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. HBW Resources is monitoring these activities to ensure that responsible and feasible policies based on sound science are advanced.
State Legislative Update: Please see linked spreadsheet for an updated listing of state legislation dealing with hydraulic fracturing.
Two Los Angeles City Council members introduced a motion calling for a citywide halt to hydraulic fracturing, a process that uses a pressurized water mixture to release oil or natural gas from deep underground. Council members Paul Koretz and Mike Bonin want their colleagues to back a moratorium on the practice, which entails injecting a water and chemical mixture into rock formations at high pressures, creating cracks to release natural gas or oil. Critics of fracking link the activity to property damage, air and water pollution and an increased risk of earthquakes. The motion, which was referred to the City Council’s Planning and Land Use Management Committee, asks the city attorney and planning officials to craft an ordinance that uses land use and zoning laws to ban “all activity associated with well stimulation, including, but not limited to, hydraulic fracturing, gravel packing, and acidizing, or any combination thereof, and the use of waste disposal injection wells” in the city. The moratorium should be in place until energy production companies can assure the council impacts on the environment and the surrounding community will be mitigated and until state and federal laws regulating the activity are in place, according to the motion.
The Santa Cruz County Board of Supervisors seems set to enact a moratorium on new oil exploration throughout the county, a vote driven by fears about hydraulic fracturing’s environmental impacts. If approved, the vote would make Santa Cruz County the first to temporarily ban fracking, and comes as a raging debate over new state fracking regulations plays out in the state Legislature. For more information, please contact HBW Resources.
Anadarko Petroleum Corp. and Noble Energy Inc. are backing a new group that’s wading into the controversy over booming energy production and the widespread use of hydraulic fracturing in the state. They filed paperwork with Secretary of State Scott Gessler Aug. 26 to create the nonprofit Coloradans for Responsible Energy Development, or CRED. An announcement from the group Thursday said it planned to focus on “a new public education effort in Colorado … aimed at informing the general public about the energy, economic and environmental benefits of safe and responsible oil and natural gas development.” For more information, please contact us.
Voters in Loveland probably won’t be able to vote on whether to ban hydraulic fracturing in the city in November. City councilors narrowly voted against putting the citizens’ initiative on the ballot Tuesday night because a resident has filed a lawsuit challenging the petition’s signatures. The Loveland Reporter-Herald reports that five councilors didn’t want to take action until Larry Sarner’s appeal was resolved. But Mayor Cecil Gutierrez and three other council members voted in favor of putting the measure on the ballot now with the understanding that it could be removed if the appeal is successful. If the appeal fails, a special election could be called to vote on it. The initiative calls for a two-year ban on hydraulic fracturing while effects on human health and property values are studied.
High-volume hydraulic fracturing has the potential to create a “gas boom” of activity and economic growth in Michigan, but fracking could also harm air and water quality and degrade ecosystems, according to a series of reports released by University of Michigan researchers. The reports are the first phase of a two-year assessment process at U-M that will provide a foundation for analyzing fracking policy options. It’s unclear how prominent high-volume fracking will ever become in Michigan. Only 19 high-volume wells have been completed in Michigan in recent years, likely because of the low price natural gas currently garners and the deeper, costlier wells required to reach it in Michigan when compared to more active states, such as Pennsylvania, U-M researchers said. For more information, please contact us.
Safety concerns over water used by the oil and gas industry for hydraulic fracturing dominated discussions during a meeting of state legislators at San Juan College. State legislators heard from a panel of industry officials, scientists and related agencies during a meeting of the state’s Water and Natural Resources Committee and the Drought Subcommittee at the college’s Henderson Fine Arts Center. With the local economy still recovering from a sharp downturn in 2010, one oil and gas official underscored the potential of hydraulic fracturing in a San Juan Basin shale formation.
Representatives of six Ontario County towns expect to have drafts of local laws that address hydraulic fracturing ready to take back to their towns by the end of October. Working with Boylan Code LLP, a Rochester-based law firm, the towns hope the documentation will offer their communities and others solid protection against fracking as well as other heavy industrial development involving natural resources. The proposed model law or laws would have to be passed by each individual municipality and could also serve as a guide for towns, villages and cities in the county in crafting their own policies. The group of six are the towns of Bristol, Canadice, Canandaigua, East Bloomfield, Richmond and Victor. For more information, please contact HBW Resources.
U.S. rail-safety regulators began a “Bakken blitz” of inspections of crude oil tank cars as they seek to prevent a railroad disaster in the U.S. similar to July’s fatal inferno in Quebec. Inspectors from the U.S. Federal Railroad Administration and Pipeline and Hazardous Materials Safety Administration are examining rail cars moving crude from North Dakota’s Bakken region. U.S. regulators are carrying out the inspections to make sure shippers are properly identifying the cargo in the rail tank cars from the region. Hazardous materials regulations require tank cars to carry placards telling railroads and emergency responders what’s inside. U.S. railroads originated 108,605 carloads of crude in the quarter ended June 30. That’s a U.S. record for rail shipments in a quarter as oil production increases in North America and rail gains in popularity over pipelines as a means of transport.
A single Monroe County Utica Shale well drilled by Antero Resources could be producing as much as $300,000 worth of revenue per day. This estimated cash flow triples the $100,000 daily assessment Tim Carr, Marshall Miller Professor of Energy at West Virginia University, made for a Gulfport Energy well in southwestern Belmont County earlier this year. Denver-based Antero plans to spend $1.95 billion this year to frack wells and produce natural gas in Ohio’s Utica Shale and West Virginia’s Marcellus Shale. According to the company’s recent operations report, it paid an average of $11.5 million to drill and frack each of its eastern Ohio wells. Antero has signed the village of Barnesville to a drilling contract, along with many individual landowners in the community. The deals call for Antero to pay $5,700 per acre to lease the land and 20 percent of production royalties once the gas starts pumping. The company is also paying the Barnesville Exempted Village School District more than $400,000 in lease payments for the rights to extract gas from school property.
Uneasy about the economic and other side effects that come with legislation recently adopted that tries to ban hydraulic fracturing and related activities in city limits, one member of Niles City Council wants to see the measure reconsidered. So Democrat Steve Papalas says when council meets next week, there may be legislation pulling back what’s called a ”community bill of rights” and a resolution brought forward that clearly defines where council stands: that drilling should not happen in Niles’ residential neighborhoods.
Drillers have completed 514 wells in Ohio’s Utica shale formation, with 125 in production. The remaining wells are awaiting pipelines or connections. A total of 36 rigs are drilling in Ohio. The state issued a record-high 75 permits in July, with Belmont County obtaining the most, 15. Through July 30, the state had issued 382 permits this year, compared with 218 through the same period in 2012.
Siemens has won a $400m order to supply two units for the first power plant to be built on the Marcellus gas field in Pennsylvania in the US. The combined-cycle Liberty plant will be fired entirely by the Marcellus shale gas reserves and will have a capacity of 829 MW. Due to be commissioned in 2016, the plant will consist of two units as single-shaft configurations, each with one of Siemens’ H-class gas turbines as the main component.
U.S. Rep. Allyson Schwartz (D, PA 13), who is running for governor, wants to add a five percent tax to the shale gas drilling boom. Schwartz said in a release that the rate would still be lower than the 7.5 percent tax Texas charges. Schwartz says the tax could generate $13 billion in revenue over a decade from Pennsylvania’s Marcellus Shale, which also extends under Ohio, West Virginia and New York.
Two plays in the Permian Basin could see a surge in production and together pump 38 percent of the West Texas region’s oil by 2018, according to report by energy research firm Wood Mackenzie. Exploration and production giants such as Apache Corp., ConocoPhillips, and Chevron are positioned to lead an investment boost in the oil fields, and in five years, capital expenditures could jump 57 percent to $22 billion in the two Permian Basin plays. Together, the Bone Spring and the Wolfcamp plays could pump 1 million barrels of oil per day by 2018, Wood Mackenzie reports. For more information, please contact HBW Resources.
The Dallas City Council denied several permits for a company hoping to drill within city limits. The company, Trinity East, had applied to drill and use hydraulic fracturing at several wells on city land, including a golf course. Mayor Mike Rawlings announced that he is personally is against gas drilling in Dallas. “To paraphrase Ecclesiastes there is a place for everything under heaven and I don’t think that place for gas drilling is Dallas,” Rawlings explained. But he voted to approve the permits. Rawlings warned that city would likely be sued for millions of dollars if the permits were denied. Trinity East paid the city $19 million in 2008 for the right to drill. And the mayor argued that the company probably wouldn’t drill anyway because of low natural gas prices, and without drilling the lease expires in February.
Carrizo Oil & Gas has agreed to sell certain non-core assets, including substantially all of its remaining Barnett Shale assets, as well as all of its interest in the Camp Hill Field in East Texas and certain undeveloped acreage in the Marcellus Shale, for approximately USD268 million. The company intends to use the net proceeds to fund a portion of the remainder of its 2013 capital expenditures program, largely in the Eagle Ford Shale. For more information, please contact us.
Inergy Midstream and Enserco Midstream have formed a joint venture to own and operate a crude oil rail terminal located in Douglas County, Wyoming which will provide crude oil takeaway solutions for producers in the emerging Niobrara Powder River Basin shale play.
Oil and gas companies operating in the Marcellus and Utica Shale plan to hire at least 4,000 new employees. Available jobs range from engineering and construction to operations and maintenance, as well as positions in environmental health, safety, and administration. The problem is that these companies are often looking for qualified candidates, which are tough to find as so few have the technical experience these companies desire. The good news is that because of the competition for qualified candidates, many companies are now looking to hire and train more local candidates. In fact, last year 96% of the new hires in the Marcellus and Utica were local candidates, as fewer experienced oil-field professionals are looking to relocate because of the oil and gas boom elsewhere in the United States. For more information, please contact us.
IHS CERA issued a new report, America’s New Energy Future: The Unconventional Oil & Gas Revolution and the US Economy that finds that unconventional oil and gas production last year supported 2.1 million jobs, generated $75 billion in federal and state revenue, contributed $284 billion to GDP, and raised household income by $1,200. Assuming a policy and regulatory status quo, by 2025 production is expected to support 3.9 million jobs, generate $138 billion in federal and state revenue, contribute $533 billion to GDP, and increase household income by more than $3,500.
Anadarko Petroleum Corp., a dominant player in the Eagle Ford Shale, will use the proceeds from its sale of a project in Mozambique to speed up development of its domestic projects, including those in South Texas. The company will spread the $2.64 billion in proceeds across projects in the Eagle Ford Shale, the Gulf of Mexico, the Wattenberg field and the Permian and Powder River basins, CEO Al Walker said in written statement. For more information, please contact HBW Resources.
The EPA will host another technical workshop on Thursday, September 12, 2013 at 11:00am EDT to provide a summary of the recent Technical Workshop on Case Studies. To register, visithttp://www.clu-in.org/conf/tio/frac8/
GDF Suez SA, owner of Europe’s biggest natural gas network, is considering exploring for shale oil and gas in Germany, Poland, the U.K. and in Latin America. GDF Suez’s move into shale exploration would come amid a continued ban in its home country of France on hydraulic fracturing a drilling technology used to extract oil and gas.
The Caspian Sea is an ancient oil producer, but its future may be in natural gas. Since 2006, Azerbaijan and Kazakhstan, which border the Caspian Sea’s west and east coasts, have led a boost in natural gas production in and around the region, where coastal countries extracted a total 2.5 trillion cubic feet of natural gas in 2011. That’s up from about 1.25 trillion cubic feet in 2000 and about 1.75 trillion in 2006. Each of the Caspian’s coastal countries has sizable discovered natural gas fields, one indication that the region’s energy production growth will come from natural gas in the future, according to the EIA. After the region spent decades under Soviet control, newly independent countries on the coast of the Caspian began to build export infrastructure to tap into global energy markets, a move bolstered by higher oil and gas prices in those countries and foreign investment. In July, a state-owned oil company in Kazakhstan said it would buy an 8.4 percent stake in a Caspian Sea production sharing agreement from Houston-based ConocoPhillips for $5 billion. EIA estimates the region houses about 48 billion barrels of oil and 292 trillion cubic feet of natural gas, with most proved reserves sitting 100 miles from the coast.
Madalena Energy is seeking a partner to help develop its Curamhuele block in Argentina for unconventional oil and natural gas resources, a country where it sees large potential. Madalena hired RBC Capital Markets in June to help find a partner for Curamhuele, in which Madalena has a 90% interest. Curamhuele is part of the Neuquen Basin, which since 2010 has emerged as a hotspot for shale investment as estimates show it holds most of the country’s estimated 27 billion barrels of shale oil and 800 Tcf of shale gas. Madalena has three blocks in the basin, where it is targeting shale resources in the Vaca Muerta and Lower Agrio plays as well as tight sand plays in the Mulichinco and Quintuco formations and select conventional zones. Curamhuele and its other blocks — a 30% stake in Coiron Amargo and a 40% stake in Cortadera — hold an estimated 2.9 billion barrels of oil equivalent of recoverable resources (45% crude oil and natural gas liquids), according to a recent Ryder Scott evaluation of Madalena’s acreage. Curamhuele is estimated to hold more than 1.5 billion boe, of which 65% is oil. For more information, please contact HBW Resources.
Securing adequate water resources will be critical for exploration and production companies seeking to tap Argentina’s shale resources, an expert with consulting firm Accenture said. Argentina President Cristina Fernandez de Kirchner last month signed a decree establishing new incentives to boost shale exploration activity in Argentina. The new decree was released a day before U.S.-based Chevron Corp. and YPF S.A. announced plans to invest $1.5 billion to develop shale resources in Argentina’s Neuquen province. YPF expects its next shale oil and gas partnership to be with a group that includes China’s CNOOC Ltd., Bloomberg reported Aug. 21. Argentina ranks fourth behind Russia, the United States and China in terms of technically recoverable shale oil resources, and second behind China in terms of technically recoverable shale gas resources, according to a June 2013 report by the U.S. Energy Information Administration (EIA) and Advanced Resources International (ARI) of global shale resources.
China has gone back to the drawing board on how to develop what could be the world’s largest shale gas reserves after attempts to stimulate investment and engineer an energy revolution brought little progress in the gas fields. Beijing has struggled to find a way to emulate the frenetic exploration and production activity of the shale gas boom in the United States, and the latest setback makes reaching even a modest 2015 output target of 6.5 billion cubic metres (bcm) unlikely. This is only a fraction of the 224 bcm of shale gas the United States produced in 2011, and would amount to just 6 percent of China’s total current output of natural gas. For more information, please contact us.
The petroleum ministry has finalized a shale oil and gas exploration policy, which will be tabled before the cabinet soon after the oil minister approves it, Petroleum Secretary Vivek Rae said. The proposed policy initially permits state-run energy firms Oil & Natural Gas Corp (ONGC) and Oil India (OIL) to explore shale resources in the onland blocks, which are already held by them, government officials said. ONGC and OIL can explore shale oil and gas only in the blocks that are awarded to them without auction. State explorers can’t explore shale resources in blocks they won in nine auction rounds under new exploration licensing policy (Nelp). Even pre-Nelp blocks such as Cairn-operated Rajasthan oilfields and coal bed methane (CBM) blocks are kept out of its preview, officials said.
Kenya expects the first draft of its revised laws on the petroleum sector to be ready for parliament’s approval by November, a senior government official said, as it prepares to tap its oil discoveries. Tullow Oil and partner Africa Oil Corp have discovered oil in northwest Kenya and are in the process of determining commercial viability. Kenya last updated its petroleum rules in 1986. The new law would also list new guidelines on natural gas exploitation, not adequately covered in the existing law.
America’s return as an energy superpower is complicating life for the Russian petro state. The rise of a vibrant, global, and pipeline-free liquefied natural gas (LNG) market is a direct threat to Russia’s interests in Europe, where Gazprom, the state-owned energy giant, supplies about 25 percent of the gas. So is the shift in pricing power from suppliers to consumers as a result of the huge supply shock emanating from North America. Russia is still the world’s biggest overall energy exporter: It’s the No. 1 oil producer and No. 2 in gas after the U.S. However, the country’s known oil reserves—primarily between the Ural Mountains and the Central Siberian Plateau—are enough to sustain current production levels for just 20 years, according to a study in December by the European Bank for Reconstruction and Development (EBRD), vs. 70 years for Saudi Arabia and 90 years for the United Arab Emirates. Untapped oil and gas reserves in eastern Siberia and the Arctic will take massive investments to explore. As of late 2012, oil and gas accounted for about 70 percent of exports, compared with less than 50 percent in the mid-1990s, providing half of the government’s revenue and roughly 17 percent of GDP, according to the EBRD. Gazprom alone represents 14 percent of the Russian stock market’s total capitalization. For more information, please contact us.
Russia introduces tax breaks on production of hard-to-recover “tight” oil on Sept. 1, but the giveaway alone will not be enough just yet for the world’s largest oil-producing nation to replicate the North American shale energy revolution. Incentives of as much as $21 per barrel will transform the economics of exploration, encouraging the use of advanced drilling methods to pulverise, or “frack”, vast tracts of non-porous rock into yielding up their hydrocarbon riches. Rosneft, the state oil major that lobbied for and won the concessions, will lead the drive to tap Siberia’s vast Bazhenov formation with ExxonMobil, the U.S. supermajor that enjoys the most favour in Vladimir Putin’s Kremlin.
The minister for ecology and natural resources of Ukraine Oleh Proskuryakov claimed that he expected local authorities to approve the exploitation and production of shale gas. He said in response to being asked what the government would do if local authorities tried to oppose the production of shale gas that he believes that ‘common sense will prevail.’ According to Mr Proskuryakov, the development of the Olesskiv shale gas field is to be undertaken with full ecological control. He believes it is a necessary project for the region’s development. He said: “This project includes development of the region, creating jobs and significant energy resources under full ecological control by public and state environmental organizations.” 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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