Sunday, September 18, 2016

this week’s Ohio Supreme Court rulings, another record for refined products supplies, et al

before we start on the regular fracking patch news, we should take note of two rulings which were handed down by the Ohio Supreme Court this week that relate to fracking in Ohio....in the first, the Court ruled in favor of Secretary of State Jon Husted and against the citizen petitions to establish a charter form of county government that had been advanced by groups in Athens, Meigs and Portage counties, news of which we've been carrying as it developed over the past several months, wherein local election boards had ruled against the petitions, ultimately throwing the decisions to the Secretary of State...this was basically a replay of the rulings of last summer that we covered in two posts, wherein county charter government proposals in Athens, Fulton and Medina were ruled off the November 2015 ballot...

the second Supreme Court ruling involved, as best i can determine, 16 cases that had been brought in regards to the state’s Dormant Mineral Act, wherein the court ruled on three of those cases, while the remaining cases were disposed of based on the authority of those initial three decisions...to cut to the chase, the question being decided was who owns the mineral rights to a property, the surface land owner, or the mineral rights holder, after decades of extraction inactivity at the site...i gather that the Ohio Dormant Mineral Act, Ohio Revised Code § 5301.56, sets forth that ownership of mineral rights would transfer to the owner of the surface property after said mineral rights would deem to be abandoned...however, the court ruled that this transfer is not automatic, ie, that the surface owner must bring a quiet title action to obtain a judicial decree that a mineral interest has been abandoned, and otherwise, as in the cases being ruled on this week, the mineral rights holder would retain those long dormant rights...thus, in the lead case, Corban v. Chesapeake, the court found that an Ohio man who had inherited 164.5 acres in Harrison County could not prevent Chesapeake from drilling on his land, even though the property had been purchased by his family 57 year ago from a coal company, since that company had retained rights to the oil and gas deposits...thus, it would appear that all of those properties in our part of the state that have at one time had gas or drilling on them would be subject to fracking in the future, without any additional compensation the surface landowners...that would seem to include all the farms that had wells drilled on them in the gas boom of the mid-1980s, when everyone with a piece of land in this part of the county thought they were the reincarnation of J.R. Ewing, and that would be the case even if said farms have since been sold and been subsequently developed as residential properties...now, there are several links to this ruling below, including two from law journals, so i'd welcome anyone with a law background to further clarify what this ruling means for those who might own or who have purchased such a property in this part of the state, because eventually we're going to want to know that...

in other news, oil prices fell more than 6% this week, despite two days that saw prices rise, as global oil glut concerns overwhelmed the impact of other news & rumors...after closing last week at $45.88 a barrel, oil prices rose nearly one percent on Monday, supported by a weaker dollar and a broad-based market rally, and closed up 41 cents at 46.29 a barrel...but oil prices fell steadily all day Tuesday, after OPEC raised its 2017 forecast of non-OPEC oil supplies and the Paris based International Energy Agency (IEA) published its September Oil Market Report, which forecast demand for oil would only grow 1.3 million barrels per day this year, or 100,000 barrels per day less than their prior estimate...after falling 3% on that news to close at $44.90 a barrel on Tuesday, oil prices then fell another 3% on Wednesday to close at $43.58 a barrel on news that oil shipments from both Libya and Nigeria would soon be resuming, exacerbating the oil glut...oil prices then rose roughly 0.8% to $43.91 on Thursday when gasoline prices rose 5.1% after a major rupture of the Colonial Pipeline, which transports 1.2 million barrels of gasoline a day from Texas to New Jersey, spilled the fuel near Birmingham Alabama, closing the pipeline and thus threatening gasoline supplies to 6 states...oil prices then resumed their slide on Friday after a report from Goldman Sachs forecast that crude would continue to trade within the $45-50 band over the next 12 months, and that any price increase above $50 was highly unlikely, comparing the current period to the 12 year stretch in the 1990s, when oil traded around $20 a barrel....oil prices thus closed the week at $43.03 a barrel, 6.2% lower than last Friday's close..

The Latest Oil Stats from the EIA

this week's oil stats for the week ending September 9th from the US Energy Information Administration indicated that our oil imports returned to recent levels after last week's storm related interruptions, that refinery throughput eased from the near record levels of last week, and that a relatively small drawdown of crude oil inventories was more than offset by a six and a half million barrel increase in supplies of refined products...however, this week's crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung back to +513,000 barrels per day, after last week's -169,000 barrels per day, which meant that 513,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week's metrics were off by that amount... we've now seen a large positive adjustment in 11 out of the last 12 weeks, and as a result this year's cumulative daily average of that weekly statistical adjustment has risen to a positive 101,000 barrels per day, a significant reversal of the negative adjustment we saw through the first 6 months of this year, when much of what we had appeared to have produced or imported wasn't showing up in the final consumption or inventory figures...   

this week's EIA data also showed that production of crude oil from US wells rose by 35,000 barrels per day to an average of 8,493,000 barrels per day during the week ending September 9th, as output of Alaskan oil rose by 30,000 barrels per day and production from the lower 48 states was 5,000 barrels per day higher, the second small increase in continental US production in a row....that still left the week's domestic oil production 6.8% lower than the 9,117,000 barrels we produced during the week ending September 11th of last year, and 11.6% off the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...our oil production for the week ending September 9th was also still 726,000 barrels per day lower than what we were producing at the beginning of this year...  

during the same week, the EIA reported that our imports of crude oil rose by an average of 993,000 barrels per day to an average of 8,062,000 barrels per day, 12.1% more than the 7,189,000 barrels of oil per day we imported during the week ending September 11th a year ago...the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) remained at an average of 10.2 million barrels per day, 10.1% higher than the same four-week period last year... at the same time our exports of crude oil fell by an average of 83,000 barrels per day to an average of 418,000 barrels per day during the week ending  September 9th, well down from the oil export record of 698,000 barrels per day we saw during the week ending August 26th...combined, that meant our net imports were 1,076,000 higher than last week...

meanwhile, the amount of crude oil used by US refineries fell by an average of 200,000 barrels per day to an average of 16,730,000 barrels of crude per day during the week ending September 9th, as the US refinery utilization rate fell to 92.9% for that week, down from 93.7% of capacity the prior week, and down from the refinery utilization rate of 93.1% logged during the week ending September 11th last year...refining on the glutted east coast fell by 54,000 barrels per day as the refinery utilization rate there fell back to 85.5% from last week's 89.6%, while the Gulf coast refineries also took in 116,000 less barrels of crude per day than they did last week...nonetheless, the amount of crude refined this week nationally was still 1.3% more than the 16,513,000 barrels of crude per day US refineries used during the week ending September 11th last year, and 2.6% more than the equivalent week in 2014, as refining for “the summer driving season” now comes to a close with the passing of the labor day weekend ...   

the 200,000 barrel per day drop in crude oil being refined, combined with the beginning of the seasonal switch in refinery processes, led to a 273,000 barrel per day drop in our refineries’ production of gasoline, which fell to 9,900,000 barrels per day during the week ending September 9th, the lowest gasoline output since the second week of June...still, that was 7.1% higher than our gasoline output of 9,247,000 barrels per day during the week ending September 11th last year, and 7.9% higher than the gasoline production of the equivalent week of 2014....at the same time, refinery output of distillate fuels (diesel fuel and heat oil) was also down, falling by 98,000 barrels per day to 4,933,000 barrels per day during the week ending September 9th....that left our distillates output 2.8% less than the 5,076,000 barrels per day that was being produced during the same week last year, but still a bit more than the 4,910,000 barrels per day of distillates production of the equivalent week of 2014...  

however, even with the slowdown in gasoline production, our gasoline inventories rose by 567,000 barrels to 228,360,000 barrels as of September 9th, as our gasoline imports rose by 43,000 barrels per day to 650,000 barrels per day and as our domestic demand for gasoline fell by 189,000 barrels per day to 9,406,000 barrels per day, confirming that driving really did tail off after Labor Day...that left this week's gasoline inventories 5.0% higher than the 217,387,000 barrels of gasoline that we had stored on September 11th last year, and 8.4% higher than the 210,738,000 barrels of gasoline we had stored on September 12th of 2014...at the same time, our distillate fuel inventories rose by 4,619,000 barrels to 162,754,000 barrels by September 9th, which was the largest one week build of distillate inventories since January 8th of this year...that put our distillate inventories 5.7% above the distillate inventories of 153,963,000 barrels of September 11th last year, and 27.4% above the distillate inventories of 127,772,000 barrels of September 12th, 2014...  

end of the week inventories of most other major refined products were higher as well....our stockpiles of propane/propylene rose by 1,963,000 barrels to 98,51,000 barrels last week, which meant they were 3.5% above last year's September 11th record high of 97,693,000 barrels, and 30.5% higher than the propane/propylene inventories of the same weekend in 2014...inventories of kerosene type jet fuel rose by 908,000 barrels to 42,749,000 barrels as of September 9th, 4.1% above our jet fuel stockpiles of 41,077,000 barrels on September 11th last year, and 10.8% higher than our 38,596,000 barrels of jet fuel supplies we had stored on September 12th of 2014...in addition, our stockpiles of residual fuel oils rose by 997,000 barrels to 40,583,000 barrels as of September 9th, up 4.1% from the 38,988,000 barrels we had stored a year earlier, and 11.3% higher than the 36,463,000 barrels of residual fuel oils we had stored on September 12th of 2014....and while inventories of NGPL (Natural Gas Plant Liquids) and LRG (Liquefied Refinery Gases) fell by 439,000 barrels to 150,681,000 barrels as of September 9th, they remained 14.0% higher than the 132,196,000 barrels we had stored as of September 11th last year, and 15.0% higher than the equivalent week in 2014...adding all the refined products together, we find that they rose by 6,571,000 barrels over the week ending September 9th, to another new record high, just as we've seen them do almost every week this year...

lastly, the expected rebound in our oil supplies after Hurricane Hermine curtailed last week's East Coast and Gulf imports did not materialize, and therefore refineries and exporters found in necessary to withdraw 559,000 barrels of oil from our stockpiles of crude oil in storage to meet their needs, and hence our oil inventories as of September 9th fell to 510,798,000 barrels...but that was still 12.0% higher than the 455,894,000 barrels of oil we had stored as of September 11th, 2015, and 41.0% higher than the 362,271,000 barrels of oil we had stored on September 12th of 2014, so the two weeks of inventory drawdowns barely put a dent in our oversupply of crude.... 

This Week's Rig Count

US drilling activity fell for the 3rd time in the past 16 weeks during the week ending September 16th, following the prior string of 39 weeks back to August 21, 2015 wherein the rig count had not risen at all...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rigs to 506 rigs as of Friday, which was also down from the 842 rigs that were deployed as of the September 18th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil rose by 3 rigs to 416 rigs this week, and they’re now up by 100 rigs since the May 27th nadir; however, that was still down from the 644 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...meanwhile, the count of drilling rigs targeting natural gas formations fell by 3 rigs to 89 rigs this week, which was also down from the 198 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...the week also saw the removal of 1 rig that was classified as miscellaneous, still leaving a single miscellaneous rig in play, still up from a year ago when there were no miscellaneous rigs deployed....  

two additional drilling platforms were deployed in the Gulf of Mexico this week, both of which were offshore from Louisiana...that bought the Gulf of Mexico and the total US offshore count up to 20 rigs, down from 29 rigs drilling in the Gulf and a total of 31 rigs working offshore nationally a year ago...at the same time, there was also a rig removed that had been drilling through an inland lake in southern Louisiana, which cut the inland waters rig count back to 4 rigs, which was down from 5 rigs on inland waters a year earlier...

the number of working horizontal drilling rigs fell by 2 rigs this week after rising by only 1 rig last week, which left the count of active horizontal rigs at 394 rigs, which was down from the 664 horizontal rigs that were in use on September 18th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count was unchanged at 64 rigs this week, which was down from the 119 vertical rigs that were drilling in the US during the same week last year, while the directional drilling rig count was also unchanged at 48 rigs, which was also down from the 83 directional rigs that were deployed during the same week last year...     

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 16th, the second column shows the change in the number of working rigs between last week (September 9th) and this week (September 16th), the third column shows last week's September 9th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in September a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week's case was September 18th of 2015:      

September 16 2016 rig count summary

there's really not much to see here this week, is there?  Oklahoma saw three rigs added, with one obviously in the Ardmore Woodford and another in the Cana Woodford, but those came after they had pulled out 4 rigs last week, which we suspected may have been in reaction to the record setting 5.8 earthquake they'd seen in that region the Saturday before...Louisiana was down two rigs despite the 2 additions in the Gulf, and we can account for part of that by the inland lake rig shutdown and the rig pulled out of the Haynesville, which also accounts for one of the gas directed rigs pulled out...we should also note that a single rig was also pulled out of Alabama, where 1 rig remains, and out of Idaho, where there are now none, which aren't shown on the state table above...otherwise, there were 2 more rigs added in the Permian, which by itself accounts for 70 of the oil rigs that have been added since the end of April...thus, without the Permian, there wouldn't be much of a drilling recovery to speak of at all...

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Campaign launched against proposed Community Bill of Rights-: Voters in Youngstown will get to decide on the Community Bill of Rights for the sixth time this November.The charter amendment is being placed on the ballot again by the group that’s opposed to fracking and injection wells.Tuesday, the Mahoning County Coalition for Job Growth and Investment launched its campaign against the Community Bill of Rights at the Teamsters’ Union Hall.“Voters have rejected the Community Bill of Rights five times and this is the sixth time, and I expect they’re going to reject it this fall,” said Youngstown Mayor John McNally.The charter amendment would ban most oil and gas activity, along with fracking in the city limits. Opponents have said they don’t think that’s constitutional.“To get to that argument, you have to have an issue that gets approved by the voters and I don’t think that’s going to happen over the next month, month and a half,” McNally said.The city doesn’t have the right to regulate the oil and gas business. That job falls with the state.“This is an unenforceable amendment to a charter that oversees the operations of the city,” said Ron Massullo, vice chair of the Mahoning County Democratic Party.At the same time, Bill of Rights supporters gathered outside the union hall to protest. They say the idea has grown on voters. Last time, it lost by less than 300 votes.

Coalition wants Youngstown voters to reject anti-fracking amendment proposal - — A coalition of business, labor, political and religious leaders are urging Youngstown voters to reject the anti-fracking “Community Bill of Rights” charter-amendment proposal, saying it could hurt the city’s economy if approved. Members of the Mahoning Valley Coalition for Job Growth said today the ballot issue wouldn’t just ban fracking – none exists in the city – but gives people the right to sue based on perceived violations of environmental pollution. Supporters say their charter-amendment proposal strengthens people’s rights to drink clean water, breathe clean air and to self-govern. This is the sixth time the proposal is on the city’s ballot. It failed twice in both 2013 and 2014, and in the November 2015 election. The last time it was in front of voters, however, it lost by only 2.46 percentage points. If it loses again, backers of the proposal say they will put it on the ballot until it wins - no matter how many times it takes.

Meigs commissioners vote to put charter on ballot, protest filed -  athensmessenger.com: — The Meigs County Board of Elections on Thursday complied with an Ohio Supreme Court order and approved a resolution to place a 2015 county charter proposal on the ballot. However, a protest filed the same day has sent the matter to Ohio Secretary of State Jon Husted, who last year rejected similar county charter proposals from other counties, including Athens County. The Ohio Supreme Court upheld Husted’s decision in 2015 regarding the other charters, although the court did not agree with all his reasoning. In response to the protest filed Thursday, Husted issued an advisory that set a deadline of 10 a.m. this Monday for filing briefs for and against the 2015 charter proposal. As The Messenger previously reported, the Meigs County Board of Elections last year voted that the petition seeking to put the charter on the ballot was valid and had enough signatures, and relayed that information to the county commissioners. The commissioners would not pass a resolution to place it on the ballot, saying their decision was based on the elections board missing the deadline for properly submitting the information to the commissioners. However, in a split 4-3 opinion the Ohio Supreme Court ruled last week that an earlier letter sent to the commissioners by the elections board was sufficient to require the commissioners to place the charter on the ballot. The commissioners voted Thursday to do that, but a protest was filed by Daniel Lantz of Route 684, Pomeroy. Lantz argues that the proposed 2015 charter does not meet requirements for establishing a form of government.The charter seeks to make it illegal to use injection wells to dispose of fracking waste from high-volume horizontal hydraulic fracturing, and illegal to use water from the counties for that oil and gas drilling process.

Supreme Court says no to Athens County charter proposal - athensmessenger.com: The Ohio Supreme Court said Tuesday it will not order that a proposed Athens County charter be placed on the Nov. 8 ballot. It was a 6-1 majority opinion which also applies to charters proposed in Meigs and Portage counties. "It's pretty discouraging," said Dick McGinn, a spokesman for the Athens County charter committee. "I think that basically they got the law wrong ..." Charter supporters in the three counties had asked the Supreme Court to order Secretary of State Jon Husted and election boards of the counties to place the charters on the ballot. The boards had ruled the charter petitions invalid, and Husted had upheld their decisions. In Tuesday's ruling, the court agreed with Husted's position that the proposed charters failed to meet a threshold requirement that they create a form of government that includes the powers and duties required of county government and officials by state law. The court also did not agree with the argument of charter supporters that any pre-election review of the charters violates their First Amendment rights. The court noted that in a 2015 decision it recognized the authority of election officials to determine if a charter initiative meets the threshold requirements to be on the ballot. Also, charter supporters had argued that their right to local self-government was being violated. Charter proponents "failed to persuasively demonstrate why we should recognize a new fundamental right in the current proceeding," states the court's opinion. "Moreover, there is no indication that the boards of elections or the secretary of state attempted to thwart the principles of local self-government." McGinn said he was pleased to see Justice William O'Neill's dissenting opinion.

Ohio Supreme Court Keeps Anti-Drilling Petitions Off Ballot - The Ohio Supreme Court ruled Tuesday that Secretary of State Jon Husted and the election boards from three counties did not violate the law when they rejected proposed county charters that, if successful, could have led to local bans on oil and natural gas development. In a slip opinion, the state's high court ruled 6-1 that supporters of the proposed charters were not entitled to a writ of mandamus that would have placed the charters on the ballot in November. The case is State ex rel. Coover v. Husted [No. 2016-Ohio-5794]. According to court records, election boards in Athens, Meigs and Portage counties rejected the proposed charters for a variety of reasons last year. Husted subsequently invalidated similar petitions in Athens, Fulton and Medina counties (see Shale Daily, Aug. 14, 2015). "There is no indication that the boards of elections or the secretary of state attempted to thwart the principles of local self-government," Chief Justice Maureen O'Connor wrote for the majority. "They did not deny relators the right to establish a charter form of county government; instead, they merely examined the charter initiatives to determine whether they met the threshold requirements for inclusion on the ballot." Justices Judith French, Judith Ann Lanzinger, Terrence O'Donnell and Paul Pfeifer concurred with O'Connor. Justice Sharon Kennedy concurred in judgment only. In a dissenting opinion, Justice William O'Neil said the majority "would prefer that relators reinvent the wheel of government in one document. I disagree... "The secretary of state does not have the power to veto charter petitions on behalf of the oil and gas industry simply because the citizens did not pick exclusively from the two forms of county government delineated in [the state's Revised Code]. This is a usurpation of power from the people that we should not indulge."

Supreme Court flushes county charters yet again - For the second year in a row, a proposed anti-fracking county charter amendment will not appear on the Athens County ballot, as a result of a decision by the Ohio Supreme Court. This continues a pattern of failure in Ohio courts for charter amendments advanced by anti-fracking “community rights” groups. Local charter committees, including the one in Athens, receive legal help and guidance from a Pennsylvania public-interest group, the Community Environmental Legal Defense Fund (CELDF). Community rights supporters decried Tuesday’s decision by the Supreme Court that tossed out similarly crafted charter amendment petitions submitted by Bill of Rights Committees in Athens, Meigs and Portage counties. Dick McGinn, representing the Athens County Bill of Rights Committee, charged the state Supreme Court with inconsistency in its reasons for rejecting the charter amendments. “Last year, we advanced rights-based county charter initiatives in Athens, Medina, and Fulton Counties,” he said in a prepared release. “The Supreme Court determined they could not go on the ballot due to a technicality in the format. Yet they remained unclear in defining exactly what was required.” McGinn continued, “We drafted new charters this year, using the ambiguous direction given by the Supreme Court. One has to wonder: How convenient to deny there are clearly articulated rules on creating a charter, and then avoid providing clarity.” He said the varying legal bases for rejecting the charter measures “leave the people chasing a moving target and unable to vote on their own county initiative, year after year.” Tish O’Dell, community organizer for CELDF, said the decisions compromise democracy and justice. “The people’s right to alter or reform their government is meaningless when the same government that the people want to alter, acts as gatekeeper, restricting access to direct democracy as they so choose,” she said.

Local residents, students occupy Forest Service meeting over fracking concerns - About 30 Ohio University students and Athens County residents occupied Saturday’s National Collaboration Cadre Workshop, held in Grover Center. They occupied the workshop to protest the possible fracking in Wayne National Forest.  In 2011, the U.S. Bureau of Land Management announced the purchase of land for oil and gas drilling purposes, according to a previous Post report. Since then, the federal government has gone back and forth considering developing a fracking plan. The workshop, coordinated by the U.S. Forest Service and themed “Working Together to Improve the Quality of Life in Southeast Ohio,” invited dozens of groups from around the Wayne National Forest area to discuss topics ranging from economic development to forestry and wildlife issues. The occupiers asserted that the invitation-only event excluded members of the community who wish to participate in environmental conversations, particularly about fracking.   “While we are completely supportive of the inclusion of community groups in the U.S. Forest Service’s decision-making process, we believe that sitting down with the oil and gas industry is not in the best interests of our community,” the Appalachian Ohio Group of the Sierra Club said in a news release.Although occupiers were not invited to the meeting, they were permitted to take part in the workshop’s group discussions once they arrived, and some participants in the workshop supported their cause. “I think (the occupiers) should be here,” Roxanne Groff, a Bern Township trustee, said. “They have a voice.”   While conversations turned to fracking, occupiers were still not satisfied with the discussion that happened. “Obviously this decision (to frack) has already been made,” . “It’s not a democratic process.” Some local residents and business owners also came without invitation. Madeline Fitch, a Millfield resident and landowner, said the occupiers were showing the U.S. Forest Service they would show up when those discussions are being had, regardless of invitation.

Researchers just discovered an entirely new bacteria species in multiple fracking sites -  Researchers have discovered an unknown species of bacteria living in shale oil and gas wells used for fracking, which they’ve named frackibacter. The genomes of species living in two separate fracturing wells in Ohio were analysed, and despite the fact that they are hundreds of kilometres apart, the two bacterial communities were surprisingly similar. A total of 31 different types of bacterial genome were found at the two sites, including Candidatus frackibacter. "We thought we might get some of the same types of bacteria, but the level of similarity was so high it was striking,” said one of the researchers, Kelly Wrighton, from Ohio State University. “That suggests that whatever's happening in these ecosystems is more influenced by the fracturing than the inherent differences in the shale.”The types of environments that these bacterial colonies thrive in are very inhospitable, with high temperatures, pressure and salinity.  "We think that the microbes in each well may form a self-sustaining ecosystem where they provide their own food sources," Wrighton explained.  "Drilling the well and pumping in fracturing fluid creates the ecosystem, but the microbes adapt to their new environment in a way to sustain the system over long periods."  The researchers say that the microbes are protected from the salinity by creating compounds called osmoprotectants to keep them from bursting apart. The bacterial communities also form a type of symbiotic relationship with each other in these unwelcome conditions. When the cells die, their osmoprotectants are eaten by other microbes, such as frackibacter, which then produce food for the other bacteria called methanogens. This ultimately produces methane, which is a main component of natural gas.  The researchers are looking into how the new-found bacterial colonies could be used to increase the methane output of the fracking sites.

Ohio Supreme Court sides with mineral rights holders in oil and gas reserve cases — In a hefty release Sept. 15, the Ohio Supreme Court sided with longtime mineral rights holders in more than a dozen decisions involving oil and gas reserves in the eastern part of the state. The bottom line: Owners of mineral rights don’t automatically abandon those rights absent surface owners following procedures outlined in state law. And that could mean a lot of future court cases, as surface owners try to sort out whether they really hold the mineral rights to their land. “There will certainly be a lot of activity as people sort out the implications of the decision and where they stand on their mineral right interest relative to the decisions,” said Webb Vorys, who served as a legal adviser to the Ohio Oil and Gas Association in the case. The lead case, Corban v. Chesapeake Exploration LLC, focused on mineral rights in Harrison County, but that opinion was cited in 13 other pending cases involving the state’s Dormant Mineral Act. The ownership issues came to light as companies turned to horizontal hydraulic fracturing, or fracking, to drill for oil and gas reserves in shale formations deep underground. In Corban, justices ruled that the current surface owner of about 165 acres was not entitled to compensation for minerals extracted by a company that long held oil and gas rights to the property, despite decades of inactivity at the site. Other cases decided Sept. 15 pitted current property owners against companies that have held mineral rights but did not launch exploration work for years. The former alleged the companies had abandoned their mineral rights, with a prior state law automatically shifting those rights to the surface owner. The latter held that those rights were reserved and properly documented or held and were not automatically abandoned. In the Sept. 15 decisions, a majority of justices sided with the mineral rights holders, saying that a 1989 state law did “not automatically transfer the interest from the mineral rights holder to the surface owner by operation of law… Rather, a surface holder seeking to merge those rights with the surface estate under the 1989 law was required to commence a quiet title action seeking a decree that the dormant mineral interest was deemed abandoned.”

Ohio Supreme Court issues key decisions on pending Dormant Mineral Act cases - This week, the Ohio Supreme Court issued key decisions on its pending Dormant Mineral Act (DMA) cases. The Supreme Court Announcement itemized the various decisions released this morning, which were further detailed in Court News Ohio . Only three cases received full opinions: Corban v. Chesapeake Exploration, L.L.C., Walker v. Shondrick-Nau and Albanese v. Batman, while the remaining cases were disposed of based on the authority of those three opinions. Overall, the Corban opinion addresses the issues that were most anticipated by oil and gas lawyers around the state, finding that the 1989 version of the DMA applied a fixed look back from its effective date, and that it was only operative until its amendment in 2006. Critically, the Court also held that the 1989 DMA is not self-executing and that a surface owner was required to obtain a judicial determination of abandonment of a severed mineral interest under the 1989 DMA. However, now that the 2006 version of the DMA has completely displaced any right to proceed under the 1989 DMA, only the 2006 version applies today.

Ohio Supreme Court Reconciles Application of the 1989 and 2006 Versions of Dormant Mineral Act - On September 15, 2016, the Supreme Court of Ohio issued its much-anticipated decisions in multiple appeals dealing with the Ohio Dormant Mineral Act, Ohio Revised Code § 5301.56 (DMA).  Using Corban v. Chesapeake Exploration, L.L.C. (Slip Op. No. 2016-Ohio-5796), as the lead case to determine the pivotal legal issues, the Supreme Court held:

  • The 1989 version of the DMA is not self-executing, and, therefore, did not cause ownership of mineral rights to automatically transfer to the owner of the surface rights;
  • Because the 1989 DMA is not self-executing, a surface owner must bring a quiet title action to obtain a judicial decree that a mineral interest has been abandoned and is merged with the surface estate pursuant to the 1989 DMA; and
  • The 2006 DMA, and not the 1989 DMA, applies to all claims asserted after June 30, 2006, the effective date of the 2006 amendments to the statute.

The Court applied its holding in Corban to all of the pending DMA appeals, but provided specific commentary only in its decisions in Walker v. Shondrick-Nau (Slip Op. No. 2016-Ohio-5793), and Albanese v. Batman and Lipperman v. Batman (combined) (Slip Op. No. 2016-Ohio-5814).  The remaining decisions merely reference the result (affirmance or reversal of the appellate court decision), with a cursory reference to Corban, Walker, or the Court’s previous decision in Dodd v. Croskey (143 Ohio St.3d 293).  In Corban, the Supreme Court was tasked with answering the following certified question of state law from the United States District Court for the Southern District of Ohio: “Does the 2006 version or the 1989 version of the [Dormant Mineral Act] apply to claims asserted after 2006 alleging that the rights to oil, gas, and other minerals automatically vested in the surface land holder prior to the 2006 amendments as a result of abandonment?” The Court answered the certified question and concluded that the 2006 DMA applies to all claims asserted after June 30, 2006.  In comparing the 1989 DMA to the Ohio Marketable Title Act, the Supreme Court did not equate the former’s use of the word “deemed” with the latter’s use of “extinguish” and “null and void.”  Rather, the Court determined that the 1989 DMA creates a conclusive presumption (i.e., an evidentiary device) as to the abandonment of severed mineral interests.  Therefore, the surface owner must bring a quiet title action in order to terminate abandoned mineral rights pursuant to the 1989 DMA.  The Court believed that the Ohio General Assembly did not intend that mineral rights would automatically transfer to surface owners outside of the record chain of title.

It's been a really bad week for fracking opponents in Ohio - No, landowners of Ohio, you cannot stop frackers on your own property. No, voters of Ohio, you cannot create your own oil and gas regulations.  That’s the news this week out of the state Supreme Court, which handed down decisions Wednesday and Thursday that benefit the fracking industry. They are the most recent in a series of moves by the state government that have boosted the natural gas industry, often at the expense of everyday Ohioans. At one point, the state’s Department of Natural Resources was working to discredit environmentalists in a push to allow fracking in state parks.  People have responded by seeking local ways to curb the practice, two of which were highlighted this week.   The first decision is the more complicated one, and deals with local governance: Last year, the state Supreme Court ruled that Medina County voters could not legally ban fracking using zoning laws. Voters passed the now-defunct ban using zoning laws because, in Ohio, only two out of 88 counties have a charter, which offers a system known as home rule. In those two counties, and in municipalities such as Youngstown and Cincinnati, changes to the charter can include such self-determination as a local ban on fracking. So in an attempt to get around the court’s 2015 ruling, a Medina County group — as well as groups in three other counties — proposed a ballot measure to establish their own county charter.But Ohio Secretary of State Jon Husted ruled that the counties cannot even put these new charters to a vote. Husted argued that the proposed charters are not clear enough about how the counties would operate, and the state Supreme Court agreed. Last week, it decided not to revisit the issue, and on Wednesday denied yet another motion, killing the counties’ last chance to put the measure on the November ballot.   Not content to stop there, the state Supreme Court issued another series of opinions on Thursday, finding in three different cases that property owners did not have mineral rights — that is, rights to the fossil fuels or other minerals — beneath their land. Those decisions, in turn, nullified arguments in 10 other contested cases.  The court found that the Ohio Dormant Mineral Act, a 1989 law governing mineral rights that have been abandoned, does not automatically go into effect. Instead, the landowner must get a judicial degree. In one case, the court found that an Ohio man who had inherited 164.5 acres in Harrison County could not prevent drilling on his land. The property was purchased more than 50 years ago from a coal company that retained rights to the oil and gas deposits. Even though there was no activity between 1959 and 2011, the court found that the rights did not revert to the owner.

Gas Drillers Look to Use Ford City Brownfields - Vacant land near the Ford City Veterans Bridge may be in-use by next year for Marcellus Shale operations if an agreement is made.Last night at Ford City Borough Council’s regular meeting, PennEnergy Resources Land Manager Zach Dixon and Construction Compliance Manager Joe Schwab discussed preliminary conversations to lease up to five acres in the Ford City brownfields.“Generally, this facility will withdraw clean water from the Allegheny River, hold it in a tank facility and will then be used at PennEnergy’s operations in-and-around the region,” Dixon said. “With about 48-50,000 acres under lease around Ford City, we have a significant demand for water – these facilities are important for our operation and keeping the oil and natural gas operations continuous in nature.“We have facilities that are operating basically 24/7 on creeks around Freedom Borough, Butler County, for a very, very similar type of withdrawal from the Ohio River.”If approved, Ford City Borough would receive an upfront bonus of $10,000, plus a $2,400 annual payment depending on the number of acres utilized.

Firm: Faster-than-expected corrosion led to pipeline blast  AP) — Faster-than-expected corrosion caused a Pennsylvania natural gas pipeline blast that scorched 40 rural acres in April and badly burned a man whose home was destroyed, the Texas energy company that owns the pipeline said. Andy Drake, the vice president of operations and environmental health and safety with Houston-based Spectra Energy Corp., shared those findings Tuesday night in Salem Township, Westmoreland County. The 30-inch pipeline burst there April 29. The pipeline showed some corrosion during a 2012 inspection but not enough to warrant action until 2019. That’s because officials anticipated corrosion would grow 2 to 3 percent annually. Instead, the line corrosion increased about five times faster, or 10 to 15 percent each year, said Drake, who apologized for the failure. “We’ve never seen anything like this before,” Drake told the township’s board of supervisors, as well as federal and state regulators, at a meeting that drew about 80 residents. “This is the challenge we’ve put to ourselves: Imagine a person standing next to this pipe — your son, your mother. Are we comfortable that this pipe is absolutely safe everywhere?” Drake said. Spectra is reviewing 625 other sites along the 265-mile pipeline that runs from a gas transmission station in nearby Delmont to Lambertville, New Jersey. Spectra has dug up 400 of those sites where potential problems have been found and repaired problems found in about a third of those areas. But the company hasn’t found corrosion comparable to what caused the blast, officials said. The company estimates the digging and repairs will eventually cost $75 million to $100 million.

Decision to delay Dakota Access construction worries backers of natgas projects - Advocates of the US natural gas pipeline industry expressed concern Tuesday over an Obama administration decision to delay construction of a controversial crude oil pipeline, fearing the move could have negative implications for natural gas pipeline development. The US Justice and Interior departments and the US Army Corps of Engineers on Friday issued a joint statement halting construction of a portion of the Dakota Access project, a 1,172-mile, 30-inch oil pipeline being built to carry crude oil from North Dakota's Bakken and Three Forks producing fields across four states to a major refining area in Illinois. The project is about 60% complete and Energy Transfer Partners remains committed to finishing it, despite the halt in construction, CEO Kelcy Warren told employees in memo Tuesday. The administration action came after a federal judge ruled against a bid by the Standing Rock Sioux Indian tribe to block pipeline construction. The tribe and their allies in the environmental community had been staging protests along the pipeline route, which they said would travel over sacred Native American sites. While the Federal Energy Regulatory Commission's process for siting gas pipelines differs substantially from the process to approving crude oil pipelines, gas pipeline advocates worried that the administration's action could have a negative knock-on effect on the gas industry."With its decision, the administration has turned the process for pipeline infrastructure projects that just engage in National Historic Preservation Act Section 106 tribal consultations into a moving target," Cathy Landry, a spokeswoman for the Interstate Natural Gas Association of America, said in an email Monday. "Regulatory approvals for these expensive infrastructure projects should be predictable and transparent. It is not good public policy to change the rules or expectations midstream," Landry said. Landry said the administration's action in the Dakota Access has cast unnecessary doubt on the future of that project.

NY regulators order full environmental review for pipeline  (AP) — New York state regulators say a proposed dual pipeline from Albany to New Jersey oil refineries requires a full environmental review. The Department of Environmental Conservation and the Thruway Authority announced its finding Wednesday, saying the Pilgrim Pipeline project has the potential for significant adverse impact on the environment and communities. The pipelines would carry North Dakota crude oil to New Jersey refineries and return gasoline and other fuels to Albany. Connecticut-based Pilgrim Holdings LLC says it’s a safer alternative to Hudson River barge transport. Environmental groups and numerous communities oppose the pipelines, citing environmental and safety concerns. About 79 percent of the project would lie within the New York State Thruway right of way. A public comment period will be held to determine the scope of the environmental review.

Pipeline Spill Triggers Supplier 'Red Alert' in Alabama, Georgia -- Last week's Colonial Pipeline spill has prompted Alabama Gov. Robert Bentley and Georgia Gov. Nathan Dealto both declare states of emergency over gasoline shortages on Thursday. Aerial photo of two of the three mine water retention ponds at the site of a pipeline leak that spilled an estimated 250,000 gallons of gasoline in Shelby County, Ala. The retention pond on the right is where the gasoline has been contained. Colonial PipelineThe Sept. 9 break has leaked 6,000 barrels (approximately 250,000 gallons) of fuel into Shelby County, Alabama, the operator estimated , up from its original estimation of 1,000 barrels. The cause of the leak is currently unclear. Colonial Pipeline , the largest refined products system in the nation, operates 5,500 miles of underground pipe and above ground storage tanks and pump stations, delivering more than 100 million gallons of refined petroleum products a day. Their customer base is an estimated 50 million Americans, between Houston and New York City. CNN Money said that the disruption "threatens to drive up prices and leave service stations without fuel to sell." In response to the spill, the Alpharetta, Georgia-based company closed its main gasoline line, Line 1, that runs from refineries in the Gulf Coast to the East Coast. About 500 employees and contractors are currently working to clean up the site and repair the impacted segment of pipe.The Birmingham Business Journal reported that most of the spilled gasoline has been contained in a nearby mining retention pond as workers skim the pond to remove the gasoline. Underflow dams are also being constructed to prevent gasoline seepage into the nearby Cahaba River.However, Billy McDanal, a landowner living near the river, spoke to AL.com over his concerns about the spill. "That's our water," he said. "I guess in a way I am worried about the drinking water."

Why East Coast Gas Prices Are About To Explode --As Native Americans protesters face arrest in North Dakota for blocking the construction of the Dakota Access Pipeline, TheAntiMedia's Carey Wedler reports a gasoline pipeline spill is currently unfolding in the South. The leak has prompted Alabama Gov. Robert Bentley, Tennessee Gov. Bill Haslam, and Georgia Gov. Nathan Deal to declare states of emergency. The Colonial Pipeline, which runs from Houston to New York, began leaking on September 9, spilling 250,000 gallons of gasoline, or 6,000 barrels. The pipeline was built in 1962, and the current leak in Helena, Alabama, is the largest one Colonial Pipeline has experienced in 20 years, Reuters noted.AL.com reported that according to the Colonial Pipeline company’s spokesperson, Bill Berry, the pipeline could still be leaking:“The leaking pipeline was shut down [last] Friday after the leak was discovered, but Berry said there may be additional gas still inside the pipeline. The leaking section of pipeline hasn’t been excavated yet due to safety precautions, so Berry said the condition of the pipeline and cause of the leak is still unknown.”  Hundreds of employees and contract workers face health risks from inhaling vapor as they work overtime to clean up the spill, which the company says is contained to a mining retention pond. AL.com reports “the leak was discovered at the inactive mine site by employees of the Alabama Surface Mining Commission.” The governors of Georgia, Tennessee, and Alabama have declared states of emergency, not due to environmental concerns, but over the gas shortage that will result from the leak. After Colonial Pipeline announced Thursday there would be a delay in restarting the pipeline because “work activity was intermittent overnight due to unfavorable weather conditions that caused gasoline vapors to settle over the site,” the price of gasoline futures rose six percent... even as crude futures prices tumbled... As CNN reports, The major pipeline, one pipe of which has been severed, provides gasoline for an estimated 50 million people on the East Coast each day, according to company estimates. The cause of the leak has yet to be determined, according to the company's most recent statement.

Shell begins production at world's deepest underwater oilfield. - Royal Dutch Shell has started production at the world’s deepest underwater oil and gas field, 1.8 miles beneath the sea surface in the Gulf of Mexico. The first oil pumped from the Stones field, 200 miles south of New Orleans, comes after billions of dollars of investment from Shell over the last three years.  The achievement will anger many climate change campaigners, but will boost annual pay for Shell’s chief executive, Ben van Beurden, under the group’s controversial performance bonus arrangements. The field is in much deeper water than the Macondo prospect, where six years ago BP’s Deepwater Horizon rig exploded and sank, killing 11 workers and causing environmental disaster. The latest costly addition to Shell’s production capacity comes despite Van Beurden’s repeated pledges on climate change. In May, he said: “We know our long-term success … depends on our ability to anticipate the types of energy that people will need in the future in a way that is both commercially competitive and environmentally sound.” Faced with low oil prices and increased pressure from climate change activists, Shell has retreated from some of its most expensive production projects. In the autumn last year, it ditched drilling operations in the Alaskan Artic and abandoned a tar sands project in Alberta, Canada.  But the group has told shareholders it will continue spending heavily on pioneering deep water projects, which will provide a major source of future growth.  Shell has forecast that its deep water production will increase to the equivalent of more than 900,000 barrels of oil a day by the early 2020s from already discovered, established reservoirs. Major projects the group is working on include Coulomb Phase 2 and Appomattox in the Gulf of Mexico and Malikai off the coast of Malaysia. Shell began the costly Stones project in 2013, two years after the International Energy Agency (IEA) warned that two-thirds of proven fossil fuel reserves will need to remain in the ground to prevent the earth from warming 2C above pre-industrial levels – a proposed temperature limit beyond which scientists warn of spiralling and irreversible climate change.

Anadarko Goes Deeper in GOM with $2B Deal -- Anadarko Petroleum Corp. is diving even further into deepwater Gulf of Mexico with a $2 billion acquisition of assets from Freeport McMoran Oil & Gas, the company announced Monday. The deal, effective Aug. 1, will be immediately accretive, Anadarko CEO Al Walker, said in a news statement. It is expected to close by the end of the year. The $2 billion buy will achieve several objectives for the Houston-based exploration and production company (E&P), including:

  • doubling Anadarko’s ownership in the Lucius development to about 49 percent;
  • expanding the company’s infrastructure throughout the Gulf of Mexico;
  • generating $3 billion in incremental cash flow during the next five years at current prices; and
  • enabling the company to accelerate investment in Anadarko’s Delaware and DJ basin assets.

The Delaware basin made headlines recently when another Houston-based E&P, Apache Corp., announced a major find in the region. All told, Anadarko’s Gulf position will have net sales volumes of about 155,000 barrels of oil equivalent per day (boepd), 85 percent of which is oil, Walker said.  For their part, Freeport McMoran CEO Richard Adkerson said in a news statement the deal brings the company’s total asset sales in 2016 to more than $6 billion. Freeport McMoran is focusing on dedicating capital and management resources to its global copper business, he said.

Cynthia: Flesh-Eating Synthetic Bacteria that has Gone Wild --  One could recall that back in April 2010 an explosion at a British Petroleum oil rig resulted in millions of barrels of oil contaminating the Gulf of Mexico. Despite the drastic measures taken to prevent an environmental catastrophe, an oil slick produced by the Deepwater Horizon oil spill covered over sixty thousand square miles. As one of the means of addressing the environmental catastrophe on their hands, Washington decided to take drastic measures, regardless of the possible consequences of those actions. It was at that time when an artificially created microorganism nicknamed Cynthia was unleashed, without any kind of examination of the possible threat it may pose to the environment.  Cynthia is the brainchild of the J. Craig Venter Institute — which was engaged in genetic engineering experiments since the beginning of the 21st century — and Synthetic Genomics Inc, and was created and funded directly by BP. It was believed that Cynthia feeds on oil, but it turns out now that it is equally willing to consume all forms of organic life as well… In 2011, Cynthia was unleashed in the Gulf of Mexico and in its initial stages of life it was absorbing oil slicks at breathtaking speed. In January, 2011 the Register reported that scientists were particularly impressed by the speed with which the bacteria was eating up its “meal”. But then this bacteria mutated and soon was feeding on organic lifeforms. Strange reports started coming from the US, like five thousand birds falling victims of an “unknown disease” in Arkansas, or more that a hundred thousand dead fish found off the coast of north Louisiana. It was also reported that a total of 128 British Petroleum employees that participated in the liquidation of the oil slick were struck by some mysterious illness. According to various sources they were forbidden to seek relief in public hospitals, to prevent them from talking to anyone about what has happened to them… Soon it was recorded that the disease and the symptoms that are now associated with the coastal zone of the Gulf of Mexico began spreading to the continental United States – for example, people who were caught by heavy rains that came from the Gulf of Mexico were also exposed to it.  In fact, such disturbing reports have become pretty common, in spite of the restrictive measures taken by the US government to prevent this information from spreading. In particular, it’s been reported that certain individuals who were unfortunate enough to take take a swim in the Gulf of Mexico often found themselves covered with itching sores only to die in agony a few days later due to extensive internal bleeding.

France Banned Fracking, So Biggest Oil Company Headed To Texas - France’s largest oil company is about to become the only company with hydraulic fracturing, or fracking, operations in Texas’s Barnett Shale formation. The oil company Total will soon be the sole Barnett Shale fracker after Chesapeake Energy stopped drilling new wells in the shale formation because natural gas prices were too low. Total will pay pipeline company Williams Partners $420 million for a “a fully restructured, competitive gas-gathering agreement.” “With the new conditions created by the exit of Chesapeake and the associated restructuring of the midstream contracts, we believe that we can extract significant value from the substantial, well-located resource base of the play,” José Ignacio Sanz, Total’s president of U.S. operations, told The Wall Street Journal. The move is expected to boost the company’s total U.S. production up another 65,000 barrels per day, from its current 89,000 barrels a day. Fracking in the Barnett Shale has produced more than 15 trillion cubic feet of natural gas since 2003, enough to heat 225 million homes for a year. The fracking industry in Texas produces $11.8 billion in annual economic output and has created more than 107,000 permanent jobs.  With current fracking technology, the Barnett Shale has an estimated 172 million barrels of shale oil and 176 million barrels of natural gas liquids, according to a December study by the U.S. Geological Survey. To put those reserves in some context, Saudi Arabia’s total proven oil reserves are estimated to be 268 billion barrels, according to the CIA.

Saudi Bid on a Houston Oil Refinery Is a Big Strategic Bet  -— The Saudi national oil company is making a bid to significantly expand its operations in the United States at a critical moment in the always uneasy relations between the United States and Saudi Arabia. The company, Saudi Aramco, aims to strengthen its position on the Gulf of Mexico coast by buying a large oil refinery in the Houston Ship Channel that LyondellBasell is putting up for sale. And despite geopolitical tensions between Riyadh and Washington, Saudi Aramco sees the potential acquisition as a way to shore up its exports at a time of erosion in the oil business on which the Saudi economy is still largely reliant. Because of plunging prices, the value of Saudi oil sales has shrunk in recent years. And Saudi Arabia’s archrival, Iran, is becoming a more potent commercial competitor now that it is exporting substantial quantities of crude. Four years ago Saudi Aramco completed a $10 billion expansion of a giant oil refinery in Port Arthur, Tex., in a joint venture with Royal Dutch Shell called Motiva Enterprises. The converted plant is now the biggest producer of gasoline, diesel and other petroleum products in the United States.  This time, Saudi Aramco wants to do a deal on its own. But its negotiations with LyondellBasell, a Dutch company, come as Congress is moving to allow families of victims of the Sept. 11, 2001, terrorist attacks to sue Saudi Arabia for supposed ties between government officials and the terrorists, most of whom were Saudi citizens. The Obama administration has threatened to veto the measure, although an override is possible.

How The Oil And Gas Industry Awakened Oklahoma's Sleeping Fault Lines - It was either February or March of 1952 when an Oklahoma City petroleum geologist named William Atkinson took the unusual step of getting an earthquake insurance policy for his house. Today, that seems a bit eerie in its prescience — in 2014, the state had more big earthquakes than California, and on Saturday it was rattled by its largest earthquake in the modern record, a magnitude 5.8. But consider this: The only reason anyone knows about Atkinson’s insurance policy is because his weird choice became newsworthy on April 9, 1952, when Oklahoma City rocked and swayed its way through an earthquake that might have been almost as powerful as the one last week. Eerie doesn’t cut it. In his predictive accuracy, Atkinson was downright unnatural.  Or maybe he was just good at his job. Susan Hough, a seismologist with the United States Geological Survey, has studied the historical context surrounding Atkinson’s decision. In a paper published this year, she concluded that two factors could have led a person with Atkinson’s expertise to buy earthquake insurance. First, oil and gas extraction, even the old-fashioned, non-fracking kind, has the potential to shift the forces affecting fault lines. Second, Oklahoma is positively lousy with fault lines. Before 2008, Oklahoma had maybe a couple of earthquakes of magnitude 3 or greater each year, said George Choy, a research geophysicist with the USGS who studies human-caused quakes. In 2015, it had around 900. The evidence studied by scientists like Choy and Hough strongly suggests that this increase was caused by the practice of injecting wastewater from oil and gas extraction — both conventional and fracking — back into the earth. To understand why that is, and why those same scientists can’t tell you whether any individual earthquake was caused by the petroleum industry, you have to pay attention to the faults. Because of the way you learned geology in grade school, you may be used to thinking of faults as places where two of the tectonic plates that make up the Earth’s crust meet.   But faults exist in other places, as well. On our map, you can see an estimation of the known faults that crack the surface of Oklahoma like an overbaked cheesecake. “Any part of the crust has a bunch of faults in it that are old faults. They were created in past geologic times,” Hough told me. Oklahoma’s faults are tens or even hundreds of millions of years old, dating to times when the boundaries between tectonic plates were in very different places. “There’s a mountain range in southeastern Oklahoma, called the Ouachita, that was actually the remnants of an old collision zone,” Hough said.

Past time for Oklahoma to wake up to earthquake causes - A week after the earth shook many Kansans out of bed on a Saturday morning, we’re once again questioning when Oklahoma is going to wake up to the dangers it has caused with slow regulation of oil and gas production. An earthquake Sept. 3 near Pawnee originally measured at 5.6 and was then upgraded to 5.8 – the strongest in Oklahoma’s history and the worst among the 48 contiguous states in two years. It was felt across Kansas and as far away as Chicago and Arizona. It caused damage to rattled houses and buildings close to the epicenter. In Kansas, we’re getting used to feeling the tremors from our neighbors to the south, but it’s becoming tiresome. We have quakes in Kansas, too, but they’re not as strong and don’t come as often since our state began tightening regulations on oil and gas wells last year. The spike in earthquake activity over the past five years has corresponded to wastewater from oil and gas, caused both by traditional wells and those that use the technology of hydraulic fracturing – also known as “fracking.” High-pressure injections into underground rock formations force out oil and gas but also create a wastewater solution that is injected into underground wells. Seismologists say that puts pressure on old faults and triggers the earthquakes. Gas and oil are huge factors in Oklahoma’s economy. They’re important to many Kansans, too. But this state has taken strong steps to regulate activity, which has lessened the shock. Oklahoma has been slow to follow. For years, political leaders said the causes were unclear, and the state’s Corporation Commission has requested the oil industry to cut back. But the state showed it can move when it wants to, shutting down three dozen wells within 500 miles of the earthquake last week. It was the first time the state had ordered such a stoppage in production related to earthquakes.

Even with disposal well shutdowns, Oklahoma's seismicity set to rumble for 'many years' - Tulsa World: Latest Earthquake Information From The U.S. Geological Survey: Some critics have shouted for state regulators to place a blanket moratorium on wastewater disposal from oil and gas production, which industry officials argue would be crippling, and science points to seismicity remaining for untold years even in that scenario. Oklahoma’s earthquake energy released in 2016 slowed to 2014 rates, and its quake frequency dipped about 20 percent at the halfway mark compared to 2015’s banner year, according to U.S. Geological Survey data. Regulations contributing to unprecedented cutbacks in wastewater disposal volumes linked to man-made quakes apparently have played a significant role in the decline. But then a week ago the powerful 5.8-magnitude quake near Pawnee struck in a relatively weak seismic area, shaking Oklahoma and several surrounding states. The episode served as a reminder of the state’s precarious situation despite the recent downward rumbling trends. Dan McNamara, a USGS research geophysicist, published a peer-reviewed paper in October 2015 that is a clear indicator induced seismicity can be managed based on a study of Cushing. But McNamara cautioned last week that quakes can continue rattling off for years after disposal is reduced or stopped. “So even if you shut down all wells, there will be seismicity for many years,” he said.

Oklahoma, EPA officials revise well shut-in plans after earthquake - Natural Gas | Platts News Article & Story: Based on new geological data, state and federal officials lowered by 22 the number injection wells ordered to be shut in an area of Oklahoma near the city of Pawnee, where a 5.8-magnitude earthquake occurred September 3. Monday's action was a collaborative effort involving the Oklahoma Corporation Commission's Oil and Gas Division and the US Environmental Protection Agency, as it involves Osage County, where the injection wells are under EPA jurisdiction. The wells to be closed include 27 under OCC jurisdiction and five under EPA jurisdiction. State officials said the 27 wastewater wells ordered to be shut compared with the shutdown of 37 wastewater injection wells that OCC the announced within hours of the quake earlier this month. Meanwhile, the EPA ordered the shut-in of five wells in its area of jurisdiction, down from 17 shut-ins the agency announced earlier this month. At the same time the OCC expanded the area of concern from a 725-square-mile area around the city of Pawnee to a 1,116-square-mile area.The mandatory shut-ins are expected to last at least six months and may become permanent, depending on new data that is collected, officials said. The OCC action follows and clarifies an emergency action the commission's OGD announced the day of the quake, the largest in state history. Monday's order will result in the shutting in of 40,000 b/d of wastewater injections in the wells within the oil and gas division's jurisdiction, according to an OCC statement. There are 67 injection wells that dispose into the deep Arbuckle formation in the geological area of interest where the officials are considering taking action, 48 within OCC's jurisdiction and 19 within EPA's jurisdiction.

Fracking Thanks: Experts Urge US Midwest to Prep for Earthquakes like California  --- Oklahoma was hit on Saturday with a significant 5.8 magnitude earthquake, the largest ever in the state, and now, thanks to oil extraction practices including fracking, the US Geological Survey is warning the region to prepare for more earthquakes, in the same manner quake-prone California does. According to reports, odds are high that the quake was triggered by fracking operations in the region, due to the injection of fracking wastewater below the subsurface.  Now, the USGS has produced a 2016 seismic hazard forecast which includes natural as well as fracking-induced earthquakes. In it, they warn that injection of water can induce earthquakes of larger magnitudes, particularly if there are nearby pre-existing faults reactivated by upsetting subsurface pressure. The USGS warns that if the fracking-induced seismicity continues unabated, areas in Kansas and Oklahoma may face similarly damaging earthquakes as those seen in California. “Conversion of ground shaking to seismic intensity indicates that some places in Oklahoma, Kansas, Colorado, New Mexico, Texas, and Arkansas may experience damage if the induced seismicity continues unabated,” the report warns. “The chance of having Modified Mercalli Intensity (MMI) VI or greater (damaging earthquake shaking) is 5–12 percent per year in north-central Oklahoma and southern Kansas, similar to the chance of damage caused by natural earthquakes at sites in parts of California.”

Adequacy of Current State Setbacks for Directional High-Volume Hydraulic Fracturing in the Marcellus, Barnett, and Niobrara Shale PlaysPDF Version (367 KB) Abstract

  • Background: There is an increasing awareness of the multiple potential pathways leading to human health risks from hydraulic fracturing. Setback distances are a legislative method to mitigate potential risks.
  • Objectives: We attempted to determine whether legal setback distances between well-pad sites and the public are adequate in three shale plays.
  • Methods: We reviewed geography, current statutes and regulations, evacuations, thermal modeling, air pollution studies, and vapor cloud modeling within the Marcellus, Barnett, and Niobrara Shale Plays.
  • Discussion: The evidence suggests that presently utilized setbacks may leave the public vulnerable to explosions, radiant heat, toxic gas clouds, and air pollution from hydraulic fracturing activities.
  • Conclusions: Our results suggest that setbacks may not be sufficient to reduce potential threats to human health in areas where hydraulic fracturing occurs. It is more likely that a combination of reasonable setbacks with controls for other sources of pollution associated with the process will be required.

The Regulation of Hydraulic Fracturing on Federal and Indian Land: Wyoming v. Department of the Interior The Bureau of Land Management (BLM) of the Department of the Interior (DOI) is responsible for overseeing oil and gas development on approximately 700 million acres of subsurface mineral estate and 56 million acres of Indian land, in addition to millions more above ground.[13] Until 2012, the BLM did not separately regulate hydraulic fracturing on federal or Indian lands, which remained under individual Indian and state regulation. The BLM regulated the surface effects of using hydraulic fracturing in oil or gas extraction but generally did not regulate the subterranean aspects of that technique.[14] On March 26, 2015, the BLM adopted regulations to govern hydraulic fracturing on federal and Indian land.[15] The bureau summarized the goals of the rule as follows:   To ensure that wells are properly constructed to protect water supplies, to make certain that the fluids that flow back to the surface as a result of hydraulic fracturing operations are managed in an environmentally responsible way, and to provide public disclosure of the chemicals used in hydraulic fracturing fluids.[16] The BLM Fracking Rule seeks to achieve that result in several ways. It imposes additional drilling and construction requirements on shale mining companies for operations on federal or Indian lands. It requires disclosure of the chemicals and propping agents used in hydraulic fracturing. And it imposes new management requirements for the surface-operation aspects of hydraulic fracturing, including the use of above-ground storage tanks, instead of below-ground pits, to hold “flowback” (returned drilling fluid) and “produced water” (briny water found in shale containing oil and gas).[17] The primary effects of the rule would land on seven western states where some 98 percent of hydraulic fracturing operations on federal lands take place.[18] The vast majority of BLM land is located in the West, leaving fracking operations in other areas of high activity like Pennsylvania, Texas, and Ohio mostly untouched by the BLM’s rule. The rule would therefore give eastern states a competitive advantage in the extraction process and could render some drilling in the western states unprofitable.

North Dakota tribe's request to stop work on pipeline denied (AP) — The Standing Rock Sioux Tribe’s attempt to halt construction of the four-state Dakota Access oil pipeline near their North Dakota reservation was denied Friday the 9th by a federal judge. The tribe had challenged the Army Corps of Engineers’ decision to grant permits at more than 200 water crossings for Dallas-based Energy Transfer Partners’ $3.8 billion pipeline, saying that the project violates several federal laws, including the National Historic Preservation Act, and will harm water supplies. The tribe also says ancient sacred sites have been disturbed. U.S. District Judge James Boasberg in Washington denied the tribe’s request for a temporary injunction in a one-page ruling that included no explanation. It ordered the parties to appear for a status conference on Sept. 16. Attorney Jan Hasselman with environmental group Earthjustice, who filed the lawsuit in July on behalf of the tribe, said in the days before the ruling that it’ll be challenged. “We will have to pursue our options with an appeal and hope that construction isn’t completed while that (appeal) process is going forward,” he said. “We will continue to pursue vindication of the tribe’s lawful rights even if the pipeline is complete.” Energy Transfer Partners officials didn’t return The Associated Press’ phone calls or emails seeking comment. The 1,172-mile project will carry nearly a half-million barrels of crude oil daily from North Dakota’s oil fields through South Dakota and Iowa to an existing pipeline in Patoka, Illinois.

NDPC Statement on Dakota Access Pipeline Decisions– North Dakota Petroleum Council President Ron Ness issued this statement today in response to U.S. District Court Judge James Boasberg’s ruling today: “The NDPC is pleased with Judge Boasberg’s ruling today that upholds what a vast majority of North Dakotans have known and believed all along: that this is a legal project that has met and exceeded the requirements of four states and the federal government. We are, however, disappointed with the U.S. Department of Justice, the U.S. Department of Interior and the U.S. Army Corps of Engineers’ decision to intervene in this lawfully approved project and continue to postpone the construction of this infrastructure that is so vital to our nation’s energy future. “For too long, this project has been mired in a campaign of misinformation and violence that does not consider the greater interests of national security and the state and nation’s economic prosperity. We regret that this decision, which is yet another flagrant overreach by federal government and this administration, will only allow this rancor to continue and result in more trucks and rail cars moving oil. While we support the efforts to bolster meaningful and open-minded discussions with tribal governments, this project has already met the rigorous requirements and demands of not only the federal government, but four separate states and provided ample opportunity for comments. This project is critical to our nation’s energy future and is in the best interest of the state and nation. We are hopeful that reason will prevail and construction can go on as planned so that North Dakota’s oil resources can be transported safely and responsibly via this pipeline, helping relieve the impacts to our roads and rails and continuing to support our economy, tax revenues and national security.”

Federal intervention on oil pipeline project unprecedented: (AP) — The Standing Rock Sioux's effort to block a four-state oil pipeline got a lifeline when the federal government temporarily stopped the project, a move some say likely may forever change the way all energy infrastructure projects are reviewed in the future. Just minutes after U.S. District Judge James Boasberg denied the Standing Rock Sioux tribe's attempt to halt the construction of the Dakota Access oil pipeline that skirts the reservation in southern North Dakota, three federal agencies appealed to the pipeline company to "voluntarily pause" work on a segment that tribal officials say holds sacred sites and artifacts. Tribal officials challenged the Army Corps of Engineers' decision to grant permits for Dallas-based Energy Transfer Partners' $3.8 billion pipeline that is intended to carry oil from North Dakota to Illinois. Friday's ruling by Boasberg, who was appointed by President Barack Obama, came amid growing protests over the pipeline, which would cross the Missouri River less than a mile upstream of the reservation. The statement by the Departments of Justice, Army and Interior said it would "reconsider any of its previous decisions" on land that borders or is under Lake Oahe, one of six reservoirs on the Missouri River and the drinking water source for the tribal members on the Standing Rock Sioux Reservation. The statement from the federal departments also said the case "highlighted the need for a serious discussion" about nationwide reforms "with respect to considering tribes' views on these types of infrastructure projects." Troy Eid, a former U.S. attorney in Colorado who now specializes in Indian law, said the action was unprecedented and a "significant setback" for the pipeline's builders.He said the lack of tribal consultation on the Dakota Access pipeline "is a textbook example of how not to do a project."

The fight over the Dakota Access Pipeline, explained - For months, the Standing Rock Sioux Tribe in North Dakota has been waging a pitched battle against a proposed oil pipeline that would run near their reservation — arguing that it could endanger both their water supplies and sacred sites.  The fight over the Dakota Access Pipeline encompasses everything from the federal government’s historically appalling treatment of Native Americans to broader debates over fracking and climate change. The cause has attracted a vast array of tribes, activists, and environmentalists from across the country, and tensions have soared. On September 3, private security for the company building the pipeline used dogs and pepper spray on protesters trying to block bulldozers. Opponents have taken the fight to court, hoping to alter or block the project. The DC Circuit Court is currently hearing a major legal challenge to the pipeline, with the Standing Rock Sioux arguing that the Army Corps of Engineers did not properly consult them before greenlighting the section near their reservation. In the meantime, construction is grinding to a halt: On Friday, September 9, a federal judge denied an request by the Standing Rock Sioux to put a freeze on construction. But an hour later, the Obama administration surprised everyone by stepping in and ordering the Army Corps of Engineers to hit pause until it could revisit the controversial portion near the reservation. Further protests are expected in the coming days and months, and politicians like Bernie Sanders are joining the fray.  This is becoming a bigger and bigger story. So here’s a guide to how we got this point.

Dakota Access Pipeline: The Wrong Side of a Long, Long History of Resource Extraction -- Thanks to abundant coverage by social media, the nation watched this week as activists protesting the construction of a pipeline to transport oil through the Dakotas, Iowa and Illinois put their own safety at risk to protect a Native American cultural site. A Pinkterton-esque goon squad used pepper spray and attack dogs to clear the site for unscheduled excavation, resulting in injuries, hospitalizations, and an outraged public. Energy Transfer Crude Oil Company—the developer of the Dakota Access or Bakken Oil Pipeline—asserts a public need for the 1,172-mile pipeline and promises jobs, tax revenues, and a boost to the economies of the affected states. Advocates arguing against this pipeline’s construction have found these claims to be unfounded. Energy Transfer bases its statement that the Dakota Access Pipeline is necessary on the business opportunity to get more Bakken oil to market sooner, and not on any public need that would be served by a greater flow of oil from the Dakotas to Illinois. The company’s claim that farmers need the pipeline to open up space to ship grain on trains that currently transport oil was soundly debunked by expert witnesses and even by Iowa’s Utility Board in issuing its approval of the project. There is no reason to believe either that Midwest grain shipments will be curtailed in the future or that building the pipeline would reduce any rail shipping constraints should they arise. Energy Transfer’s case for a public benefit in new jobs and tax revenue is difficult to credit after reading local economists’ critiques of the company’s underlying analysis. After studying Energy Transfer’s cost-benefit analysis of Dakota Access as well as post hoc assessments of recent, similar projects, Dave Swenson of Iowa State University found that the company had presented inflated jobs and economic benefit projections. More generally, Swenson found that pipeline projects are large but “labor-stingy” and most of their economic stimulus leaks out of the region in which they are built. Energy Transfer’s assessment also fails to look at the cost to local environments and human communities. The planned route for the Dakota Access Pipeline was re-located away from the more densely populated Bismarck area because of health and safety concerns while dangers to the rural communities impacted by its new route have been ignored. Toxic water pollution and the permanent loss of cultural heritage sites have important effects on public well-being. Any complete accounting of the costs and benefits of pipeline construction must be broad enough to include these external, or non-market, costs.

Warrant Issued for Amy Goodman’s Arrest for DAPL Reporting: Watch Your Back! - Jerri-lynn Scofield - I guess that you might expect a film showing security guards unleashing dogs and pepper spray on those protesting the Dakota Access oil Pipeline (DAPL) would be bound to get someone’s attention. Surely it might lead to an arrest or at minimum, disciplinary measures against those who employed such tactics against non-violent protestors. After all, the optics of such measures surely rebound against those who order them to be unleashed (anyone remember Selma, for example?)Well, if you thought that, you would be wrong. We don’t live in sane times. Instead, a warrant has been issued in Morton County, North Dakota for the arrest of award-winning journalist Amy Goodman, host and executive producer of Democracy Now!, on a charge of criminal trespassing, a Class B misdemeanor offense, as reported by the local Dickinson Press. Goodman and her team have been in the forefront of covering the DAPL protests. On September 3, they filmed security personnel working for the pipeline company using dogs and pepper spray to attack protesters. That graphic report, which may be viewed here, went viral and was rebroadcast widely by CBS, NBC, NPR, CNN, MSNBC and the Huffington Post, among other outlets. “This is an unacceptable violation of freedom of the press,” said Amy Goodman in a statement. “I was doing my job by covering pipeline guards unleashing dogs and pepper spray on Native American protesters.” So much for heeding the reminder that the First Amendment applies as spelled out in the statement issued by the Department of Justice, Department of the Army, and the Department of the Interiors on Friday that asked for “voluntary” suspension of DAPL construction within a forty mile area surrounding Lake Oahu:

Security Firm Guarding Dakota Access Pipeline Also Used Psychological Warfare Tactics for BP - Steve Horn - G4S, a company hiring security staff to guard the hotly contested Dakota Access pipeline (DAPL), also works to guard oil and gas industry assets in war-torn Iraq, and has come under fire by the United Nations for human rights abuses allegedly committed while overseeing a BP pipeline in Colombia and elsewhere while on other assignments. Recently, the UK-based G4S placed job advertisements on its website, announcing it would be hiring security teams to work out of offices in Mandan and Bismarck, North Dakota. These two locales are only a 45-minute drive away from the ongoing Standing Rock Sioux Tribe-led encampment unfolding along DAPL's route in Cannon Ball, North Dakota. First among the list of required experience for both locations is service related to military police, elite military forces, or “any support role in a combat zone.”  Monica Lewman-Garcia, Director of Communications for G4S Secure Solutions in North America, told DeSmog, “G4S Secure Solutions is providing fewer than 10 security officers, assigned to remote sites and providing limited short-term unarmed patrol services.”  Lewman-Garcia also stated that G4S was not on the scenes at the now-infamous Labor Day weekend incident in which private security forces used pepper spray against and allowed their dogs to bite Dakota Access pipeline protesters, adding that the company had not deployed its K9 units and that those involved worked for a different company. G4S also said it could not comment on whether it was hired to be in North Dakota by Dakota Access LLC, by another company altogether, or by one of the local police departments.   Dubbed the “Chaos Company” in an April 2014 Vanity Fair article, G4S is often brought into the stickiest situations, such as overseeing security for the Basrah Gas Company, an Iraqi natural gas company which Shell, Mitsubishi, and South Oil Company jointly own.  An article published by The Telegraph (UK) detailed that G4S had been hired to bring 500 personnel and 220 armored vehicles to protect Basrah Gas Company properties in Iraq. Those properties include two gas plants, a liquefied petroleum gas storage facility, a shipping terminal, and — paralleling the Dakota Access situation — the pipelines between them.

Tribe asks judge to side with feds in oil pipeline pause (AP) — The Standing Rock Sioux Tribe wants a federal judge to recognize three federal agencies’ request for a developer to “voluntarily pause” work on a segment of the Dakota Access pipeline that the tribe says holds sacred sites and artifacts. The tribe said in court documents filed Monday it wants U.S. District Judge James Boasberg to “formalize” the agencies’ requested work stoppage for 20 miles on both sides of the Missouri River at Lake Oahe in southern North Dakota. Boasberg had denied the tribe’s attempt to halt the construction of the pipeline Friday minutes before the agencies made their request in a statement, which also said work would stop on Army Corps of Engineers’ land around and underneath Lake Oahe. The company hasn’t signaled its position on the government’s request.

Erased by False Victory: Obama Hasn’t Stopped DAPL -  Truthout -- All Native struggles in the United States are a struggle against erasure. The poisoning of our land, the theft of our children, the state violence committed against us -- we are forced to not only live in opposition to these ills, but also to live in opposition to the fact that they are often erased from public view and public discourse, outside of Indian Country. The truth of our history and our struggle does not match the myth of American exceptionalism, and thus, we are frequently boxed out of the narrative. The struggle at Standing Rock, North Dakota, has been no exception, with Water Protectors fighting tooth and nail for visibility, ever since the Sacred Stone prayer encampment began on April 1. For months, major news outlets have ignored what's become the largest convergence of Native peoples in more than a century. But with growing social media amplification and independent news coverage, the corporate media had finally begun to take notice. National attention was paid. Solidarity protests were announced in cities around the country. The National Guard was activated in North Dakota. And then came Friday's ruling, with a federal judge finding against the Standing Rock Sioux, and declaring that construction of the pipeline could legally continue. It was the ruling I expected, but it still stung. I felt the sadness, anger and disappointment that rattled many of us as we received the news. But then something happened. Headlines like, "Obama administration orders ND pipeline construction to stop" and "The Obama Administration Steps In to Block the Dakota Access Pipeline" began to fill my newsfeed, with comments like, "Thank God for Obama!" attached to them. Clearly, a major plot twist has occurred. But it's not the one that's being sold. To understand that this isn't the victory it's being billed as, you have to read the fine print in the presently lauded joint statement from the Department of Justice, the Department of the Army and the Department of the Interior: "The Army will not authorize constructing the Dakota Access pipeline on Corps land bordering or under Lake Oahe until it can determine whether it will need to reconsider any of its previous decisions regarding the Lake Oahe site under the National Environmental Policy Act (NEPA) or other federal laws." Note what's actually being said here, what's being promised and what isn't.

Dakota Access Pipeline Would Lock In Emissions of 30 Coal Plants - The Dakota Access Pipeline would carry oil from the Bakken formation in North Dakota to Gulf Coast refineries and export terminals via Patoka, Illinois. With a maximum capacity of 570,000 barrels per day (bpd), it could carry more than 50 percent of North Dakota's current oil production. Ultimately, the net greenhouse gas (GHG) impact of the pipe would depend on what future actions we take to end our fossil fuel addiction and address climate change. Building a large, new pipeline that reduces the cost of delivering a large oil reserve to market would undermine our climate goals. Meeting the targets set out in the Paris agreement, now signed by more than 180 countries around the world, will not be possible if we continue to lock into new fossil fuel infrastructure like the Dakota Access Pipeline. In response to the ongoing protests in North Dakota and the concerns raised regarding the approval process, construction of the project within 20 miles of Lake Oahe has been suspended, yet construction activities continue elsewhere on the route. The statement from the Departments of Justice, Army and Interior that ordered the suspension indicates that a review of the process by which the remaining permits can be considered will be conducted including "under the National Environmental Policy Act (NEPA) or other federal laws." Given the White House recently issued guidance on how federal agencies should assess climate impact, it makes sense that a climate test should now be applied to this misguided project.

Thousands Rally Nationwide Demanding Permanent End to Dakota Access Pipeline --Thousands of people across the country joined more than 200 rallies in nearly all 50 states to call on President Obama to stand with the Standing Rock Sioux Tribe in their fight to protect their water and sacred cultural sites from the Dakota Access Pipeline .  At a rally in front of the White House, Sen. Bernie Sanders joined Native American leaders and activists to show his solidarity with the growing movement.  "It is vitally important that we show our solidarity with the Native American people of this country," said Sen. Sanders. "We cannot allow our drinking water to be poisoned so a handful of fossil fuel companies can make more in profits. This pipeline must be stopped. I am calling on President Obama today to ensure that this pipeline gets a full environmental and cultural impact analysis."  "We are here to tell the President stop Dakota Access. This is a violation of human rights and indigenous rights," said Tara Houska with Honor the Earth, who addressed the crowd of thousands in DC. "This pipeline cannot and should not happen. We are here to protect our drinking water and sacred sites for indigenous people."  Indigenous groups such as Honor the Earth and the Indigenous Environmental Network joined with national groups like the Sierra Club, CREDO Action and 350.org to organize Tuesday's national day of action. At rallies across the country, many local organizers connected their solidarity rallies to local fights against fossil fuel infrastructure.   "Regardless of the decision that was made, we aren't going anywhere until the pipeline is dead," said Kandi Mossett with the Indigenous Environmental Network. "We're not here just to stop one section, we are here to stop the pipeline in it's entirety. President Obama: the fossil fuel industry is dying. Help us invest in renewables and divest from fossil fuels. What will your legacy be? Stand with us for future generations or stand with the fossil fuel industry. Right now, politicians are bought out by the fossil fuel industry and our resistance here in North Dakota should be a wake up call. We won't stand for this any longer."

Did an Industry Front Group Create Fake Twitter Accounts to Promote ND Pipeline? - Steve Horn -- A DeSmog investigation has revealed the possibility that a front group supporting the controversial Dakota Access Pipeline (DAPL) — the Midwest Alliance for Infrastructure Now (MAIN) — may have created fake Twitter profiles, known by some as “sock puppets,” to convey a pro-pipeline message over social media. And MAIN may be employing the PR services of the firm DCI Group, which has connections to the Republican Party, in order to do so.   DeSmog tracked down at least 16 different questionable Twitter accounts which used the #NoDAPL hashtag employed by protesters, in order to claim that opposition to the pipeline kills jobs, that those protesting the pipeline at the Standing Rock Sioux Tribe's encampment use violence, and that the pipeline does not pose a risk to water sources or cross over tribal land.  On September 13, people began to suspect these accounts were fake, calling them out on Twitter, and by September 14, most of the accounts no longer existed. The Dakota Access Pipeline is set to carry oil obtained via hydraulic fracturing (“fracking”) from the Bakken Shale basin in North Dakota across the Dakotas, Iowa, and Illinois. Its owner, Energy Transfer Partners (ETP), says it plans to talk to the Obama administration and “reiterate [its] commitment to bring the Dakota Access Pipeline into operation.” It will do so despite the administration requesting that the company halt construction “voluntarily — particularly around the contested sacred tribal sites located 20 miles east and west of Lake Oahe and the Missouri River — until further notice.” In his memorandum announcing his company's plans to do so, ETP CEO Kelcy Warren espoused many of the same arguments that were deployed by the Twitter sock puppets, which calls into question whether his company helped spearhead the social media campaign behind the scenes in order to create the appearance of grassroots support, a technique known as “astroturfing.” In that memo, Warren said his company plans to engage more aggressively in the PR sphere.

At Camp with the Standing Rock Pipeline Protesters (photo essay) I first made the 1,600-mile journey from Berkeley, California, to the Standing Rock Sioux Reservation in late August and again in early September to document this latest skirmish in the fight to shield fresh water from pollution, to keep fossil fuels in the ground, and to ensure greenhouse gasses stay out of the atmosphere.  When I arrived, I realized there are two major stories unfolding here on the windswept prairie of North Dakota. One of them, the one that has drawn the most media attention, plays out in rallies and hashtags, Facebook Live streams, and confrontations with pipeline security workers. The other is more difficult to see unless you visit the camp itself, where old friends and long estranged tribes have reunited, and people share songs, prayers, and stories as they articulate a future in which tribal lands are no longer national sacrifice zones and the zero-sum logic of industry is not taken for granted.

Pipeline protest site a city unto itself with school, meals - (AP) — Tribal flags, horses, tents, hand-built shelters and teepees dominate one of the biggest, newest communities in North Dakota, built in a valley on federal land near the confluence of the Missouri and Cannonball rivers. It’s a semi-permanent, sprawling gathering with a new school for dozens of children and an increasingly organized system to deliver water and meals to the hundreds, sometimes thousands, of people from tribes across North America who’ve joined the Standing Rock Sioux in their legal fight against the Dakota Access oil pipeline to protect sacred sites and a river that’s a source of water for millions of people. “This is better than where most people came from,” said 34-year-old Vandee Kahlsa, referencing the oft-harsh conditions of reservations across the United States. The Santa Fe, New Mexico, resident, who is Osage and Cherokee, has been at the camp for more than a month.She joins Standing Rock Sioux members who have been here since April, people from other tribes and non-tribal members from as far away as Asia and Europe who’ve vowed to stay as long as it takes to block the four-state, $3.8 billion pipeline’s construction. Though the Dallas-based pipeline company says it intends to finish the project, protesters have some hope: Three federal agencies are reviewing their construction-permitting process, temporarily blocking work on a small section not too far from the encampment site and asking Energy Transfer Partners to temporarily stop work on a 40-mile (64 km) span. But given North Dakota’s brutally cold winters, people will need more than the campfires warming them these days. “I’m pretty sure by winter there will be some buildings up,” said Jonathon Edwards, 36, a member of the Standing Rock tribe who lives in South Dakota and has been here since April 1, when snow was on the ground. “People who came here came here to stay.” The encampment has averaged about 4,000 people recently, he estimated; only 25 of North Dakota’s 357 towns have more than 2,000 people. It’s been called the largest gathering of Native Americans in a century, and the first time all seven bands of Sioux have come together in since Gen. George Custer’s ill-fated 1876 expedition at the Battle of Little Big Horn, Edwards and others say.

More than 30 oil pipeline protesters arrested in last 2 weeks (AP) — Authorities in southern North Dakota say more than 30 protesters have been arrested in the last two days at a Dakota Access pipeline construction site north of Almont. The site is about 70 miles (113 kilometers) northwest of the main protest site near the Standing Rock Sioux Reservation. Morton County authorities say eight people were arrested Wednesday, including three cited for locking themselves onto construction equipment. The county says 69 people have been arrested since protests began last month. A federal judge declined last week to block the pipeline, but the government halted work near Lake Oahe in order to re-examine approval of the pipeline on Army Corps of Engineers’ land. Morton County Sheriff Kyle Kirchmeier says his office will keep pursuing charges against protesters who attach themselves to equipment.

Why the Native American pipeline resistance in North Dakota is about climate justice - Over the past months, hundreds of indigenous persons and their allies have gathered near the crossing of the Missouri and Cannon Ball rivers in the ancestral territories of the Standing Rock Sioux tribe. Using nonviolent means, their goal is to stop the building of the Dakota Access Pipeline (DAPL) that would connect production fields in North Dakota to refineries in Illinois. Their primary fear is that an oil leak would threaten water quality for many members of the tribal community. On Sept. 9, a federal judge denied the tribe’s request for an injunction to halt completion of the pipeline. But shortly after, federal officials said they would temporarily stop construction pending further review.  As a scholar of indigenous studies and environmental justice, I’ve been following these developments closely. The pipeline’s construction has already destroyed some of the tribe’s sacred burial grounds. During protests, the protectors – as many gatherers prefer to be called – have endured violence, including being pepper-sprayed, attacked by dogs, denied nourishment and threatened by lawsuits.  But despite the national attention to this case, one point has gone largely ignored in my view: Stopping DAPL is a matter of climate justice and decolonization for indigenous peoples. It may not always be apparent to people outside these communities, but standing up for water quality and heritage are intrinsically tied to these larger issues.  Climate justice – the idea that it is ethically wrong for some groups of people to suffer the detrimental effects of climate change more than others – is among the most significant moral issues today, referenced specifically in the landmark Paris Agreement of the United Nations Framework Convention on Climate Change.Climate scientists, through organizations such as the Intergovernmental Panel on Climate Change and U.S. Climate Assessment, are finding more evidence of climate change from human activities, such as burning fossil fuels and deforestation. . The same climate science organizations also show that indigenous peoples are among the populations who will suffer more, on average, than other communities from changing environmental conditions. Some are suffering right now.

The Death Of The Bakken Field Has Begun: Means Big Trouble For The U.S. - The Death of the Great Bakken Oil Field has begun and very few Americans understand the significance. Just a few years ago, the U.S. Energy Industry and Mainstream media were gloating that the United States was on its way to “Energy Independence.” Unfortunately for most Americans, they believed the hype and are now back to driving BIG SUV’s and trucks that get lousy fuel mileage. And why not? Americans now think the price of gasoline will continue to decline because the U.S. oil industry is able to produce its “supposed” massive shale oil reserves for a fraction of the cost, due to the new wonders of technological improvement. I actually hear this all the time when I travel and talk to family, friends and strangers. I gather they have no clue that the Great Bakken Oil Field is now down a stunning 25% from its peak in just a little more than a year and half ago: The mighty Bakken oil field located in North Dakota reached peak production in December 2014 at 1.26 million barrels per day (mbd) and is now down to 942,000 bd. This decline is no surprise to me or to my readers who have been following my work for the past several years. I wrote about the upcoming crash of the Bakken oil field in my article.  I ended the article with these sobering words: There are only so many drilling locations available and once they run out, the Great Bakken Field will become a BUST as the high decline rates will push overall oil production down the very same way it came up. Those who moved to the frigid state of North Dakota with Dollar signs in their eyes and images of sugar-plums dancing in their heads will realize firsthand the negative ramifications of all BOOM & BUST cycles. . Well, the Bust of North Dakota economy has arrived according to the article, “The North Dakota Great Recession“:

North Dakota oil output up about 2,375 barrels daily in July (AP) — North Dakota’s oil production increased by about 2,375 barrels a day in July, after dropping by about 20,000 barrels the month before. The Department of Mineral Resources says the state produced an average of 1.029 million barrels of oil daily in July, up from 1.027 million barrels in June. North Dakota’s production record was set in December 2014 at 1.22 million barrels daily. North Dakota also produced 1.69 billion cubic feet of natural gas per day in July, up from 1.66 billion cubic feet daily in June. The July tally is the latest figure available because oil production numbers typically lag at least two months. There were 33 drill rigs operating in North Dakota’s oil patch on Friday, which is up two rigs from the July average.

Judge asked to restore cancelled energy lease in sacred area - (AP) — A Louisiana energy company is asking a federal judge to reverse the cancellation of a 33-year-old oil and gas lease on land considered sacred to the Blackfoot tribes of the U.S. and Canada. Solenex LLC of Baton Rouge filed court papers Monday seeking a judgment in the case that’s before U.S. District Judge Richard Leon in Washington, D.C. The 6,200-acre lease is in the Badger-Two Medicine area of the Lewis and Clark National Forest. It’s just outside Glacier National Park and the Blackfeet Indian Reservation. U.S. Interior Department officials cancelled the lease in March. They said it was improperly issued in part because environmental studies did not consider the effects of drilling on the tribes. Government attorneys must respond to the company’s request to restore the lease within two weeks.

For Some California Kids, Back-to-School Means Back To The Dangers of Fracking Wells - As of this week, American kids are back in the classroom. Some—with summer still on their minds—will gaze longingly out the window, wishing to be anywhere but school. In Kern County, California, where 10 school districts sit less than a mile from fracking wells, that view is often obstructed by a giant metal beak bobbing up and down to extract natural gas.   This sight is a common one to children living in predominantly Latinx Kern County, which is also more than 20 percent foreign-born from Latin America and Asia. In 2015, Kern County approved permits for nearly 2,000 fracking wells in their backyard. Each emits hydrogen sulfide, benzene and xylene, all chemicals that are dangerous to human health. While the problem is concentrated in Kern County, a 2014 study found that throughout California, 352,724 students attended school within one mile of an oil and gas well. Madeline Stano, an attorney with the Center on Race, Poverty and the Environment (CRPE), visited Seqouia Elementary School in Shafter, California, in April 2013 to celebrate a new garden on the school's property. While there, she was struck by a well looming in the background. During the party, she could smell fumes emanating from the site. "It’s really heartbreaking to see young students of color on the playground surrounded by all sorts of industries that are polluting them and influencing what's happening in their lives without anyone choosing or planning that," Stano says.  Those chemical emissions, coupled with diesel truck emissions and other pollutants, gives Kern and the surrounding San Joaquin Valley some of the poorest air quality in the nation. The county suffers from an active asthma prevalence of 10.7 percent among adults, according to the California Department of Public Health. That is 3 percent higher than the state's, while the national rate of asthma is 7.4 percent.  We have wells next to elderly care facilities and hospitals, schools for the mentally disabled.

EPA Official Blasted White House Over Fracking Regulations - A senior Environmental Protection Agency official used an expletive — a term for male genitalia used to describe a foolish or contemptible person — when he called those in the White House who resist efforts to regulate fracking "********," according to a report in The Washington Free Beacon. In a text message obtained by the Energy and Environment Legal Institute through the Freedom of Information Act, then EPA policy chief Michael Goo wrote to Sierra Club lobbyist John Coequyt about difficulties with the White House Office of Management and Budget (OMB), saying, "If you want any hope of regulation of fracking then give us more time to try and remove the gun from our head and talk sense into OMB "********"  Goo, who worked with Coequvt in an effort to draw up EPA policies, sent the message in 2012 as the agency was trying to establish new rules to restrict the oil and gas industry, including the first major fracking regulations. Eventually rules were made that submitted fracking to additional emissions regulations. The Obama administration has generally been supportive of fracking as a way to boost domestic energy production, Politicoreports, with former White House adviser John Podesta summing up the policy by saying, "If you oppose all fossil fuels and you want to turn that switch off tomorrow, that is a completely impractical way of moving toward a clean-energy future." However, since Podesta left his position early last year to chair Hillary Clinton's presidential campaign, the Obama administration has become more willing to back efforts to tighten regulations, the Beacon reports.

Top EPA Official Slams 'Dickheads' At White House For Not Regulating Fracking -- A former senior EPA official known for coordinating with environmentalists slammed the White House for pushing back on agency plans to regulate hydraulic fracturing for oil and natural gas, text messages show. Michael Goo, EPA’s policy chief at the time, texted Sierra Club lobbyist John Coequyt that if environmentalists “want any hope of regulation of fracking then give us more time to try and remove the gun from our head and talk sense into OMB dickheads.”  “If you want the oil and gas nsps to give fracking a free pass, as OMB would like then don’t give us the extension,” Goo texted Coequyt, referring to proposed EPA New Source Performance Standards (NSPS) for oil and gas fracking, according to The Washington Free Beacon. OMB refers to the White House’s Office of Management and Budget.The texts were obtained through a Freedom of Information Act request by the Energy and Environment Legal Institute (EELI). This is the latest EELI release from the Goo files. Previous email releases show how Goo used his private Yahoo email account to coordinate with environmental activists.

Researchers to strengthen water-stewardship for US energy production: Every year in the U.S., a whopping 20 billion barrels of water are generated as a byproduct of domestic oil and gas recovery, according to the U.S. Department of Energy.Safe and environmentally responsible management of this "produced water" is important to energy companies, farmers, ecosystems and everyday people whose drinking water comes from associated aquifers. Now, a joint research effort founded by the University of Kansas and West Virginia University—funded by a new $4 million grant from the National Science Foundation—aims to develop cutting-edge strategies for better management, treatment, protection and recovery of produced water. The scientists behind the work hope to establish a permanent center focused on research-proven best practices for handling produced water nationwide. "Obviously, we need energy," said Edward Peltier, KU associate professor of civil, environmental and architectural engineering, who is the primary investigator of the new project. "We use energy resources every day, and we'll continue to use them. That means the better job we do producing energy in an efficient, clean manner—and not affecting other resources like water quality—the better off we are." Paul Ziemkiewicz, co-PI of the new grant and director of the West Virginia Water Research Institute at WVU, pointed out that until now there has been no nationally coordinated research effort to address issues tied to produced water. "NSF's support will create a national center for technology development as well as training and outreach to recruit a new generation of specialists to address this challenge," he said.

US shale’s resilience touted despite output decline: Fuel for Thought - Last week’s announcement by US company Apache of a major find in West Texas’ Permian Basin seemed to vindicate the optimism about shale heard the previous week at a conference in Norway. Scott Douglas Sheffield, chief executive of shale driller Pioneer Natural Resources, played the role of spoiler-in-chief at the ONS conference, harrying big oil with some uncomfortable assertions. The bad news, for those in the industry who missed out on shale and expected it to fade with low prices, is that the Permian should be able to increase its output from 2 million b/d to 5 million b/d in the next 10 years, assuming prices reach $56/b in 2025, Sheffield said. Pioneer itself is growing its output by 27-30% annually. “It’s in that [price] strip that I see the Permian adding 300,000 b/d per year in US supply,” he said. Emphasizing his contrarian stance, he said he doubted some of the higher forecasts of long-term oil demand growth due to global warming, alternative energy and electric vehicles, while boasting of the company’s use of wind power in its own operations and the solar panels on his home. In Sheffield’s view, the dip in US production has been misconstrued, with some underestimating the Permian as output falters in the Eagle Ford and the Bakken. What some have failed to appreciate is that rig reductions in the Permian have happened partly because of reduced drilling at conventional, non-shale sites, rather than in shale, he said. The Spraberry-Wolfcamp shale, where Pioneer operates, remains resilient and Pioneer’s own breakeven price is below $25/b. Prices paid for shale acreage have been rising, in some cases, to levels higher than in 2013-2014, he said.

Latest oil and gas bankruptcies hit lenders hard - FT.com: Investors’ losses from US oil and gas company bankruptcies since 2015 have been proportionally greater than in previous downturns as the industry’s debt-fuelled boom has gone into reverse, according to Moody’s, the rating agency. In 15 defaults studied by the agency, lenders have recovered just 21 per cent of the face value of their debt on average, compared with a 58.6 per cent average recovery for all defaults before 2015.Holders of unsecured oil company bonds in default have on average recovered less than 6 per cent of their face value. Although a tentative recovery in the US oil industry is under way, with the number of active rigs rising since May, the flow of bankruptcies is expected to continue. The very low default rates reflect the weak market for oil and gas assets being sold out of bankruptcy and the high debt levels that were loaded on to companies during the boom that collapsed as crude prices slumped in the second half of 2014. Between 2010 and 2014, the leading US independent oil and gas production companies added $84bn to their net debt, taking the total to $189bn, according to company data compiled by Bloomberg. Between the start of 2015 and the end of July this year, 90 US oil and gas producers went into bankruptcy, with total debt of $66.5bn, according to Haynes and Boone, the law firm. The largest bankruptcies were Sandridge Energy, which owed $8.3bn, and Linn Energy, which owed $6.1bn. Almost half the money spent on acquisitions in the US oil production industry this year has gone to the Permian Basin of west Texas, according to Wood Mackenzie, the research company, while another significant piece has gone to the “Stack” area of Oklahoma. 

Oil Bankruptcies Leave Lenders With ‘Catastrophic’ Recovery Rate - U.S. oil bankruptcies haven’t been this “catastrophic” for lenders in a long time, in what may be the worst bust of any industry this century, according to Moody’s Investors Service. Creditors are recovering an average 21 percent of what they lent, compared with about 59 percent in past decades, the credit-rating agency said Monday in a report that looks into lending to 15 exploration and production companies that filed for bankruptcy protection in 2015. That may be on par with, or worse than, the telecommunications industry collapse in 2001 and 2002, the study led by David Keisman said. High-yield bonds recovered a mere 6 percent, compared to 30 percent in previous years going back to 1987. Defaults in the oil and natural gas industry have been rising through a market slump that has exceeded two years as companies lacked the cash to make interest payments on their debt. Bankruptcies among U.S. producers so far this year are about twice the number among companies rated by Moody’s in all of 2015, the report said. The oil and gas figures have helped propel U.S. corporate defaults to the highest since 2009.  Less than half of the companies that negotiated distressed-debt exchanges in 2015 to try to stave off bankruptcy succeeded, the analysts wrote. Among those that did such deals only to file for bankruptcy protection this year are Halcon Resources Corp., SandRidge Energy Inc. and Goodrich Petroleum Corp. Their debt will probably have very weak recoveries, they said. “Given our view that prices have somewhat stabilized, and will likely gradually increase, it appears that the E&P sector is unlikely to deteriorate further,” the report said. “Although the worst is likely behind us, the E&P sector still remains stressed.”

Sizing up the shale revolution footprint  - Let’s face it — for producers, the last couple of years have stung, with low-slung energy prices allowing little-to-no returns on drilling investments in most parts of the major shale basins. A side effect of the low price environment in the past two years has been the shrinking geographic footprint of the Shale Revolution. About 50% of all onshore rigs in the Lower 48 currently are clustered in the top 20 counties for drilling activity. In effect, this also means a lot of the new production growth will come primarily from these same 20 counties, with the potential for all sorts of implications for infrastructure and regional price relationships. In today’s blog, we take a closer look at rig counts by county to see how much the geographic focus of the Shale Revolution has narrowed.  Before we jump into current drilling activity, let’s take a step back and briefly review the pricing dynamics that have led to the current situation using Figure 1, which puts the price of crude oil, NGLs and natural gas on a common denominator - $/MMbtu. .Less than a decade ago, back in 2007-09 — the Before Shale Era (yellow area in Figure 1) — the prices of natural gas (blue line), natural gas liquids (NGLs; green line) and crude oil (black line) generally moved in tandem. In the commodity run-up of early to mid-2008, prices for all three commodities blew out, and when the financial crisis hit later that year, all three crashed.

Look How Operating Cost / Bbl Of US Shale Crude OIl Compares With That Of Saudi Arabia -- -- Note the operating cost/bbl for US tight oil. For more on this graphic, see this post: By the way, in the graph above, we are not provided the denominator for calculating the CAPEX costs for a bbl of oil. Over time, those CAPEX costs will come down immensely at the same time production capacity will be seen to increase.  One last point made by the reader who sent me the article: when one considers the shipping costs (Saudi oil to the US gulf coast) vs the pipeline costs (Permian crude oil to Houston), $5 Saudi oil might be at a competitive disadvantage to $8 Permian oil. Perhaps not a disadvantage, but certainly helps level the playing field.

Buffett's firm buys nearly 1 million more Phillips 66 shares - (AP) — Warren Buffett’s company has bought nearly 1 million more shares of oil refiner Phillips 66. Berkshire Hathaway said in a regulatory filing that it owned 80.67 million Phillips 66 shares after the latest purchases this week. Berkshire now controls 15.4 percent of Phillips 66 stock. Berkshire has been investing in Houston-based Phillips 66 since 2012. After building up a sizeable stake, Berkshire traded about $1.4 billion of its Phillips 66 stock for an additive business in 2013. Buffett’s company resumed buying Phillips 66 stock when prices became attractive. The most recent purchases were done at prices between $76.77 and $77.65. The latest purchases made this week are worth roughly $78 million. Besides investments, Berkshire owns about 90 subsidiaries in a variety of industries, including insurance, utilities, railroads, and manufacturing.

NY AG Launches Probe Why Exxon Hasn't Written Down Oil Reserves --Back in January, when oil was plunging, we reported that the Dallas Fed and the OCC quietly met with US banks and advised them to suspend Mark-to-Market, allowing banks to avoid taking sharp, substantial charge offs on their loan books as a result of the dramatic selloff in crude. Incidentally the Dallas Fed first denied this meeting ever happened, only for its lies to be then revealed by the WSJ and others. That's ok: we - and everyone else - are used to being lied to by the Fed. What was surprising, however, is that neither the Dallas Fed, nor the OCC, told the actual energy majors to similarly fabricate their energy exposure, and yet, in at least in one case, they did. According to WSJ, the NY Attorney General Eric Schneiderman is probing why Exxon Mobil hasn’t written down the value of its assets, two years into a pronounced crash in oil prices. Indeed, out of the 40 biggest publicly traded oil companies in the world, Exxon is the only one that hasn’t booked any impairments in the last 10 years, according to S&P Global Market Intelligence. Schneiderman’s office, which as the WSJ notes, has been probing "Exxon’s past knowledge of the impact of climate change and how it could affect its future business", is also examining the company’s accounting practices, according to people familiar with the matter. An Exxon spokesman declined to comment about the investigation by the Democratic attorney general but said Exxon follows all rules and regulations. To be sure, it is very likely that Scheiderman is merely looking for another career-boosting witch hunt, ideally one which allows him to engage in a long-running legal battle with Exxon, the same way the Democrat launched a probe into Donald Trump's foundation earlier this week, while ignoring the far greater documented fraud committed over nearly 20 years by the Clinton Foundation.  Still, it does bring up a good point: while most other energy companies have dramatically reduced and written down the value of their assets, Exxon has been immune, at least in the view CEO Rex Tillerson.

How 'Zombie' Oil Companies Stay Alive in Life-or-Death Debt Markets   - Beneath the surge in corporate defaults lies a surge in distressed exchanges.  Such exchanges — defined by Moody's Investors Service as when a troubled company offers its lenders new or restructured debt, securities, cash, or other assets, that amount to a smaller commitment than the original IOU — could have big implications for debt markets as they stretch out the current credit cycle and result in even greater losses for investors. The trend is most apparent in the energy sector where oil and gas companies have been deploying a raft of creative measures to stay afloat amid lower crude prices that have crimped profits and threatened their survival. Such measures have included swapping unsecured debt for secured, offering discounted buybacks of existing debt, or junior-lien debt that gets paid after other creditors."While these [distressed exchanges] do result in some level of loss to bondholders, unlike missed payments and bankruptcy filings the bonds typically remain eligible for inclusion in the high-yield index," Kai Gilkes and Anneli Lefranc, analysts at CreditSights Inc, wrote in new research. They note that the 12-month default rate rose to 7.2 percent for U.S. junk-rated bonds in August. That's an increase of 30 basis points compared to July's default rate of 6.9 percent, spurred on by six corporate defaults last months — including a trio of U.S. energy companies.  "Distressed exchanges have contributed greatly to the rise in default rates," they add, with 38 of the 75 U.S. high-yield defaults over the last 12 months coming from such deals.The degree to which distressed exchanges are propelling defaults higher is apparent in the below CreditSights chart, which shows the U.S. and European default rate excluding the swaps.

Quest project captures a million tonnes of CO2 in the oilsands: Shell | CTV News: -- Shell Canada says the first carbon capture project in the oilsands has successfully stored one million tonnes of carbon dioxide deep underground after a year of operation. The company, which developed the $1.35-billion Quest project with the help of $745 million from the Alberta government and $120 million from Ottawa, says the project is operating ahead of schedule and under budget. "There isn't a metric that hasn't finished very strongly in green," said Zoe Yujnovich, executive vice-president for heavy oil at Shell. "I don't think we can say that about many projects." The Quest project is designed to capture about a third of the emissions from Shell's Scotford Upgrader near Fort Saskatchewan, Alta., turn that into a near-liquid, and then pump it over two kilometres underground into porous rock formations. The development, and carbon capture operations in general, have been significantly criticized as high-cost, stop-gap measures that rely heavily on government funding. But Yujnovich says the technology provides an important bridge as part of a long-term transition towards renewable energy. "The question for all of us is to say in the meantime, with the demand that still exists for oil products, 'How do we go about being as efficient as possible at extracting the oil from the ground?"' she said. "I think the use of something like carbon sequestration, and the ongoing operational improvements that we're constantly committed to, are a part of us navigating across that bridge."

Oil disaster investigator alarmed by BP Great Australian Bight response -A leading global expert on oil disasters has said the response to concerns about potentially faulty equipment in offshore drilling planned for the Great Australian Bight by BP is an early warning sign of problems that could potentially lead to disasters. Bob Bea, an emeritus professor and founder of the center for catastrophic risk management at Berkeley, said what BP, its subcontractor Diamond Offshore Drilling and the Australian regulator had said in response to concerns about faulty bolts was “very alarming”.  Bea has investigated major oil disasters around the world including the Exxon Valdez oil spill and BP’s Deepwater Horizon explosion and oil spill in the Gulf of Mexico. He helped establish the field of “forensic engineering” and has worked in dozens of countries, including Australia. He told the Guardian the process surrounding BP’s “high risk” application to drill for oil in the Great Australian Bight lacked adequate transparency, proper regulatory processes had not been followed and that responses from the companies involved were “inadequate” and “very alarming”. Bea said the way BP referred questions about the equipment failures to its subcontractor – which were then referred to the contractor’s equipment manufacturer – revealed a lack of responsibility being taken by BP and “a pervasive lack of effective engagement”. On Monday, the Guardian revealed BP could conduct its drilling operations in the Great Australian Bight using critical items of equipment – huge “connector bolts” – that have been failing since 2003. The US regulator said the fault appeared to be “systemic” and something that has been “plaguing subsea equipment”. Brian Salerno, the head of US Regulator the Bureau of Safety and Environmental Enforcement (BSEE) said it was just down to luck that the faulty bolts had not caused a major oil spill yet, and that it was just a matter of time until they did.

Asian LPG market firms on China buying, anticipated winter demand in Q4 -  The Asian LPG market has firmed in recent weeks from the 13-year lows seen last month, as Chinese buyers emerged to buy September cargoes, reducing some of the hefty supply glut in the region, market sources said Thursday. Buyers in China were replenishing stocks as plants resumed operations after the G20 meeting in Hangzhou. "Demand side, we see some more requirements from China compared with one to two months ago," said a Singapore-based trader. "Originally, China didn't buy because their inventories were high. Now, they see some space in their tanks," he said.Apart from Chinese buying, sources also noted a slight improvement in demand from Japan, as stocks were gradually drawn down over the past few weeks, resulting in some storage space becoming available, the trader said. A rally in flat prices on the back of crude fuelled some bargain hunting, and expectations of winter demand for cargoes loading October onwards lifted sentiment, sources noted. The physical price of propane on a CFR Singapore-Japan basis was assessed at $317/mt at the Asian close Wednesday, up almost 16% from a 13-year low of $273.50/mt assessed on August 11, S&P Global Platts data showed. Front month ICE Brent crude, on the other hand, rose by 8.8% over the same period from $43.55/b to $47.37/b.

The return of LNG imports as a backstop for US pipeline gas -  California and New England are two of the nation’s quirkier regions when it comes to energy –– and we mean that in the nicest way possible. So maybe it’s not too surprising that, at a time when the U.S. is just beginning a big push to export natural gas as LNG, the Golden State and “Yankeeland” (as some still refer to New England) are turning to imported LNG to help them deal with possible gas shortages during peak demand periods this coming winter. In neither case is liquefied natural gas considered to be a long-term fix, but –– for now at least –– LNG may be playing a role in keeping the pilot lights lit and the electric lights on. Today, we look at how the stockpiling and use of LNG can still make sense in a nation with an abundant supply of gas. Just a few years ago, before the dawn of the Shale Era, just about everyone thought that U.S. natural gas production had peaked and that our energy future would involve increasing volumes of imported LNG. That sparked the development of a number of LNG import terminals, most of them along the Gulf and Atlantic coasts. Mexico, anticipating a similar fate, developed a few import terminals too, including one –– Energía Costa Azul –– in Baja California, just south of San Diego, CA. As we all know, the Shale Revolution turned LNG-importing plans on their head (at least in the U.S.), and several of those LNG import terminals are being converted into liquefaction/LNG export terminals with the aim of selling a significant portion of U.S. gas production overseas. All this makes it somewhat ironic that, given the vast volumes of gas being produced domestically today, LNG imports are making a bit of a comeback, if only temporarily and for a special purpose –– namely, as a backup source of gas in the event that existing regional infrastructure cannot supply enough traditionally piped-in natural gas during short periods of very high demand.

Latin America may not be usual draw for US refiners eager to export product - Colonial Pipeline's outage has US Gulf Coast refiners looking to sell excess gasoline into Latin America, but sources said Thursday that limited demand and high freight rates may hamper that plan. "There's a lot on offer due to Colonial issues, but only limited space to put it. This could turn ugly," a trader with a major trading house said. "Lat Am demand is already covered." Colonial Pipeline's main gasoline line from Houston carries 1.37 million b/d -- equal to four and a half cargoes a day -- through the US Southeast into New York Harbor. It was shut September 9 on a leak -- estimated at 250,000 gallons -- in Alabama. A projected restart late this week was pushed back Thursday to sometime next week. A second line that usually carries distillates will share space with gasoline in the interim. "All cargoes will point to the East Coast, while Gulf refiners will scramble to export if they can't get on Colonial or will cut runs," a US market source said."The rise in freight rates closed the trans-Atlantic arb, so Latin America should benefit," a second US market source said. He cited Mexico as likely the most opportunistic buyer. But a second trader echoed the first trader's comments that the market may wait out the issue, especially given skyrocketing freight rates. "There are lots of offers, but very little demand," he said. "Regular outlets are filled up."

Sagging condensate margins affecting new Kinder Morgan splitters. --Two new 50-Mb/d, Kinder Morgan-owned and -operated condensate splitters came online during the first seven months of 2015, backed by a 10-year BP commitment to process a total of 84 Mb/d through the units. Located in the Houston Ship Channel’s refinery row, the splitters were expected to provide a profitable outlet to process growing volumes of the ultra-light crude oil known as condensate. Instead, average plant throughput through July 2016 has been only 71% of capacity, well below the 90% average operating level of neighboring refineries. The relatively low level at which these units have been operating reflects sagging condensate processing margins. Today, we detail how Kinder Morgan’s new splitters have been run during their first year or so of operation.   This blog follows the recent Shooting Star post reviewing the impact of falling production on waterborne movements of the superlight crude known as condensate. As noted in that blog, there has been a drop-off in condensate export volumes—as tallied by our friends at ClipperData—and changes in the international and domestic destinations of condensate moved over water in 2016.  Recent changes in condensate movements reflect broader trends in condensate production, which has declined significantly in the face of lower crude prices and narrowing differentials between condensate and “regular” light sweet crudes such as the Gulf Coast benchmark, Light Louisiana Sweet (LLS). We explored these themes in Part 1 of our Faded Love series on condensates, where we looked at the impact of lower prices on condensate production and infrastructure in the Eagle Ford, and in Part 2, where we considered detailed condensate production data from the newly enhanced Energy Information Administration (EIA) EIA-914 dataset. Today’s post (based on a recent note published by Morningstar Commodities and Energy Research) zooms in on the fate of condensate splitters on the Gulf Coast, a few of which are up and running and a few more of which are due online in the next year or two. In particular, we look at the Kinder Morgan-operated splitters along the Houston Ship Channel that came online between March and July 2015.

Pemex spending, crude output, exports all slashed in 2017 Mexican budget -  Mexico's 2017 budget proposal will cut Pemex's budget by $5.3 billion to $20.7 billion, causing the state-controlled company's crude production to drop to 1.928 million b/d, the lowest since 1980, and 43.3% below the 3.4 million b/d peak posted in 2004. The budget, submitted by Mexico's finance minister Jose Antonio Meade to legislators Thursday night, called for total cuts of $12.9 billion. Pemex's crude production has now fallen for 11 straight years. Through July of this year, the company's production averaged 2.2 million b/d. And, according to Pablo Medina, head of Latin America upstream research at Wood Mackenzie, targets set in the 2013-4 energy reforms now appear distant."The reform's 2018 objective was 3 million b/d, we will be at 1.9 million b/d. Why? Oil price crash and Pemex's fiscal regime," Medina tweeted. Exports of crude, according to the document sent to the Congress, are expected to be 771,000 b/d next year, also the lowest since 1980. So far in 2016, exports have averaged 1.14 million b/d.

Ecuador begins drilling for oil in pristine corner of Amazon: (Reuters) - Ecuador began drilling for oil on Wednesday near an Amazon nature reserve known as Yasuni, a site that President Rafael Correa had previously sought to protect from development and pollution under a pioneering conservation plan. Correa in 2007 asked wealthy countries to donate $3.6 billion to offset revenue lost by not drilling in the Yasuni National Park. But the initiative was scrapped in 2013 after it brought in less than 4 percent of the amount requested. Correa's government blamed the international community for the failure of a plan once seen as a possible model for other developing countries seeking to resist the lure of oil money. Wednesday's drilling by the state oil company Petroamazonas began in the ITT (Ishpingo-Tambococha-Tiputini) block at Tiputini, which is just outside Yasuni. Ishpingo and Tambococha are within the Yasuni reserve itself. Correra has said previously that drilling would affect less than 1 percent of the reserve. "It's the start of a new era for Ecuadorean oil," said Vice President Jorge Glas after a tour of the site on Wednesday. "In this new era, first comes care for the environment and second responsibility for the communities and the economy, for the Ecuadorean people," he told reporters, adding that the cost of production was less than $12 per barrel. Ecuador is OPEC's smallest member and has suffered heavily from the fall in oil prices. Around half its income comes from oil, according to the World Bank. It is also one of the world's most biodiverse nations, boasting Amazon rainforest, Andean mountains and the Galapagos Islands.

Norway Forced To Cancel Arctic Drilling Plans - Norway has pushed the oil and gas boundaries further north in recent years, opening up the Arctic for drilling. But low oil prices and environmental opposition are forcing a rethink in the Arctic nation.  Norway’s government retreated on a plan to open up new parts of the Arctic for exploration. Environmentalists and local fisherman beat back a proposal to allow drilling near the Lofoten Islands, a picturesque area that is crucial to fish spawning and has the largest cold-water coral reef in the world. The government had previously left out the Lofoten Islands from any exploration plans, so the decision to push forward sparked outrage. Norway’s oil minister, in the face of opposition, recently scrapped those plans in order “to create calm,” as the FT reports. Johnny Berfjord, chairman of the Norwegian Fishing Vessel Owners Association, in an interview with the FT, described his anger about the move to open up new areas for drilling: “Of course, it’s an act of war. It’s a stupid act. This kind of politics belongs to 20 years ago. They are missing what is happening in the world.” The pressure to open up more of the Arctic for drilling is coming from Statoil, the state-owned Norwegian oil company, which faces long-term decline in oil production unless it can find new reserves. Statoil has been struggling with low oil prices and mature oil fields in the North Sea. It plans on slashing another 1,500 positions this year and has even offered all of its 22,000 employees the option to apply for a severance package. Statoil does have the Johan Sverdrup field under development, which could eventually reach peak production at 550,000 to 650,000 barrels per day. The field is expected to come online in 2019.

Russia to Stop Exporting Oil Through Foreign Baltic Ports - Russia will stop exporting its oil through foreign ports sitting on the Baltic Sea by 2018, according to a new report by Reuters. Nikolai Tokarev, head of the Russian pipeline monopoly Transneft, told President Vladimir Putin about the plan during a meeting on Monday. "Last year, around 9 million tonnes were shipped through the Baltic ports, while this year the figure was 5 million tonne,” Tokarev told Putin, according to the meeting’s official transcript on the Kremlin’s website. "By 2018, we will reduce this flow to the Baltic ports to zero and will direct it to our ports instead, as we have surplus capacity.”“Good,” Putin replied. Crude supplies currently shipped through the Latvian cities of Riga and Ventspils will be redirected to Russian ports on the Baltic Sea with excess capacity, the oil executive said. The suspension of Russian imports to Latvia, Estonia and Lithuania would hurt the former Soviet republics’ transit revenues. Vitol, the world’s largest oil trader, currently operates out of Ventspils. The three European Union-member countries have been dependent on Russian oil since gaining independence from the Soviet Union in 1991.

Fracking halted in the Northern Territory | SBS News: The Northern Territory government has imposed a moratorium on fracking while it conducts an independent inquiry. Chief Minister Michael Gunner says the move delivers on an election promise from Labor. "It's clear that Territorians are concerned about the effects of fracking on our land, water and environment. My government is acting on those concerns," Mr Gunner said on Wednesday. "We heard loud and clear the concerns of everyday Territorians, pastoralists, amateur and commercial fishermen, tourism operators, traditional owners, Indigenous rangers and environmental groups." The ban on fracking will take immediate effect and applies to all hydraulic fracturing of unconventional oil and gas reservoirs, either for exploration or extraction. It does not apply to any existing operations though the government says only one is still ongoing and the fracking component has been completed. The investigation will be conducted by a panel including experts in geology, and environmental regulation with its deadline to report back to the government yet to be determined.

S Korean gasoline exports fall sharply in August on export availability, prices - South Korea is close to being overtaken by China as North Asia’s biggest gasoline exporter after its gasoline shipments in August tumbled by 36% year on year, pulled lower by stronger domestic demand and yield switching by refiners. Total exports fell to 539,249 mt from 848,801 mt a year ago, and were also down from July’s 928,994 mt, data from the country’s Customs Service showed Wednesday. South Korea’s monthly average export of 796,651 mt of gasoline between January-August is only marginally higher than China’s 773,915 mt between January-July, according to the latest available customs data. China is expected to export 800,000 mt to 1 million mt of gasoline per month for the rest of the year, trade sources have estimated, which would easily surpass South Korea for the whole year and make it the biggest gasoline exporter in Northeast Asia. South Korea’s exports to all major destinations fell in August while it made no direct shipments of gasoline to Indonesia for the first time in at least five years. Average monthly flows from South Korea to Indonesia between January-July were 75,927 mt. Shipments to Australia halved from July’s year-to-date high of 240,474 mt, while Singapore received 51,457 mt of Korean gasoline compared with the year-to-date monthly average of 162,607 mt.

OPEC says its Aug crude oil output 33.24 mil b/d as market balance improves - OPEC crude oil production in August fell from its record July levels, with the producer group reporting Monday that secondary sources had pegged its output for the month at 33.24 million b/d. Meanwhile, non-OPEC production will be far more robust in both 2016 and 2017 than had been expected, OPEC said in its closely watched monthly oil market report, due to increases in output from Kazakhstan, Norway, the UK and Canada. For 2016, non-OPEC supply has been revised upward by 190,000 b/d from the organization's August forecast to 56.32 million b/d, and 2017 supply revised upward by 540,000 b/d to 56.52 million b/d.The projection indicates that the market's lingering oversupply is likely to extend into next year, as OPEC said it expects the call on its crude for 2016 to average 31.7 million b/d, more than 1.5 million b/d below what it produced in August. For 2017, if OPEC crude output remains at August levels, that gap would remain about 740,000 b/d, as the producer group expects the call on its crude next year at 32.5 million b/d. The organization slightly revised upward its expectations of world oil demand for 2016, which it pegged at 94.27 million b/d. In 2017, world oil demand will grow a further 1.15 million b/d to hit a new record of 95.42 million b/d, OPEC said in its report.

Libyan general seizes key oil terminals from militia (AP) — Libyan forces loyal to a powerful general say they have seized a third oil terminal from a rival militia in the east, giving the divisive leader a bargaining chip in negotiations with rival U.N.-backed authorities in the capital, Tripoli. Forces led by Gen. Khalifa Hifter said late Sunday that they had seized the Zueitina terminal from a militia known as the Petroleum Facilities Guards, hours after capturing the nearby terminals of Ras Lanuf and al-Sidra. Most of Libya’s oil exports went through the three terminals before the militia seized them more than two years ago. Hifter’s army units urged the state-run oil corporation, which is based in Tripoli, to resume oil exports. Libya drifted into chaos following the 2011 uprising that toppled and killed longtime dictator Moammar Gadhafi, and today is split between rival parliaments and governments in the east and west, each backed by a loose array of militias and tribes. Hifter enjoys the support of the internationally-recognized parliament, which meets in the east. The parliament has refused to approve the formation of a U.N.-backed government in Tripoli, in the west, in part because of differences over Hifter’s future role in Libya. The capture of the oil terminals could strengthen Hifter’s hand, making it more difficult to ignore demands from him and others in the east for more clout in a power-sharing government.

Geopolitical Oil Glut: What Happens When Libya Exports 600,000 bpd in 4 Weeks? | OilPrice.com: —Only a day after the head of the Libyan National Army (LNA) took over Libya’s key oil ports to the dismay of Western powers trying to gain support for a Government of National Accord (GNA), the recently reunified National Oil Corporation (NOC) of Libya has announced that it will start exporting 600,000 barrels of oil per day in just four weeks. Late last night, the NOC also announced that it will ramp up production and exports to 950,000 barrels per day before the end of the year. That’s up from the approximately 250,000 bpd the country is exporting right now. The announcement follows the seizure, two days ago, of four major oil terminals by the forces of the LNA, led by General Khalifa Haftar. The LNA managed to take control of the ports of Sidra, Ras Lanuf, Zuetina and Al-Brega in a military operation that resulted in zero casualties. In a statement late last night, NOC head Mustafa Sanallah said: "We welcome statements from the Libyan National Army allied with House of Representatives and the president of the HoR, Aguila Saleh, that the ports should be placed under NOC's control." “Our technical teams already started assessing what needs to be done to lift force majeure and restart exports as soon as possible." LNA spokesman, Colonel Ahmed Mesmari told a press conference earlier yesterday that the army has nothing to do with the oil facilities and will hand them all over to the reunified NOC to operate and resume production freely.

Nigeria's Qua Iboe crude oil exports to resume soon; ExxonMobil offers cargo for Oct loading -  Loadings of Nigeria's Qua Iboe crude could resume in the next two to four weeks, trading sources said Wednesday, up to three months after a suspected attack on a pipeline shut in the country's biggest export grade crude. Sources said ExxonMobil, operator of the Qua Iboe terminal, was offering a cargo of this grade for October 8-16 loading at Dated Brent plus $1.80/b. By late-afternoon, Vitol said it was offering a 950,000-barrel stem of Qua Iboe for October 4-5 loading at Dated Brent plus $1.35/b. Traders said they expected a Qua Iboe October loading program to emerge in the next few days. A spokesman at ExxonMobil declined to comment on a time frame but said the "force majeure remains in effect." Qua Iboe has been under force majeure since July 14 and the last cargo was exported on July 12, according to data from cFlow, S&P Global Platts trade flow software. ExxonMobil said at the time this was because of a "system anomaly." But earlier that week, the Niger Delta Avengers militant group had claimed an attack on the Qua Iboe export pipeline. Typically Nigeria exports some 300,000-340,000 b/d of Qua Iboe but since the pipeline outage production has been minimal. Traders active in the West African crude market said, besides the ExxonMobil cargo, there could be another Qua Iboe as early as late September or early October, but details of this could not be immediately confirmed. The offers by ExxonMobil surprised traders who said a month ago they expected Qua Iboe exports to only resume by either November or December as pipeline repairs were still ongoing.

Oil rises on dollar, U.S. equities; crude inventories eyed | Reuters - Oil prices ended nearly 1 percent higher on Monday as a softer dollar and stronger U.S. equity markets helped crude futures rebound from an early drop pressured by worries about increased drilling activity for oil in the United States. Forecasts that U.S. shale oil production could fall for an 11th straight month in October also supported oil prices, although gains were capped by expectations that U.S. stockpiles may have built again last week after a sharp drawdown the previous week. Brent crude LCOc1 settled up 31 cents, or 0.7 percent, at $48.32 per barrel. U.S. West Texas Intermediate crude CLc1 rose 41 cents, or nearly 1 percent, to settle at $46.29. While some oil traders bet on more near-term gains, others were positioning to sell ahead of bearish U.S. government oil inventory data on Wednesday. Analyst polled by Reuters forecast a 4.5 million-barrel build in U.S. crude stockpiles for the last week, after an unexpected 14.5 million-barrel slump the previous week, the biggest drop since 1999. "If we get to $47.50 on WTI, I'm shorting it as it seems to be a channel top," said Phil Davis, a trader at PSW Investments in Woodland Park, New Jersey. "Fundamentally, there's little support for crude despite its attempts to hold to a bottom channel of $45 on empty OPEC talk of production cuts."

WTI Oil Prices Mostly Unchanged Year-over-year, Little Drag on Inflation - Fed Governor Lael Brainard mentioned oil prices earlier today:  The stabilization of the dollar and oil prices should lead inflation to move back toward our target in coming quarters. This graph shows the year-over-year change in WTI based on data from the EIA.  Currently WTI is down about 1% year-over-year.  Five times since 1987, oil prices have increased 100% or more YoY.  And several times prices have almost fallen in half YoY.   WTI oil prices are mostly unchanged year-over-year.The second graph shows WTI and Brent spot oil prices from the EIA. (Prices today added).  According to Bloomberg, WTI is at $46.05 per barrel today, and Brent is at $48.15.   Prices really collapsed at the end of 2014 - and then rebounded a little - and then collapsed again at the end of 2015 and in early 2016.  Unless prices fall sharply again like happened at the end of 2015, oil (and gasoline prices) will be up year-over-year soon and no longer a drag on inflation.

IEA backtracks on oil market rebalancing forecast - The International Energy Agency on Tuesday pushed back its expectations of the global oil market finding balance to beyond the first half of next year, saying it expects demand to grow by just 830,000 b/d in the current quarter and 1.3 million b/d this year. In its latest monthly oil market report, the IEA said OPEC output had surged, with Saudi Arabia now the world's top oil producer and crude output at record levels in Kuwait and the United Arab Emirates. On the demand side it highlighted "vanishing" growth in the OECD group of developed countries, coupled with China and India's demand slowdown. Oil inventories in the OECD reached a new record high of 3.111 billion barrels in July, with crude oil stocks remaining unusually flat for much of the summer amid lackluster refining activity in the US and Europe, the IEA said.Elsewhere it said the global crude glut was being exacerbated by Brazil, Iran, Iraq and Russia increasing crude output while reducing their domestic refinery throughput. As recently as June, the IEA had forecast that "assuming no further surprises, in H2 16 we expect the oil market to be balanced." The latest report however highlighted "sharply deteriorating" demand in Europe in July and forecast a 120,000 b/d decline in European oil demand year on year in the third quarter. The data suggests "a return of the previously long-entrenched trends of falling European demand," it said. While a weather-related uptick in global demand is likely in the fourth quarter, the current supply-demand dynamic "may not change significantly in the coming months," it said.

Crude Crumbles On Weak IEA Data -- The IEA crushed the hopes of oil bulls on Tuesday when it published its September Oil Market Report. The Paris-based energy agency said that global oil demand is growing a much slower pace than it previously expected, lowering its forecast for 2016 to just 1.3 million barrels per day, or about 100,000 barrels per day lower than last month’s estimate. The IEA said that the oil market’s “balance” will be delayed, citing discouraging trends – demand is actually slowing while supply has begun to rise. As a result, oil “stocks of oil in OECD countries are swelling to levels never seen before,” the IEA said. China and India are “wobbling” and the momentum in the U.S. is also slowing. The result is that supply will continue to exceed demand through at least half of next year. Bad news for oil prices. $45 to $55 is the “new range.” One often-cited range for oil prices in this era of abundance has been $50 to $60. That is a range that OPEC has been rumored to target. But as many oil producers show resilience in the face of low oil prices, that range could be a bit optimistic. Amrita Sen, chief oil analyst at Energy Aspects, says that $45 to $55 is the “new range” that oil will trade between. High inventories and record production from OPEC has put a ceiling on oil prices at that upper bound, preventing any rally beyond that point.  One of the world’s most expensive oil projects, the Kashagan oil field, could finally come online (again) in October. The project has taken 16 years, cost more than $50 billion, and has had several false startups. It was supposed to begin operations a decade ago, but has suffered from delays, massive cost overruns, and technical problems. Nevertheless, the Caspian Sea oil field is massive, and could add 370,000 barrels per day of supply to global markets within a year. It is being jointly developed by Royal Dutch Shell, Total, ExxonMobil, Eni and the Kazakh government, with Eni in the lead. Wood Mackenzie is not as confident in those production figures, however; the consultancy only sees Kashagan bringing 154,000 barrels per day online next year and then only exceeding 300,000 barrels per day sometime in the 2020s. The project, despite its huge reserves, could continue to pose challenges for its owners. Total has called it the “the mother of all projects,” and instead of its real name, The Economist once dubbed it “Cash All Gone.”

OPEC points to larger 2017 oil surplus as rivals keep pumping | Reuters: OPEC raised its forecast of oil supplies from non-member countries in 2017 as new fields come online and U.S. shale drillers prove more resilient than expected to cheap crude, pointing to a larger surplus in the market next year. Demand for crude from the Organization of the Petroleum Exporting Countries will average 32.48 million barrels per day (bpd) in 2017, OPEC said in a monthly report on Monday. That is down 530,000 bpd from the previous forecast. The prospect of a larger surplus than expected adds to the challenge of OPEC and non-members such as Russia, who are making a renewed attempt to restrain supplies. Oil LCOc1 is trading at $47 a barrel, half its level of mid-2014, as a supply glut that OPEC hoped cheap oil would banish sticks around. OPEC revised up its 2016 and 2017 non-OPEC supply forecasts, citing factors including the start up of Kazakhstan's Kashagan oilfield and a lower-than-expected decline in U.S. shale output, and said the immediate outlook was for more production. "It is expected that there will be higher non-OPEC production in the second half of 2016 compared to the first half," OPEC said in the report. OPEC expects non-OPEC supply to rise by 200,000 bpd in 2017, versus a previously forecast 150,000 bpd decline. The revision is mostly due to Kashagan, OPEC said, as the long-delayed giant field finally starts up. On top of that, the forecast for this year was revised up by 180,000 bpd.The Organization of the Petroleum Exporting Countries is meet non-OPEC members at an industry event in Algeria on Sept. 26-28 to discuss a production freeze that few analysts expect will materialize.

Oil prices hit by downward revision to global oil demand  (AP) — Oil prices took a pounding Tuesday after a leading industry group said global oil demand growth is slowing by more than previously thought, largely because of a more pronounced economic slowdown during the third quarter of the year. In its September oil market report, the Paris-based International Energy Agency reduced its forecast for global demand growth to 1.3 million barrels a day in 2016 — 100,000 below the previous forecast. And it also anticipates a further slowdown next year, down to 1.2 million barrels a day “as underlying macroeconomic conditions remain uncertain.” The organization, which represents 29 major oil-importing nations including the U.S., also noted that supplies from the OPEC oil cartel are running at near-record levels as Kuwait and the United Arab Emirates pump at their highest levels ever. It added that non-OPEC supply is expected to return to growth next year. All in all, the alteration in the demand-supply balance anticipated by the IEA has weighed on oil prices. A barrel of benchmark crude was down $1.10, or 2.4 percent at $45.20 while Brent crude, the international standard, fell 93 cents, or 1.9 percent, to $47.42 a barrel. The renewed pressure on prices follows a period when oil prices have recovered from multiyear lows and subsequently broadly stabilized. Last week’s revelation that the world’s two largest oil producers, Russia and Saudi Arabia, have agreed to act together to stabilize global oil output helped shore up prices though it remains unclear what the two have in mind. “News last week may have helped lift oil prices back towards the August highs but this data once again adds to the bearish case for oil, regardless of any “cooperation” between Saudi Arabia and Russia,”

Oil Slides After IEA Turns Pessimistic, Sees Oversupply Extending On "Dramatic Deceleration" In Crude Demand One of the great oddities in oil price forecasts and analysis in the past year has been the fascination with the supply side of the oil market, which is perhaps understandable following the relentless chaos coming out of OPEC nations. However, as we have long contended, the true wildcard is the demand side, which has been deteriorating over the past 6 months, driven primarily by a slowdown in Chinese demand, coupled with a US peak driving season which was far less exciting than many had expected. We were glad to see the IEA finally realizing just how important the demand side also was, when in its latest report released earlier today, the Paris-based organization revealed a much more pessimistic outlook on the state of the oil market, predicting that a sharp slowdown in global oil demand growth, coupled with ballooning inventories and rising supply means the crude market will be oversupplied into late 2017. The IEA had previously expected the market to show no surplus in the second half of 2016. "Our forecast in this month's report suggests that this supply-demand dynamic may not change significantly in the coming months. As a result, supply will continue to outpace demand at least through the first half of next year," the Paris-based adviser said in its monthly report. “As for the market’s return to balance -- it looks like we may have to wait a while longer.”

Oil tumbles 3 percent after both IEA, OPEC see glut persisting | Reuters: Oil prices fell as much as 3 percent on Tuesday after both the world's energy watchdog and OPEC revised forecasts that signaled the global crude glut could persist for much longer than expected. The International Energy Agency (IEA), which advises oil-consuming countries on their energy policies, said a sharp slowdown in oil demand growth, coupled with ballooning inventories and rising supply, means the market will be oversupplied at least through the first half of 2017. The IEA's comments follow a surprisingly bearish outlook from the Organization of the Petroleum Exporting Countries on Monday that also pointed to a larger surplus next year due to new fields in non-member countries. U.S. shale drillers are also proving more resilient than expected to cheap crude, OPEC said. [OPEC/M] "It seems the situation has deteriorated strongly in the eyes of OPEC, as well as the IEA," said Commerzbank head of commodities strategy Eugen Weinberg. "I wouldn't be surprised to see this price weakness continue for a while, because that was not on the cards, in our opinion." A stronger dollar also weighed on crude and other commodities denominated in the U.S. unit, making them less affordable to holders of currencies such as the euro. U.S. equity markets were down nearly 2 percent, extending the bearish sentiment across risky markets.

Crude Chaos Strikes On Disappointing Post-Hurricane Rebound In Inventories - Following last week's epic crude inventory drawdown, the market expected a post-hurricane build of 4mm barrels, but API reported a mere 1.4mm build. However, a massive build in Distillates inventories (+5.3mm - biggest in 8 months) confused the machines. WTI had fallen back to a $44 handle - erasing all the inventory-draw-spike gains - before API data hit; but then spiked to last week's API levels, tumbled, then spiked again... API

  • Crude +1.4mm (+4mm exp)
  • Cushing -1.12mm (-300k exp)
  • Gasoline -2.4mm (-1.1mm exp)
  • Distillates +5.3mm

After last week's (storm-driven) massive inventory draw, expectations were for a build, but the build disappointed. However Distillates saw the biggest build in 8 months... Notably, WTI had fallen back and erased all of the post-inventory bounce. As Price Futures' Phil Flynn noted, the market "is worried about a post-hurricane rebound in supply."

US crude oil imports continue to rise - Net crude oil imports to the U.S. Gulf Coast in 2016 have been running well above the pace set last year, the increase driven by a combination of lower U.S. crude oil production, rising import levels and relatively flat export volumes. The trend toward higher net imports –– an outgrowth of the end of the ban on U.S. crude exports –– is significant in that it affects oil inventories and oil prices. What’s driving this trend, and how soon might net imports peak? Today, we survey recent developments on the crude oil import/export front, with a focus on the Gulf Coast. Crude oil traders and the audience at the U.S. Open in Flushing Meadows, NY had one thing in common recently: their heads have been whirling, side to side and up and down. In the case of crude oil traders this was due to a sharp drop in imports in the week ending September 2, followed by a sharp rise the following week. The rollercoaster was caused primarily by the coincidence of three factors: a hurricane preventing discharges at Chevron's Pascagoula, MS refinery and disrupting offloading at the Louisiana Offshore Oil Port; the Labor Day holiday slowing operations elsewhere; and the decision by importers in Texas to reduce their intake of imported barrels ahead of the ad valorem tax assessment on September 1. Soon after tax day, the crude came flooding back in.  Refiners typically would be expected to take in less crude oil in September ahead of maintenance season in the fall. So far, this is not panning out. Waterborne imports in the first 12 days of September are at 3.24 MMb/d, compared to 3.22 MMb/d in August. Based on the number of vessels currently sailing toward the U.S. Gulf Coast, we expect the week ending September 16 to see a dip in imports, followed by a rebound in the week ending September 23, and an equally strong showing in the final week of September. Looking at the entire month, we expect September to show imports about 500 Mb/d higher than in the same month of 2015. This is a wider gap than the 300-Mb/d excess of August 2016 over August 2015. So, if there is to be an inflection point suggesting lower imports, it doesn’t appear likely to happen in September.

How Big An Impact Will A Rate Hike Have On Oil Prices? --  Oil prices could be facing a significant jolt after Federal Chair Janet Yellen, in her annual speech at the Jackson Hole economic symposium in Wyoming, said that the case to increase interest rates had strengthened. The extent of the jolt that may be felt is far from certain however. Due to the quotations of crude oil in U.S. dollars, there is often a bind between the fate of the greenback and the costs of oil per barrel, as the balance of oil trade and the effect on market psychology can be hugely influential. There are, however, other significant factors in the oil price equation, including high production rates and inventories. Spencer Welch, director of downstream energy consulting at IHS Markit explained that “a rate hike would strengthen the U.S. dollar, which would make oil more expensive globally, so this would tend to reduce oil demand slightly, but it takes a while for this effect to play out, and would therefore likely reduce oil market price.” “By how much? That depends on the size of the interest rate increase. It is likely to be less than $1/bbl in oil price impact, but that is not based on historical statistics.” Different nations Welch believes, are effected by a rate rise in varying ways, depending if they are net exporters or importers of oil. Importers are more likely to be hurt by a rate rise as oil would become more expensive due to a rising dollar, net exporters of oil would benefit as a result of selling oil in dollars, with the dollar being stronger.

Oil Plunges As Libya, Nigeria Supply Set To Worsen Glut -  Oil prices are extending their losses this morning as disappointing US economic growth indicators combined with expectations of a surge in supply from Nigeria and Libya are adding to fears about increasing overhang of oil stocks. As Bloomberg reports,Amid the most enduring global oil glut in decades, two OPEC crude producers whose supplies have been crushed by domestic conflicts are preparing to add hundreds of thousands of barrels to world markets within weeks.Libya’s state oil company on Wednesday lifted curbs on crude sales from the ports of Ras Lanuf, Es Sider and Zueitina, potentially unlocking 300,000 barrels a day of supply. In Nigeria, Exxon Mobil Corp. was said to be ready to resume shipments of Qua Iboe crude, the country’s biggest export grade, which averaged about 340,000 barrels a day in shipments last year, according to Bloomberg estimates. On top of that, a second Nigerian grade operated by Royal Dutch Shell Plc is scheduled to restart about 200,000 barrels a day of flow within days.While there are reasons to be cautious about whether the barrels will actually flow as anticipated, a resumption of those supplies -- more than 800,000 barrels a day in all -- could more than triple the global surplus that has kept prices at less than half their levels in 2014. It would also come just as members of the Organization of Petroleum Exporting Countries and Russia are set to meet in Algiers later this month to discuss a possible output freeze to steady world oil markets.“If you have some restart of Nigeria and some restart of Libya, then the rebalancing gets pushed even further out,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by phone. “It complicates matters a lot before the meeting in Algeria.” And combined with crappy US data, oil prices are sliding after an early spike...

OilPrice Intelligence Report: Oil Down As Glut Fears Return: Oil prices posted another down week after the IEA dashed hopes that the global supply and demand picture would come into balance this year. The Paris-based energy agency said demand is much slower than it previously expected, and supplies are also surprising on the upside, mostly due to record OPEC production. The end result? The supply surplus might not be worked through until the middle of next year. Oil prices plunged on the news earlier this week and have struggled to regain ground. Goldman pessimistic on oil prices. Jeff Currie, the head of commodities research at Goldman Sachs, sees low oil prices sticking around for a while. Not only that, but Currie says the risk to oil is on the downside, not the upside. He sees a dearth of bullish catalysts, and unexpectedly high output from Saudi Arabia, Iran and Russia adding to global supplies.  He predicts oil will trade within a narrow range of $45 to $50 per barrel. “It really looks similar to the period of the early 1990s, when we were at $20 oil,” he said. “Is $45 to $50 the new $20? I am not ready to say we are in this new equilibrium environment, but it sure does feel like we’re moving in that direction.” The negative sentiment echoes the latest monthly report from the IEA, which surprised the markets with its downbeat assessment, predicting a rise in crude oil inventories through much of next year.. After several oil ports were briefly taken over by a rival general in Libya’s east, the government lifted a block on sales from three ports, which could see exports rise by 300,000 barrels per day relatively quickly. That would take output up to 600,000 barrels per day, and Libyan officials are targeting further increases to 950,000 barrels per day by the end of the year, or about triple current levels. Libya has repeatedly failed to follow through on such promises, but the prospect of a return of some Libyan supply is weighing on oil prices. Also, violence in the Niger Delta is finally calming a bit. ExxonMobil said that it would resume shipments of its Qua Iboe crude, the largest Nigerian grade. Royal Dutch Shell is also expected to bring an additional 200,000 barrels per day back in Nigeria.

Goldman Sachs Crushes Hopes Of Oil Price Recovery | OilPrice.com: Goldman Sachs has been extremely pessimistic about the oil market over the last year and a half, and the latest from their head of commodity research, Jeff Currie, is no exception. According to Currie, crude will continue to trade within the US$45-50 band over the next 12 months. Any improvement above US$50 is highly unlikely. The analyst noted that the primary reason for the gloomy forecast is the simple lack of any upside potential for oil at present. He also suggested that the market may have already balanced itself at the current price levels, comparing the overall environment to that in the early 1990s when a barrel of crude sold for US$20. Currie told Bloomberg that OPEC’s meeting in Algeria, scheduled for September 27, when the cartel will discuss a potential freeze with Russia, will not have any notable impact on oil prices, whatever the outcome. Shale, he said, has taken the upper hand, because production in the shale patch can be ramped up or reduced much quicker than conventional oil. This development, according to Currie, has taken much of the leverage that previously was at the disposal of conventional oil producers. Currie’s remarks come on the heels of the latest Oil Market Report of the International Energy Agency, which warned that the growth in demand for crude will be slower than previously forecast this year. The IEA added that the supply will continue to be excessive through the end of the first half of 2017 at least. Of course, a lot of this supply will continue to come from the current top producers globally, but there may be additional barrels coming from Libya as well, which will certainly aggravate the glut and possibly drag prices down below US$45. Nigeria is also putting a lot of effort into resolving its problems with Niger Delta militants, and although success remains highly uncertain, it is still a possibility. In light of this, Currie’s forecast can actually be seen as cautiously optimistic.

US rig count down 2 this week to 506 (AP) — The number of rigs exploring for oil and natural gas in the U.S. declined by two this week to 506. A year ago, 842 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration. Houston oilfield services company Baker Hughes Inc. said Friday that 416 rigs sought oil and 89 explored for natural gas this week. One was listed as miscellaneous. Among major oil- and gas-producing states, Oklahoma gained three rigs and Alaska was up one. Louisiana declined by two rigs and North Dakota and Texas fell by one each. Arkansas, California, Colorado, Kansas, New Mexico, Ohio, Pennsylvania, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

    Oil continues its decline after data show weekly U.S. oil-rig count up by 2 - Oil futures continued to decline Friday after data from Baker Hughes revealed that the number of active U.S. rigs drilling for oil climbed by 2 to 416 rigs this week. They have now posted increases in 11 out of the last 12 weeks. However, the total active U.S. rig count, which includes oil and natural-gas rigs, edged down by 2 to 506, Baker Hughes said. October crude CLV6 was at $42.97 a barrel on the New York Mercantile Exchange, down 94 cents, or 2.1%, from Thursday's settlement. It traded around $42.93 before the rig data.

    BHI: US oil rig count up 100 since May 27 - - The Baker Hughes Inc. count of active US oil-directed drilling rigs this week added the 99th and 100th units to come online since the drilling rebound began following the week ended May 27.  Now having gone nearly 3 months without recording a loss, the tally of oil-directed rigs rose 2 units to 416. The modest increase, however, wasn’t enough to prevent the overall US rig count from declining for just the third time in 17 weeks. The overall tally during the week ended Sept. 16 fell 2 units to 506, still up 102 units since May 27 (OGJ Online, Sept. 9, 2016).  The overall count’s recent upward momentum has come on the back of oil-directed rigs and particularly those in the Permian basin, where all 65 of the units to start operations during the rebound have targeted oil and firms continue to advance plans to mobilize drilling activity. In tandem with its $2-billion agreement this week to acquire Freeport-McMoRan Inc.’s Gulf of Mexico assets, Anadarko Petroleum Corp. reported plans to add 2 more rigs later this year in each of the Permian's Delaware basin and the DJ basin of Colorado and Wyoming, with the intent of further ramping up activity thereafter (OGJ Online, Sept. 13, 2016).Anadarko had previously said it planned to keep 6 rigs working in the Delaware basin instead of reducing the count to 4 as originally intended. The firm cited improved efficiencies and lower drilling costs as reasons for maintaining the higher count. During this week, the Permian gained 2 units to 202 while the DJ-Niobrara edged up a unit to 16. Coinciding with the increased Permian drilling activity in recent weeks is a growing number of drilled but uncompleted (DUC) wells, according to new estimates by the US Energy Information Administration.The Permian’s tally of DUC wells posted a monthly increase of 38 in August to 1,348 (OGJ Online, Sept. 13, 2016). EIA also forecasts the basin’s crude production to rise 22,000 b/d in October from its September total to just fewer than 2 million b/d. The basin represents more than a quarter of the 5,031 DUC wells counted for August in the major US oil and gas producing regions, and about two thirds of the entire US rig count increase since the drilling rebound began.

    WTI Crude Tumbles To One-Month Lows As Libya, Nigeria Supply Looms --Concerns over Libya, Nigeria compounding the already record high global crude surplus (glut) has sent WTI Crude futures to $43.50 - one-month lows...Stocks are ignoring crude's collapse for now...As Bloomberg notes, OPEC members Libya and Nigeria, whose supplies have been reduced by domestic conflicts, are preparing to boost exports within weeks. The oil surplus will last longer than previously thought as demand growth slumps and output proves resilient, the International Energy Agency said Tuesday. “Oil prices keep trading in a narrow range,” said Michael Poulsen, an analyst at Global Risk Management Ltd. “A short spike yesterday is erased this morning as supply glut worries rule.” World oil stockpiles will continue to accumulate through 2017, a fourth consecutive year of oversupply, according to the IEA. Just last month the agency predicted the market would return to equilibrium this year.

    Oil ends at mid-August low, logs a more than 6% weekly loss - Oil futures on Friday settled at lows last seen more than a month ago, suffering a sharp loss for the week as traders braced for an expected increase in oil exports from Libya and Nigeria. October West Texas Intermediate crude fell 88 cents, or 2%, to settle at $43.03 a barrel on the New York Mercantile Exchange. That was the lowest finish since Aug. 10 and the U.S. oil benchmark ended the week down 6.2%, according to FactSet data. November Brent crude on London’s ICE Futures exchange fell 82 cents, or 1.8%, to $45.77 a barrel. That was its lowest finish month to date. It fell about 4.7% for the week. “Expectations are rising for Nigerian and Libyan oil exports to increase after geopolitical tensions have crippled the [Organization of the Petroleum Exporting Countries’] exports,” said Daniel Holder, commodity analyst at Schneider Electric. “This additional supply is sending the crude complex lower.” Nigeria and Libya are both preparing to ramp up their oil exports. Royal Dutch Shell and Exxon Mobil have both lifted force majeure on Nigerian exports after militants had caused the shut-in of supply. Libya’s state oil company also lifted curbs on sales from three ports on Wednesday, ANZ Bank said.The news on the two OPEC producers come just over a week ahead of an informal meeting of major oil producers on the sidelines of an energy forum in Algeria set for Sept. 26-28. Friday’s decline “indicates that expectations of a deal between OPEC member countries and Russia. are already low and falling fast,” said Colin Cieszynski, chief market strategist at CMC Markets. “Uncertainty over the outlook for U.S., Chinese and global demand also continues to drive swings in energy markets.” Traders expect the oil producers to discuss a potential cap on production levels, but producer concerns surrounding the loss of market share have continued, especially following an increase in last week’s U.S. crude output.

    Saudi Arabia Ousts U.S. as Biggest Oil Producer, IEA Says - Bloomberg: Saudi Arabia has retaken the position of the world’s top oil producer from the U.S., according to the International Energy Agency. “Saudi Arabia’s elevated oil production has allowed it to overtake the U.S. and become the world’s largest oil producer,” the Paris-based IEA said in its monthly report on Tuesday. While Saudi Arabia added 400,000 barrels a day of output from low-cost fields since May, about 460,000 barrels a day of “high-cost” production was shut down in the U.S. America has been the world’s largest producer of crude and other liquid hydrocarbons since April 2014 following the shale oil boom. U.S. output in August stood at 12.2 million barrels a day, including natural gas liquids, according to the IEA. That compared with Saudi Arabian production of 12.58 million barrels a day the same month. The drop in U.S. production came as the number of rigs drilling for oil and gas fell to a record low of 404 on May 20, according to data from Baker Hughes Inc. That number has since recovered to 508 as of Sept. 9. Saudi Arabian crude supply climbed to 10.65 million barrels a day in July, before easing to 10.6 million in August. Production has averaged 10.36 million barrels a day in the first eight months of this year, almost 200,000 barrels a day higher than the year-earlier period.

    Do Saudis Dump '$750B' After US 9/11 Bill Passes? -  Earlier this year, Saudi Arabia warned that they stood ready to unload hundreds of billions worth of American assets were the US congress to pass a bill allowing families of victims of the 9/11 attacks to sue Saudi Arabia for damages. Maintaining that their country had no direct involvement in the attacks, Saudi officials threatened to sell off up to "$750 billion" in American assets. From the NY Times in April: Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts. Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States. Fast-forward to the present time and US lawmakers have not taken Saudi threats seriously as the bill passed unopposed through the lower house:  The unopposed House vote Friday to allow families of Sept. 11 victims to sue Saudi Arabia begins a diplomatic nightmare for President Barack Obama. The legislation is sure to antagonize a key U.S. ally in the Middle East which already has tense relations with the administration. While Obama is likely to veto the bill, the House’s passage by voice vote raises the possibility Congress could override him, for the first time in his presidency, and make the measure law. The bill passed the Senate by a voice vote in May. The bill would carve out an exception to sovereign immunity -- the legal doctrine which protects foreign governments from lawsuits -- if a plaintiff claims to have suffered injury in the U.S. from state-sponsored terrorism. It would be up to the 9/11 victims suing KSA to demonstrate culpability via a money trail, which appears difficult to establish. What is more immediately interesting though is whether the Saudis merely bluffed about dumping American assets. Treasury records indicate that the country holds $98.3 billion in US Treasuries as of June 2016. Saudi Arabia may hold more though through indirect purchases:  Saudis can also sell off tangible investments in the US, though the stock of FDI of Middle Eastern countries as a whole in the US appears to make $100B a stretch. Moreover, hard assets are not as liquid and take time to sell.  So the questions for Saudi Arabia over the next few days are as follows: First, US lawmakers having called their bluff, will the Saudis really unload "hundreds of billions" worth of assets? Second, do they really have $750B to unload in US assets? From the limited data available to me, I'd be hard-pressed to say they have even a third as much to dispose.

    Saudis Threaten US: "Passage Of Sept 11 Law Will Lead To Instability, Chaos And Extremism" - When Congress unanimously passed a bill last Friday known as "Justice Against Sponsors of Terrorism Act," or JASTA, allowing families of 9/11 victims to sue Saudi Arabia in U.S. courts, there was confusion whether Obama would still veto said bill, as he had threatened to previously, even though by sheer numbers Obama's veto may be overruled, leaving him hanging and appearing to support a Saudi position over that of the US people. Then on Monday we got the answer when White House press secretary Josh Earnest announced that Obama would still veto said bill. "That is still the plan," Earnest said. "The president does intend to veto this legislation." The Saudis, however, are not taking any chances, and are back to engaging in the same verbal warnings they unleashed in April of this year, when they suggested passage of the law would force the kingdom to sell its US-denominated reserves: threats. As Reuters reports, a senior Saudi policy adviser on Wednesday condemned a U.S. bill that would allow families of victims of the Sept. 11 attacks to sue the kingdom for damages, "warning it would stoke instability and extremism." In other words, if Obama fails too stop a law which everyone in Congress voted for, the US would suffer.

    Saudi Press Just Accused US Govt Of Blowing Up World Trade Centers As Pretext To Perpetual War - In response to the U.S. Senate’s unanimous vote to allow 9/11 victims’ families to sue Saudi Arabia in federal court, a report published in the London-based Al-Hayat daily, by Saudi legal expert Katib al-Shammari, claims that the U.S. masterminded the terror attacks as a means of creating a nebulous “enemy” in order garner public support for a global war on terror.  The report by al-Shammari, translated by the Middle East Media Research Institute (MEMRI), claims that long-standing American policy is “built upon the principle of advance planning and future probabilities,” which the U.S. has now turned toward the Saudi regime after being successfully employed against first the Taliban and al-Qaeda, then Saddam Hussein and his secular Baathist controlled Iraq.  Al-Shammari claims the recent U.S. threats to “expose” documents implicating the Saudi government are simply the continuation of a U.S. policy, which he refers to as “victory by means of archive.” He highlights that during the initial invasion of Iraq, under George H.W. Bush, Saddam Hussein was left alive and in power to be used as “a bargaining chip,” but upon deciding that he was “no longer an ace up their sleeve” Washington moved to topple his government and install a U.S.-backed ruling party. The terrorist attacks of 9/11 are now the “ace up the sleeve” of the U.S. government, according to al-Shammari. “September 11 is one of winning cards in the American archives, because all the wise people in the world who are experts on American policy and who analyze the images and the videos [of 9/11] agree unanimously that what happened in the [Twin] Towers was a purely American action, planned and carried out within the U.S. Proof of this is the sequence of continuous explosions that dramatically ripped through both buildings… Expert structural engineers demolished them with explosives, while the planes crashing [into them] only gave the green light for the detonation – they were not the reason for the collapse. But the U.S. still spreads blame in all directions. [This policy] can be dubbed ‘victory by means of archives.”

    Now the Saudis Have Killer Drones, Too -- Saudi Arabia is the world’s newest drone power. And that could be a problem, since the Saudis are in the midst of a rather nasty war.Riyadh has signed a contract with Chinese firm Chengdu for an unspecified number of Pterodactyl drones, Saudi media reported in late August and early September.The 30-foot-long, propeller-driven Pterodactyl, which Chengdu apparently modeled on America’s iconic Predator and Reaper drones, can fly for hours at a time carrying cameras and missiles. Operators on the ground control the unmanned aerial vehicle via satellite.As far as killer drones go, the Pterodactyl probably isn’t terribly sophisticated—its sensors are certainly less capable than U.S.-made models—and that can mean the difference between life and death for innocent people caught in the crossfire as flying robots hunt militants on the ground.Just ask people in Iraq. The Baghdad government acquired rudimentary CH-4 killer drones from China in late 2015. On one of the type’s very first missions against suspected ISIS terrorists in January, the drone’s operators accidentally targeted pro-government militamen, killing nine fighters and wounding 14. The Saudi drone acquisition, for its part, could mean “grim news, especially for Yemenis,” Andrew Cockburn, author of Kill Chain: The Rise of the High-Tech Assassins, told The Daily Beast. Saudi Arabia’s Sunni regime has been bombing Shia rebels in Yemen for years, with a major escalation beginning in March 2015. The Saudi air campaign has killed thousands of civilians and destroyed irreplaceable ancient sites.

    The Horrifying Starvation of Yemen Continues - Much of the civilian population of Yemen is being starved to death. As I have said many times before, the Saudi-led blockade is primarily responsible for cutting Yemen off from its food supply. These are some of the consequences:  A boy lies on a hospital bed in Yemen’s port city of Al-Hudaydah. His eyes are full of life, but his skinny body tells another story: His arm is so thin that he can wrap his lips around it. His ribs stick out under his skin. He is one of 1.5 million children in Yemen who are suffering from malnutrition.  The scale and severity of Yemen’s humanitarian crisis are staggering, and both will only continue to worsen unless the situation changes dramatically and very soon. Not only are the lives of millions of people at risk of being lost right now, but the future development and health of an entire generation are being destroyed as well. Even if the immediate crisis is addressed with an end to the blockade and a massive infusion of aid, Yemen will be living with the destructive effects of this intervention for decades. If the international response remains as limited and halting as it has been, Yemen will suffer massive loss of life from a man-made famine that need never have happened and could have been prevented. This is what the Saudis and their allies have wrought with our government’s help.  Yemen’s ongoing starvation by the Saudi-led blockade is horrifying, but what makes it even worse is that the humanitarian crisis created by the intervention was entirely foreseeable and many warned about it when the Saudi-led war began. The disaster consuming Yemen was entirely to be expected, and it didn’t have to happen, but the Saudis and their allies went ahead and made it happen. U.S. backing for this appalling war is by far the worst thing Obama has done overseas as president, and it stands out as one of the most shameful episodes of modern U.S. foreign policy.

    Saudi Arabia Fights To Maintain Access To U.S. And British Arms Sales -- Saudi Arabia, which is fighting a brutal war in Yemen, is having to fight on a second, diplomatic front to maintain access to British and American-made arms. Foreign minister Adel Al-Jubeir was in London in early September, giving media interviews, speeches and trying to charm MPs away from supporting an arms embargo on the country. His visit coincided with news that a parliamentary committee was preparing to issue a report which called for arms sales to Riyadh to be halted. A draft version of the report seen by the BBC concluded that it was “inevitable” that British-made weapons had been used to violate international humanitarian and human rights laws in Yemen and that arms exports to Saudi Arabia should be suspended.In the U.S., there has also been considerable oppositionto a $1.15bn deal to sell tanks and other equipment to Saudi Arabia, led by Republican Senator Rand Paul. The relationship is big business for defence companies in the U.S. and Britain. The two countries are by far the largest suppliers of arms to Riyadh, accounting for $2.6bn of the $3.2bn spent by Saudi Arabia on weapons last year, according to the Stockholm International Peace Research Institute. Since 2010, the U.S. has sold $4.9bn worth of arms, while Britain has sold $3.5bn.

    Saudi prince warns Iran against using force to pursue rivalry | Reuters: A senior Saudi official, responding to Iranian criticism of Riyadh's management of the haj pilgrimage, urged Iran to end what he called wrong attitudes toward Arabs and warned it against any use of force in its rivalry with the kingdom. Mecca province governor Prince Khaled al-Faisal, in remarks likely to be seen as a reference to Iran, added that the orderly conduct of the pilgrimage this year "is a response to all the lies and slanders made against the kingdom". The remarks carried by the official Saudi Press Agency (SPA) on Wednesday evening follow an escalating war of words between Shi'ite Muslim Iran and Sunni Saudi Arabia since a crush at the annual haj pilgrimage a year ago in which hundreds of pilgrims, many of them Iranians, died. SPA quoted Prince Khaled as telling journalists his message to the Iranian leadership was "I pray to God Almighty to guide them and to deter them from their transgression and their wrong attitudes toward their fellow Muslim among the Arabs in Iraq, Syria, Yemen and around the world". "But if they are preparing an army to invade us, we are not easily taken by someone who would make war on us.""When we desire, and with the help of God Almighty, we will deter every aggressor and will never relent in protecting this holy land and our dear country. No one can defile any part from our country if any one of us remains on the face of the earth."

    Exclusive: Iranian oil output stagnates for third month amid OPEC bargaining | Reuters: Iran's steep oil output growth has stalled in the past three months, new data showed, suggesting Tehran might be struggling to fulfill its plans to raise production to new highs while demanding to be excluded from any OPEC deals on supply curbs. Iran's oil output soared to 3.64 million barrels per day in June from an average of 2.84 million bpd in 2015 following the easing of Western sanctions on Tehran in January, adding to a global crude glut which has slashed oil prices. But since June, output has stagnated and reached just 3.63 million bpd in August, according to fresh OPEC data based on secondary sources, which include consultants and industry media, and seen by Reuters. Iran also told OPEC it produced 3.63 million bpd in August, according to an OPEC source. Iran became the main stumbling block to an initiative by OPEC and non-OPEC Russia earlier this year to freeze output globally. Tehran said it needed to first regain market share lost while it was under sanctions. OPEC's largest producer Saudi Arabia insisted all nations should join and the freeze deal collapsed in April.

    US military: Iranian behavior getting worse in Persian Gulf (The Hill)  Iran has stepped up its harassment of U.S. Navy ships in the Persian Gulf, angering the U.S. military and members of Congress.  Since the international nuclear deal with Iran was implemented in early January, the number of incidents involving U.S. and Iranian ships in the Gulf has approximately doubled.  The Navy has counted at least 31 interactions with Iranian naval forces deemed “unsafe”, “unprofessional”, or both, according to a defense official.  That's about as many such interactions that occurred all of last year.  And those are also only counting interactions that have met the criteria of “unsafe” or “unprofessional”.  Overall, there were more than 300 interactions between U.S. and Iranian forces last year.  That figure includes incidents in which Iranian vessels waited for and followed U.S. ships transiting in the Persian Gulf, or sailed by with their weapons uncovered, in addition to other incidents of muscle flexing considered routine. 

    Iran threatened to shoot down US Navy spy planes in the Persian Gulf | Fox News: Iran threatened to shoot down two US Navy surveillance aircraft flying close to Iranian territory in the Persian Gulf over the weekend, the latest in a series of recent provocations between Iran and the US military in the region, three US defense officials with knowledge of the incident told Fox News. On Sept. 10, a Navy P-8 Poseidon with a crew of nine and an EP-3 Eries with a crew of roughly 24, were flying a reconnaissance mission 13 miles off the coast of Iran, through the Persian Gulf, Strait of Hormuz and Gulf of Oman, according to officials who call the boundary Iran’s “black line.” Iran’s territorial waters—like all nations--extend 12 miles into the sea, according to international maritime law. At some point during the flight, the Iranian military warned the two aircraft to change course or risk getting shot down. The US military planes ignored the warning and continued flying in international airspace, although close to Iranian territory, the officials told Fox. “We wanted to test the Iranian reaction,” one US official told Fox News when asked why the US jets were flying close to Iran.

    Israel will reportedly get a record $38 billion in military aid from the US - The United States is reportedly about to give its biggest-ever pledge of military assistance to Israel. According to sources who spoke to Reuters, the two countries recently came to a final agreement on a new military assistance pact that will see the US give Israel at least $3.8 billion a year for a decade. Under the previous deal, which expires in 2018, Israel received more than $3.1 billion annually. In addition to being America's largest-ever grant of military aid to its longtime ally, the new agreement, which is set to be signed within days, contains several firsts. The funding includes money set aside for Israeli missile defense, which in the past had been funded ad-hoc by US Congress to the tune of up to $600 million annually. And in exchange for the military package, Israel will refrain from lobbying Congress for additional funds throughout the duration of the new pledge — though sources told Reuters the wording of the deal may allow exceptions to be made in the event of war. Sources said that Israel made several concessions in the deal. Israeli prime minister Benjamin Netanyahu originally asked for at least $4.5 billion each year. And as part of the new deal, Israel will have to scale down the amount of American military aid money it spends on its own defense industry. Currently, Israel spends about 26 percent of US aid on domestic military contractors; Washington wants that to go to US companies instead. Decades of US aid has helped Israel raise one of the world's most formidable military forces. A 2015 report from Credit Suisse ranked the Israeli military the world's 14th most powerful.

    New Tricks Make ISIS, Once Easily Tracked, a Sophisticated Opponent - WSJ: Weeks before Islamic State militant Abdelhamid Abaaoud led the Nov. 13 terror attacks in Paris, French authorities thought he was holed up in northern Syria. Western Intelligence agencies pursuing Abaaoud had tracked him there using cell-phone location data and other electronic footprints. The Paris attacks, which killed 130 people, showed how badly they were fooled. Abaaoud had slipped past the dragnet and entered the city unnoticed. Drawing from a growing bag of tricks, Islamic State accomplices located in Syria likely used phones and WhatsApp accounts belonging to Abaaoud and other attackers to mask the group’s travel to Europe, said a Western security official: “We relied too much on technology. And we lost track.” Terror attacks in Europe, which have killed more than 200 people in the past 20 months, reflect new operational discipline and technical savvy by the Islamic State terrorists who carried them out, security officials said.The extremist group’s communications, once commonly conducted on phones and social media accounts easily tracked by authorities, have evolved into a mix of encrypted chat-app messages over WhatsApp and Telegram, face-to-face meetings, written notes, stretches of silence and misdirection.  These techniques helped protect attackers from Western intelligence agencies by leaving few electronic clues in a sea of intercepted data.  In recent months, Europe has been convulsed by a string of simple yet lethal attacks. Some were committed by people who appear to have received little direct training from Islamic State. The suspects in a failed plot in France last week were “remotely controlled” from Syria by the group, prosecutors said Friday. Officials worry such attacks could be a way to distract intelligence services while militants prepare more complex plots.

    What Happens After ISIS Falls? - It is easy to think that Islamic State is still on the march. It isn’t. Over the past year, the territory under its control—once roughly the size of the U.K.—has shrunk rapidly in both Iraq and Syria. Islamic State has lost the Iraqi cities of Ramadi and Fallujah, the ancient Syrian city of Palmyra and the northern Syrian countryside bordering on Turkey. Its militants in Libya were ousted in recent weeks from their headquarters in Sirte. In coming months, the group will face a battle that it is unlikely to win for its two most important remaining centers—Mosul in Iraq and Raqqa in Syria.  It may be tempting fate to ask the question, but it must be asked all the same: What happens once Islamic State falls? The future of the Middle East may well depend on who fills the void that it leaves behind both on the ground and, perhaps more important, in the imagination of jihadists around the world. Oone likely consequence of the demise of ISIS (as Islamic State in Iraq and Syria is often known) will be to revive its ideological rival, al Qaeda, which opposed Mr. Baghdadi’s ambitions from the start. Al Qaeda may yet unleash a fresh wave of terrorist attacks in the West and elsewhere—as may the remnants of Islamic State, eager to show that they still matter.  “Simply having ISIS go away doesn’t mean that the jihadist problem goes away,” said Daniel Benjamin of Dartmouth College, who served as the State Department’s counterterrorism coordinator during the Obama administration. “Eliminating the caliphate will be an achievement—but more likely, it will be just the end of the beginning rather than the beginning of the end.”

    Hopes fade for peaceful Eid in Syria as over 100 killed -  Ruinous violence has raged in several parts of Syria, shortly after the US and Russia sealed an ambitious agreement aimed at breathing life back into a stuttering peace process.More than 100 people were reported killed in a series of bombing raids on rebel-held parts of Aleppo province in the north of the country, and in Idlib in the north-west.The worst strikes were in Idlib city, the capital of the province of the same name, where they hit a market, killing 55 civilians."A Russian fighter jet targeted a residential area and a market in Idlib," said Al Jazeera's Adham Abu al-Husam, reporting from the city as civil defence forces, firefighters and paramedics worked to pull survivors from the rubble. "The marketplace was full of civilians shopping for the upcoming Eid holiday."In Aleppo, at least 46 civilians, including nine children, were killed in a bombardment of opposition-held areas, an Al Jazeera correspondent in the city said.The raids on Idlib and Aleppo were believed to have been carried out by Syrian army fighter jets, or those of its main ally Russia.

    Syria war: Cessation of hostilities comes into effect - BBC News: A cessation of hostilities has come into effect in Syria, although it is unclear how widely it will be observed. The Syrian army says it is implementing the truce, which began at sunset, but rebel groups have been more guarded. US Secretary of State John Kerry, who helped broker the deal, warned it could be the last chance for peace in a united Syria. Humanitarian groups are hoping to make aid deliveries to the worst-hit areas, especially the war-torn city of Aleppo. Mr Kerry, speaking at the state department in Washington, said early reports indicated "some reduction in violence". But he said that it was too early to draw a definitive conclusion about how effective the truce would be. Just after the ceasefire came into effect at sunset on Monday, the Syrian army announced a seven-day "freeze" on military operations.  The Syrian Observatory for Human Rights monitoring group reported that calm appeared to be prevailing on most front lines. The deal was struck on Friday in Geneva after months of talks between Russia and the US. It also requires both sides to allow unhindered access for humanitarian aid to besieged areas.

    Details of Syria Pact Widen Rift Between John Kerry and Pentagon - — The agreement that Secretary of State John Kerry announced with Russia to reduce the killing in Syria has widened an increasingly public divide between Mr. Kerry and Defense Secretary Ashton B. Carter, who has deep reservations about the plan for American and Russian forces to jointly target terrorist groups.Mr. Carter was among the administration officials who pushed against the agreement on a conference call with the White House last week as Mr. Kerry, joining the argument from a secure facility in Geneva, grew increasingly frustrated. Although President Obama ultimately approved the effort after hours of debate, Pentagon officials remain unconvinced.On Tuesday at the Pentagon, officials would not even agree that if a cessation of violence in Syria held for seven days — the initial part of the deal — the Defense Department would put in place its part of the agreement on the eighth day: an extraordinary collaboration between the United States and Russia that calls for the American military to share information with Moscow on Islamic State targets in Syria.“I’m not saying yes or no,” Lt. Gen. Jeffrey L. Harrigian, commander of the United States Air Forces Central Command, told reporters on a video conference call. “It would be premature to say that we’re going to jump right into it.”White House officials were also dubious. “I think we’d have some reasons to be skeptical that the Russians are able or are willing to implement the arrangement consistent with the way it’s been described,” Josh Earnest, the White House press secretary, said Monday at a briefing. He added, darkly, “But we’ll see.” In Mr. Kerry’s view, the administration has needed to do everything it can to restrain the forces of President Bashar al-Assad of Syria from continuing to bomb civilians. Once the Russians entered the war, that meant making the deal with President Vladimir V. Putin — one in which the Russians would pressure Mr. Assad to stay out of the skies.

    US Troops Forced To Flee Town After US-Backed Rebels Threaten To "Slaughter" Them --  US special forces soldiers were reportedly forced to flee a town in northern Syria after Free Syrian Army fighters threatened to "slaughter" them for their "invasion",according to videos and reports posted on social media on Friday.Full video of #FSA chasing#US #SOF of #AlRai #Aleppo "We're going to slaughter u. Ur coming to invade #Syria"pic.twitter.com/qy7fIVeG8x The US soldiers were working with Turkish forces as they advanced on al-Rai, Aleppo, in preparation for an offensive against nearby al-Bab, which is controlled by the Islamic State group.The FSA is allied with Turkish forces and ostensibly supported by the US as a "moderate" rebel group fighting against the government of Bashar al-Assad.However, Friday's confrontation highlights the complex nature of the war in Syria.  In the video, fighters from the FSA chant that US forces are "pigs", "crusaders" and "infidels". "Dogs, agents of America," one man can be heard to say in Arabic, while others chant "They are crusaders and infidels", "Down with America", "'Get out you pigs" and "They are coming to Syria to occupy it". A voice on a megaphone can be heard to say there will be a "slaughter". The US forces were reportedly forced to leave the town after the protests.The video was posted on Twitter hours after pictures showing men in US military uniform in al-Rai. Another video showed US soldiers in a column of armoured vehicles and Turkish tanks speeding out of al-Rai, which is known in Turkish as Cobanbey.

    Russia may rise to super power status again following US deal over Syria - Russia could be poised to become a super power again after agreeing with the US to launch what amounts to a joint air campaign against the two main extreme Islamist groups in Syria. If the ceasefire that starts at sunset on Monday holds for seven consecutive days and the UN is able to deliver aid to besieged people in Aleppo, then the US and Russia will establish “a joint implementation centre” that will organise joint military targeting by American and Russian aircraft directed against Isis and Jabhat al-Nusra, the Syrian branch of al-Qaeda which has relabelled itself – with al-Qaeda publicly assenting to a break with its affiliate – as Jabhat Fateh al-Sham.    For the US and Russia to plan and implement what may be a lengthy air campaign in Syria is perhaps the most striking aspect of the deal announced in Geneva early on Saturday morning. If the plan goes ahead, it goes a long way towards elevating Russia back to the status of a superpower – at least in the Middle East – that it lost with fall of the Soviet Union in 1991. Military partnership with the US, though in pursuit of the single objective of attacking Isis and al-Nusra, is a powerful incentive for Moscow to insist that the Syrian air force stop combat missions over all opposition areas, aside from those held by Isis.

    Is China Deliberately Trying To De-Rail The Russia/Saudi Oil Deal? -- China, the world’s largest oil consumer, has been increasing oil imports and feasting on the low crude oil prices. Could Russia and Saudi Arabia’s plan to stabilize crude oil prices cut into China’s oil hoarding plans?  Chinese oil imports have increased to 32.85 million tons in August, the second highest figure after the record 33.19 million tons import figures of December 2015. It’s a 7 percent increase over the same period last year, and a 6 percent increase over July. Currently, the Asian giant imports 66 percent of its crude oil requirements.  “Chinese oil majors are no longer under orders to increase domestic production, as they were doing so at a loss,” said Adam Ritchie, executive general manager for supply at Caltex Australia Ltd. “China’s change to let economics decide between imports and domestic production is a big change,” reports Bloomberg. Russia and Saudi Arabia, the two largest suppliers, have been battling it out to increase their market share in China. While Russia has increased its market share in China from 12.6 percent last year to 13.6 percent this year, Saudi’s have seen their share dip from 15.1 percent to 14 percent during the same period.“There’s a market-share battle going on mainly among the Middle East producers and Russia,” Olivier Jakob, managing director of Petromatrix, said by phone from Zug, Switzerland. “Rivals are making a big push into China,” reports Bloomberg. An agreement between both the competing producer nations reduces the bargaining power of the Chinese refiners, who had started to choose the spot sales offered by Russia against the long-term contracts policy of Saudi Arabia.Nevertheless, the Chinese can breathe easy, because like many other experts globally, even the Chinese analysts are not confident that the deal between Saudi Arabia and Russia will result in any substantive action. "It will be very difficult to implement this agreement, as the volume for each exporter country is different. Many countries - producers of oil and gas rely on exports, so they are unlikely to agree to the terms of the agreement," a senior consultant for Sinopec Yang Qixi said.

    China's peak oil problem --  First, an update on China's peak oil problem -- Chinese oil production has tanked; lowest in six years -- Forbes. I first posted a "China's peak oil" problem back on August 26, 2016. This from Forbes dated today's date. Some data points:

    • China: world's second largest crude oil importer
    • China: fifth largest crude oil producer
    • China: domestic production fell nearly 10% in the past 12 months -- the lowest in more than six (6) years
    • second consecutive month of decline in production
    • but look at this: Chinese production is in the same ballpark as the Bakken unfettered
    • Bakken unfettered: 2.2 million bopd
    • Chinese production: 3.87 million bopd
    • Chinese imports reaching record highs
    • up 16% this past year
    • on glide path to pass US as the world's largest oil importer

    Analysis: China crude oil imports rebound in Aug despite lower runs, pushes excess to tanks - China's crude oil imports rebounded in August despite lower crude throughput at both state-owned and independent refineries, implying that the excess imported barrels likely made their way to storage tanks. China imported a total of 32.85 million mt, or 7.77 million b/d, of crude in August, up 5.7% from July, the first rebound after three consecutive month-on-month declines since April, when 7.96 million b/d of crude was imported, S&P Global Platts' calculation based on customs data showed. China's state-owned oil refiners Sinopec, PetroChina and China National Offshore Oil Corporation, planned to operate their plants at an average of 80% of nameplate capacity in August, down two percentage points from the planned run rate of 82% in July, according to a Platts survey. The actual average operating rate in August may, however, be lower than 80%, as some of the refineries under maintenance were not included in the survey, Platts previously reported.In addition, the 38 independent refineries in Shandong that were surveyed also lowered primary throughput in August to an average of 46.5% of their processing capacities, down from 47.2% in July, data from Beijing information provider JYD showed. Lower crude throughput last month was mainly due to maintenance at some of the refineries, market sources said.

    Analysis: China's refinery throughput seen rebounding in Sep on seasonal demand - China's refinery throughput is expected to rebound in September as refinery maintenance comes to an end and the country gears up to meet seasonal revival in demand, sources said. The country has been registering downward slides in throughput over the past two months -- preliminary data released Tuesday by the National Bureau of Statistics showed August throughput fell 2.3% month on month to 44.28 million mt, or 10.47 million b/d. It was the second consecutive monthly drop in throughput, which hit a historic high of 11.02 million b/d in June 2016, S&P Global Platts calculations based on NBS data showed.The volume was in line with a S&P Global Platts monthly survey in August, which highlighted the downward trend in state-owned refineries' crude throughput. "China's throughput is expected to rebound in September given the fact that several refineries of Sinopec and PetroChina will resume operations after maintenance, while runs at independent refineries will also rise due to better oil products demand," a Shanghai-based analyst said. China's state-owned oil refiners -- Sinopec, PetroChina and China National Offshore Oil Corporation -- planned to operate their plants at an average 80% of their nameplate capacity in August, down two percentage points from the planned run rate of 82% in July, according to a Platts survey.

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