits of Mackinac. Weather records from the National Oceanic and Atmospheric Administration’s Great Lakes Environmental Research Laboratory indicate that from 2010 through 2014, the straits area averaged wave heights of 3 to 4 feet about 24 days per year — as an entire day’s average. Waves exceeded 4 feet as an entire day’s average 8 days of the year.

Virginia groups want stronger safeguards on fracking — Environmental and public interest groups are urging officials to halt any new fracking efforts in Virginia until they complete a thorough review of the state’s standards. The groups say Virginia’s current safeguards on fracking are inadequate and outdated. They’re urging Gov. Terry McAuliffe to conduct a comprehensive review before approving any new permits for oil and gas drilling that would require fracking. Fracking, or hydraulic fracturing, is a high-pressure technique for extracting oil and gas from shale deposits. The groups pushing for the review are the Virginia Organizing Washington County Chapter, Clean Water Action, Virginia Sierra Club and Shenandoah Riverkeeper. Virginia’s Department of Mines Minerals and Energy has proposed changes to some aspects of the state’s fracking laws. But the groups say more are needed.

Days of Revolt: The Revolution Will Be Local - The Real News Network - I'm Chris Hedges. Welcome to Days of Revolt. Today we're going to talk about the grassroots movement across the United States to rise up against the fracking industry, what that resistance looks like, how it can become effective, and what the industry, and in particular the state, is doing to stop it. With me are two anti-fracking activists: one, Thomas Linzey, the executive director and senior legal counsel for Community Environmental Legal Defense Fund, or CELDF. CELDF has assisted close to 200 communities in ten states to ban certain corporate projects and nullify corporate constitutional, quote-unquote, rights at the municipal level. I'm also joined by Mark Clatterbuck. He's an associate professor of religion at Montclair State University. He lives in Lancaster County, Pennsylvania. He's a member of LAP, or Lancaster Against Pipelines. This works with a large coalition of community members to keep the proposed Atlantic Sunrise project from being installed through five Pennsylvania counties. Thank you very much for joining us.

Florida Supreme Court questions Florida Power & Light on fracking deal - The Florida Supreme Court on Tuesday drilled into the state’s largest utility on whether it should be allowed to charge customers for a fracking deal that may or may not save them money on electricity. The plan by Florida Power and Light to invest in a natural gas fracking project in Oklahoma was approved by the Public Service Commission last December. But consumer advocates say that approval wasn’t within the PSC’s authority. FPL insists that the fracking deal will result in cheaper electricity for its customers in the long term — as much as $49.2 million in savings in the next 50 years. Yet, so far, the drilling project has cost more than it would have to buy natural gas at a market rate. This year, the project lost $5 million, and it is projected to lose even more money next year. The justices’ questions Tuesday focused on two key points: whether FPL is allowed to charge its customers for a deal that may or may not result in savings, and whether the PSC was empowered to approve it.

Natural Gas Price Rises on Larger-Than-Expected Demand - The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 76 billion cubic feet for the week ending December 4. Analysts were expecting a storage withdrawal of around 60 billion cubic feet. The five-year average for the week is a withdrawal of around 79 billion cubic feet, and last year’s withdrawal for the week totaled 51 billion cubic feet. Natural gas futures for January delivery traded down less than 0.1% in advance of the EIA’s report, at around $2.05 per million BTUs, and traded at $2.08 after the data release, compared with Wednesday’s closing price of $2.06. Last Thursday natural gas closed at $2.18 per million BTUs, and over the past five trading days natural gas futures posted a high of $2.21 on Friday and a new 52-week low on Tuesday. The 52-week range for natural gas is $2.01 to $4.02. One year ago the price for a million BTUs was around $3.94. For the rest of this week and well into next, temperatures across the United States are expected to be well above normal. This weather pattern cuts the demand for heating and with it the demand for natural gas. Temperatures are likely to be 10 to 25 degrees warmer than usual for the next several days and demand for natural gas is expected to remain lower than normal. Stockpiles are about 15% above their levels of a year ago and about 6.5% above the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 3.88 trillion cubic feet, around 236 billion cubic feet above the five-year average of 3.644 trillion cubic feet and 514 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 3.366 trillion cubic feet for the same period a year ago.

Natural Gas Retreats to New Three-Year Low - WSJ: Natural gas prices flopped to their lowest point in more than three years as a historically warm December keeps limiting expectations for demand. Temperatures across the East and in most of the country’s biggest markets for natural-gas heating will be more than 15 degrees above normal through Monday, said MDA Weather Services in Maryland. Winter heating demand is usually the biggest driver for gas consumption and prices, but this December is likely to be one of the warmest five on record, MDA said. That prediction comes on top of a fall that has already been warm. Stockpiles kept building up in November, a time when colder weather usually causes rising demand to prompt draining storage. Instead, they are still at near-record highs, 15% above levels from a year ago and 6.5% above the five-year average despite a larger-than-expected draw last week, the U.S. Energy Information Administration said Thursday. “The idea that we have tons of gas in storage and more mild weather in the foreseeable future, (gas prices) can’t overcome…those two overwhelming facts,”

2 new natural gas facilities proposed for Louisiana - Two companies are looking at building large facilities along the Mississippi River south of New Orleans where they can export natural gas to the world market, another sign of the expanding footprint of the natural gas industry in Louisiana. Until now, the area around Lake Charles has been the center of a boom in the market to import and export natural gas with 10 projects in various stages of development there. Two large facilities — Cheniere Energy’s Sabine Pass LNG and Sempra Energy’s Cameron LNG — are under construction. Cheniere plans to make its first overseas shipment of LNG in January. Now companies are looking to Plaquemines Parish as an alternative hub. Venture Global LNG, a Washington, D.C.-based energy firm, wants to build a large facility near Pointe-a-la-Hache on the west bank of the Mississippi River while Louisiana LNG Energy LLC. is working to construct a smaller facility on the east bank of the river near Davant. Louisiana LNG is a Houston-based venture. The projects in Plaquemines are an outgrowth of the nation’s boom in natural gas production that has resulted from developments in hydraulic fracturing to reach gas stored deep inside the earth. Natural gas is then turned into liquid form and exported by ship. In related news, Initial unemployment claims drop in Louisiana. “We’ve got a lot of LNG available or coming available,”

Texas Frack Zone Is World’s Biggest Methane Leaker!  - Producing more climate cooking gases than all the coal burning plants in the US. Thanks frackers. Texas Fracking Zone Emits 90% More Methane Than EPA Estimated The Barnett Shale’s emissions have been vastly underestimated, sweeping study finds. And the study itself does not include leaks during the drilling, completion and early production stages – in other words, it underestimates the known sources of leaks. A sprawling, aggressive effort to measure the climate footprint of natural gas production has yielded striking results: methane emissions from the Barnett Shale in North Texas are at least 90 percent higher than government estimates. That conclusion comes from a peer-reviewed study published Monday in Proceedings of the National Academy of Sciences. The paper is the the most sweeping study to emerge from the Environmental Defense Fund’s $18-million project to quantify methane leaks from the natural gas industry. It was written by 20 co-authors from 13 institutions, including universities, government labs, EDF and private research firms. Overall, the two-year study found that methane emissions from the Barnett Shale are nearly twice as much as estimated by the Environmental Protection Agency’s Greenhouse Gas Inventory, and 5.5 times the number from a separate global database. Co-author Amy Townsend-Small, an environmental studies professor at the University of Cincinnati, said peer-reviewed papers often find larger emissions than EPA estimates. The EPA’s databases are often based on decades-old methodology, Townsend-Small said, adding that the federal agency knows it has “a long way to go.”

Oil below $40 forces Texas driller into bankruptcy -- A Fort Worth oil company became the 18th driller in Texas to succumb to the oil slump. Energy & Exploration Partners announced that it filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in order to deleverage its balance sheet and achieve a viable capital structure for building long-term value. The company said capital markets have closed to producers in the wake of $40 oil, leaving it unable to raise funds that could have prevented bankruptcy. “We have taken this difficult, but necessary step in order to provide adequate time to complete ongoing discussions and process with our lenders to restructure our balance sheet and create a strong financial foundation for the future,” Founder and CEO Hunt Pettit said. Crude oil prices fell as low as $36.64 per barrel on Tuesday, before rising to $37.88 in early trading on the New York Mercantile Exchange.

Fire out at Texas natural gas processing plant, cause sought — A fire that burned for days at a West Texas natural gas processing plant is out as investigators try to determine what sparked the blaze. An Anadarko (an-uh-DAR’-koh) Petroleum Corporation official had no timeline Tuesday on when the Ramsey unit near Orla will reopen. Two people were slightly hurt when fire broke out last Thursday at the plant a few miles south of the Texas-New Mexico line. Anadarko spokesman John Christiansen says the fire was extinguished Monday. He says the next step is to work with regulators to determine the cause and assess damage. Christiansen says the priority will be to safely repair the plant, to resume service to customers, and to complete previously planned expansion projects.

Hydrogen sulfide concerns in West Texas oil well blowout — Emergency officials have evacuated a 2-mile radius near a West Texas oil well that blew out and spewed a mixture of dangerous hydrogen sulfide. Gaines County Judge Tom Keyes says nobody was hurt in Tuesday morning’s accident at a rural site about 4 miles east-northeast of Seminole. Keyes says about two dozen homes were evacuated, as a precaution. Keyes says the well is operated by Tabula Rasa Energy of Houston. Company officials didn’t immediately return a message. Authorities haven’t said what caused the blowout. Keyes says emergency personnel are monitoring winds for any shifts that could mean expanding the isolation area. Hydrogen sulfide is a flammable, poisonous gas with an odor similar to rotten eggs. Seminole is a town of about 6,400, located 70 miles northwest of Midland.

Another fracking fracas, this one in New Mexico - — A small tract of land is creating a big fuss outside the fastest-growing city in New Mexico. An energy company based in Oklahoma is looking at a two-acre plot in a scarcely populated area as a potential place to drill, but opponents say the site is too close to Rio Rancho, a sprawling bedroom community that hugs the state’s largest city, Albuquerque. “If there is an accident, there is no money for compensation or remediation,” Rio Rancho homeowner Steve Frankuchen told during a break at a meeting of the Sandoval County Planning and Zoning Commission. “If the company goes bankrupt, Rio Rancho goes down the tubes.”

Oklahoma Earthquakes: Bombshell Doc Reveals Big Oil’s Tight Grip on Politicians and Scientists  --   Al Jazeera America correspondent Josh Rushing and the Fault Lines team recently traveled to the state and spoke to several Oklahoma residents, seismologists, oil and gas industry officials, and lawmakers, including Oklahoma Governor Mary Fallin, who has been slow to acknowledge the connection between the earthquakes and the oil and gas industry. The bombshell documentary, which EcoWatch has previewed, explores the mounting scientific evidence that links earthquakes to injection wells, as well as the maddening hurdles and bureaucracy that state scientists and regulators face in their efforts to halt the potential crisis and national security threat. As EcoWatch has extensively reported, the Sooner State is experiencing a frightening spike in seismic activity. Before 2009, Oklahoma had two earthquakes of magnitude 3.0 or greater each year, but now there are two a day. Oklahoma now has more earthquakes than anywhere else in the world, a spokesperson from the Oklahoma Corporation Commission (OCC), the state’s oil and gas regulatory body, said earlier this month.  Scientists have identified that the injection of large volumes of toxic wastewater left over from oil drilling and fracking operations into underground wells has triggered the state’s now daily earthquakes. While state regulatory agencies have ordered changes and the shut down of several wells to slow the earthquake rate, as you can see in the image below, thousands of these wells are still in operation, literally dotting the map.

Energy Companies Want Judge to Dismiss Historic Lawsuit Over Oklahoma Earthquakes  -- Energy companies are trying to legally distance themselves from the fracking-linked earthquakes currently rattling Oklahoma. According to a new report from the Associated Press, Lincoln County District Judge Cynthia Ferrell Ashwood is hearing two energy companies’ motion to dismiss a major liability lawsuit. The lawsuit in question was brought by Sandra Ladra, an Oklahoma woman who claims she was injured after a 5.6-magnitude quake—the largest ever recorded in the state—hit the city of Prague in 2011. She alleges that the earthquake was caused by the injection of wastewater from oil and gas production into underground wells. Ladra is specifically suing Spess Oil Co., in Cleveland, Oklahoma, Tulsa-based New Dominion LLC as well as 25 unnamed parties. According to the Associated Press, Ladra claims the large tremor crumbled her two-story fireplace and caused rocks to fall on her legs and left a gash her knee. Ladra is asking for $75,000 in actual damages plus punitive damages.  Steve Spess, a manager of Spess Oil, said in an August 2014 statement that his company injects water at low pressure and they don’t believe that is causing the earthquakes.  This lawsuit is particularly significant because it could “for the first time, legally acknowledge that the oil and gas industry may have something to do with the swarm of earthquakes the state,” as Newsweek observed. Oklahoma has been a hotbed of frequent and ongoing earthquakes ever since the state’s fracking boom kicked off in 2009. Before 2009, Oklahoma had two earthquakes of magnitude 3.0 or greater each year, but now there are two a day. In the past year alone, there have been more than 2,100 earthquakes of magnitude 1.5 or greater. The scientific consensus is that the seismic activity is caused by the massive quantities of wastewater that is injected underground and triggering faults. This joint study by the University of Oklahoma, Columbia University and the U.S. Geological Survey even says that the devastating 2011 quake was linked to fluid injection.

Oklahoma’s Oil And Gas Industry Says Paying For Earthquake Damage Would Be Really Terrible - Less than a week after state regulators shut down seven waste disposal wells in Oklahoma, two companies being sued for earthquake damages are asking the case be dismissed.  Spess Oil Company and New Dominion LLC say that plaintiff Sandra Ladra waited too long to file her suit, which asks for $75,000 in damages stemming from being hit by falling rock when an earthquake struck her home and damaged her chimney. The earthquake was allegedly triggered by the fracking companies, who were conducting wastewater injection nearby.  “When you look at the actual science and you look at the data, you can’t help but go, ‘It’s the injection wells, stupid.’ It’s just that obvious,” Scott E. Poynter, Ladra’s lead attorney, told the Associated Press. “Oklahoma shouldn’t have more earthquakes than anywhere on the planet, but it does.”  Earthquakes have proliferated across Oklahoma in recent years as oil and gas production from fracking, or hydraulic fracturing, has exploded. During fracking, chemical-laced water is injected at high pressure into the ground, allowing pockets of trapped oil and gas to loosen and be captured. The process creates a huge amount of wastewater, which cannot be reused due to the chemical content and contamination from elements in the ground, often including oil itself. Fracking companies typically inject the wastewater into lined wells.  The U.S. Geological Survey has linked disposal wells to Oklahoma’s earthquakes, which have gone from one or two a year to an expected 941 this year. By August, the state had already seen more earthquakes than 2014, the previous record year.

Bakken pipeline hearing nears completion; decision could be weeks away -- A forthcoming decision by Iowa regulators is just one of the approvals needed across four states for a proposed 30-inch diameter crude oil pipeline, but may prove the biggest hurdle. The Iowa Utilities Board is expected to conclude its hearing next week after 11 days of testimony, 80 witnesses and a public comment day that drew hundreds of people. The anticipated decision may not come until February, though. “In my opinion, the Iowa utility commission and Iowa courts are going to be the biggest hurdle to getting the pipeline built,” said Chris Healy, a lawyer with Meierhenry Sargent LLP of Sioux Falls, S.D., who represents landowners on eminent domain settlements in the case. The governor-appointed, three-person Iowa Utilities Board will not only rule on Texas-based Dakota Access LLC’s hazardous liquid permit to cross 346 miles of Iowa as part of the 1,134-mile Bakken pipeline, but also to what extent, if at all, to empower the developer to condemn private land in the path. Dakota Access, which is seeking permission to build the pipeline from North Dakota through South Dakota and Iowa to a terminal in Illinois, did not return several messages seeking comment. Iowa’s process for eminent domain, which will play a key role in how quickly the $3.8 billion pipeline if approved gets built, is different from other states. Iowa could grant or deny the permit, and has a range of options for eminent domain — from all or none to some point in between.

Bakken pipeline developer urges faster decision - The developer proposing a Bakken crude oil pipeline from North Dakota to Illinois wants Iowa regulators to decide on its hazardous liquid pipeline permit request by early January. That would be consistent with the Iowa Utilities Board’s estimate earlier this year of a decision by December or early January, but faster than the board’s most recent estimate of February. “We believe the IUB should adhere to the original schedule of rendering a decision by late December or early January to ensure the timely construction of this important energy infrastructure project so we can safely transport domestically produced crude oil to refining markets as quickly as possible,” Dakota Access LLC spokeswoman Vicki Granado said in an email Tuesday. The board’s hearing on the permit, which began Nov. 12, concluded after about 10 p.m., Monday. The board must decide whether to grant the permit and, if so, whether to grant Dakota Access eminent domain power. Dakota Access already has hundreds of miles of pipes stockpiled in a farm field near Newton, and has agreements with contractors to build the line. The Texas-based oil company had hoped to begin construction in early 2016 and have the 1,134 mile pipeline operational by the end of the year. The new timeline puts that schedule at risk.

Judge throws out lawsuit challenging Nebraska pipeline law  — A judge has thrown out a lawsuit challenging a Nebraska law that allowed the Nebraska governor to approve the proposed Keystone XL oil pipeline route through the state. Holt County District Judge Mark Kozisek tossed the lawsuit on Friday, agreeing with the pipeline company’s argument that the issue was rendered moot by TransCanada’s decision to abandon plans to move forward on the project, the Omaha World-Herald reported.  That means the law will remain on Nebraska’s books, for now. The landowners who filed the suit had urged the judge to allow them to proceed with the lawsuit, arguing that companies could use the 2012 law in the future to avoid the Nebraska Public Service Commission — a small, elected group that regulates most pipeline projects — opting instead for a governor’s review and blessing.

Colorado fracking bans land at the state Supreme Court -  The bitter battle over whether local governments in Colorado — specifically Fort Collins and Longmont — should be able to ban oil and gas drilling rigs, and fracking, from their borders will go before the state’s highest court on Wednesday. In two hours of oral arguments at the Colorado Supreme Court, attorneys representing the state, energy companies, environmental groups and the governments of Fort Collins and Longmont will argue an issue that exploded in 2012 and 2013, as voters and officials grappled with drilling rigs setting up new operations in what once were farm fields, but over the years have become home to towns, schools and strip malls.  And people from across the United States will be watching the outcome of the cases, according to energy industry executives. The central issue is whether state officials have overarching authority to regulate how energy companies drill for oil and natural gas in Colorado, or whether local governments should do it instead. State officials and members of the energy industry say the oversight authority rests with the state, which has the expertise and experience to do so. “It’s the state’s position that there are technical aspects of oil and gas exploration and production over which the state has primacy as matters of statewide concern and that under the law in Colorado, as it exists today, a local jurisdiction may not prohibit those activities,” said Matt Lepore, the director of the Colorado Oil and Gas Conservation Commission, which has sued Longmont’s ban on fracking and storing fluids related to fracking within its borders.

Colorado Supreme Court hears arguments in intense fracking case (Slideshow) - Attorneys, state officials and representatives from oil and gas industry as well as people opposed to drilling rigs in their neighborhoods packed the Colorado Supreme Court chambers Wednesday. More people stood outside the courtroom, unable to get a seat to listen to oral arguments on whether local communities — specifically Longmont and Fort Collins — can ban hydraulic fracturing within their boundaries.   State officials and energy industry executives have said the state has the final say over industry operations — including the use of fracking, which has been credited with the production of record-breaking amounts of oil and natural gas in Colorado and nationwide in record years. In 2012, Longmont voters approved a ban on the use of hydraulic fracturing, or fracking, within the city’s borders. In 2013, Fort Collins voters approved a five-year moratorium on fracking inside the city. Both cities were sued in separate legal cases, each case got one hour of oral argument on Wednesday; a decision could come anywhere between three months to nine months from now. The legal cases have drawn attention nationwide because Colorado is at the forefront of the issue of conflicts over oil and gas operations close to towns and neighborhoods. Outside, before the hearings started, a group of about 30 residents held protest signs.  “I’d prefer to see the fracking wars of the last five years to end — and have local officials and citizens have the ability to control the type of development that’s occurring in their jurisdictions,” Sura said.  But inside the hearings, attorneys for the Colorado Oil and Gas Conservation Commission (COGCC), which regulates industry operations and sued Longmont, as well as attorneys for the oil and gas industry, argued repeatedly that the two cities’ bans violated the state’s authority and impeded the efficient recovery of Colorado’s oil and gas reserves.

Legislative committee approves new oilfield waste rules --  New oilfield waste rules will take effect in North Dakota with the new year. The Legislature’s Administrative Rules Committee has approved rules that will allow certain landfills to accept waste with higher levels of radioactivity. Environmental Health Chief Dave Glatt has said the elevated standard is still safe for people and the environment, and that the rules will enable regulators to better track the waste. The state Health Council endorsed the rules in August. North Dakota generates up to 75 tons of radioactive waste daily, largely from so-called oil filter socks that strain liquids during the oil production process. Environmental groups say they’re considering a court challenge.

We Are Sacrifice Zones: Native Leader Says Toxic North Dakota Fracking Fuels Violence Against Women  (video interview and transcript) "What we're dealing with is a death by a thousand cuts," says North Dakota indigenous leader Kandi Mossett of the impact of the booming fracking and oil-drilling industry in her home state. "We've had violence against women increase by 168 percent, particularly in the area of rape," Mossett says. "We have 14-, 15- and 16-year-old girls that are willingly going into man camps [for oil workers] and selling themselves." She says the full impact of toxins from oil drilling won't be felt for another 20 years. "I'm so worried that at this COP21 my two-and-a-half-year-old daughter won't have a say, but she will be experiencing the worst impacts. It just doesn't make any sense to me that this is the 21st COPand we are considered sacrifice zones in my community."

Pipeline reclamation program fields 2 dozen complaints — A North Dakota program aimed at helping resolve disputes over pipeline reclamation has fielded about two dozen requests for help so far. The Legislature earlier this year created the pipeline restoration and reclamation oversight pilot program. It’s meant to help resolve disputes between pipeline companies and landowners or tenants. Twenty-three requests had been filed as of the end of October, The Bismarck Tribune reported. Williams County had the most with five, followed by Mountrail and Burke counties with four each, McKenzie County with three and Divide County with two. Bowman, Dunn, McLean, Mercer and Oliver counties had one each. “We’re getting really good feedback. The industry, they see it as a good approach to the problem.” There are more than 20,000 miles of pipeline already crossing North Dakota and thousands more miles to be added in coming years, according to the Agriculture Department.  The North Dakota Farm Bureau earlier this year opposed the pilot program, calling it duplicative. Officials with the group declined comment to the Tribune.

North Dakota Boosted Oil Output Ahead Of OPEC Meeting  |  Rigzone: (Reuters) - North Dakota's oil producers boosted output in October to sell as much as possible ahead of last week's OPEC meeting, bucking a trend for contraction amidst plunging crude prices. The 13-member bloc of global oil producers had long been expected to keep or raise its unified output cap at its semiannual meeting. Because output wasn't trimmed and members were effectively allowed to pump at will, oil prices have sunk further since the meeting, adding to losses of more than 50 percent in the past year. "A lot of (North Dakota) operators were pretty pessimistic about the OPEC meeting, and they looked at October and November to sell oil at what may have been the high price for the next six months," Lynn Helms, head of the state's Department of Mineral Resources, said on a Wednesday conference call with reporters. The move now appears prescient, as OPEC's meeting ended last week without a reference to its output ceiling. North Dakota producers also were able to raise output, in part, because of new natural gas collection equipment coming online from Oneok Inc and others. About 86 percent of produced natural gas was collected and processed during October, 5 percentage points higher than the previous month and far above state-required minimums. Roughly 260 wells had failed to meet the minimum during September and had been temporarily shuttered by state officials, but they were able to come online by October, fueling part of the production rise. Still, the state's oil producers only fracked 43 wells in October, 65 percent fewer than the previous month, an ominous harbinger as at least 110 must be completed each month to maintain long-term production.

Producing Wells Completed -- December 9, 2015 - One of the more interesting data points for tracking the Bakken may be "producing wells completed." These are wells that had/have been drilled to total depth (including the horizontal segment) but for some reason were not completed at the time they reached total depth. Early in the boom, wells were not completed soon after reaching total depth mostly due to logistical reasons: a shortage of frack spreads or a shortage of sand, for example. Then, during the peak of the boom, when there waere adequate resources, the fracklog began to grow because of operational reasons. Operators delay fracking on multi-well pads until all wells are drilled; in addition, operations on neighboring wells may affect fracking operations on another pad. There is a slowdown in fracking during the winter but that generally does not occur until January or February. Starting in October, 2014, operators began drilling to depth but then shutting in the wells due to the low price of oil. In mid-2015, the NDIC gave the operators additional time to complete their wells, no longer holding them to the "one-year rule." Sometime over the past year of tracking "producing wells completed," it started to become apparent that this might be a useful data point to track to better understand the Bakken. Right now, I have just some very basic data, but there are some derivative data points yet to be tracked. For example, the wells that are being drilled now and not completed are in the very best spots in the Bakken. In addition, they are being drilled on existing pads and may positively impact production from existing wells. Here are some basic data points from November, 2015:

North Dakota sees further declines in oil production ahead as prices hit seven-year low - North Dakota’s oil price has dropped to a seven-year low, and operators are drilling fewer new wells, portending future declines in production, the state’s Mineral Resources Department reported Wednesday. “We are looking at a lot of belt tightening and we are looking at it to continue through the entire first half of 2016,” Lynn Helms, director of the regulatory agency said on his monthly Director’s Cut conference call with reporters. In October, however, oil production in North Dakota rose 0.6 percent to nearly 1.17 million barrels per day compared with September, but that’s down from the peak of 1.23 million barrels last December. Helms said that upward blip partly resulted from North Dakota producers selling oil in advance of last Friday’s meeting of Organization of the Petroleum Exporting Countries (OPEC). The decision at that meeting to maintain production levels further sank oil prices. “They were trying to move and sell as much as they could ahead of the OPEC meeting,” said Helms, who expects prices won’t recover for months.

The Red Queen Has Not Fallen Off The Treadmill Yet -- - It's possible a comment was made in the Director's Cut but I did not see it. I may have missed it.  The Director's Cut has had a monthly comment suggesting how many well completions were needed to maintain a certain amount of oil production. The last time I saw that comment was in the July, 2015, Director's Cut (May data). This was the comment: To maintain production near 1.2 million barrels per day, 110 - 120 completions must be made per month.  Did anyone note how many completions there were in October, 2015, as reported in the most recent Director's Cut? Yup -- 43 completions. I find that incredible. For the longest time it was reported that upwards of 120 well completions were needed each month to maintain 1.2 million bopd production in North Dakota, and in October, only 43 completions were reported. And that was down from 123 completions the month before. 

Pipeline companies buy land for multi-billion pipeline projects to carry Bakken crude  A multitude of rigs may be stacked in the weeds right now, but pipeline companies are still laying big bets on a big oil future in the Bakken. Two of those multi-billion bets were recently laid in southwestern Williams County. Advertisement Lunnen Real Estate Services has recently closed two multimillion dollar real estate deals, one for TransCanada’s Upland Pipeline project and the other for Energy Transfer Partner’s Dakota Access pipeline. “There may be a slowdown in oil drilling, but these companies are preparing for the future,” said Jeff Lunnen, with the company. “These are significant investments in infrastructure for infrastructure to get future oil out of this area. These are the backbones of getting this stuff to market.” The two deals were separate, although located in the same vicinity in the 1804 Industrial Park on the west side of Williston. Lunnen said he had been in the process of subdividing the property for an industrial park when he was approached by the companies.

AP: Railroads beat back new safety rules after derailments - A pair of train derailments in 2012 that killed two people in Maryland and triggered a fiery explosion in Ohio exposed a little-known and unsettling truth about railroads in the U.S. and Canada: No rules govern when rail becomes too worn down to be used for hauling hazardous chemicals, thousands of tons of freight or myriad other products on almost 170,000 miles of track. U.S. transportation officials moved to establish universal standards for when such steel gets replaced, but resistance from major freight railroads killed that bid, according to Associated Press interviews with U.S. and Canadian transportation officials, industry representatives and safety investigators. Now, following yet another major accident linked to worn-out rails — 27 tanker cars carrying crude oil that derailed and exploded in West Virginia earlier this year — regulators are reviving the prospect of new rules for worn rails and vowing they won’t allow the industry to sideline their efforts. “We try to look at absolutely every place where we can affect and improve safety,” said Federal Railroad Administrator Sarah Feinberg. “Track generally is the place that we’re focusing at the moment, and it’s clearly overdue. Rail head wear is one place in particular that we feel like needs to be addressed as soon as possible.”

BNSF fined for tardy reporting of spills along railway - Washington state regulators have fined BNSF Railway $71,700 for tardy reporting of crude oil leaks and other hazardous material spills along the state’s railway. The Utilities and Transportation Commission on Monday approved a settlement agreement between the railroad and its staff. But the UTC removed a provision that would have suspended $40,000 of the penalty if the railroad complied with reporting requirements for a year. Commissioners said in their order that imposing the entire penalty would give BNSF more incentive to follow reporting requirements. The company initially faced up to $700,000 in potential fines. In March, regulators issued a complaint alleging that BNSF failed to report 14 releases to the state within the required time period. The incidents occurred at BNSF facilities throughout the state, including Seattle, Vancouver, Blaine and Everett.

Washington pens list of recommendations for oil terminal projects - A letter from the state Utilities and Transportation Commission to the Department of Ecology outlines a plethora of railroad safety concerns the commission has over the crude-by-rail storage facilities proposed for the Port of Grays Harbor. The letter, dated Nov. 30, came on the final day of the Department of Ecology’s public comment period following the release of the draft environmental impact statements for the projects, which was released on Aug. 31. The statements outlined potential environmental and economic impacts of two crude-oil-storage facilities proposed for Westway and Imperium’s Port properties. Imperium’s facility was purchased this summer by Iowa-based Renewable Energy Group. The commission’s letter breaks down its safety concerns by category, including bridges, public and private railroad crossings, signage along the track, issues with sections of the track itself and switching operations. The letter also outlines recommendations for the Department of Ecology to address the various concerns. The commission’s general functions include regulating businesses in the electric, telecommunications, natural gas and water industries, and overseeing costs of those services to ensure fairness to both the companies and the consumers, according to the commission’s mission statement. The commission’s first section of concern centers on the load capacity of the 52 bridges that sit along the Puget Sound &Pacific rail line between Centralia and the Port. The draft statements from Ecology, the commission’s letter says, do not address this concern thoroughly enough.

Antonovich calls for Porter Ranch gas leak state of emergency  - Los Angeles County Supervisor Michael Antonovich said earlier this week that he will ask the Board of Supervisors to declare a “state of emergency” regarding a leaking well at Southern California Gas Co.’s storage facility above Porter Ranch. The board will take up the request at next week’s meeting. “This action will ask for state and federal assistance to provide for our residents in the Porter Ranch area with additional air monitoring and help with efforts to cap the well,” Antonovich said in a statement. “This is a serious problem that has severely impacted our communities for the last 48 days.” More than 3,600 families have been or are being relocated. Antonovich also sent a letter to Gov. Jerry Brown saying that the gas company did not report the leak in a timely fashion and had not prepared a response plan for such an event. He is also asking the state Public Utilities Commission to conduct a review of the facility regarding its “future viability.” During a Wednesday afternoon briefing at a gas company facility in Chatsworth on progress to fix the leak, Gillian Wright, vice president of customer services for the utility, said she could not comment on Antonovich’s plan because she did not know about it.

Erin Brockovich calls on her neighbors to unite over Porter Ranch gas leak - More than 2,000 residents affected by a natural gas leak above Porter Ranch attended a community meeting Wednesday night hosted by environmental activist Erin Brockovich. Brockovich brought an attorney from law firm Weitz & Luxenberg — where she works, a law firm spokeswoman said — a meteorologist and a water pollution expert who gave about an hour presentation and answered questions from residents. Residents asked about health concerns and whether air filtration systems installed on their homes by the gas company would be effective. More than 3,600 residents have left their homes or are in the process of relocation due to the odors emitted by a leaking gas well at the Aliso Canyon storage facility in the Santa Susana Mountains above Porter Ranch. Mercaptan, an additive to natural gas that smells like rotten eggs, has caused symptoms of nosebleeds, headaches, nausea, respiratory problems and stomach discomfort among residents. Southern California Gas Co. discovered the leaking well on Oct. 23. Officials have said it could take four months to cap the leak. Because the leak will likely drag on for months, county health officials have begun to monitor chemicals, some that are known carcinogens, in natural gas because those chemicals can cause long-term health effects. So far, the levels monitored have not reached a level of concern.

Alaska predicts sharp oil tax decline amid low prices - US News: (AP) — The state of Alaska is projecting revenue from oil and gas production taxes at $172 million this year, a dramatic drop from two years ago when production taxes totaled $2.6 billion. Continued low oil prices contributed to the decline. "Nobody's making any money on oil," deputy Revenue Commissioner Jerry Burnett said. In a report released Tuesday, the state Revenue department said production taxes for fiscal year 2015, which ended June 30, totaled nearly $390 million. Alaska relies heavily on oil revenues to fund state government and is currently grappling with an estimated $3.5 billion budget deficit amid chronically low prices. In recent years, petroleum revenue provided about 90 percent of the money available for spending. Last year, that dropped to 75 percent, and it's not projected to provide more than 72 percent during the rest of the decade, the report said. Gov. Bill Walker is expected to release his budget proposal for fiscal year 2017 on Wednesday.

Judge rejects bid to block Alberta Clipper pipeline upgrade — A federal judge rejected the key parts of a lawsuit brought by tribal and environmental groups that sought to block a capacity expansion on the Alberta Clipper crude oil pipeline, saying Wednesday that the courts don’t have the authority to intervene at this stage. U.S. District Judge Michael Davis concluded the letters the State Department sent to Canadian-based Enbridge Energy weren’t the kinds of final decisions that courts have jurisdiction to review. A coalition of tribal, environmental and climate change groups sued, saying the State Department should not have allowed Enbridge to build a temporary workaround to move more tar sands crude across the border pending the final federal approval. They said it threatens ecologically sensitive areas in northern Minnesota, and resources such as wild rice that are important to the area’s Ojibwe bands. But the government countered that the State Department merely confirmed that Enbridge already had the legal authority to proceed under its existing permit. “Obviously we’re disappointed in the decision, which essentially says the courts can’t help you,” said Ken Rumelt, an environmental attorney from the Vermont Law School, who represented the plaintiffs. He said they’ll consider whether to appeal after they’ve digested the judge’s opinion.  The plaintiffs, including the Sierra Club, issued statements saying that while the court may not have the authority to stop the project, President Barack Obama does. They noted that a fully expanded Alberta Clipper would carry more tar sands oil than the proposed Keystone XL pipeline, which Obama killed last month because it would have undercut U.S. efforts to achieve a global climate change deal.

Oil crash adds to steelmakers' woes: The oil industry isn't the only one reeling from the plunge in crude prices, which hit new seven-year lows this week. Steelmakers are suffering their worst downturn in at least 15 years, partly because oil producers have drastically cut drilling activity and so have less need for steel pipes. This week's drop in oil prices below $40 a barrel could intensify the pain for steel manufacturers by delaying a rebound in energy investment, says Barclays analyst Matthew Korn. Yet the oil slump only partly explains the steel industry's woes. Steel producers have been hit by a global nose-dive in commodity prices exacerbated by a massive glut of Chinese steel that the industry says is being illegally unloaded below cost around the world, including in the U.S.  Industry officials have asked the Commerce Department's International Trade Administration to impose hefty tariffs on Chinese and other countries' steel in the hope of avoiding a wave of bankruptcies and consolidation that would rival the sector's punishing shake-up in the late 1990s and early 2000s. "If we can't stop this dumping into the country, that could be fatal for the industry," U.S. Steel CEO Mario Longhi said in an interview. "The situation is now worse than what it was in the early 2000s."

Chevron slashes budget by 24 percent to weather low oil prices - Chevron Corp plans to slash its budget by 24 percent next year, part of a revamped strategy to rein in spending and position the energy giant to be nimble as oil prices show little sign of rising in the near future. The dramatic cutback in spending is likely to be echoed by other oil majors who will soon release spending plans, with rival ConocoPhillips set to release its 2016 budget on Thursday. Shares of Chevron fell 0.5 percent to $87.20 in after-hours trading. As of Wednesday's close, the stock has dropped 21 percent so far this year. Chevron had previously signaled it could slash its budget for next year. Plunging oil prices have cut sharply into the industry's margins this year, fueling thousands of layoffs and spreading deep unease on Wall Street about whether some energy companies can service their debt. Chevron plans to spend $26.6 billion across the globe in 2016, with the bulk of spending on international oil and gas exploration and production projects, with the second-largest share going to projects in the United States, including shale developments in Texas. The San Ramon, California-based company said in October it would cut 10 percent of its staff to weather the low-price storm.

ConocoPhillips to cut spending due to falling oil prices - ConocoPhillips said it plans to slash spending on projects by 25 percent next year as the energy company and its rivals deal with plunging oil prices. The Houston company said it expects to spend $7.7 billion in 2015, down from the $10.2 billion it expects to spend this year. The money is used for oil exploration, drilling and other projects around the world. Oil prices reached their lowest levels since 2009 this week. There’s an oversupply of oil, bringing prices down. ConocoPhillips CEO Ryan Lance said in a statement that the current environment for the company “remains challenging.” Several energy companies have reduced spending on weakened demand for oil. Chevron Corp., for example, said this week that it expects to spend $25.6 billion on projects next year, down 24 percent from this year. ConocoPhillips also said Thursday that it expects operating costs to be $7.7 billion for 2016, down from $10.5 billion in 2014.

Oil’s drop below $38 may cause a world of hurt for U.S. shale -- As crude-oil futures are descending toward seven-year lows, U.S. shale-oil producers are getting walloped.  West Texas Intermediate crude-oil futures for January delivery dropped 5.4% to below $38 a barrel Monday and were looking at their worst levels since 2009, after the Organization of the Petroleum Exporting Countries decided last week to keep crude-oil production at its current levels despite a price plunge of more than 60% from the 2014 summer peaks.   Saudi Arabia, OPEC’s largest oil producer and exporter, “is clearly betting on two things: a pickup in 2016 global demand, and the long-awaited impact of production cuts from nonconventional U.S. projects,” said Katrina Lamb, head of investment strategy and research at MV Financial. ‘We believe Saudi Arabia will stay the course, forcing high-priced production out of the market.’ Jay Hatfield, co-founder and president of InfraCap and portfolio manager of its MLP exchange-traded fund   Since the November 2014 OPEC meeting, the Saudis have made their strategy to defend market share regardless of price very clear.   “We believe Saudi Arabia will stay the course, forcing high-priced production out of the market,” Hatfield said the Saudi’s share of global production has edged up to about 10.5% currently from 10.4% in April 2015, while the U.S.’s share has declined to 9.5% from 10.1% over that period. On Monday, U.S. monthly government data showed that total domestic shale-oil production is expected to fall by 116,000 barrels a day to 4.861 million barrels a day in January.

Impact of crushed oil and gas prices on production economics. -- The CME/NYMEX Henry Hub contract for January delivery hit a 22-year low yesterday (December 10, 2015) of $2.015/MMBtu, 46% below year-ago price levels. But US gas production has been humming along near 73 Bcf/d, more than 3.0 Bcf above a year ago and about 1.0 Bcf below the all-time high earlier this year. It’s a similar story for crude oil, with oil prices closing at $36.76/Bbl yesterday, but production hanging in there above 9 MMb/d. This is a testament to lower drilling service costs and producers’ ability to improve drilling productivity. But can productivity gains and drilling costs keep up with continually lower commodity prices? Today we look at how productivity gains and falling drilling costs are impacting producers’ rates of return.In Part 1, we told the productivity story:  how productivity improvements made production a formidable force in the market in 2015 in spite of substantial headwinds from low oil and gas prices, drilling budget cuts and falling rig counts. We showed how rig counts came off dramatically in correlation with prices this past year. But gas production volumes didn’t follow the rig count down. That’s because producers very quickly learned to do a lot more with a lot less.  To quantify drilling productivity in the context of gas, we showed various industry metrics, including drilling time, wells drilled per year per rig, 30-day average IP rate and IP additions per rig per year. We looked at these metrics over time for EOG Resources in the Eagle Ford play, which showed that EOG is now drilling wells in one-third the time it took in 2011, drilling three times more wells per rig each year, and producing double the volume from each well in its first 30 days. And all of that translates to five times more volume produced for every rig than in 2011. So there are fewer rigs operating but those rigs are much more prolific than they were in 2011 or even a year ago.

Natural Gas Settles Below $2 for First Time Since 2012 - WSJ - Natural gas settled below the $2 mark for the first time in three years Friday as mild forecasts for December get even milder and expectations for heating demand fall even more.  Natural gas has now lost 48% in a year, as a U.S. drilling boom has filled up stockpiles to record high while months of temperate weather have limited demand both for gas heat and gas-fired power. Winter is often the time when heating demand hits its highs and prices follow, but weather has been so mild through the fall that prices for a January futures contract has hit its lowest point in 17 years,   Prices for the front-month January contract settled down 2.5 cents, or 1.2%, at $1.99 a million British thermal units on the New York Mercantile Exchange. That is the lowest settlement since April 24, 2012. Gas futures have lost 9% during the week, their fifth-straight losing week. Weather updates Friday showed above-normal temperatures spreading even further. Temperatures across the East and in most of the country’s biggest markets for natural-gas heating will be more than 15 degrees above normal through Tuesday.  Many traders and analysts have been caught off guard by how far gas has fallen. But with stockpiles still near a record of 4 trillion cubic feet and forecasts suggesting the unseasonable warmth could last through January, there is little urgency to buy now or expect prices to shoot higher. The warm weather also pushed heating oil to a six-year low. And prices for both oil and coal have been plummeting, suggesting energy is cheap across the board and likely to remain so.  Spot prices in New York, which once were regularly higher than those in the Louisiana benchmark, plummeted below $1/mmBtu for most of the day. Prices on pipelines that go through the Marcellus Shale region, the heart of the country’s gas boom, traded as low as 48 cents/mmBtu.

Tick Tock: Time Running Out for Struggling Oil and Gas Drillers - The 18th oil and gas driller so far this year is in the process of filing for bankruptcy protection, as the company ran out of funds. As reported by Fuel Fix, the Fort Worth-based Energy & Exploration Partners, which drills for oil and gas in East Texas, had the unfortunate timing of going public in 2014 just as oil prices began collapsing. The company’s revenues sank along with low oil prices, but the nail in the coffin is the sudden tightfistedness from credit markets. Without the ability to access new loans, Energy & Exploration Partners had no other choice but to go through the bankruptcy process. “The impact of the depression in oil prices on the debtors’ business cannot be overstated,” John Castellano, a managing director of AlixPartners and also the company’s interim chief financial officer, said in court documents,  according to Fuel Fix.The gloom over the health of the energy sector is reflected in the rapid deterioration of the value of energy bonds. While the share prices for energy companies have plummeted, more recently bond prices have also collapsed. That suggests a growing consensus that more defaults are likely. As the WSJ notes, the price for credit-default swaps, which act as insurance against the possibility of default, for Chesapeake Energy have quadrupled in just the past three months. The markets are currently putting the chance of default for the second largest gas driller in the U.S. at 95 percent within the next five years.

Warning: Half of oil junk bonds could default - Energy companies that loaded up on debt during the oil boom are likely to have trouble paying back those loans. Oil prices have collapsed over 65% since the middle of last year to below $37 a barrel this week and there's no recovery in sight. It's fueling financial turmoil on Wall Street with Standard & Poor's Ratings Service recently warning that a stunning 50% of energy junk bonds are "distressed," meaning they are at risk of default. Overall, about $180 billion of debt is distressed. It's the highest level since the end of the Great Recession and much of it is in energy companies. "The wave of energy defaults looming in the wings could make for some very bumpy roads ahead in 2016," Bespoke Investment Group wrote in a recent report. The firm described the junk bond market environment as "pretty terrible" lately. That's a dramatic change from recent go-go years, when the shale oil boom along with cheap borrowing costs allowed energy companies to take on loads of debt to fund expensive drilling operations. U.S. oil production skyrocketed, creating a gigantic supply glut that is currently pushing prices lower and hurting the ability of many energy companies to repay their debt. "The tide may be turning. Excess leverage during the good years has dented credit profiles," analysts at research firm Markit wrote in a report published on Wednesday. 

Zombies appear in U.S. oilfields as crude plumbs new lows | Reuters: Drained by a 17-month crude rout, some U.S. shale oil companies are merely hanging on for life as oil prices lurch further away from levels that allow them to profitably drill new wells and bring in enough cash to keep them in business. The slump has created dozens of oil and gas "zombies," a term lawyers and restructuring advisers use to describe companies that have just enough money to pay interest on mountains of debt, but not enough to drill enough new wells to replace older ones that are drying out. Though there is no single definition of a zombie, most investors and analysts consulted by Reuters say they tend to have exceptionally high debt loads and face the prospect of shrinking oil reserves. About two dozen oil and gas companies whose debt Moody's rates toward the bottom of its junk bond scale broadly fit that description. Investors and analysts mentioned SandRidge Energy Inc., Comstock Resources, and Goodrich Petroleum Co as some of that group's more prominent members. To stay alive, zombie companies have curbed costly drilling and are using revenue from existing production to pay interest and other expenses in a process some describe as "slow-motion liquidation."  Bankruptcies and defaults loom because the cutbacks in new drilling have been so deep that many companies risk getting caught in a vicious circle of shrinking oil reserves, falling revenue and declining access to credit, experts say.

The Largest US Pipeline Operator Is Plunging After It Just Cut Its Dividend By 74% -- From a dividend of 51 cents, expectations were for a cut to around 32c.. but the company slashed the dividend to just 12.5c - strongly suggesting the balance sheet is considerably worse than expected... a 74% collapse! Kinder Morgan, Inc. (KMI) today announced that its Board of Directors has approved a plan pursuant to which it expects to pay quarterly dividends of $.125 per share to its common stockholders ($.50 annually), down from its current quarterly level of $.51, beginning with the fourth quarter 2015 dividend payable in February 2016. This dividend enables the company to use a significant portion of its large cash flow to fund the equity portion of its expansion capital requirements, eliminate any need to access the equity market for the foreseeable future and maintain a solid investment grade credit rating. KMI anticipates enough retained internally generated cash flow to fund all of the required equity contribution projected for 2016 and a significant portion of its debt requirements. The company has reviewed its expected investments in 2017 and 2018 and believes that its stable and growing internally generated cash flow will allow it to continue to fund the equity portion of its capital budget without the need to access the equity market. It anticipates meeting all of the rating agencies’ requirements to remain investment grade, and expects a net debt/EBITDA ratio of 5.5 for 2016 and anticipates reducing that ratio in subsequent years.

If It Owns a Well or a Mine, It’s Probably in Trouble - -  The pain among energy and mining producers worsened again on Tuesday, as one of the industry’s largest players cut its work force by nearly two-thirds and Chinese trade data amplified concerns about the country’s appetite for commodities.The full extent of the shakeout will depend on whether commodities prices have further to fall. And the outlook is shaky, with a swirl of forces battering the markets. The world’s biggest buyer of commodities, China, has pulled back sharply during its economic slowdown. But the world is dealing with gluts in oil, gas, copper and even some grains. “The world of commodities has been turned upside down,” said Daniel Yergin, the energy historian and vice chairman of IHS, a consultant firm. “Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production. It’s the end of an era that is not going to come back soon.” The pressure on prices has been significant. Prices for iron ore, the crucial steelmaking ingredient, have fallen by about 40 percent this year. The Brent crude oil benchmark is now hovering around $40 a barrel, down from more than a $110 since the summer of 2014. A number of commodity-related businesses have either declared bankruptcy or fallen behind in their debt payments. Even more common are the cutbacks. Nearly 1,200 oil rigs, or two-thirds of the American total, have been decommissioned since late last year. More than 250,000 workers in the oil and gas industry worldwide have been laid off, with more than a third coming in the United States.

Daily chart: Adjusting the taps | The Economist -- HOW will the oil price affect profitability and production? Who pumps how much at what price? Depending on geography, some reserves are more expensive to exploit than others and only a high oil price can justify the costs. This interactive graphic allows you to choose an oil price and see its effect on OPEC and non-OPEC production and viability, broken down by country. Saudi Arabia and its Gulf neighbours, blessed by geology, manage to make a profit even when oil is at $20 due to its readily accessible reserves. America's shale belt used to be profitable with oil at around $100. But now efficiency gains have sent that down sharply. It takes a soaring oil price for Russia's giant but costly reserves kick in. Oil firms involved in other hard-to-reach and inefficient reserves, such as oil sands in Canada, ultra-deep offshore deposits, and the Arctic, are also hoping for a return to three-digit oil. Using the graphic above, take your turn at the tap, tighten the squeeze, and feel the oil magnates' pain.

Energy Sector’s Junk-Bond Pain Spreads - WSJ: Losses in the energy sector’s junk-bond market are spreading beyond oil-and-gas producers amid a prolonged slump in commodity prices, further rattling investors who are now preparing for a wave of defaults next year. Bonds from electric utilities including Dynegy Inc., DYN,  AES Corp. and NRG Energy Inc. have declined in recent days, reflecting concerns that falling natural-gas prices will drag down electricity prices as well. A Dynegy bond is down 10.9​ cents on the dollar over the past week to 85.6 cents, an AES Corp. bond is down 4.8 cents to 85.3 cents and a bond from NRG Energy is down 8.9 cents to 84 cents, according to trading data from MarketAxess Holdings Inc.  “Sentiment is awful,” said Henry Peabody, who helps oversee the $1 billion Eaton Vance Bond Fund. “We’re flirting with credit-crisis energy prices, and we’re probably flirting with credit-crisis bond prices to some degree in these sectors.” Debt from low-rated oil-and-gas producers continued to drop Tuesday. Bonds from Oasis Petroleum Inc. were down 6.2 cents

Year of Distress for Debt-Burdened Oil Firms Just Got Even Worse -  Just when it seemed things couldn’t get worse for debt-laden energy companies, a renewed rout in oil prices is deepening their distress. As crude plunged to the lowest in more than six years, the average yield on the debt of speculative-grade oil and gas borrowers climbed to 13.4 percent, the highest since the waning days of the global financial crisis in 2009 and the widest divergence ever relative to the broader U.S. junk bond market, Bank of America Merrill Lynch index data show. That’s likely to push more companies to ask their bondholders to restructure debt to avoid bankruptcy, according to corporate-turnaround adviser Stroock & Stroock & Lavan LLP. Bonds of Chesapeake Energy Corp. led the declines on Monday with the biggest drop, with Oasis Petroleum Inc. also sliding. “It’s bad and it’s going to get worse,” . “There’s a lot of confusion over the path of energy prices and the illiquidity of high yield is exacerbating that confusion.” Because high-yield borrowers make up such a large portion of junk bonds issued in recent years, the fresh turmoil is compounding what is poised to be the market’s first annual loss since 2008. Speculative-grade bonds lost 2.74 percent through Monday, the Bank of America Merrill Lynch index data show. Yields in the $1.35 trillion U.S. junk bond market have risen to about 8.4 percent -- a four-year high. “Investors will have to be realistic about the alternatives unless they think they have a magic wand to change the oil price,”

Oil's plunge hammers U.S. funds, humbles even savviest investors - The plunging price of crude oil is causing pain at every kind of U.S. mutual fund this year, humbling even the industry’s best portfolio managers as their mistimed bets in the energy sector continue to cause losses for investors. The sector’s bottom has been more of a trap door for many fund managers. On Tuesday, for example, U.S. crude futures fell below $37 a barrel for the first time since early 2009. The oil price recovery that many predicted for 2015 is now being forecast for 2016, though investment bank Goldman Sachs has said prices could drop as low as $20 a barrel. Last week, a policy meeting at the Organization of the Petroleum Exporting Countries resulted in no decision to cut output, fanning fears of a growing global crude oil glut. The $11 billion Energy Select Sector SPDR ETF , used by mutual funds and hedge funds alike, is off 10 percent in the past month. Even when fund managers point to optimistic signs in the oil market their message sounds somewhat pessimistic. “Nothing fixes low oil prices like low oil prices,” says John Dowd, who runs Fidelity’s $2 billion Select Energy Portfolio, describing how the industry is usually self correcting with lower production and rising demand. Dowd’s total return this year is minus 17.77 percent, but that’s better than most of his energy fund peers who average a nearly 20 percent negative return.

Junk Bond Prices Tumble To 2009 Levels  --With the biggest single-day drop in over 4 years, US High-Yield bond prices have collapsed to their lowest levels since July 2009. Crucially, it's not just energy companies as the painful illqiuidty has careened across the entire space, not helped by fund liquidations and the biggest outflows since August 2014. As we warned here, and confirmed here, something has blown-up in high-yield...With the biggest discount to NAV since 2011... The carnage is across the entire credit complex... with yields on 'triple hooks' back to 2009 levels... As fund outflows explode.. And here's why equity investors simply can't ignore it anymore... It is getting harder to ignore that this isn’t just about crude oil prices and the death of “transitory.”

High-yield debt fund blocks investors from withdrawing funds as junk bonds swoon - A high-yield mutual fund is blocking investors from withdrawing their money, in a rare and jarring move amid a severe downturn in below-investment-grade and distressed debt. The move at Third Avenue Focused Credit Fund is intended to facilitate an orderly liquidation of the fund, which recently had $789 million in assets, down from more than $2.4 billion earlier this year. It comes amid redemption requests at the fund and reduced liquidity in some parts of the bond market. Those two factors made it “impractical” for the fund to pay off departing investors without selling holdings at fire-sale prices “that would unfairly disadvantage the remaining shareholders,” David Barse, chief executive of Third Avenue Management LLC, wrote in a letter to shareholders dated Wednesday. “Most mutual-fund investors are under the presumption that their money is available for them at a moment’s notice,” says Jeff Tjornehoj, head of Americas research at Thomson Reuters Lipper. While investors understand that the higher yields of junk bonds come with risks, he said, “I don’t think many of them ever plan on a fund blowing up like this.” The move at the Third Avenue mutual fund comes at a time of widespread uneasiness about holdings of hard-to-sell securities in funds that trade daily or intraday.

Politico: Democrats might give Big Oil a big win in Congress -- As today’s Politico headline makes clear, Democrats are poised this week to grant the oil industry its number one wish — lifting the oil export ban. The fact that they most likely will vote to pass this the same week as the COP21 talks are concluding does make it seem like in DC they are all talk and no action when it comes to caring about the climate over Big Oil. The big win in question would be a vote to lift the oil export ban. This has been a goal of the oil industry for the past several years and is the stated top priority of the American Petroleum Institute.  As Kenneth Cohen, Exxon Mobil’s recently retired vice president for public and governmental affairs, told the New York Times in October - “The sooner this happens, the better for us.” ConocoPhillips CEO Ryan Lance said lifting the export ban is “number one on my wish list.” The oil companies want to lift the ban so that they can frack every last bit of American oil and sell it to countries like China who are going to need a lot more oil in the next couple of decades while most predictions have American oil demand staying flat or decreasing.  There is no good reason to do this other than to improve oil company profits. This could result in several more million barrels a day of oil be fracked in the US in the coming decade. And yet now Democrats are saying they want to negotiate on the issue.

Democrats steadfast in demands for axing U.S. oil export ban – Senate Democrats on Tuesday laid out a list of demands they seek before making any deal to end the 40-year-old ban on crude oil exports in the wide-ranging government funding bill. With oil prices falling to nearly seven-year lows of less than $40 a barrel, producers are desperate to open crude sales to global markets. They say lifting the ban would give U.S. allies an alternative to Russia and OPEC countries for oil, breathe life into the drilling industry, and increase U.S. energy security. Opponents say it would hurt jobs at refineries, raise the amount of oil carried by trains, which have suffered a slew of recent accidents while carrying crude, and hurt the environment. “I’ve heard a long list, a long list of things,” Senator Dick Durbin, an Illinois Democrat, told reporters. Durbin said a deal to end the ban on the trade restriction is something Senate Majority Leader Mitch McConnell and his fellow Republicans “are salivating over.”  Democrats want measures in return for their support, including extending tax credits for wind and solar power for 10 years, or make them permanent. Granting that could alienate Republicans in states that produce or rely on coal. Democrats also want the Land and Water Conservation Fund, which maintains national parks with revenues from oil operations, reauthorized and fully funded. Lifting the ban on crude exports could be a $20 billion to $30 billion “windfall” per year for oil companies, Durbin said. “There are things that the oil industry … should be willing to help us pay for in this country,” Durbin said.

The U.S. Is About To Get A Lot More Fracking, Thanks To Congress - When Congress emerges on the other side of the annual scrum of budget-building, the oil and gas industry is poised to pick up a major win. The decades-old oil export ban — which was developed to protect American consumers and support energy independence — is unlikely to survive into the new year.  The ban is expected to be lifted in a rider attached to the omnibus spending bill — which is stuffed annually with environmental cuts and attacks that can’t otherwise get passed — due Friday. Environmentalists and consumer advocates have largely come down against lifting the ban, which they say will increase fossil fuel extraction in the United States and raise oil prices for American consumers.  “This will certainly lead to more drilling,”  Oil Change International, an anti-fossil-fuel group, estimated that lifting the ban will result in 476,000 more barrels per day by 2020. The American Petroleum Institute (API), which is pushing for a lift to the ban, came up with 500,000. In a political landscape where different interests can come up with very different estimates, it is telling that the two groups converged closely.  According to a report from the Center for American Progress, repealing the ban would result in an additional 515 million metric tons of carbon pollution each year — roughly equal to 108 million more passenger cars or 135 coal-fired power plants. The increase in extraction — primarily expected to come from fracking — will be accompanied by an increase in transportation from the oil fields to the coast, which means more pipelines and more oil trains, which pose additional environmental threats.  Big Oil is going to get $22 billion in profits because of this. Twenty-two billion. It’s absolutely crazy.  And the increased production won’t make the United States any more energy independent. In fact, American oil refineries are expected to take a hit, as much of the oil will be shipped overseas.

Congress Does Some Horse Trading Over Possible End to U.S. Oil-Export Ban -- A potential end to the longtime ban on U.S. oil exports is emerging as a surprise flash point in congressional negotiations to pass spending and tax measures in the coming week, reflecting a political and economic shift that was unthinkable not long ago. Many obstacles remain, but oil executives consider the flurry of year-end legislation the best chance to remove the 40-year-old ban at least until after the 2016 presidential election, raising the political stakes for an industry being pummeled by cheap oil prices. Congress is now battling over what to include in the fiscal 2016 spending bill and a measure renewing tax breaks. Democrats are pushing for renewable energy and environmental measures, and some Republicans are signaling they might agree, in exchange for the provision allowing oil exports, which is urgently advocated by oil companies. The government's current funding runs out at midnight on Friday. To avoid any funding lapse, the House is expected to pass by Friday a measure keeping the government running through Dec. 16 as lawmakers finish negotiations on a longer- term bill. The Senate approved the five-day patch on Thursday. Democrats, in exchange for allowing oil exports, are demanding the renewal for at least five years of tax credits for wind and solar power, as well as a permanent authorization for the Land and Water Conservation Fund. Democrats from the Northeast, including Sen. Tom Carper of Delaware and Edward Markey of Massachusetts, are also floating a tax credit for independent domestic refineries, especially a few in the Northeast whose profits could be hit if oil exports are allowed.

Lifting oil export ban bad for the environment  -- It’s the fundamental connection between environmental degradation and human health that has us concerned about the prospect of Congress lifting the U.S. oil export ban as part of any tax package or spending bill deal. Doing so would worsen climate change and threaten our communities with toxic spills.  The list of threats climate change poses to our health – and especially children’s health -- is long. Too many children already struggle to breathe on bad air days, and increased temperatures will make those days more frequent and severe. The tick that carries Lyme disease—fear of which already has us constantly checking our kids for bugs—is already breeding faster due to warmer weather, and other insect born diseases are likely to spread more easily. Detailing these impacts and more, The Lancet, one of the world’s most respected medical journals, labeled climate change ‘the biggest global health threat of the 21st century.’ To avoid global warming’s most devastating health impacts and reduce pollution, we must end our dependence on fossil fuels and transition to 100 percent pollution-free, renewable energy. But lifting our decades-old ban on the export of U.S. oil takes us in the opposite direction. If the oil companies have a larger distribution market for oil produced in the U.S., they’ll drill more—upwards of another 3.3 million barrels per day for the next 20 years, according to some estimates. Even if only a fraction of all this extra oil is burned, global warming pollution could still increase 22 million metric tons per year—the equivalent of five average-sized coal power plants.

Making the US a Petro-State – White House Keeps Alive GOP Hopes for Lifting the Oil Export Ban -  Gauis Publius - Short and brutally ugly. This is an all-hands-on-deck moment. The White House is reportedly the chief negotiator on behalf of Big Oil’s attempt to lift the crude oil export ban. As part of the government shutdown negotiation, the White House, in collusion with Democrats in the Senate, is willing to lift the crude oil export ban in exchange for “renewable energy … conservation benefits … and other party priorities” (see below for this language). More here; search for “oil”. To be clear, lifting the four-decades-old crude oil export ban would be a disaster. In particular, it would:

  1. Give the GOP and the American Petroleum Institute (API) a huge win on a top-priority item.
  2. Throw a lifeline to struggling U.S. oil producers, many of whom are terribly over-leveraged and would otherwise default on their debt. (This is one reason API wants the ban lifted so badly.)
  3. Bail out the industry’s debt-holders (banks and other entities), whose money is at risk should these oil producers fail (yes, another bank bailout).
  4. Add a great deal to the carbon that enters the atmosphere by removing a choke-point for bringing extracted U.S. carbon to the global market. (Think of this as offsetting the Keystone pipeline rejection. Instead of preventing carbon from coming to the market, this would enable it.)
  5. Offset any good Obama may be trying to do in Paris, by a lot.
  6. Offset or destroy his attempt to create a “good on carbon” legacy. Obama, simply put, is acting like a “Big Oil enabler,” and should the deal go through, he deserves to see that phrase on his tombstone every time he looks at it.

Mexican crude exports to Europe, Asia are rising - In September 2015, monthly U.S. crude oil imports from Mexico totaled 0.6 million barrels per day (b/d), the lowest level since 1990, and a decrease of about 50% since January 2011. Meanwhile, Mexico's exports of heavy crude oil to Asia and light crude oil to Europe rose, according to data from Mexico's national oil company Petróleos Mexicanos (Pemex). Most of Mexico's exports are of heavy crude oil, which Pemex defines as crude oil with an API gravity equal to or below 27 degrees. Heavy crude oil volumes sent to U.S. Gulf Coast (Petroleum Administration for Defense District 3) refineries have fallen as new infrastructure has allowed greater volumes of Western Canadian Select heavy crude oil to reach PADD 3 refineries. In addition, production of Maya crude oil from the offshore Cantarell field, traditionally Mexico's largest oil field, has decreased significantly. As Mexican heavy crude oil exports to the United States have decreased, increasing volumes have been sold to Asian markets, especially India, and to a lesser extent South Korea and Japan. Greater volumes of heavy crude oil have been processed in Mexico's domestic refineries, partially offsetting a decline in processed volumes of lighter domestic crude types. A drop in Mexican exports of light crude oil (API gravity above 38 degrees) to the United States has been largely offset by increased light crude exports to Europe, especially Spain. Smaller volumes of Mexico's light crude oil have been exported to European countries such as Italy, France, and the Netherlands. 

Fracking Expands in Latin America, Threatening to Contaminate World's Third-Largest Aquifer - Hydraulic fracturing, or fracking - a method whereby hydrocarbons trapped within rocks are extracted - is expanding rapidly in Latin America. Fracking emits benzene, toluene, ethylbenzene and xylene, which are considered by the World Health Organization to be carcinogenic and responsible for blood disorders and other immunological effects. Despite these adverse health effects, however, reserves have already been mapped out in Bolivia, Colombia, Venezuela, Paraguay, Uruguay, Chile, Argentina, Brazil and Mexico. In Mexico, recently passed energy reform legislation promotes fracking as a means of extracting shale gas - and with the reform, the government has opened the oil industry up to the private sector. More than 1,000 wells using the technique are currently in operation in at least 11 of Mexico's 32 states.. "I didn't know anything about oil, but after our water started to get contaminated, we found out that more than 240 wells in our region were using that thing they call fracking,"    This year in Argentina, fracking was used to drill into more than 1,000 shale gas reserves of compact sand and tight oil in slate or shale. According to International Energy Agency figures published in 2015, only the United States, Canada, and more recently Argentina and China produce large volumes of shale gas; the latter two countries are spearheading the development of shale extraction. One of the greatest current fracking threats in South America is located in the Entre Ríos region of Argentina and the neighboring area of Uruguay in the Paraná Chaco, where the extraction of shale oil and shale gas is planned. According to Roberto Orchandio, an engineer and former oil industry employee in the United States and Argentina, contaminated water poses a serious danger. "In this region, the Guaraní Aquifer can be found, which is the third-largest in the world and holds 20 percent of South America's water, spanning an area that includes southern Brazil and part of Paraguay, Argentina and Uruguay," Orchandio told Truthout. "So, we are concerned that if they have to drill into the aquifer, it will be contaminated and therefore destroyed. We have to weigh up if this is worthwhile."

Nine firms apply for Scottish fracking rights - BBC News: Nine companies have applied for licences to carry out fracking operations beneath 1,900 sq km of land in Scotland, it has been revealed. The information was given by the UK government in response to a freedom of information request by the Ferret investigative journalism website. It did not disclose who the companies were or where they have applied to extract shale gas. But Scotland's shale reserves are said to be focused in the central belt. The UK government's Department for Energy and Climate Change (DECC) has been offering exclusive rights to exploit onshore oil and gas resources under its 14th licensing round.  But a decision on who will be awarded the licences in Scotland, and whether they should be awarded at all, will not be taken until after full powers over fracking are devolved to Holyrood under the Scotland Bill. The Scottish government placed a temporary moratorium on fracking in January while a study was carried out into is potential impact. In its response to the Ferret, the DECC said a total of nine companies had applied for the rights to 19 blocks in Scotland, each covering 100 sq km. But the DECC said it could not name the companies, or say where the blocks were, for commercial confidentiality reasons.

Gazprom Neft undertakes first ever 15-stage fracking operation - The Gazprom Neft Group’s first high-volume 15-stage fracked* horizontal well has been brought into production by Gazpromneft Khantos: such high-level multi-stage fracking having been made possible through the use of non-ball-and-socket well completion and stimulation technology**.  Multi-stage fracking operations at the Yuzhno-Priobskoye field well were undertaken as part of the company’s activities in the development of hard-to-recover oil reserves. Running to a total well depth of 4.2 kilometres, horizontal drilling comprised 760 metres. The key feature of the configuration of the horizontal section of the well lies in its allowing well stimulation to continue throughout its entire operation, removing any limitations on the number of fracking operations that can be undertaken. Once development is complete, the well’s operational potential is expected to reach at least 75 tonnes of oil per day — exceeding comparable figures for lesser multi-stage fracking operations by at least 10 percent. The implementation of innovative technologies here not only makes possible greater well output, but will, in the longer term, also lead to a greater proportion of hard-to-recover reserves being brought into development. Vadim Yakovlev, First Deputy CEO, Gazprom Neft, commented: “The use of cutting-edge technologies is an absolute priority throughout the entire Gazprom Neft Group. In 2015, in particular, we expect to see group-wide horizontal drilling volumes increasing by 12.5 percent, to 334 wells, with the number of high-technology wells completed with multistage hydraulic fracking increasing by more than 40 percent this year, to 238.”

Caspian Sea Oil Rig Continues to Burn, Heightening Risk of Spill - — A fire on an oil platform in the Caspian Sea burned on Monday for a fourth day, and the Azerbaijani company that operates the site warned that the fire could spread to the oil wells that feed the platform, heightening the risk of a spill. Workers were evacuated on Friday, but one of two lifeboats capsized in rough seas, leaving 29 people missing and presumed dead.There have been no reports of spills so far. While rich in oil, the Caspian Sea, the largest enclosed inland body of water in the world, is also vulnerable to ecological damage. After the breakup of the Soviet Union, Western companies including BP modernized the Caspian offshore industry. But the platform that caught fire on Friday was a legacy of the Soviet period, built in 1984.  BP has no relation to the site, which is operated by the State Oil Company of Azerbaijan, but it does operate nearby drilling rigs. A burst natural gas pipeline started the fire on Friday.  Whatever the eventual consequences of the fire, an accident so costly in lives and risky to the Caspian Basin is sure to raise alarms about safety in the offshore oil industry, still struggling to rebuild its reputation after the BP spill in the Gulf of Mexico in 2010. So far, 33 workers have been rescued and one body has been retrieved from the water,  On Sunday, in an indication that rescuers did not expect to find the missing 29 men alive, the company said it had sent a request to neighboring countries to search for bodies in their territorial waters.

Overflowing Global Oil Storage Leads To Soaring Supertanker Rates -- One month ago when oil was attempting another break out above $50, we wrote that the black gold had officially reached its "tipping point" when as we noted China had finally reached the limits of its onshore oil storage capacity.  This followed rather dire warnings by both us earlier in the year.... and Goldman more recently, that US oil storage is also rapidly approaching it own tipping point, something which the oil market has finally priced in with the collapse in crude to levels not seen since the financial crisis. Fast forward to today, when none other than the PIRA Energy Group warned that the oil market is set to exhaust onshore crude storage some time in 1Q 2016, which considering there are just 23 days left in 2015, could be as soon as 4 weeks from today, and judging by the way oil is trading, that's increasingly what the market (if not so much Andy Hall) thinks. PIRA adds that global oil stocks seen 500m bbl above normal by end-2015, and that Brent will "continue to struggle" because of surplus.  To be sure, if land storage is exhausted, even Goldman's rather dire prediction of $20 oil may prove optimistic.

OPEC Unity Shattered as Saudi-Led Policy Leads to No Limits: At a chaotic meeting Friday in Vienna that was expected to last four hours but expanded to nearly seven, the Organization of Petroleum Exporting Countries tossed aside the idea of limiting production to control prices. Instead, it went all in for the one-year-old Saudi Arabia-led policy of pumping, pumping, pumping until rivals -- external, such as Russia and U.S. shale drillers, as well as internal -- are squeezed out of market share. “Lots of people said that OPEC was dead; OPEC itself just confirmed it,”  OPEC has set a production target almost without interruption since 1982, though member countries often ignored it and pumped well above it. The ceiling of 30 million barrels a day, in place since 2011 and now abandoned as too rigid, is no exception. OPEC output has outstripped it for 18 consecutive months, according to data compiled by Bloomberg. Now the organization says it will keep pumping as much as it does now -- about 31.5 million barrels a day -- effectively endorsing limitless output. The oversupply has sent the price of Brent, a global oil benchmark, to a six-year low, triggering the worst slump in the energy sector since the 2008 world financial crisis. It’s cut the profits of major oil companies such as Exxon Mobil Corp. and BP Plc in half while crude-rich countries such as Mexico and Russia have watched their currencies plunge and their coffers shrink.

OPEC's Middle Finger to the Oil Markets -- OPEC’s decision at its semi-annual meeting in Vienna on Friday not to cut production but to legitimize its overproduction shows that the group is determined at any cost to recover the market share it lost to producers outside the cartel, particularly those drilling for oil in the United States. Which means that the world can probably expect oil prices to remain low for some time. Traditionally, OPEC members have produced about 40 percent of the world’s crude oil, but 18 months ago prodigious U.S. production began to eat into its market share. It also created an oil glut that caused prices to decline precipitously from a high of more than $110 per barrel beginning in June 2014.The group had the option of reducing its production ceiling, which had been at 30 million barrels per day for several years, to help stabilize prices. Such a move would have been led by Saudi Arabia, OPEC’s leading producer, which for years had been the “swing” producer, adjusting production up or down to keep prices at levels with which the group was comfortable. Instead, Saudi Oil Minister Ali al-Naimi decided on a strategy to maintain OPEC’s production level, a move that helped accelerate the drop in oil prices, which have now plunged to just over $40 per barrel. There were calls from several members of the group, including Algeria, Ecuador and Venezuela, for OPEC to reduce output, but at Friday’s meeting the cartel agreed to maintain its production ceiling. Al-Naimi said his goal in refusing to cut production was to drive the U.S. drillers out of business. . So far that strategy has worked, as rig counts in the United States have fallen substantially. But al-Naimi’s strategy has also had unwanted side-effects on OPEC members themselves. The Saudi minister evidently believed that oil-producing countries, particularly rich Gulf States, could weather a period of lower revenues while frackers licked their wounds. After all, at the time Saudi Arabia had monetary reserves of about three-quarters of a trillion dollars.

Oil price tumbles to lowest level in 7 years - Dec. 7, 2015: Oil tumbled another 6% on Monday to as low as $37.50 a barrel, its weakest level in almost seven years. A massive supply glut has wiped out two-thirds of oil's value after it peaked at nearly $108 a barrel in June 2014. The latest oil plunge is weighing on the stock market, with shares of Big Oil companies like Exxon Mobil (XOM) retreating further. The Dow dropped 117 points, with the energy sector its biggest drag. Oil settled at $37.65 a barrel on Monday, the lowest since February 2009. These moves come after Friday's decision by OPEC not to cut oil output following a contentious six-hour meeting. The oil cartel essentially left production near record highs despite the oversupply problem. "My head is spinning from the past few days of declines. Sentiment is horrible. It's very bearish,"OPEC is gripped by a deep divide between two factions, one led by the top oil producing nation Saudi Arabia and its rich allies in the Gulf that can stomach cheap oil and another led by Nigeria, Venezuela and other countries that need higher prices to boost their economies. But with Saudi Arabia firmly in control of decision making, a near-term oil recovery doesn't seem likely. "If you didn't get the message before you probably have by now: The Saudis are really not coming to the rescue,"

Fear grips market as oil leads commodity crash - Brent crude prices have crashed below $40 a barrel for the first time since the depths of the global financial crisis as Opec floods the market to drive out rivals, with a parallel drama unfolding across the gamut of industrial metals. The Bloomberg commodity index has fallen to within a whisker of lows last seen in 1998 and has now dropped by two-thirds from its peak, wiping out the entire gains of the resource supercycle.  While plummeting commodity prices can be a warning sign that the world economy is heading into recession, the latest sell-off has a different character. The slump is chiefly due to excess production, and amounts to a “positive supply shock” that should boost global recovery. Bank of America said oil demand has risen by 1.8m barrels a day (b/d) over the past year, the second strongest in a decade.“The oil market is driven by fear,” . The spectacle of a neutered Opec unable to act in a clear crisis – or even issue a coherent statement – has rattled investors. “We have a ‘dump and pump’ war between Saudi Arabia and Iran. It’s possible the Saudis will try to match the Iranians with an extra 500,000 b/d in an exhaustion game. Anything could happen,” he said. “US inventories are already at record highs, yet we are going into a seasonal period when they normally rise further."

OPEC Takes Down Oil Majors as Lower-for-Even-Longer Kicks In  - For months, many executives at the world’s largest oil producers have been talking about prices staying lower for longer. After OPEC’s decision to keep pumping full pelt that could become lower for even longer. Even before Friday, the prolonged slump in crude had forced analysts to cut their earnings-per-share estimates for the world’s 10 largest integrated oil companies in recent weeks. With oil dropping to the lowest in more than six years after the Organization of Petroleum Exporting Countries meeting on Friday, further downgrades are probably on the way. “A potential OPEC cut was the last source of hope for the bulls near term,” “The oil majors have already started to underperform the market over the past few weeks, but this now coupled with earnings downgrades and valuations that imply $70 a barrel should put further pressure on share prices.” The mean adjusted 2016 EPS estimate for Exxon Mobil Corp. has been cut by more than 9 cents a share and for Royal Dutch Shell Plc by 8.4 cents over the past month, according to data compiled by Bloomberg. EPS projections for Total SA, Europe’s second-biggest oil company, and Repsol SA are lower for 2016 than those for this year. Those estimates assume a much higher price than the $41.19 a barrel that Brent traded at as of 9:57 a.m. in London on Tuesday.

Oil to stay low for a long, long time, according to traders: Crude oil's slide continued on Monday morning, as oil futures broke below $39 per barrel. And with oil producers unwilling to publicly make moves to reduce the supply of oil, traders don't appear to see crude rising back above $50 per barrel any time soon. On Monday, the first futures contract that shows oil above $50 expires in the second half of 2017. Crude oil for December 2017 delivery (which is more liquid than other far-in-the-future contracts) is trading at just $50.50 per barrel. Futures contracts don't reflect pure expectations of where that commodity will trade; they also reflect things like the costs of storing that commodity, the extra price that users will pay to have access to the commodity for convenience reasons, and prevailing interest rates. Yet the crude oil futures curve clearly reflects expectations that the commodity's plunge below $50 is not a short-term phenomenon. "The futures curve is telling you that the market is totally oversupplied, and will remain so for a long time,"  The latest bad news for crude came on Friday, when the Organization of Petroleum Exporting Countries decided to take a "wait and watch" approach to production levels, rather than taking action as oil prices continue to plummet. That spelled bad news for oil bulls who may have been hoping the oil cartel might signal a policy shift.

Crude Pops As API Reports Surprise Inventory Draw After 10 Weeks Of Builds - After 10 weeks of inventory builds, API reports a 1.9mm barrel draw (hugely missing DOE expectations of a 1.3mm build). The initial reaction was a knee-jerk higher by 25c, but we note that Cushing saw a 614k barrel build (5th week in a row) and is perhaps the more crucial storage level to montori. As one trader noted, "OPEC wants to produce as much as they want," and as global land (and sea) storage fills, so "$35 is clearly a level of interest."  Charts: Bloomberg

Crude Surges After DOE Reports Biggest Inventory Draw In 4 Months -- Following last night's unexpected inventory draw reported by API, DOE reported an even bigger draw of 3.568 million barrel (against expectations of a 1.3mm barrel build). The biggest draw in almost 4 months sent crude surging back to $39.  Biggest crude inventory draw in 4 months...

Oil gives up gains; crude stocks drop 3.6M barrels: Oil prices gave up gains on Wednesday after spiking on the first decline in crude stockpiles in nearly three months, and as many investors expected a fall to below 2008 lows due to a mounting global supply glut. The Energy Information Administration reported crude inventories fell by 3.6 million barrels in the last week, compared with analysts' expectations for an increase of 252,000 barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 423,000 barrels, EIA said. Crude futures got support earlier in the day after industry group the American Petroleum Institute reported on Tuesday a 1.9-million-barrel fall in U.S. crude inventories last week. Brent crude oil futures were down 58 cents at $39.68 a barrel at 12:44 a.m. EDT (1744 GMT). U.S. West Texas Intermediate (WTI) crude futures were at $36.97 per barrel, down 54 cents from their last settlement. Gasoline stocks rose by 786,000 barrels, compared with analysts' expectations in a Reuters poll for a 2.2 million barrels gain. Distillate stockpiles, which include diesel and heating oil, increased by 5 million barrels, versus expectations for a 2.5-million-barrel increase, the EIA data showed. The headline decline in crude inventories was driven by a 7.3-million-barrel draw in the Gulf Coast region. Andy Lipow, president of Lipow Oil Associates, told CNBC crude deliveries into the area were delayed by fog in the ship channel last week.

SPR, Commercial Crude Oil Stock With More Than A Year's Worth Of Import Protection; -- EIA  ---  From the EIA today: As a member of the International Energy Agency (IEA), the United States is obligated to maintain stocks of crude oil and petroleum products, both public and private, to provide at least 90 days of import protection and to collectively participate in the release or sale of oil supplies to help balance a shortage among IEA members in the event of a severe energy supply disruption. Based on September levels of net crude oil and petroleum product imports, the SPR alone holds crude oil stocks equivalent to 156 days of import protection.   Including average levels of commercial stocks over the past 5 years, total days of import coverage provided by strategic and commercial stocks is currently 450 days.

Oil Prices Down, But Production Stays Up --  Oil prices have fallen to their lowest levels since 2009. Brent crude oil, one of several kinds of oil on the world market, dropped below $40 a barrel on Tuesday. However, the main group of oil producing countries has been unable to reduce production to limit supply. The Organization of Petroleum Exporting Countries (OPEC) met in Vienna last week. OPEC said members should be part of climate change-related talks such as the COP-21 meeting in Paris. The group also called on members to maintain, in its words, an “energy dialogue” with countries that produce oil but are not OPEC members. About two-thirds of oil production is carried out by non-OPEC countries. But, the 13 member countries could not agree on any production cuts. OPEC oil production continues at record levels. An OPEC report says the group’s oil production increased to over 31 million barrels of oil per day. Some experts say OPEC member Saudi Arabia continues its production levels to keep competitors from gaining market share. Some producers in the United States use techniques like hydraulic fracturing, or fracking,to increase oil output. However, that method costs more than the traditional drilling techniques used in many other countries. These may include the indirect costs of pollution to ground water or very small earthquakes in some places.

The Pain Game – How Low Can Oil Prices Go?: Crude oil prices plunged to new lows on December 7, following on the heels of OPEC’s decision to scrap its production target last week. The markets are reaching new depths of pessimism, with WTI and Brent breaking fresh seven-year lows, dipping below the nadir from earlier this year. The decision to scrap its production target stems from the increasing competition between Saudi Arabia and Iran. As Iran has the intention of bringing 500,000 to 1 million barrels of oil per day back online within the next year, Saudi Arabia decided to abandon all pretense of a production ceiling. As we reported in last week’s newsletter, the practical effect of removing the ceiling will likely be minimal – OPEC members were ignoring it anyways. But by erasing the production target from its official policy, Saudi Arabia and Iran could engage in increasing pricing competition and fights for market share. All OPEC members, except for Saudi Arabia, are producing flat out. Iran will soon be doing the same. Saudi Arabia, on the other hand, could decide to produce more or discount its crude further in order to capture more market share in Europe and/or Asia, for example. Either way, the repercussions are not good news for oil prices as supplies will remain abundant and could even increase. The markets reflected the grim news on Monday with oil prices plunging by more than 5 percent.

IEA Chief Sees No Oil-Price Recovery Until 2017 -- The International Energy Agency (IEA) expects oil prices to remain low through 2016, but forecasts a rebound to begin in 2017 as the current oil glut recedes and demand rises. “Looking to 2016, I see very few reasons why we can see growth in prices,”  Fatih Birol, the executive director of the IEA, told a news conference Wednesday in Paris on the sidelines of the United Nations climate conference. “I think 2016 will be a year where we will have a lower price environment.” Iran’s return to the global oil market will only contribute to the oversupply of oil, especially since OPEC, of which Iran is a member, agreed at its third consecutive ministerial meeting on Dec. 4 not to adjust its daily output to bolster prices. The ceiling remains at 30 million barrels per day, but the group has been exceeding this limit by an estimated 1.3 million barrels per day. “There is a lot of oil in the market now, and 2016 demand in the market will be weaker,” said the chief of the Paris-based IEA, which advises its 29 member states on energy policy. “And at the same time we may well see Iran to come to the market if sanctions are lifted, which is going to increase the amount of oil in the markets.”

How Far Will Oil Sink Before Christmas? -- Last week’s OPEC decision has set off another round of crude losses, which persisted through the week. WTI is now decidedly in mid-$30s territory, with Brent breaking through the $40 per barrel threshold. The losses were once hard to imagine. The bearish voices out there (Goldman Sachs, for example) had raised eyebrows over the course of this year when they predicted oil would drop below $40 per barrel, even provoking some mockery at times. But they were right – here we are. The short run doesn’t look great, either. “When we look at 2016, I don't see many reasons why we can see upward pressure on the prices…Demand is weaker and we may well see Iran come back (to the market) and there will be a lot of oil,” IEA’s executive director Fatih Birol said in Paris this week. “So 2016 may well be another year with lower prices and this will have implications of course for investments in the oil sector.” The collapse of crude prices has once again put pressure on emerging market currencies. Canada’s dollar hit an 11-year low against the U.S. dollar this week. Colombia’s peso hit an all-time low. Russia’s ruble is once again under fire, nearing record lows. Other currencies under pressure – the Saudi riyal, the Nigerian naira, the South African rand, Brazil’s real, and Mexico’s peso. With a rate hike just around the corner from the Federal Reserve, the dollar could appreciate further – or put another way, emerging market currencies could continue to fall. This threatens to destabilize fragile economies with rising inflation and depleting foreign exchange reserves.

Oil Sinks to Biggest Weekly Decline of 2015 After IEA Warning --Oil tumbled to its biggest weekly decline of the year after an International Energy Agency report highlighted the magnitude of the global crude glut. The IEA, an energy monitor, said low prices are taking a toll on supply but producers haven’t yet scaled back enough to make a dent in stockpiles. Oil has fallen for six straight sessions while registering its largest weekly percentage decline of 2015. This latest leg of oil’s selloff, which has slashed prices by about a third since the start of the year, has rattled stock and debt markets anew. The Dow Jones Industrial Average recently was down 270 points, or 1.6%. Junk bonds, which were also reeling from a fund’s closure, slumped. U.S. oil futures for January delivery fell $1.14, or 3.1%, to $35.62 a barrel on the New York Mercantile Exchange Brent, the global benchmark, fell $1.80, or 4.5%, to $37.93 a barrel on ICE Futures Europe. Both lost about 11% for the week, putting them down a third for the year and at their lowest settlement since the financial crisis. U.S. oil last settled this low in February 2009 and Brent in December 2008. The last time U.S. crude posted a six-session losing streak was in March. For Brent, it was in mid-2014.  Money managers have moved sharply against crude in recent weeks, repeatedly adding to bets on falling prices. Data released late Friday by the Commodity Futures Trading Commission shows only 80,474 more bets on rising prices than falling prices, the smallest margin in more than five years.

Oil slides to new 7-year low as IEA warns of worse glut - BNN News: Oil futures extended their tumble with little pause on Friday, with crude prices hitting their worst levels since the 2008/9 credit crunch, after the International Energy Agency (IEA) warned that global oversupply could worsen next year. Mild pre-winter weather that reduced heating demand and a plummeting U.S. stock market ahead of a widely expected interest rate hike this month added to the drag. Brent crude futures slipped below $39 (U.S.) a barrel the first time since December 2008, trading down $1.07 at $38.66 by 10:15 a.m. EST. U.S. crude’s West Texas Intermediate futures entered the $35 territory for the first time since February 2009. WTI was 80 cents lower at $35.99, hitting a session low at $35.78. “The WTI and Brent markets are trending at this point with no real interest from anyone to buy,” . “The forecast remains incredibly warm for the U.S. That’s a large drag on demand and means less demand for distillates and more for export, which drags down the rest of the world as well.”

How Low Can It Go? Oil Crashes To $35 Handle | Inventory levels are at record highs across the globe, and the OPEC price war has killed off any notion that the oil cartel will act to rescue prices. That means the only way markets balance out will be from a sharp contraction in supply from private sector drillers. So the spotlight shifts back to U.S. shale, where the IEA says OPEC’s decision to scrap its production target will force a more severe correction on supplies. The Paris-based energy agency warned that the medium-term will look more constrained on the supply side because of the fall in production and investment, but the markets will have to suffer through excess capacity in the short run.Next week, the Federal Reserve could add a bit of pressure on oil markets when it moves to raise interest rates. That should put downward pressure on oil prices, but also spark some volatility in emerging market currencies. 2015 has been eventful, but the fireworks are not over yet.

This Is Why $20 Oil Is A Possibility -- The day of reckoning has arrived for the oil price with the head and shoulders pattern I have been tracking for two months finally being completed in recent weeks. It became a rather drawn out affair with markets awaiting the outcome of the OPEC meeting of 4 December where OPEC elected to stay the course and do nothing. With WTI closing at $40 and Brent on $43 on Friday both are testing support levels. WTI in particular has had strong support at $40 in recent weeks. Should this support be broken then another major down leg is to be expected to the vicinity of $20. I can see nothing in the numbers presented below to provide hope that $40 may hold. The market remains over-supplied and awash in oil. Lower price is required to remove supply from the market.

  • World total liquids production up 240,000 bpd to 97.09 Mbpd, a new record high.
  • OPEC production down 20,000 bpd to 31.72 Mbpd (C+C)
  • N America production up 260,000 bpd to 19.66 Mbpd.
  • Russia and FSU up 90,000 bpd to 14.01 Mbpd
  • Europe down 10,000 bpd to 3.40 Mbpd (compared with October 2014)
  • Asia down 50,000 bpd to 7.99 Mbpd.
  • Middle East rig count is rising. The international oil rig count is stable. The US oil rig count is falling.

U.S. rig count in steepest decline in three months - Fuel Fix: – The number of active U.S. drilling rigs fell by 21 this week, Baker Hughes reported Friday, as crude prices continued to sputter in the wake of OPEC’s move to do away with its longstanding output ceiling. The overall U.S. rig count dropped by 28 to 709, the steepest one-week drop since late September. Since the 2014 peak, U.S. oil producers have sidelined 1,221 units, about 63 percent of them. In Texas, drillers idled nine units this week, the state’s sharpest fall since April. Oil producers peeled off 15 rigs in the prolific Permian Basin in West Texas, where so far crude production hasn’t fallen amid a sharp oil-market downturn.

U.S. Oil-Rig Count Declines by 21 - WSJ: The U.S. oil-rig count dropped by 21 to 524 in the latest week, according to Baker Hughes Inc., marking the fourth consecutive week of declines. The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year. There are 67% fewer rigs from a peak of 1,609 in October 2014. According to Baker Hughes, the number of gas rigs was down seven to 185. The U.S. offshore-rig count was 23 in the latest week, down two from last week and down 37 from a year ago. For all rigs, including natural gas, the week’s total fell by 28 to 709.  Oil tumbled to nearly seven-year lows Friday, with the U.S. benchmark price slipping below $36 a barrel after a top energy watchdog said low prices are taking a toll on supply but that isn’t yet enough to relieve the global crude glut.

OPEC Production Hits Three-Year High As Oil Price Resumes Slump - The latest confirmation that the oil cartel formerly known as OPEC is effectively non-existent, came a little over an hour ago when in its latest November monthly report, the Organization of Petroleum Exporting Countries reported that total monthly crude output for the member nations rose to 31.695 million barrels per day, the highest amount produced in three and a half years. The production boost was driven not so much by the wildcard Iran (whose own supply will hit the global market in the near future) but by Iraq, as the second biggest oil producer in OPEC Pumped 4.3 million bpd, an increase of 247,500 barrels from the previous month, offsetting a modest 25,200 barrel decline from Saudi Arabia. Bloomberg reports that Iraq has pushed output to record levels this year as international companies develop fields in the south, while the semi-autonomous Kurdish region increases independent sales in the north, according to the International Energy Agency. Production had dipped in October as storms delayed southern loadings and as flows through the northern pipeline were disrupted, according to Iraq’s Oil Ministry. This was the highest monthly production since April 2012, and shows that even OPEC's recently announced production ceiling of 31.5 million barrels was already breached even before it was introduced.  Some other highlights from the report (link):

  • OPEC says in its monthly report that demand for its crude is at 29.4M barrels/day this year - lower than its current output and 200K less than previous estimates. But it's keeping 2016's demand view steady at 30.8M and still anticipates global demand rising about 1.25M barrels/day next year versus 2015's projected increase of 1.5M. OPEC cautions its "oil-demand forecast for 2016 is subject to considerable uncertainties--depending on the pace of economic growth, development of oil prices and weather conditions, as well as the impact of substitution and energy policy changes." - WSJ
  • OPEC trims supply estimates for outside the group in 2016 by 250K barrels/day to 57.1M as it expects the price plunge to take its toll on the US oil industry and other producers near-term. It notes US shale-oil production had been declining since April, and "this downward trend should accelerate in coming months given various factors, mainly low oil prices and lower drilling activities."  - WSJ

OPEC points to larger 2016 oil surplus as group's output hits multi-year high – OPEC pumped more oil in November than in any month since late 2008 and forecast little increase in demand for its crude next year, pointing to a larger supply surplus even as low prices hurt rival producers. The Organization of the Petroleum Exporting Countries in a report also forecast supply from non-member countries will fall more sharply next year, which would suggest its strategy, reaffirmed last week of defending market share, is working. OPEC’s report follows an acrimonious OPEC meeting on Dec. 4, where it rolled over a policy of pumping crude to safeguard market share, despite oil prices that have more than halved to $40 a barrel in 18 months due to excess supply. A year ago, Saudi Arabia pushed though an OPEC decision to defend market share instead of cutting output to support prices, hoping to slow growth in rival supplies such as U.S. shale oil. “U.S. tight oil production, the main driver of non-OPEC supply growth, has been declining since April,” OPEC said in the report. “This downward trend should accelerate in coming months given various factors, mainly low oil prices and lower drilling activities.” Supply outside OPEC is expected to decline by 380,000 barrels per day (bpd) in 2016, the report said, as output falls in regions such as the United States and former Soviet Union. Last month, OPEC predicted a drop of 130,000 bpd. But OPEC also increased its 2015 non-OPEC supply growth forecast by 280,000 bpd, citing upward revisions to output from the United States, Brazil, Russia and the UK, among other countries. OPEC production, which has surged since the policy shift of November 2014 led by Saudi Arabia and Iraq, is far higher than forecast demand. Supply rose by 230,000 bpd in November to 31.70 million bpd, said the report, citing secondary sources.

Despite Climate Concerns, OPEC Plans to Keep Pumping Oil While It Can - Even as United Nations climate-conference delegates met near Paris on Friday seeking ways to reduce the globe’s dependence on high-carbon fuels like oil, some of the world’s biggest petroleum producers vowed to keep pumping flat out.The Organization of the Petroleum Exporting Countries said on Friday that it would keep producing oil at current levels, which are estimated to exceed 31 million barrels a day.But with petroleum prices continuing to plummet and world leaders intent on steadily reducing the burning of oil and natural gas, OPEC, meeting in this holiday-bedecked city, might be celebrating what history could show to be Big Oil’s last hurrah. Some OPEC members, including the United Arab Emirates, have acknowledged that their economies need to diversify and wean themselves from an oil-rich diet.  In fact, the United Arab Emirates’ delegation to the climate conference has pledged to increase their use of clean energy sources — a mere 0.2 percent of the mix last year — to 24 percent by 2021.But, meanwhile, the pumping continues unabated. The United Arab Emirates say they are producing close to three million barrels a day, up about 180,000 barrels a day from last year’s levels.

Despite low oil prices, Gates looks to Gulf in anti-poverty campaign – Low oil prices and tight budgets in the Gulf are making it harder to raise money for a fund tackling poverty in the Muslim world, but a growing culture of philanthropy may draw in wealthy regional donors, billionaire campaigner Bill Gates said. The Microsoft co-founder is visiting the Gulf seeking donations towards his foundation’s planned $2.5 billion fund, which will work to reduce poverty and disease across 30 countries in the Middle East, Africa and Asia. The fund is a joint project with the Jeddah-based Islamic Development Bank, which has committed $2 billion in loans financing if the Gates Foundation raises $500 million in donations – mostly from the wealthy oil-producing Gulf states. “Certainly the price of oil means that these countries are having to prioritize both domestic and internationally things they do,” Gates told Reuters on Sunday in the United Arab Emirates, ahead of his trip to Kuwait City. “It would be easier if oil was $100 a barrel.”

A New World Order? -- Global Crude Supply and Demand Through 2025. - Overall oil prices and the differentials between the world’s different benchmark crude grades have been on a rollercoaster ride over the past decade. In the last eighteen months - since June 2014 – rising production of U.S. shale crude together with oil producer cartel OPEC’s decision not to curb output in response - have led to significant worldwide supply and inventory surpluses that are hurting producers and providing a windfall to many refiners. Today we review a new report from Turner Mason & Company that offers a detailed analysis of global crude oil supply and demand drivers and pricing over the next 10 years. The oil market (including prices) is driven by a large number of factors and influences including those that are characteristic of commodities such as supply/demand fundamentals, technology breakthroughs, and new discoveries as well as unpredictable influences such as politics, OPEC decisions, weather, economic conditions, and government regulation (to name but a few). These factors together have contributed to rampant and unpredictable oil price volatility in the past 10 years. Against this backdrop of uncertainty, energy companies must plan, operate and build their businesses. Major project costs often run into billions of dollars with lead times of 5-10 years or more. Before these projects are completed, market shifts can cause margins to evaporate or soar unexpectedly. It is therefore essential that all segments of the industry, upstream, midstream and downstream analyze the potential of such volatility to impact their plans in order to survive and make appropriate investment choices.

Financial War over Oil Reshapes World, Will End with Much Higher Prices - We have not begun a new era of low oil prices, fruits of new tech and a beneficent Fate. Low oil prices are the wreckage from a war – a financial war. The verdict is in. Experts proclaim OPEC’s policies a failure. Here’s T. Homer Bonitsis, associate professor of finance at the New Jersey Institute of Technology:  OPEC is non-relevant in terms of its ability to affect the price of oil. So any decision by OPEC will not have a long-term effect on the oil market. There are too many OPEC quota-chiseler countries and non-OPEC production countries that cast a shadow over the effectiveness of OPEC maneuvers. … The Saudi strategy of attempting to knock out competitors by using predatory pricing is not a game changer long-term … Some producers may shut down temporarily, but will reopen when prices recover again. Indeed, some producers may go bankrupt — only to have their assets sold at bargain prices. The new investors in these assets have a lower fixed cost structure to produce oil; in essence, creating a lower-cost competitor! The policy is doomed to failure long-term.” This is an economist’s perspective: now is forever, economics is everything. It’s why they are so frequently astonished by events.   In 2014 world output was 8% above that of 2008. Non-US production had risen 2%; US output had risen 64%. Action was necessary. The Saudis kept their taps open, watched oil prices crumble, and waited. It’s a game of chicken. With their cost of production (including both capital and operating costs) under $10/barrel, they know who will win. Here’s Saudi Aramco CEO Ali I. Naim yesterday at the International Petroleum Technology Conference in Qatar, speaking softly: “There is no additional unconventional oil coming to the market; actually there is a decline. … So the supply and demand imbalance in the market will adjust and stabilize, and the gap will be closing. And we will be seeing, hopefully, adjustment in the prices going forward starting in 2016.”

Impending natural gas deal angers many Israelis - As Israel prepares to push through a long-delayed landmark natural gas deal, Prime Minister Benjamin Netanyahu is facing a growing backlash by protesters who accuse him of using shady backroom dealings and strong-arm tactics to push through the plan. While some critics say the deal is a sellout, much of the opposition has focused on the great lengths Netanyahu has gone to win its approval. To clear the final hurdle, Netanyahu is said to have orchestrated the resignation of his economics minister in order to personally overturn an anti-trust ruling against the deal. Thousands of people have taken to the streets in recent weekly protests — the biggest show of discontent with the government’s economic policies since demonstrations over the country’s high cost of living in the summer of 2011. “The reason people are going out into the streets … is not just because the public opposes the deal. It’s because the public understands, and it’s not so difficult to understand, that a dubious deal has been prepared here,”

'No gas imports from Israel; not now, not later' — Jordan neither imports natural gas from Israel nor plans to do so, Minister of Energy and Mineral Resources Ibrahim Saif said on Tuesday. In response to a question by MP Rula Hroub during Tuesday’s Lower House oversight session, Saif said the issue of importing natural gas from Israel “was halted and the deal with the American company shelved”. The minister added that the liquefied natural gas imported and stored at the terminal in Aqaba covers 85 per cent of the electricity companies’ needs of the substance. Earlier this year, Prime Minister Abdullah Ensour announced that talks between Jordan and Noble Energy to buy natural gas from Israeli fields were put on hold “until the US company settles its ongoing legal dispute with Israel”. State-owned National Electric Power Company signed a letter of intent in late 2013 with Noble Energy, which owns 39 per cent of the Leviathan natural gas field in Israel, to buy gas over a period of 15 years at a total cost of $15 billion starting late 2017. The deal was expected to be signed in November.   Hroub’s question was on the authenticity of rumours about planned construction of a pipeline to pump natural gas into Jordan from Palestinian territories occupied by Israel. Hroub said she was not satisfied with the minister’s response and will turn her question into an inquiry at the right time.

Oil Producer's Currencies Are Collapsing As Brent Breaks Below $40 -- With the oil price collapse accelerating (Brent just dropped below $40 for the first time since Feb 2009), the currencies of major oil-exporting nations - such as the Canadian dollar and Norwegian crown - are plunging... Not helped by weakness in China trade data, questions over global growth and inflation expectations are growing. Oil-exporting nations  (and growth-linked currencies) are getting monkey-hammered... As Reuters notes, with lower oil prices likely to add to global deflationary concern and Chinese data doing little to improve sentiment, risk appetite remained fragile. The Canadian currency fell 0.4 percent against the U.S. dollar, to C$1.3555. That was the U.S. dollar's strongest level since mid-2004. Similarly the Norwegian crown fell a six-week low against the euro. "If you are looking to play weak oil prices, you would want to sell the Canadian dollar and the Norwegian crown," said Jeremy Stretch, head of currency strategy at CIBC World Markets. "With oil prices falling and some even talking about oil falling to $30 a barrel, revenues for these countries will take a beating and hence their currencies will remain under pressure."The Australian dollar fell 0.6 percent to $0.7220 AUD=D4 as this week's tumble in iron ore and the latest Chinese data weighted on the currency's woes. Citi recommended that investors sell the Aussie through options. "The weakness in the Chinese economy will spill over to Australia through commodities demand as well as reduced demand for the Australian dollar via reserves and other channels. This should leave it vulnerable to an eventual leg higher in the dollar," they said. Charts: Bloomberg

Brazil's Petrobras offers to sell up to 10 pct of coveted offshore oil field | Reuters: Brazil's state-run oil company Petrobras is offering up to a quarter of its 40 percent stake in the huge Libra offshore oil prospect as its seeks to reduce the largest debt in the global oil industry, two industry sources said on Tuesday. The stake could fetch up to $1.5 billion, according to analysts at Macquarie, and is likely to attract international oil companies keen to expand in one of the world's fastest-developing oil basins. Petroleo Brasileiro SA, as Petrobras is formally known, is targeting $15.1 billion in disposals by the end of next year but has struggled to sell assets in less attractive prospects off Brazil and in the Gulf of Mexico. Chief Executive Aldemir Bendine has told Brazil's congress that the company will not be able to meet repayment obligations on its debt of more than $130 billion and maintain a $19 billion investment plan next year unless it hits the disposal target. The company is now offering sought-after oil prospects in the so-called sub-salt areas in the Santos basin south of Rio de Janeiro, several industry sources said. These areas contain vast reserves trapped deep beneath the sea bed by a layer of mineral salts.

Venezuelan Government Losing Grip As Low Oil Prices Take Their Toll - The Venezuelan government suffered a huge electoral loss on December 6. The opposition won a majority of seats in the parliament, a striking blow to Venezuelan President Nicolas Maduro. Maduro’s ruling party lost its majority for the first time in sixteen years. The result can largely be chalked up to the collapse in crude oil prices, which has shattered the economy, drained government coffers, and left the country’s currency in tatters. Despite the crisis, OPEC declined to throw Venezuela a lifeline on December 4, and not for a lack of trying on behalf of the Venezuelan delegation. The South American nation pleaded its case with its fellow OPEC members, calling for a lowering of the collective output target by five percent. But largely due to the uncertainty over how much extra production is set to come back from Iran, OPEC failed to agree on a production target. Without a quick fix in oil prices, the only option left for Venezuela is the tougher task of addressing the problems within its own domestic oil sector. Admittedly, this won’t reap benefits in the short-term, but Venezuela consistently underperformed even before the collapse in oil prices, so there is no time like the present to begin addressing the problems at the state-owned PDVSA.  There is a lot to work with. Venezuela has the world’s largest proven oil reserves – its 298 billion barrels exceed even Saudi Arabia’s reserves (268 billion barrels). It has large but mature and declining conventional production in the Maracaibo Basin in the northwest. It also has massive deposits of heavy bitumen in the Orinoco Belt.

Venezuela Oil Prices Crashes To 2004 Lows -- Putting the 'mad' in Maduro. Venezuela's heavy crude oil price just crashed almost 9% to $31.24... its lowest since December 2004. Time for another 'swap' with China?  Charts: Bloomberg

On Iran Sanctions, Mixed News–and Warnings for Potential Investors - Over the past few months, investors from Europe and Asia have gone to Tehran in droves, searching for post-sanction deals and bolstering Iranian hopes that the lifting of international sanctions will draw significant investment. Some in Europe have described Iran “as ‘an El Dorado’ and potential ‘bonanza.’ ” The chief of Iran’s central bank has cited the country’s “unique geographical advantage,” its “sense of timeliness and discipline,” and “very good history of being a trade partner.” In October, he predicted that “Iran will be a very favored destination for many international investors.” But Treasury officials bear mixed news: The U.S. is preparing to meet its commitments on sanctions relief tied to implementation of the nuclear deal. Still, many U.S. sanctions tied to Iran’s support for terrorism, human rights abuses, and other negative behaviors remain in place. And within days of the Iranian central banker’s comments in October, the Financial Action Task Force, which sets global standards on countering money laundering and terrorist financing, issued another searing rebuke of Iran’s “strategic deficiencies.” Only Iran and North Korea, the task force said, present such “on-going and substantial money laundering and terrorist financing” risks that the international community should apply active “counter-measures” to protect the global financial system. The task force said that as sanctions are being lifted under the nuclear agreement, it “remains particularly and exceptionally concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system.” It repeated its long-standing call for financial institutions to “give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions.”

Islamic State oil trade 'worth more than $500m' - BBC News: The so-called Islamic State (IS) has made more than $500m (£330m) trading oil, a US treasury official has said. Its "primary customer" has been the government of Syria's President Bashar al-Assad, despite its ongoing battle to overthrow the regime, Adam Szubin told the BBC. IS had also looted up to $1bn from banks in territory it held, he said. A US-led coalition has been bombing IS targets, including oil facilities, in Syria and Iraq for over a year. IS' finance chief was recently killed in one such mission, Pentagon officials announced on Thursday. "The two are trying to slaughter each other and they are still engaged in millions and millions of dollars of trade," Mr Szubin said of Syria and IS, in comments reported by Reuters news agency. The group was estimated to be making as much as $40m a month from the oil trade, including from buyers in Turkey, he added. Cutting off the group's cash flow was a key part of the coalition strategy to defeat IS, he said. Unlike other designated terrorist groups, IS did not rely on funding from foreign donors, but generated money from its own operations, Mr Szubin said. The US-led coalition has recently launched a military campaign, dubbed Tidal Wave 2, intensifying air strikes on IS oil fields, refineries and tankers being used by the group. IS currently generates around $80m a month, mainly from oil revenues, according to findings focusing on late 2015 from UK defence consultancy IHS.

War, low oil prices cripple Iraq Kurds' once-vibrant economy - Less than two years ago, Iraq’s northern Kurdish region was booming, as oil revenues poured in and foreign investors flocked to a rare island of stability in a turbulent region, but that all began to change when the black flags of the Islamic State group darkened the horizon. Kurdish forces backed by U.S.-led airstrikes repelled an IS assault in the summer of 2014 and have been among the most effective forces battling the extremists. But low oil prices and a longstanding dispute with the central government over revenues, along with an influx of refugees, have crippled the local economy. The regional capital, Irbil, is littered with half-finished or abandoned building projects — hotels, offices and apartments that many had hoped would one day transform the largely autonomous region into a Kurdish Dubai. Foreigners attracted to the region by business opportunities and liberal social mores are leaving, civil servants haven’t been paid for months and day laborers gather on street corners, hoping for work. “The economy today has very bad indicators. Savings are running out, people are starting to borrow and cut their expenses, which is directly affecting the market’s direction,” . “The housing sector is declining in a way that has never been seen before, the trade sector, including car sales, is also seeing declines, and all this is connected to the important fact that the region’s market is disconnected from its customers and markets in central and southern Iraq.”

Iran Has "Irrefutable Evidence" Of Turkey's Role In ISIS Oil Trade - When Turkey shot down an Su-24 near the Syrian border late last month, the world held its collective breath. Everyone was asking themselves the same question: “How will Putin respond?” The fear was that Moscow would retaliate militarily. After all, Putin isn’t exactly known for backing down from a fight. Of course an attack on one NATO member is considered an attack on the entire alliance and so, it appeared that the world might have witnessed a Franz Ferdinand moment, if you will.  But Putin had an ace up his sleeve.  Rather than sending a couple of Tupolev Tu-95 Bears to Ankara, Moscow unleashed a propaganda campaign aimed at exposing Turkey’s role in facilitating Islamic State’s lucrative oil trade. It was almost as though Putin was just waiting for Turkey to give him an excuse. Just hours after the Russian warplane crashed, Putin accused Turkey of buying ISIS oilon the way to calling Erdogan a “backstabber”. Adding insult to injury, he said all of that while sitting right next to Jordan’s King Abdullah.  From there, Moscow proceeded to deliver near daily pronouncements accusing Erdogan and his family of funding international terrorism and the entire media campaign culminated in an epic presentation by the Russian MoD featuring photos of oil trucks, videos of airstrikes and maps detailing the trafficking of stolen oil.  As it turns out, this strategy has done far more damage to Ankara than one could ever hope to achieve with a couple of bombing runs. Turkey’s complicity in the smuggling of stolen crude from Syria and Iraq has been put on display for the entire world to see and it’s been nothing short of an epic embarrassment for Erdogan. It’s also helped to inform the public about the extent to which ISIS operates with the support of state actors. Last week, Russia even went so far as to suggest that the US is involved as well.  Meanwhile, Iranian diplomat and analyst Seyed Hadi Afghahi had the following to say in an interview with Sputnik: "If Erdogan continues to deny the facts [Iran] will provide more irrefutable hard evidence such as photos, GPS navigation of the oil convoys and videos.”

Turkey refuses to withdraw troops sent to north Iraq base -- Turkey has said it will not withdraw hundreds of soldiers who arrived last week at a base in northern Iraq, despite being ordered by Baghdad to do so within 48 hours. The arrival of such a large and heavily armed Turkish contingent in a camp near the frontline has added yet another controversial deployment to a war against Islamic State fighters that has drawn in most of the world’s major powers. Ankara says the troops are there as part of an international mission to train and equip Iraqi forces to fight against Isis. The Iraqi government says it never invited such a force, and will take its case to the UN if they are not pulled out. Washington, which is leading an international coalition against Isis that includes Turkey, Arab states and European countries such as Britain and France, has told the Turkish and Iraqi governments to resolve the standoff, and says it does not support deployments in Iraq without Baghdad’s consent.

Iraq May Seek "Direct Military Intervention From Russia" To Expel Turkish Troops -- Turkey just can’t seem to help itself when it comes to escalations in the Mid-East.  First, Erdogan intentionally reignited the conflict between Ankara and the PKK in an effort to scare the public into nullifying a democratic election outcome. Then, the Turks shot down a Russian warplane near the Syrian border. Finally, in what very well might be an effort to protect Islamic State oil smuggling routes, Erdogan sent 150 troops and two dozen tanks to Bashiqa, just northeast of Mosul in a move that has infuriated Baghdad.  We discussed the troop deployment at length on Saturday in “Did Turkey Just Invade Iraq To Protect Erdogan's ISIS Oil Smuggling Routes?,” and you’re encouraged to review the analysis in its entirety, but here was our conclusion: The backlash underscores the fact that Iraq does not want help from NATO when it comes to fighting ISIS. Iraqis generally believe the US is in bed with Islamic State and you can bet that Russia and Iran will be keen on advising Baghdad to be exceptionally assertive when it comes to expelling a highly suspicious Turkish presence near Najma. You’re reminded that Iran wields considerable influence both politically and militarily in Iraq. The Iraqi military has proven largely ineffective at defending the country against the ISIS advance and so, the Quds-backed Shiite militias including the Badr Organisation, Asaib Ahl al-Haq and Kataib Hezbollah have stepped in to fill the void (see our full account here).Of course that means that the Ayatollah looms large in Iraq and when it comes to loyalty, both the militias and a number of Iraqi lawmakers pledge allegiance to Tehran and more specifically to Qassem Soleimani. The point is this: Iran is not going to stand idly by and let America and Turkey put more boots on the ground in Iraq which is why just hours after Ash Carter announced that The Pentagon is set to send in more US SpecOps, Kataib Hezbollah threatenedto hunt them down and kill them. Not coincidentally, PM Haider al-Abadi rejected a larger US troop presence just moments later.  Now, Abadi has given Turkey 48 hours to get its troops out of Iraq or else.

The Bad Blood Between Russia and Turkey Is Spreading to Armenia and Azerbaijan - Escalating tensions between Russia and Turkey have spread to the Caucasus, a volatile region where both powers have long contested each other's influence. After Turkish jets shot down a Russian warplane that allegedly flew into Turkish airspace last week, a Cold War-style war of words erupted between Ankara and Moscow. Turkey has refused to apologize for the incident, while Russia has blocked sales of tourism packages to Turkey, imposed sanctions on Turkish fruits and vegetables, and accused Turkey of buying oil from the Islamic State. Now the two sides are squaring off over the ongoing conflict between Armenia and Azerbaijan, two tiny former Soviet republics that have been at loggerheads since a six-year war over an ethnic Armenian enclave in Azerbaijan called Nagorno-Karabakh ended in 1994. "This is largely talk right now, but the problem is neither Turkey nor Russia really need war in the Caucasus," said Paul Stronski, a senior associate at the Carnegie Endowment for International Peace. "The situation between Armenia and Azerbaijan has been pretty dangerous already. It's clear that things can easily get out of hand."

The Saud Family to Select West’s ‘Moderate’ Jihadists Who Will Take Over Syria -- The Saud family, Saudi Arabia’s royals, have called together a meeting on December 15th in Riyadh, Saudi Arabia, of their fellow fundamentalist Sunnis who are fighting against the secular Assad government to take over Syria, and the Sauds will announce after the conference which groups will have the West’s blessings.  The only armed group that has thus far been announced to have been invited is Jaysh al-Islam, which is a Salafist-Wahhabist fundamentalist organization, and like all Salafists and Wahhabists, is rabidly anti-Shiite. By contrast, Syria’s President, Bashar al-Assad, is a Shiite, and, furthermore, he has always insisted upon a strict separation of church-and-state; so, he’s considered like the devil, by the Sauds and other Wahhabists and Salafists (including the leaders of America’s other Arabic allies: Qatar, UAE, Kuwait, and Bahrain).

The spread of Wahhabism, and the West’s responsibility to the world - François Hollande’s declaration of war against Isis (also known as Islamic State) was, perhaps, a natural reaction to the carnage in Paris but the situation is now so grave that we cannot merely react; we also need sustained, informed and objective reflection. The French president has unwittingly played into the hands of Isis leaders, who have long claimed to be at war with the West and can now present themselves as noble ­resistance fighters. Instead of bombing Isis targets and, in the process, killing hapless civilians, western forces could more profitably strengthen the Turkish borders with Syria, since Turkey has become by far the most important strategic base of Isis jihadis. We cannot afford to allow our grief and outrage to segue into self-righteousness. This is not just the “Middle East problem”; it is our problem, too. Our colonial arrangements, the inherent instability of the states we created and our support of authoritarian leaders have all contributed to the terrifying disintegration of social order in the region today. Many of the western leaders (including our own Prime Minister) who marched for liberté in Paris after the Charlie Hebdo massacre were heads of countries that, for decades, have backed regimes in Muslim-majority countries that denied their subjects any freedom of expression – often with disastrous results.

Jihadis now integral part in US designs for Syria - In Syria [the US] plan was to use the non-IS jihadis against IS by promising them a part in the post-Assad Syrian regime. That is the reason why Kerry is promoting a political transition there to get Assad out, hand over Syria to these jihadis with a bunch of old Syrian politicians being the external face of the regime (mainly for pacifying public opinion back home). Saudi Arabia and Qatar have provided the necessary assurances that the US will have nothing to fear from this new Syrian government, and that it will follow the plan. The US will provide more arms to this 'new Syrian army' (ie, the non-IS jihadis) and hope that, with the Kurds and Western air support, it’ll knock IS out (or at least push it out of Syria). This plan has been stymied by the Russian intervention, and the rejuvenated Syrian army's successful offensive against the jihadis. Kerry is still pushing the political plan, but Russia will never agree to anything that hands Syria over to these jihadis. The outcome is, therefore, likely to be decided on the battlefield, where it currently seems the R+6 will succeed. For Iraq the West's plan appears to be to split it into three portions: a Kurdish entity, a Sunni one, and a Shia rump. The first part of the plan has been put into effect. The Kurdish peshmerga, supported by US airpower and SF, captured Sinjar. Additional SF have now been sent to support the Kurdish peshmerga. The Turks have moved troops near Mosul to support the coming Kurdish attack on the city. This expanded Kurdish region will be one entity in the new Iraq.(The Kurds would never attack Mosul or any other non-Kurdish areas unless they had solid assurances that they could keep their gains). It was because of this plan that the US's air campaign in Iraq was so devoid of results (often because planes weren't cleared to attack targets). Large-scale air attacks with their attendant civilian casualties would have alienated the local Sunni population of Anbar. That is also the reason why IS's oil operations weren't attacked until Putin shamed Obama into it; even then special steps were taken to avoid Sunni casualties. The hope was (is) to revive the old Sahwa (Sons of Iraq) movement (a Sunni force friendly towards the US) and let it take over Anbar and other Sunni areas of Iraq to form the Sunni entity.“

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