HBW Resources: Ollison Hydraulic Fracturing Report
Below is a summary of publicly available activities currently underway at the federal, state and international levels that could impact the use of hydraulic fracturing for oil and gas extraction.
State Legislative Update: Please see linked spreadsheet for an updated listing of state legislation dealing with hydraulic fracturing.
The Arizona Geological Survey now has a new report assessing the potential resources of other formations in Arizona for shale oil and shale gas. The report identifies 10 rock formations in Arizona that consist dominantly of shale or phyllite (very low grade metamorphic shale) that represent potential areas of interest for shale-oil and shale-gas exploration. Many of these units are weakly metamorphosed, and are perhaps too thermally mature to contain recoverable oil or gas in known exposures. However, lateral equivalents of these units may be less metamorphosed and so contain recoverable hydrocarbons. In 2012, Arizona oil production totaled 51,949 barrels from 21 producing wells in 2012, up from 36,925 barrels from 9 wells in 2011. The Dineh-bi-Keyah produced 49,972 barrels of oil. Gas production totaled 116.6 million cubic feet from 4 producing gas wells, down from 168 million cubic feet from 5 wells in 2011.
Purestream Services has deployed its AVARA brand vapor recompression commercial water-treatment system for an Arkansas Fayetteville Shale gas producer in White County, Arkansas. The company has been contracted to treat the wastewater at a centralized water treatment facility near Searcy, Arkansas. The facility was built to accommodate produced water from shale gas wells operating in the vicinity. Treating wastewater nearer to the source of the production reduces the costs of processing the produced and frac flowback water and minimizes the environmental impacts of hauling the wastewater long distances. For more information please contact HBW Resources.
A new study draws a straight line between pulling water out of the ground and increased seismic activity. The University of California Santa Cruz study, “Anthropogenic Seismicity Rates and Operational Parameters at the Salton Sea Geothermal Field,” concluded that a CalEnergy geothermal field near the Salton Sea in Southern California triggers small earthquakes very close to the San Andreas Fault. The study examined more than 30 years of data from CalEnergy production facilities, but could have broader implications. Tinkering with subterranean pressure dynamics is a staple of modern oil and gas production, and if they cause earthquakes it could prove a sensitive topic in California, where lawmakers are grappling with new regulations for the emerging technologies.
The U.S. Air Force will consider leasing land on Vandenberg Air Force Base for private companies to extract offshore oil and gas from the central California coast, officials said Wednesday. The proposal would allow oil companies to use onshore equipment with new extended reach “slant drilling” technology to access deposits several miles offshore. Over the next several months, the military will study whether the new type of drilling is compatible with the base’s space and satellite-launching missions and determine if it is “economically, environmentally and politically feasible,” the Air Force said in a statement. For more information please contact us.
State officials have been flooded with more than 20,000 comments and suggestions regarding proposed regulations of a controversial oil and gas drilling technique known as fracking, officials said. Members of the California Water Commission voiced concerns of their own about whether the state should treat the recipes for some fracking liquids as trade secrets, not to be disclosed to the public. Tim Kustic, the state oil and gas supervisor, told the commission that proposed regulations would require companies to notify the state at least 30 days before they begin fracking, with the information publicly posted no more than seven days later. Fracking is currently permitted in California. Companies would also have to disclose to state regulators the materials used in fracking, but Kustic told the commission that his office was wrestling with rules to apply when companies claim the formulas for their fracking solutions are trade secrets. A new draft of regulations will be released this summer with final approval, after additional hearings, likely in mid-2014, well after the state Legislature is expected to act on its own proposed regulations.
A Boulder County District Court judge, D.D. Marshall is allowing state regulators to join a lawsuit the Colorado Oil and Gas Association has filed challenging Longmont’s ban on hydraulic fracturing. The Longmont Times-Call reports the decision lets the trade association add the Colorado Oil and Gas Conservation Commission as another plaintiff. Industry officials are challenging the ban because they want to be able to extract oil and gas through hydraulic fracturing, which they have done for years. Meanwhile the commission says it has regulatory authority over technical aspects of drilling. The commission also is suing Longmont over drilling regulations passed by City Council. For more information please contact HBW Resources.
A five-year moratorium on fracking in Boulder took a step toward the November ballot. The Boulder City Council unanimously gave initial approval to a ballot measure that would ban fracking through 2018 unless, after June 2016, a two-thirds majority of the City Council decides it should be lifted. Some City Council members said the moratorium should extend five years from the end of the one-year moratorium adopted by the council last month, rather than converting the one-year moratorium into a five-year one. That would extend the moratorium through 2019 unless the council signed off in 2017. The City Council will consider the date changes at a second reading of the ballot measure on a special meeting Aug. 5. If the state Supreme Court ultimately rules against Longmont’s voter-approved fracking ban, the City Council could simply not enforce Boulder’s moratorium, City Attorney Tom Carr said.
The Fort Collins’ moratorium on permitting new oil and gas operations likely will expire on schedule at the end of July. The City Council rejected two options for extending the moratorium, which applies to accepting land-use and other applications for drilling new oil and gas wells. The City Council on Tuesday rejected two options for extending the moratorium, which applies to accepting land-use and other applications for drilling new oil and gas wells. One option would have extended the moratorium through the end of the year; the other would have been for seven years. Both proposals went down on 4-3 votes, with Councilman Gerry Horak making the swing vote.
The Colorado Department of Public Health and Environment announced that it will consider new requirements for oil and gas storage tanks and leak detections systems on wellheads. The state is facing increases in air pollution in the nine-county Denver metropolitan area and is in danger of exceeding federal ambient air quality standards. The increases are largely attributed to the state’s 50,000 oil and gas wells. New air regulations would be determined by a nine-member panel of commissioners appointed by the Governor. For more information please contact us.
Matt Lepore, director of the Colorado Oil and Gas Conservation Commission (COGCC), criticized hydraulic fracturing opponents as “misinformed” about the impacts of banning the practice of injecting chemical-laced water and sand underground to crack tight rock formations and release trapped oil and gas. Lepore said Tuesday during a panel discussion at the Northern Colorado Energy Summit in Loveland that banning the use of fracking essentially bans gas development, forcing the state to look to other sources such as coal for energy and driving up electricity costs that would be borne in some way by all the state’s residents.
Clariant AG, (CLN) the Swiss chemical maker, expects to continue expanding in the U.S. to take advantage of the “tremendous opportunity” created by rising production of oil and natural gas from shale formations. Clariant is doubling its capacity in Louisville, Kentucky, to make catalysts that help convert gas liquids into propylene and butadiene. Clariant joins Dow Chemical Co. and South Africa’s Sasol Ltd. (SOL), among others, in expanding U.S. production amid increased output of oil and gas from shale formations. The Muttenz, Switzerland-based company will benefit from sales to U.S. oil producers as well as to chemical makers benefiting from lower costs for raw materials and energy.
Citing the availability of low price natural gas from the Eagle Ford shale play, Valero Energy Corporation announced that it would build a new $700 million methanol plant at its existing St. Charles, Louisiana refinery. Methanol is a chemical feed stock used in paints, plastics, and other products. Once completed in 2016, the plant would produce 1.6 billion tons of methanol per year. The company also stated that it may construct additional methanol plants in the future.
The Maine House of Representatives sustained a gubernatorial veto of a study of the transportation of tar sands oil, over the objections of lawmakers who cited last week’s train explosion in Quebec Province as proof of the dangers posed by the industry. LD 1362, sponsored by independent Rep. Benjamin Chipman (I, District 119), started months ago as a proposal for a two-year moratorium on the transportation of tar sands crude oil in Maine. After changes at the committee level, the bill went to the full Legislature as a directive to state officials to expand an already-underway study. It passed unanimously but Republican Gov. Paul LePage, in his veto letter, called the bill redundant. Rep. Bernard Ayotte (R, District 3), was one of the 52 lawmakers who voted against the study. “I’m not opposed to this study, but I would be concerned about the study leading to a moratorium, which then leads to being forced to use other forms of energy that would be extremely expensive,” he said. For more information please contact us.
The O’Malley administration has put hydraulic fracturing on hold in Maryland until state officials complete a three-year study of whether it can be done safely. Environmental regulators took questions and comments at the Department of the Environment on a recently issued draft report outlining “best practices” used in other states or recommended by experts, which Maryland might require of gas companies here. Dozens of people, many of them members of environmental groups, urged state officials Tuesday to adopt even stricter regulations on hydraulic fracturing in the gas-rich Marcellus shale formation in Western Maryland. Some called for the state to ban the controversial practice outright, given concerns raised in other states over groundwater contamination and air pollution. Industry officials and regulators in states that permit shale gas drilling say those concerns are misplaced or overblown. For more information please contact HBW Resources.
A group of Democrats in Michigan’s Republican-controlled House introduced a package of eight bills that would tighten state regulation of hydraulic fracturing, which releases natural gas trapped in deep underground rock formations. Sponsors said the measures would bring more safety, accountability and transparency to the process widely known as “fracking,” although the state Department of Environmental Quality said it already has solid rules in place. The DEQ says about 12,000 wells have been fractured during the past half-century and “has never jeopardized the environment or public health.” Meanwhile, a group that wants to ban fracking said the bills don’t go far enough. The bills include: HB 4900, HB 4903, HB 4901, HB 4899, HB 4902, HB 4904, HB 4905, and HB 4906.
Atmos Energy Corp. will buy two southwest Mississippi natural gas systems. The Mississippi Public Service Commission voted Thursday to approve Atmos’ purchase of gas systems from the towns of Meadville and Bude. The Bude system has 280 customers, while the Meadville system has 190. The company will pay $96,000 to Meadville and $145,000 to Bude, and expects to complete the purchases by August.
The New Mexico Environment Department has reached a settlement with Occidental Permian Limited Partnership, the operator of a natural gas processing plant in southeastern New Mexico over alleged pollution violations. The settlement is worth more than $920,000. Most of the money will go toward installing pollution controls at the company’s plant near Hobbs. The department alleges the plant in 2010 failed to fully report emissions from flaring events that exceeded permit limits for carbon monoxide, hydrogen sulfide, sulfur dioxide and other pollutants. Under the settlement, Occidental denies violating any regulations but agreed to pay a $95,000 penalty and will spend at least $825,482 to install the new equipment. Occidental says the total cost of the equipment could be more than $2 million. For more information please contact us.
New York’s proposed rules for hydraulic fracturing drew an unprecedented response in January, when more than 200,000 comments were submitted by the public to the state Department of Environmental Conservation. Seven months later, the fate of those comments is unknown, with the DEC declining to say whether it would respond to the concerns raised in the submissions or allow them to sit unanswered. The DEC ignored a series of inquiries over the past week from Gannett’s Albany Bureau about the comments, which were submitted by the boxful in mid-January by a coalition of fracking opponents. But after a series of delays — including the addition of a yet-to-be-completed review by the state Department of Health — the state first extended and then missed a deadline to finalize the rules, causing them to expire in March.
Hurley town officials next week will hear a proposal to ban hydraulic fracturing and other activities related to the production of natural gas. The proposal, from the grassroots group Sustainable Hurley, is to be presented during the board’s meeting next week. Sustainable Hurley said in a press release that it will make a presentation on the “dangers of fracking” and will propose that town officials amend local zoning regulations to prohibit the “heavy industrialization that fracking and its supporting activities bring with it.” The group also plans to submit an anti-fracking petition that has about 110 signatures on it. For more information please contact us.
More temporary oil workers are expected in Williston, Dickinson and Minot this summer to catch up on a backlog of wells that need hydraulic fracturing, North Dakota’s top oil and gas regulator said. At the end of May, an estimated 500 oil wells were waiting on fracking crews. North Dakota oil production rose 2.1 percent in May to set an all-time high of 810,129 barrels per day, according to preliminary numbers from the department. Companies are taking an average of 22 days to drill a new oil well, but the length of time to complete the well and bring it on production has increased to 92 days.
The fallout from the derailment in Lac-Mégantic, Que., will likely have a detrimental impact on the near-term growth of moving petroleum by freight, and also likely raise costs and tighten restrictions for North American oil producers that rely on railways to ship oil across the continent, according to Moody’s Investors Service. In particular, any slowdown would be felt by oil producers focused on the Bakken shale oil formation, which depend far more on rail than on pipelines for transport, Moody’s said. Moody’s notes roughly two-thirds of the Bakken’s North Dakota oil production, or roughly 727,000 barrels a day in April, reaches its customers by rail. For more information please contact HBW Resources.
North Dakota Congressman Kevin Cramer said that leaders of the House Energy and Commerce Committee needed to see what is going on in North Dakota’s oilfields. Cramer led six Republican members of the U.S. House of Representatives on a one-day fact-finding mission from Minot to Tioga, checking out an oil rig, fracking site, the Hess Energy company facility in Tioga and Enbridge Pipeline company station in Berthold.
On a national scale, cheap natural gas retrieved through fracking is being credited with helping to resurrect the manufacturing industry. On the state level, affordable energy means lower overhead costs for North Dakota manufacturers. Meanwhile, the state is looking for other benefits it could provide. The 2013 Legislature approved a study by the state’s energy policy advisory commission, EmPower North Dakota, “to determine what is the best fit for value-added natural gas liquid projects” in the state, commission member and North Dakota Petroleum Council President Ron Ness said. “We have seen several major projects announced. But many believe this could be the new energy economy in our state,” Ness said. The projects include fertilizer plants that use natural gas to make their products, a natural gas-fired unit at the Heskett Plant, plans for a new MDU Resources natural gas pipeline and two diesel fuel refineries.
North Dakota’s per person gross domestic product increased nearly 11 percent from 2011 to 2012 — tops in the nation for the second straight year, and three times larger than runners-up Texas and West Virginia. The U.S. Energy Information Administration spotlighted the growth by GDP in a brief released. In 2001, North Dakota ranked 38th in real GDP. But crude oil production in North Dakota has more than quintupled since 2007 and natural gas withdrawals more than tripled, thanks to advances in technology such as horizontal hydraulic fracturing. For more information please contact us.
North Dakota oil and natural gas production reached new all-time highs in May, breaking the previous records set in April despite record rain in May thanks primarily to Bakken and Three Forks exploration and production activity. Preliminary estimates by the North Dakota Industrial Commission’s (NDIC) Department of Natural Resources indicates that the state’s oil production reached 810,129 barrels of oil per day (bopd), up from the 793,852 bopd in April, while natural gas production grew to 899.9 million cubic feet per day (MMcf/d) from 861.1 MMcf/d in April. The number of producing wells in the state also reached a record 8,915 in May, compared with 8,772 wells in April, according to NDIC’s Department of Natural Resources. Drilling permits grew to 211 in May from 202 in April, but declined to 165 in June; all three figures are down from the record of 370 set in October 2012.
The U.S. State Department has approved a Presidential permit to build an 80-mile-long leg of the Vantage Pipeline in North Dakota. The completed pipeline, with an estimated investment of $300 million, will be 430 miles and will carry up to 60,000 barrels per day (bpd) of ethane natural gas from Tioga, North Dakota, through Saskatchewan, to facilities in Empress, Alberta, Canada. The Vantage project will require approximately 400,000 man hours to construct, inject $300 million into the U.S. and Canadian economies, expand the market for North Dakota natural gas, create financial opportunities for service providers and increase revenues to local cities and counties along the route. The new pipeline will carry ethane gas, a component of natural gas that is used as a feedstock by the petrochemical industry to produce plastics, rubber, detergents and other consumer products.
New research shows Ohio’s shale oil and gas development so far has had little effect on demand for housing. Ohio State researcher Amanda Weinstein says despite earlier fears of an influx of oil workers in some eastern Ohio counties there’s still no housing shortage. Weinstein says in shale development areas in other states, an increase in housing permits during boom years quickly declined the following year. Weinstein says the oil and gas industry appears to be moving “much more cautiously” in adding drilling sites and hiring new workers in Ohio. At the end of 2012, oil, gas and other shale energy employers had posted help wanted ads for more than 6,000 positions, mostly in eastern Ohio counties. Weinstein adds that Ohio is better positioned to absorb any newly hired oil and gas workers. Unlike other shale regions in Pennsylvania and North Dakota, Ohio has more cities and towns within commuting distance of the oilfields.
Five oil and gas companies are participating in a joint industry project (JIP) to gain better insight into the Utica/Point Pleasant shale play. The joint industry project launched in early April is designed to improve fundamental understanding of the Utica/Point Pleasant shale play. The project is expected to last one year or more. The purpose of the Utica JIP is to identify the most productive formations or zones, improving fundamental understanding of what rock properties are most important for good wells, and exploring the variability within the Utica/Point Pleasant play. The partners hope to better understand the relationships between facies, depositional sequences and reservoir quality compared with other U.S. shale plays. For more information please contact HBW Resources.
Devon Energy Corp. plans to lease five more natural-gas fueled generators for its operations in northern Oklahoma after a successful pilot project with General Electric. The generators allow the company to power a site with natural gas from the wellbore, rather than buying about $100,000 worth of diesel each month. Using natural gas instead of diesel is cheaper and better for the environment. Devon is not the only company using the gas it produces to power its operations in the Mississippian, which covers a large swatch of northern Oklahoma and southern Kansas.
Blue Energy Fuels has plans to expand its network of compressed natural gas stations. The company plans to begin construction of a public fill station in 30 days. It will be a great option for fleet vehicles and regular drivers now using natural gas. Construction of the CNG station in Grove will be finished and it will open to the public in January or February. Then, future plans include CNG stations in Big Cabin, Vinita and Pryor in 2014. For more information please contact us.
Marcellus Shale and other natural gas plays are considered valuable for what can be extracted from them, but what if they could also be valuable and environmentally helpful after they are been depleted? That is a question Penn State faculty are looking at as part of a research project the National Energy Technology Lab’s Regional University Alliance is conducting. The study, the first of its kind, is also looking at what is known as enhanced gas production – injecting carbon dioxide into the wells and stimulating more gas production. That scenario would mean separating the two gases, then pushing the carbon dioxide back into the formation, potentially reaping the economic benefit of the additional gas production — depending on its market price.
The ethane being produced in the Marcellus and Utica shale region should be enough to support construction of several ethane crackers, officials with MarkWest Energy believe. MarkWest has invested $2.2 billion into pipelines, processing and fractionation plants in the region. The fractionation plant at Hopedale served as the destination of the six “superloads” that recently made their way through Steubenville. MarkWest has contracts to process Ohio gas for Gulfport Energy, Antero Resources, Petroleum Development Corp. and Rex Energy. The company also processes gas at the Mobley site in Wetzel County and the Majorsville complex in Marshall County, working for producers such as Magnum Hunter, Consol Energy, Noble Energy and Range Resources. The Cadiz processing complex will soon include two de-ethanizers, which will remove ethane from the gas stream. Currently, the company has three options for its ethane: send it to Canada for cracking via the Mariner West Sunoco pipeline; send it to the Gulf Coast for cracking via the ATEX Express pipeline; or send it to the Gulf Coast for cracking over the Bluegrass Pipeline. There are now about 2,500 construction employees working to build the Harrison County plants and the pipeline network to which they connect, a number he believes will increase in the near future.
State Sen. Jim Ferlo, (D, District 38), has sent out a memorandum asking for co-sponsors for a bill titled “Statewide Natural Gas Drilling Moratorium.” The moratorium would prohibit the Pennsylvania Department of Environmental Protection from issuing “new unconventional well permits while a seven-member commission studies the varied environmental impacts that the natural gas industry has on the Commonwealth,” the memo states.
Butler County continues to benefit from Marcellus shale money, according to Controller Jack McMillin’s Comprehensive Annual Financial Report. For 2012, the county received $1.2 million in drilling impact fees, up from $900,000 in 2011. The county used a portion of that money to balance its 2013 budget that included a 1-mill tax increase, with commissioners saying that deficits at the emergency services center and the Sunnyview nursing home made the increase necessary. At the end of 2012, according to McMillin’s report, the county had 152 producing gas wells, up 81 percent from 84 wells at the end of 2011. For more information please contact us.
Proportionally, more bridges have been substantially repaired in areas where the natural gas industry is booming than in the region’s more urban areas since March 2011, state Department of Transportation data show. In Lackawanna, Luzerne and Pike counties in PennDOT’s District 4, 38 bridges deteriorated to the point at which they were classified structurally deficient during that period. Meanwhile, 32 bridges in these counties were replaced or repaired sufficiently to remove the structurally deficient designation. Rettew Associates provides bridge and highway services for several Marcellus Shale companies. “Three of the businesses we work with have spent more than $250 million on roadway reconstruction in the northern tier of Pennsylvania alone,” said Jeffrey Case, director of transportation at Rettew, in an emailed response sent by company spokeswoman Holly White. “There have also been two bridge replacements in Northeast PA where the cost to the natural gas company exceeded $300,000.” One of those companies is Southwestern Energy, which Mr. Case said offered to “make a temporary repair” to a Susquehanna County bridge that could not support the weight needed for its trucks. Mr. Case said the company offered to fully fund and manage a full replacement of the bridge in the fall.
The new Chairman of the Delaware River Basin Commission (DRBC) responded to the multiple of requests related to the lack of movement on implementing new gas drilling regulations and moratorium on hydraulic fracturing. Michele Siekerka, representing the state of New Jersey, issued a statement on what the DRBC has been doing since a scheduled vote on the new regulations was cancelled last November. Among the points highlighted were: reviewing new scientific studies on the effects of natural gas development on water resources; benchmarking new regulations, best management practices and performance standards adopted by other states, federal agencies and organizations; using what has been learned to identify a level of minimum standards that will protect the DRBC’s shared water resources; performing water quality and quantity monitoring to establish baseline conditions prior to the onset of natural gas development; and with the assistance of a grant from the William Penn Foundation, developing a tool for evaluating the impacts of land-based development on water resources. At the same time, two energy companies are pulling out of northeastern Pennsylvania, where the existing DRBC three-year moratorium on gas drilling has infuriated landowners who say it’s now cost them a windfall of more than $187 million. The $3,000-per-acre lease was structured so that some of the money was to be paid up front and the rest once drilling began. The landowners’ group said its members received about $150 million several years ago. Another $187.5 million would have been due had the companies been able to develop gas wells. The notifications, sent on Newfield letterhead on behalf of Newfield and Hess, made official what had in practice already occurred, as the companies pulled staff from the region long ago.
Consol Energy provided an operations update for the quarter ended June 30, 2013 according to which the company successfully drilled an exploration well in the Devonian Shale. Consol Energy drilled its Upper Devonian Shale well in the Burkett formation, which is the deepest of numerous Upper Devonian shales. The company believes that while all of its acreage in Southwestern Pa. and Northern W.Va. has the potential for the existence of the Upper Devonian Shale formation, initial geologic estimates show that it controls 300,000 acres with commercial Upper Devonian Shale potential. During the second quarter, Consol Energy drilled 13 horizontal shale wells: nine Marcellus Shale and four Utica Shale wells. The average drilled lateral length for the Marcellus Shale wells and the Utica Shale wells was 8,860 feet and 5,459 feet, respectively. Consol completed 15 Marcellus Shale wells in the second quarter and expects to initiate completion operations on the Utica Shale wells in the third quarter of 2013. For more information please contact HBW Resources.
A Cabot Oil and Gas Corp. well in northeastern Pennsylvania is being shut down in the midst of a state Department of Environmental Protection investigation. The Scranton Times-Tribune reported the Costello 1 vertical well in Dimock Township will be plugged after the DEP decided it can’t be used anymore. The issue is whether methane found in two nearby water wells has been coming from the well; the DEP said it isn’t clear. The well will be plugged even as the investigation continues.
In the event of fracking or drilling damages, Pennsylvanians and their communities may not be adequately covered financially when – or if – the bill comes, a new report says. The report, “Who Pays the Cost of Fracking?” by PennEnvironment Research & Policy Center, outlines what it says are shortcomings when it comes to the state’s financial assurance requirements for oil and gas companies. These assurance requirements are the state’s way of protecting leaseholders or communities from being left with the bill for damages when oil and gas companies move on.
North Strabane Township supervisors are poised to make a decision regarding a possible non-surface Marcellus Shale gas lease deal when the board meeting next week. Two offers are on the table—one from Rice Energy and one from Range Resources—both located in Southpointe. Both companies want to conduct non-surface drilling on 81.8 acres located off state Route 519, that township Manager Frank Siffrinn said consists of the land the municipal building and park are situated. He stressed that it is non-surface drilling, which would mean no disruption of daily activities there. For more information please contact us.
Texas oil producers pulled more oil out of the ground than many countries in recent months, putting it in the ranks of such powerhouses as Kuwait and Venezuela. The latest numbers show Texas produced 74 million barrels of oil in March and 73 million barrels of oil in April, more than double the output per month from 2009, according to the Energy Information Administration. If Texas were a country, it would rank 15th in the world in terms of oil production, according to Fuelfix.com. That’s thanks in large part to the Eagle Ford Shale and Permian Basin where drillers use horizontal drilling hydraulic fracturing to pass through the shale formations and free the oil.
Sales tax revenues continue to show the Eagle Ford Impact. Texas Comptroller Susan Combs said state sales tax revenue in June was $2.17 billion, up 9.1 percent compared to June 2012. Combs sent cities, counties, transit systems and special purpose taxing districts their July local sales tax allocations totaling $578.3 million, up 8.1 percent compared to July 2012. Local sales tax allocations remitted in July represent sales made in May. “The Eagle Ford Shale keeps getting larger,” Kyle Kramm, assistant director of economic development for the city of Seguin said, noting that the economic development office has been receiving lots of inquiries from oilfield service companies, many of them asking about housing for their employees. Counties in the Eagle Ford Shale have seen sharper increases than elsewhere in the state. Karnes County’s July allocation was up 58.5 percent and its year-to-date allocations total $5.6 million, up 55.2 percent. For more information please contact us.
The Houston metropolitan area has become the nation’s top exporter for the first time in history, pushed by growing shipments of petroleum products, according to a U.S. Department of Commerce report released this week. About $110.3 billion in merchandise shipped from the Houston-Sugar Land-Baytown area in 2012, a nearly 6 percent jump from the year before. The metropolitan area surpassed New York City’s export value of $102 billion to grab the title of top U.S. exporter. Petroleum and coal products were the largest group of exports from the Houston area, totaling $36.6 billion in value. Another $31.2 billion worth of chemicals left the region.
Forest Oil Corp. intends to sell oil and natural gas fields in the Texas Panhandle that may fetch as much as $1 billion, more than the company’s market value. The Denver-based energy company hired JPMorgan Chase & Co. to sell about 100,000 acres, including producing wells, after receiving unsolicited offers, according to a filing. The divestiture would leave Forest with assets in East Texas and the Eagle Ford shale in West Texas.
Enefit American Oil, a subsidiary of Eesti Energia, is seeking approval from the U.S. Bureau of Land Management (BLM) to install utility lines for its project to produce shale oil, a liquid fuel, in the Uintah Basin. In 2011, Enefit bought the mineral rights across a large tract of land in eastern Utah, believed to contain 2.6 billion barrels of recoverable shale oil. Though Enefit has yet to obtain the numerous federal, state and local permits to begin shale mining, the company is optimistic it will begin mine construction in Utah in 2017, with the first oil being extracted in 2020. Its ultimate target is to produce 50,000 barrels of shale oil per day. The BLM will conduct an environmental impact study and is seeking suggestions on specific issues that should be part of the analysis. For more information please contact HBW Resources.
Consol Energy dedicated its Northern West Virginia Advanced Water Treatment Facility, where water from underground mines is being treated to reduce harmful discharges. Located in Mannington, W.Va., the $200 million project was finished “ahead of schedule, under budget and without any accidents,” Consol President Nicholas J. DeIuliis said. The facility is designed to treat a maximum flow of 3,500 gallons per minute of mine water and is based on a Zero Liquid Waste process. Solid waste from the treatment process, including sludge and mixed salts, will be disposed of in an on-site landfill. As a result, no liquid or solid waste from the water treatment operations will leave Consol’s property. John Owsiany, director of waste systems and operations for Consol, said the water treatment plant cost $130 million. Consol spent another $70 million to build 35 miles of pipeline and six pump stations to bring water from underground areas of Consol Energy’s Blacksville 2, Loveridge and Robinson Ridge mines to the central treatment plant. The water is pretreated at the mine locations for metals removal before entering the pipelines.
West Virginia lawmakers soon will travel to North Dakota to learn about that state’s Legacy Fund, in hopes of establishing a similar savings program. The 2-year-old trust fund, built with oil and natural gas tax revenues, already contains more than $1 billion in assets. State officials aren’t allowed to touch that money until 2017, when interest generated from the account will flow into North Dakota’s general revenue fund. The current Legacy Fund takes 30 percent of all oil and natural gas tax revenues. The earlier, defeated version would have taken 50 percent. The ND Legacy Fund is part of the state constitution and requires voter approval to change. West Virginia collected $74.7 million in natural gas severance taxes last fiscal year, a slight increase from the $68.8 million collected in fiscal year 2012. Coal severance taxes, meanwhile, fell $73.4 million between the 2012 and 2013 fiscal years, from $460 million to $386.6 million.
U.S. Interior Secretary Sally Jewell drew on her experience as a former oil-industry engineer to defend proposed federal regulation of hydraulic fracturing for oil and gas on publicly owned land. Testifying to the House Natural Resources committee, Jewell faced criticisms from Republican lawmakers, who said the department’s proposed rule on fracturing, or fracking, will lead to unnecessary production delays. Lawmakers told Jewell that state regulators best know the local geology and the federal government should leave the regulation to them. Jewell also drew on her engineering experience at Mobil Oil Co., now part of Exxon Mobil Corp., to answer Representative Alan Lowenthal (D, CA 47) who complained that the Interior proposal relies on the industry’s FracFocus website for disclosure of fracking chemicals. FracFocus “is imperfect, but it’s being updated,” she said. If it’s not providing adequate disclosure, “we will look for other ways to do it.”
The Environmental Protection Administration (EPA) said it plans to develop a proposed rule requiring companies who make chemical substances and mixtures used in hydraulic fracturing to report data on the chemicals. For more information please contact us.
Shale oil production in the U.S. and Canada added one million barrels to domestic production over the last year. Current activity may bring North American shale oil supply from 3.5 million to 8 million barrels per day before 2020. Such rapid growth from new oil wells has not been seen since Saudi Arabia increased its oil production capacity in the early 1970s. The timing for the world economy is ideal: the global oil supply balance was stretched to its limits in 2007-2008; Saudi expansion since then has mostly been to balance decline from northern Ghawar, and BRIC demand and Iraq supply now appear increasingly fragile. Rystad Energy believes that the world would be headed into an oil-driven recession without the North American shale oil revolution.
Domestic shale oil production could shoot up to 5 million barrels per day by 2017, making the United States the top oil producing country in the world, according to a policy brief, “The U.S. Shale Oil Boom: Potential Impacts and Vulnerabilities of an Unconventional Energy Source,” from the Belfer Center for Science and International Affairs at Harvard’s Kennedy School. The brief also projected that the U.S. could become the world’s largest oil producer. The report estimates there could be more than 100,000 working wells in North Dakota and Texas by 2030. There are about 10,000 now. Nationwide, production of all oil could shoot up from 11.3 million to 16 million barrels per day by 2017.
The U.S. economy is struggling to find a new formula for vigorous growth. But all growth opportunities are not created equal. New McKinsey Global Institute research, “Game changers: Five opportunities for U.S. growth and renewal” pinpoints five catalysts – in energy, trade, technology, infrastructure, and talent development—that can quickly create jobs and deliver a substantial boost to GDP by 2020. According to the report, a main catalyst is “Shale-gas and -oil production. Powered by advances in horizontal drilling and hydraulic fracturing, the production of domestic shale gas and oil has grown more than 50 percent annually since 2007. The shale boom could add as much as $690 billion a year to GDP and create up to 1.7 million jobs across the economy by 2020. The impact will extend to energy-intensive manufacturing industries and beyond. The United States now has the potential to reduce net energy imports to zero—but only if it can successfully address the associated environmental risks.” For more information please contact HBW Resources.
In a new market research report, “The Shale Gas Market 2013-2023” by Visiongain has determined that the value of the global shale gas market in 2013 will reach $33.2 billion. The shale gas market is currently dominated by the US as this is where the technology to develop shale was pioneered. The U.S. also has a number of favorable characteristics that have helped promote the speed of shale gas production. However, this has created a distinctly two tier market between the nations with an established shale gas market, and less mature and more rapidly developing markets. Investment in shale gas exploration outside of North America will grow strongly over the next decade while the U.S. and Canadian markets will maintain their position as the epicenter of shale gas investment.
A new study, “Liquefied Natural Gas: Why Rapid Approval of the Backlog of Export Applications is Important for US Prosperity,” from the American Council for Capital Formation calls for the Department of Energy (DOE) and Federal Energy Regulatory Commission (FERC) to speed up the permitting process to authorize natural gas exports. An even better solution is for Congress to remove the DOE’s authority for authorizing natural gas export permits and allow the states to control the environmental review and permitting process for natural gas export facilities. Allowing for increased natural gas exports would be a huge boon for the American economy as it would expand U.S. market opportunities. According to the analysis, expanded natural gas exports would, in the time frame 2016–2035:
· Increase employment by between 73,100 and 452,300 jobs;
· Increase manufacturing job growth by between 7,800 and 76,800; and
· Grow U.S. gross domestic product by $15.6 billion to $73.6 billion per year on average.
The study also includes increased employment for the refining, petrochemicals, and chemicals job sector and projects natural gas price increases of only about $0.32 to $1.02 per million British Thermal Units on average. For more information please contact us.
Demand for crude tankers has hit its highest level for this time of year since at least 2007. Traders and crude producers in July commissioned 126 oil tankers, each capable of carrying at least 2 million barrels, according to data released from Marex Spectron Group, a London-based commodities and freight-derivatives broker. Demand for very large crude carriers (VLCCs) is on the rise thanks to a recent International Energy Agency report predicting an “exceptionally high” 3 percent increase in global refinery processing between July and September.
Senate Energy and Natural Resources Committee Chairman Ron Wyden (D, OR) said lawmakers on the panel will soon unveil proposals on natural gas policy, a topic that has been a top committee focus this year. The committee, in hearings and informal committee “forums” this year, has heard hours of testimony on hydraulic fracturing, natural gas exports, infrastructure and many other topics related to the nation’s gas production boom.
EP Energy (formerly El Paso Energy) have committed to sharing key drilling, completions and hydraulic fracturing data on their Eagle Ford, Rockies / Altamont and Wolfcamp wells drilled between 2012 and 2014. It has joined the ‘Shale Performance Review’ (SPR) to trade its North American offset shale well data with BHP (Petrohawk), Chevron (Atlas), Hess, Husky, Hunt, Marathon, Murphy, Newfield, Nexen, Pioneer, Shell, Statoil (Brigham) Suncor and Talisman. Established early 2012 in Houston by a group of operators, the SPR enables the exchange of high quality and reliable data between Operators to aid them with their well planning, budgeting, performance management and benchmarking processes. For more information please contact us.
Memorial Production Partners LP announced it is acquiring oil and gas properties in the Permian Basin, East Texas and the Rockies for $606 million. The acquired properties in Texas, New Mexico, Wyoming and Colorado consist of 973 gross wells on 363,000 acres, which the company will operate 94 percent of the total proved reserves and 74 percent of the producing wells. Additionally, the company will acquire nearly 275 billion cubic feet of equivalent proved reserves, of which about 48 percent are located in the Permian Basin, 31 percent in East Texas and 21 percent in the Rockies. This sale will increase Memorial’s proved reserves by 36 percent to more than 1 trillion cubic feet of equivalent.
The EPA hosted two updates on its Hydraulic Fracturing Study. The first focused on “Water Acquisition Modeling” and was led by Dr. Andrew Gillespie, EPA’s ORD/National Exposure Research Laboratory. The second update focused on “Well Construction/Operation and Subsurface Modeling” and was jointly led by Jeanne Briskin, Hydraulic Fracturing Research Coordinator and Stephen Kraemer, Ecosystems Research Division of the National Exposure Research Laboratory. Both of the updates were based upon previously held technical workshops.
A new study, “Water-Smart Power, Strengthening the U.S. Electricity System in a Warming World,” released by the Union of Concerned Scientists recommends focusing on renewable energy rather than natural gas and nuclear power as a means for addressing both water and carbon concerns, as the country begins to replace many of its aging coal plants. The major sources of electric generation – coal, natural gas and nuclear power – all require large amounts of water to create power.
The Federal Energy Regulatory Commission (FERC) issued a “Notice of Data Requests to Certain Natural Gas Marketers for Information Related to Natural Gas Sales” in Docket No. RM13-1-000. Last November, FERC solicited comments on its proposal to require quarterly reporting of every jurisdictional natural gas transaction that entails physical delivery for the next day or for the next month. Quarterly reporting of all jurisdictional electric market contracts and transactions effectuated thereunder long has been the norm. The vast majority objected to the proposal, with many explaining that the requirement would not advance FERC’s goal of improving natural gas market transparency because jurisdictional transactions make up only a small portion of relevant sales. Instead of abandoning the proposal as expected, FERC now seeks more information to help it assess whether the proposed reporting requirement would improve transparency. The Notice explains that FERC’s Office of Enforcement will send data requests to “certain natural gas marketers” in order to gather “additional information about what portion of the total natural gas sales are jurisdictional natural gas sales.” Marketers that receive the five-question data request must respond directly to FERC staff within 15 days. Although marketers can seek confidential treatment of the data they provide in response, if FERC takes further action in the docket it may disclose information “in some summary or aggregated form.” For more information please contact HBW Resources.
When the Organization of the Petroleum Exporting Countries (OPEC) meets in December, it is rumored that they may slash its oil production for the first time in five years. OPEC could reduce production by half a million barrels a day due to the surge in the North American shale boom. OPEC’s latest report, released last week, projected that demand for its crude will slide 300,000 barrels a day next year to 29.6 million barrels of oil per day (MMbopd), or about 2.6 percent less than the organization is currently producing.
The European Union has no plans to impose a blanket ban on hydraulic fracturing, but it will lay out rules to address environmental concerns, a top EU official said. EU Environment chief Janez Potocnik said the European Commission, the bloc’s executive arm, will draft its proposal for the rules by the end of the year to settle “some serious legislative gaps.” “We don’t talk about banning fracking at the EU level,” Potocnik said after discussing the issue with the bloc’s environment ministers in the Lithuanian capital Vilnius. But he said they plan to ensure hydraulic fracturing or fracking is “done in a safe and secure way.” The EU’s 28 members are divided in their approach to fracking. Poland, for example, has enthusiastically granted exploration rights to U.S. fuel giants while France has banned the method. Leo Brincat, Environment Minister for Malta, has said that the EU continues to have doubts regarding the use of shale and its geological impact, production costs and socio-environmental impacts. Brincat, speaking at the same meeting for EU environment ministers in Lithuania, said that the largest challenge will be assessing the impact the gas will have on energy prices, competition and security of supply. For more information please contact us.
Chevron and Argentinian oil firm YPF have inked a deal to spend $1.2 billion to further develop shale oil and gas resources in the Vaca Muerta formation. The deal calls for an initial phase in which 100 wells will be drilled in a 5,000-acre tract in the Loma La Lata Norte and Loma Campana areas. Chevron said the deal gives it the chance to grow productionbeyond its 2017 target of 3.3 million barrels per day. The Vaca Muerta formation is a giant shale oil and gas field that was discovered in 2010 by Spanish oil and gas firm Repsol and YPF. Repsol once owned a majority stake in YPF, but now holds a much smaller stake. Chevron Argentina currently produces an average of 21,000 barrels of crude oil and 4 million cubic feet of natural gas in the Neuquen Basin. The Loma La Lata area is currently producing more than 10,000 barrels of oil-equivalent per day. YPF said that Chevron will spend the first $300 million of the total planned outlay once a concession is granted by local officials. After that, both companies may continue with the total development of the areas, YPF said. YPF said that money it has already spent on the project together with the new contribution outlined in the deal with Chevron mark a total investment of $1.5 billion. Members of the Argentine Mapuche community are protesting against the deal claiming they were not consulted on plans to extract the resources from the site in southern Neuquen province – land which they claim as their own – nor were they informed of the potential environmental impact.
The Argentinean government is hoping to attract investment in the country’s Vaca Muerta shale oil field by announcing that it will allow energy companies to export up to 20% of the gas they produce free of tax. Buenosairesherald.com has reported that “export revenue of companies that invest at least $1 billion over five years will also be exempt from the foreign exchange controls that have been imposed by the government, according to an announcement in the government’s official daily gazette.” Moreover, these companies can keep their foreign exchange earnings outside Argentina and will be allowed to renew their concessions for a 25-year period, with a possible 10-year renovation after that. For more information please contact HBW Resources.
Queensland could have its own shale gas industry within two years, the State Government says. Government briefing notes for Environment Minister Andrew Powell show there are 16 shale gas exploration programs in the state. But it warns any development would need numerous wells and an extensive expansion of the gas pipeline network to be viable. It would also use the controversial process known as fracking, which will put the fledgling industry on course for a battle with environmentalists. The main areas for exploration are the Cooper, Galilee, Eromanga and Maryborough basins. The Cooper Basin is already well developed and is considered the most likely to have the infrastructure to handle the development.
PetraGas, has applied for a Petroleum Exploration License covering approximately 3,900 square kilometers north of Hobart in central Tasmania to explore for shale oil and gas. The tenement application spans part of the petroleum-bearing Tasmania Basin, which is prospective for both conventional and unconventional oil and gas. The company’s initial geological assessment indicates shale oil and gas are the most prospective targets with the primary areas of interest located 50 km north of Hobart. The license straddles the Tasmanian Gas Pipeline which runs between Hobart and eastern mainland Victoria, allowing potential access to major gas markets.
Australia’s Prime Minister has announced a plan to replace a carbon tax with an emissions-trading scheme in 2014, a year earlier than the initial 2015 timetable. “The move to bring forward the market-based system a full year earlier is expected to quickly produce a sharp drop in the cost of carbon, from a predicted $23.30 per metric ton in July 2014 to around $5.50 per ton in American dollars.”
Mako Hydrocarbons has received reiteration of support from joint venture partners Transerv Energy and Tamaska Oil & Gas for the farm out of its Duvernay and Rock Creek assets in Western Alberta to Canadian Pan Ocean. The Duvernay Shale is an emerging world class liquids rich resource play that is the source rock for most of the conventional oil fields in Alberta and has attracted the attention of companies such as ExxonMobil, Sinopec Daylight, Encana Corporation, Talisman Energy and ConocoPhillips. Mako’s farm out its Duvernay acreage to Canadian Pan Ocean requires CPO to also acquire all of Transerv and Tamaska’s interests in the resource play. Transerv will receive about $14.2 million while Tamaska will get $3.6 million from the sale. Transerv has a 34% interest in the Duvernay Shale acreage and 34% in the Rock Creek while Tamaska has 8% and 16% respectively. For more information please contact us.
Chilean energy executives interested in Pennsylvania’s Marcellus Shale natural gas are in the middle of a three-day trade visit to the state. The tour comes on the heels of Pennsylvania Governor Tom Corbett’s own trade trip to Chile last April. Bernardo Larrain is the chairman of Colbun, a Chilean energy company. Larrain says demand for energy in Chile is growing five to six percent a year, and will continue at that rate for the next 20 years. “And that’s why we’re here,” Larrain said. “Pennsylvania produces a lot of natural gas, shale gas. And Chile has a big installed capacity with plants that operate with natural gas. So I think there’s a good potential for association with the state of Pennsylvania.” Larrain says opposition to new coal fired plants in his country limits their options. He says his company has spoken to executives from large energy companies like Shell and BP about importing natural gas from the United States. For more information please contact HBW Resources.
Prime Minister Jean-Marc Ayrault has rejected a call for a rethink in the shale gas debate and said the government will not allow its exploitation in France. He was speaking after Industrial Renewal Minister Arnaud Montebourg told a committee planning reforms to the Code Minier – which sets the laws on development of underground resources – that he would like to see a state-owned company involved in “ecological” exploitation of shale gas gaz de schiste. New Ecology Minister Philippe Martin said there was no such thing as “ecological” exploitation of shale gas and received support from Housing Minister Cécile Duflot, of the Ecology Party. French President Francois Hollande ruled out exploration for shale gas during his presidency, dousing hopes that a ban on hydraulic fracturing could be reviewed following a legal challenge by a U.S. firm.
France’s top court said it would examine a challenge to a law that bans hydraulic fracturing, the drilling technique used to produce shale gas and oil. U.S. firm Schuepbach Energy, which held two exploration permits that were canceled in 2011, has contested the law. The Constitutional Council, made up of judges and former French presidents, has the power to annul laws if they are deemed to be unconstitutional. Schuepbach Energy challenged the law in the local court of Cergy-Pontoise near Paris, which forwarded the case to France’s highest administrative court, which then passed it on the Constitutional Council. Fracking was banned in France in 2011 under President Nicolas Sarkozy on concerns it could pollute groundwater and trigger earthquakes. After France put the ban in place, Schuepbach Energy said it had no alternative way to carry out the exploration, which led to the suspension of its two permits in the south of France.
The government has appointed the German firm DMT GmbH & Co. KG to study the country’s shale gas potential and help meet the mounting demand for energy as its conventional energy sources, in terms of the presently estimated proven reserve, are depleting fast, a top government official said. The Hydrocarbon Unit (HCU), a state-owned entity under the Energy Division of the ministry of power, energy and mineral resources (MPEMR), appointed the German firm through a competitive bidding process, in line with an instruction from the energy ministry. The DMT GmbH has been asked to submit its report by next October. For more information please contact us.
Romania-focused Zeta Petroleum reported Wednesday that it is raising $1.2 million on the Australian Securities Exchange to fund work programs on its assets. Zeta plans to bring theDornesti Sud-1 well into production. This is a discovery well on the company’s 50 percent-owned Suceava gas concession. It has tested at a rate of 918,000 cubic feet of gas per day and is currently suspended, ready for production. Successful production test at the Dornesti Sud-1 well is part of an on-going feasibility study to bring two gas discovery wells on the Suceava concession into production.
The proved amount of South Africa’s technically recoverable, largely untapped, largely onshore natural gas reserves trapped in shale rock formations totals an estimated 11.04 trillion cubic metres (Tcm) of volume, the equivalent of about 390 000 trillion British thermal units (TBtu). South Africa’s reserves have been ranked as the eighth-largest in the world. Southern Africa has the gas resources to defy expectations by stealing some of that spotlight, especially when the controversial hydraulic fracturing (fracking) process gets the green light in South Africa’s onshore bounteous shale plays situated in the coveted Karoo Basin landscape. The cost to produce the gas is one issue. The price it may fetch in domestic, regional, or international markets in the future is another. South Africa’s shale plays are being tending by a super-major, Dutch Royal Shell, amid four other players. For more information please contact us.
An unscientific poll run by the media organization, The Sun, found almost three-quarters of were in favor of mining the massive reserves – using technology known as fracking — which lie under many parts of the country. Sun readers signaled, “We’re backing fracking” by 71 per cent to 29 per cent after experts estimated there are 1.3trillion cubic feet of gas lying buried between Blackpool and Scarborough. Energy Minister Michael Fallon said, “Shale gas is a great opportunity for Britain. It could provide secure energy, generate investment and create jobs.”
At the 2nd Annual UK Shale Summit: Making It Happen event, Tim Yeo, chair of the energy and climate change committee in the UK Parliament, described the event as ‘timely’ and ‘topical’ (just last month the British Geological Survey (BGS) said that the country’s shale gas resources are estimated to be 1329 trillion cubic feet). His reasons to develop shale gas are to reduce dependency on imports and to keep gas prices down. However, he said that unlocking shale potential would be a slow and difficult process because of the UK’s strong tradition of protecting its environment. There is a near certainty, he believed, of strong opposition based on environmental concerns even though this may “sometimes border on being completely irrational.” The way to win over local communities would be to make them direct beneficiaries. While he personally felt that 25% of revenues going to land owners would be a great method and a model used in the US, he said its implementation would not be likely, there are other ways of going about it, such as offering to freeze energy bills. Something dramatic is needed, said Yeo, not just for local councils but individuals too. He also spoke about the importance of having a low carbon element as part of the UK’s energy mix.
Gas prices could fall by a quarter and help bring down household energy bills if Britain exploits its shale gas reserves, a report commissioned by Ed Davey, the Energy Secretary, suggests. The study by Navigant Consulting backs up David Cameron’s claim that shale gas drilling could help cut the cost of living for families struggling with average bills of more than £1,300 per year. For more information please contact HBW Resources.
For additional information, please contact Bo Ollison with HBW Resources. His contact information is below.
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