HBW Resources: Ollison Hydraulic Fracturing Report
Below is a summary prepared by Bo Ollison, HBW Resources’ Senior Director of Policy, 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 development. HBW Resources is monitoring these activities to ensure that responsible and feasible policies based on sound science are advanced.
- With the U.S. economy relying less on oil and gas imports than at any time in two decades, energy expenses for Americans have fallen and cut into inflation more than any other living cost in the past year
- Alaska has signed an agreement with major oil and gas firms to build an 800-mile pipeline to bring natural gas from the state’s North Slope to a proposed export plant and on to Asia
- Demand for jobs in the geosciences is expected to grow faster than many other occupations during the next 10 years
- 2014 Shale Gas Innovation Contest will award a total of $100,000 to the four best shale energy-oriented innovations
- Shale gas supplies are expected to meet 46% of the growth in gas demand and account for 21% of world gas and 68% of US gas production by 2035
- Consol Energy Inc. plans to increase spending on natural gas by about 20 percent this year, to more than $1.1 billion, as it ramps up its focus on drilling
- Magnum Hunter Resources Corp. says its push into the Utica shale play has helped the company post a 23 percent increase in its total proved oil and natural gas reserves
- Abundant, low-cost energy courtesy of the shale revolution incentivizes chemical producers and manufacturers to shorten their respective supply chains and return production facilities to the US
- RSP Permian Inc., a shale oil and gas explorer, raised $390 million in an initial public offering
- The Shadyside Local School District (OH) signed a natural gas drilling lease with Gulfport Energy for $7,250 per acre and 20 percent of production royalties. The district has reason to hope the initial $145,000 lease payment for the district’s 20 acres could be just the beginning for Shadyside
- The price of U.S.-produced natural gas will remain stable and relatively low for at least the next two decades
- Citing economic and national security woes, more than a dozen European nations are ramping up pressure on Washington to open wider its federally restricted spigot of natural-gas exports
- As new global shale oil resources continue to emerge, Saudi Arabia plans to increase its crude oil reserves by 20 percent. Saudi Aramco said it would add 160 billion barrels to the kingdom’s crude reserves
State Legislative Update: Please see the linked spreadsheet for an updated listing of state legislation dealing with hydraulic fracturing.
Alaska has signed an agreement with major oil and gas firms to build an 800-mile pipeline to bring natural gas from the state’s North Slope to a proposed export plant and on to Asia. The project, expected to cost between $45 billion and $65 billion, would be one of the largest projects of its kind in the world and would free gas stranded for decades without a market. The project, which would liquefy the gas for shipment in tankers overseas, is expected to take ten years to build, according to the state.
Whether to rein in fracking was the big topic at the recent Butte County Water Commission meeting. The method for extracting oil and natural gas isn’t used within the county, and the Citizen Action Network (CAN) wants to ensure it stays that way for now. After the meeting, Joni Stellar of CAN said the group is ready to gather signatures for a ballot measure as soon as petitions are printed. The meeting was for information only, with members of the group stating their distrust of the oil industry, citing environmental damage in other states, questioning the safeguards and stating risks. One suggestion during the meeting was to create a county zoning code that would require public hearings before fracking occurs. The item will be brought back to the Water Commission Feb. 5 for more discussion. Although fracking does not currently take place in the county, it would be allowed only in certain land use zones, and a permit is needed, explained Dan Breedon of county Development Services. The Planning Commission gives approval, with no appeal process. For more information, please contact us.
Rep. Jerry Sonnenberg (R, District 65) and Sen. Greg Brophy (R, District 1) introduced HB 14-1064, which would ensure that local governments that ban hydraulic fracturing no longer receive new revenues from oil and gas. Currently, communities that are impacted by energy development, processing or conversion of mineral and mineral fuels get grants and loans from the state’s Local Government Severance Tax Fund. Under the bill, communities that ban fracking would see those funds frozen at the level they received at the time of the decision to ban fracking. Any new revenues would be distributed to communities that already receive severance tax monies but do not ban fracking.
Ecosphere Technologies, Inc., an innovative U.S. technology licensing and manufacturing company, announced that the U.S. Patent and Trademark Office has issued a formal Notice of Allowance for a process patent for lowering the scaling tendencies in flowback water used in the exploration and production of oil and natural gas. This notice of allowance marks the sixth patent for Ecosphere’s patented Ozonix water treatment technology issued by the U.S. Patent Office since 2010. Ecosphere’s patented Ozonix systems are currently being used by major energy exploration and production companies around the United States to reduce the amount of chemicals used during hydraulic fracturing (or “fracking”) operations. Ecosphere’s latest patent is directed to a technology that allows energy companies to save millions of gallons of water and reduce the amount of production wastewaters being disposed of in Class II injection wells. The advanced oxidation system covered by the allowable patent combines ozone, hydrodynamic and acoustic cavitation, and electro oxidation equipment in a process that causes colloidal suspension of precipitated hardness salts suitable for water recycling without the need for conventional liquid chemicals.
A Kansas House committee is getting an update on hydraulic fracturing for oil and gas in the state and the potential connection to increased seismic activity. Officials of state agencies and the Kansas Geological Survey were scheduled to speak to the House Energy and Environment Committee. Kansas has seen an increase in oil and gas exploration in southern counties as new technology allows extraction in difficult geological formations. For more information, please contact HBW Resources.
A New Mexico county that’s already defending its ban on oil drilling has been sued again, this time by an international oil company. SWEPI LP, a U.S. subsidiary of Royal Dutch Shell PLC, filed a federal lawsuit against Mora County, saying the county’s anti-drilling ordinance violates state law and the U.S. Constitution. Mora County, a rural area just northeast of Santa Fe with a population of about 5,000, passed an ordinance in April that bans drilling for oil and gas, bans the use of water for hydraulic fracturing, and declares that corporations aren’t people. “Natural communities and ecosystems including, but not limited to, wetlands, streams, rivers, aquifers and other water systems, possess inalienable and fundamental rights to exist and flourish within Mora County against oil and gas extraction,” the ordinance says. “Residents of the county, along with the Mora County Commission, shall possess legal standing to enforce those rights.” SWEPI leased land in the county in 2010, intending to explore for oil and gas. The suit says Mora County’s ordinance violates the Constitution’s equal protection and commerce clauses, amounts to taking property without compensation, conflicts with U.S. Supreme Court rulings that gave legal rights to corporations, and violates other state and federal laws. The county was already being sued by a landowner and by companies owned by the Yates family, descendants of the oilman who drilled the state’s first well.
Within 10 days of taking over City Hall, Mayor Rich David dropped the appeal of a court decision striking down the moratorium on oil and gas drilling in Binghamton. The move ends a long-standing push by the outgoing Democratic administration to block hydraulic fracturing. David, a Republican, said he wanted to declare his opposition to the city’s attempt to ban the controversial natural gas drilling technique, also known as hydrofracking. “To ban an action that has not even been approved in New York was premature,” David said. The city formally withdrew the legal appeal Jan 10. For more information, please contact HBW Resources.
A Delaware County judge has thrown out a fracking ban imposed last year by the Sidney town board.
The judge agreed with the plaintiff’s argument that a super majority of the board – or four votes – were needed to pass the ban. The Sidney board passed the ban 3-1 with one non-vote. According to the plaintiff’s attorney, at issue is a town law which requires a super majority vote if landowners who own at least 20 percent of acreage in a municipality sign a petition protesting a change in zoning. “The significance of this case is that no judge up to this point in time has ever said that this town law would be applicable to a gas moratorium,” said Robert Wedlake, plaintiffs attorney and partner at Hinman, Howard, and Kattel. For more information, please contact us.
A hearing on a lawsuit that seeks to force a decision on shale-gas drilling in New York has been pushed back to March after the state Attorney General’s Office successfully asked for a delay. State Supreme Court Justice George Ceresia ruled in favor of the state’s request, delaying an in-court hearing on the suit until March 7. It had been scheduled for Jan. 24. Last month, Albany-based oil-and-gas attorney Tom West filed what’s known as an Article 78 challenge on behalf of a shareholder and bankruptcy trustee for now-defunct Norse Energy. An Article 78 claim, which is used to challenge a state action, is generally put to an expedited schedule, with a hearing scheduled within weeks of its filing. But the state argued that it would need more time to prepare, largely because the lawsuit makes claims based on the Department of Environmental Conservation’s 5 1/2-year review of high-volume fracking, the controversial technique used to help extract gas from the Marcellus Shale and other shale formations.
Fracking companies won the right to keep secret the chemical cocktails they pump underground during shale gas drilling in North Carolina under a chemical disclosure rule approved by the NC Mining and Energy Commission. The public safety standard will help the energy companies protect their secret sauce used in natural gas drilling, but critics said it would also keep residents in the dark about potent chemicals used near local farms and waterways. The rule passed unanimously after nearly three hours of intense debate, and it follows more than a year of deliberations that had the commissioners tied up in knots. Commissioners sought to appease residents, the energy industry and lawmakers eager to promote drilling for economic development. The rule as passed by the commission is merely a recommendation to the state legislature, which will have final say over fracking standards later this year or next year. But as it now stands, the rule puts North Carolina among the states that don’t require energy exploration companies to turn over corporate trade secrets to government agencies for safeguarding in case of emergency. For more information, please contact HBW Resources.
North Dakota’s Democratic legislators called for an overhaul of the state’s main oil regulator in the wake of a string of high-profile accidents, saying the Department of Mineral Resources too often blurs the line between policing and promoting the energy business. The head of the department said it would take a state law to separate the two functions, and he said he’s clear on what his responsibilities are. “My primary job is a regulator,” Mineral Resources Director Lynn Helms said on a conference call with reporters. State Senate Minority Leader Mac Schneider, a Democrat from Grand Forks, and House Minority Leader Kenton Onstad (D) sent a letter to Gov. Jack Dalrymple (R) saying that North Dakota needs stricter enforcement of oil field regulations and that the dual roles of Helms’ department could undermine public support for the oil industry. North Dakota’s production has increased tenfold since 2005 to a record 973,000 barrels in November, driven by output from the Bakken Shale formation.
Demand for jobs in the geosciences is expected to grow faster than many other occupations during the next 10 years, and Muskingum University is rolling out a new major field of study to fill that need. The new petroleum geology bachelor of science degree program, to be offered beginning the 2014-15 academic year, is intended to serve as a complement to majors in geology, environmental science, conservation science and earth science. The announcement comes at a time when many institutions of higher learning are trying to keep up with the energy industry demands for more skilled workers. The U.S. Bureau of Labor Statistics Occupational Outlook Handbook forecasts the need for geoscientists to grow by 16 percent during the next decade as oil and gas exploration and development intensifies across the country.
Magnum Hunter Resources Corp. says its push into the Utica shale play has helped the company post a 23 percent increase in its total proved oil and natural gas reserves. The Houston oil and gas exploration and production company said its 2013 year-end increase compared with 2012 was primarily attributable to its success in southeastern Ohio and in West Virginia’s Marcellus play. “(Magnum) expects to significantly increase reserves in the Utica shale, where it presently owns over 97,000 net leasehold acres, during 2014 as a result of ‘pad’ drilling and delineation of its lease acreage position” in the region, the company said in a statement. For more information, please contact us.
Engineering and surveying firms are seeing new opportunities with oil and gas production in eastern Ohio’s Utica shale play, as companies there continue to scout locations and drill new sites. In an effort to stay ahead of the flood of outside companies eyeing the play, the state agency that regulates engineers and surveyors recently released “important information” outlining the steps that any out-of-state engineer or surveyor who wants to work in Ohio must follow. Certificates of Authorizations and reciprocity approval to work in the state have increased by a couple hundred during the last few years, said John Greenhalge, executive director of the Ohio State Board of Registration for Professional Engineers and Surveyors. “A good amount of that is due to oil and gas,” he said. Greenhalge said the board has received calls from firms both in-state and out-of-state with questions on what is allowable when trying to work in the state. The rules aren’t new but the board wanted to be proactive because the play is attracting new engineers and surveyors. The rules can be tricky to the uninitiated. For instance, firms wanting to work in the state must register and obtain a Certificate of Authorization before even offering their services. To do that, they must be registered with the Ohio Secretary of State and designate a registered, full-time engineer or surveyor to be responsible for all engineering or surveying activities and decisions for the firm. Engineers or surveyors aren’t typically approved if they hold other jobs, and full-time employment means the employee must spend most of their time engineering or surveying and not in another capacity.
Carrizo Oil & Gas has announced results from its initial Utica Shale well, the Rector 1H. Earlier this month, Carrizo brought its initial Utica Shale well, the Rector 1H in Guernsey County, Ohio, online after its resting period. The Rector 1H was drilled to a true vertical depth of 7,456 ft. with an effective lateral of 7,890 ft. and was completed with 31 frac stages. The well tested at a peak gross rate of 1,680 Bbl/d of condensate and 5.6 MMcf/d of rich natural gas with a Btu content of 1,248 on a 24/64 in. choke. In ethane rejection mode, the gas stream is expected to yield 47 Bbl/d of NGLs per MMcf of gas and result in a natural gas shrink of 7%. Assuming full ethane recovery, the gas stream is expected to produce 111 Bbl/d of NGLs per MMcf of gas and result in a natural gas shrink of 17%. Carrizo plans to continue to conduct various flow and pressure tests on the well until it is hooked up to a sales pipeline later this year. The company currently plans to bring a drilling rig into the Utica Shale in early Q2 to begin its 2014 drilling program. Carrizo then expects to maintain a 1-rig program in the play for the balance of the year.
The Shadyside Local School District signed a natural gas drilling lease with Gulfport Energy for $7,250 per acre and 20 percent of production royalties. “With just 20 acres, it’s not a lot, but every little bit helps,” said Haswell, who serves as both district superintendent and Shadyside High School principal. “It will help our budget this year, though, for sure.” Gulfport continues drilling productive wells throughout Belmont County, as the Irons 1-4 H well along Ohio 148 near Armstrong Mills is yielding about 30 million cubic feet of dry methane natural gas per day. Haswell has reason to hope the initial $145,000 lease payment for the district’s 20 acres could be just the beginning for Shadyside. No one should expect to notice any environmental impact from drilling on the district’s land, as Haswell said the Gulfport contract includes a “non-surface use clause.” This means the driller would place its rig and other equipment on the surface outside the village to access the school’s property via horizontal drilling and fracking. For more information, please contact HBW Resources.
The Southern Local Board of Education in Salineville moved forward with plans to establish and operate a gas- and oil-oriented community school by approving a preliminary agreement with Jefferson County Educational Service Center. Southern Local Superintendent John Wilson laid out his vision, noting the school will be geared toward preparing students for careers in the gas and oil industry, but also will offer a traditional curriculum as per state requirements. The school will be open enrollment for students grades ninth through 12th, and most of the studies will be through online modules, said Wilson. He noted teachers also will be onsite at the community school to provide guided instruction in conjunction with the students’ online learning. Wilson emphasized that plans for the school are still in the early phases, and the charter for the school is not yet complete. For more information, please contact us.
In late 2011, the Union Local Schools district leased 105 acres at the its campus to XTO Energy, a wholly owned subsidiary of global oil giant Exxon Mobil, thus securing a $519,750 check. The contract will yield Union Local 19 percent of production royalties if XTO eventually extracts the district’s gas. The district used the $519,750 to purchase two school buses and new radio systems for all buses, repair the running track at the football stadium and repay loans. Now, the district has another lease agreement, this time with Rice Energy for a 50 percent share of about 36 acres at the former Bethesda school. Treasurer Janet Hissrich said this agreement will pay a 20 percent royalty for any future drilling in addition to the $112,000 lease payment.
Governor Corbett unveiled his state energy plan, “Energy = Jobs.” Speaking at the Pennsylvania College of Technology’s Earth Science Center in Lycoming County, he promoted the state’s vast energy reserves as a significant economic driver. “Energy equals jobs in our gas and coal fields,” he said. “But it also equals jobs in our nuclear reactors and our growing renewable energy sectors.” The 73-page plan is meant to be a guide for business decision makers to lay out the advantages of doing business in the Commonwealth. It outlines Pennsylvania’s historical role in energy production– from the site of the first commercial oil well in the U.S., to the state’s coal industry, and the recent surge in natural gas production from the Marcellus Shale.
The Ben Franklin Shale Gas Innovation and Commercialization Center is seeking innovators developing the next breakthrough technology for the shale energy play. The 2014 Shale Gas Innovation Contest will award a total of $100,000 to the four best shale energy-oriented innovations, new product ideas or service concepts. The contest is open to researchers, entrepreneurs or small companies located in Pennsylvania or West Virginia — or those willing to locate to those states.
These are boom times for shale gas exploration but towns and municipalities like South Fayette Township are concerned that it should be controlled and limited, adopting zoning ordinances that would keep drilling away from schools and residential areas. “If you own property, if you breathe the air, if you live in Pennsylvanian this affects you,” said South Fayette Township attorney Jonathan Kamin. But the owner of an abandoned airport strip says South Fayette’s ordinance is so restrictive it will not allow drilling even in the remotest places. In a case will likely test similar ordinances throughout the state — John Kosky and the gas exploration company Range Resources are challenging South Fayette’s ordinance, calling it an illegal ban on drilling. Even though Kosky’s property of 800 acres is industrial, and the closet resident is 2,500 feet away — South Fayette doesn’t allow drilling within 1,500 feet of a stream. But without a state law and statewide restrictions, that battle over shale gas drilling will be fought out town-to-town, but all bets are that this will eventually be decided by the courts. For more information, please contact us.
Seven Pennsylvania municipalities are fighting the governor’s appeal of a state Supreme Court ruling last month that found a “drill anywhere” provision unconstitutional. The administration of Republican Gov. Tom Corbett filed an appeal earlier this month against the December decision. The court had ruled 4-2 in favor of a legal challenge by local governments and environmentalists against a major gas drilling law, one of Corbett’s signature pieces of legislation. The governor’s Office of General Counsel argued in its appeal that the Supreme Court’s decision overreached, delving not just into the legal but also the technical by doing its own fact-finding on hydraulic fracturing. Citing “a detrimental effect on the environment” from exploitation of the Marcellus Shale, the court’s ruling found that state law cannot override municipal zoning decisions. That includes zoning regulations that prohibit fracking in a state with booming shale production. The law had come with steeper environmental regulations but sought to bar local zoning codes from influencing drill sites. In their filing asking the court to deny the state request for reconsideration, the seven municipalities argue that new factual evidence has no bearing on a case they say was decided on purely legal grounds. The state Department of Environmental Protection and the Public Utility Commission have sought to enter in new findings for the state’s appeal. Besides South Fayette, the municipal plaintiffs included Peters, Mount Pleasant and Robinson townships in Washington County, and Nockamixon and Yardley in Bucks County. For more information, please contact HBW Resources.
The Heinz Endowments are continuing to strongly support research and advocacy relating to environmental and health impacts of natural gas hydraulic fracturing, in spite of significant turnover in its senior management. The Pittsburgh-based Endowments told the Associated Press that it gave out over $3.3 million in 2013 for grants specifically related to gas drilling. That estimate doesn’t include grants to other groups who spend only part of their time on drilling issues.
Marcellus Shale gas developers must now notify the Allegheny County Health Department before they drill, frack or flare any wells, just as they are required to do for the state and local municipalities. The new county ordinance, approved by county council last month and signed by Allegheny County Executive Rich Fitzgerald on Dec. 27, closes a loophole that omitted the county from the pre-notification requirement in the state’s oil and gas law, said Karen Hacker, Health Department director. “The companies must begin notifying the county of all stages of gas development operations,” Dr. Hacker said. “It’s exactly the same information the companies must report to the state. We need this information so we can do our job.” The Health Department monitors, regulates and enforces air quality in the county. The state Department of Environmental Protection has air quality responsibility for the rest of the state, except Philadelphia, which also has local air oversight. Gas companies must notify the Allegheny County Health Department’s air quality division at least 24 hours before work begins on well pads, and before they drill, hydraulically fracture, or flare gas. Drillers must also report any equipment malfunctions or breakdowns that could release increased air pollutants. The county can issue violation notices if proper and timely notification is not given. The purpose of the notifications is to inform ACHD air quality staff of new well developments in time to set up emissions monitors.
The first big Marcellus Shale gas development project in Allegheny County, on county-owned land near Pittsburgh International Airport, will get special air pollution monitoring attention from the Allegheny County Health Department before and after the drilling begins. The county announced that it will soon begin air quality monitoring on more than 9,000 acres in Findlay where Consol Energy Inc. plans to drill 47 shale gas wells and construct 17 miles of gas collection lines and 12 miles of water supply lines. Allegheny County Executive Rich Fitzgerald, who has been a shale gas development supporter, requested the pre- and post-drilling monitoring after hearing the concerns of residents of the area and state Sen. Matt Smith (D, District 37) and state Rep. Mark Mustio (R, District 44). For more information, please contact HBW Resources.
The Pittsburgh-based Center for Sustainable Shale said that it is now accepting applications for a program that aims to enforce tough but voluntary new standards for fracking and other related activities in the Northeast. The CSSD said it has hired Bureau Veritas, a French global testing and inspection firm, to review applications and compliance by drillers. The Environmental Defense Fund, PennFuture and some other prominent environmental groups are part of CSSD, but others — such as the Sierra Club — have criticized the effort, saying it isn’t meaningful and that a voluntary program is no substitute for tough state or federal rules. But some energy companies, such as Chesapeake Energy, have suggested that there’s no need to go beyond existing state regulations, and have said they won’t join or support CSSD.
Consol Energy Inc. plans to increase spending on natural gas by about 20 percent this year as it ramps up its focus on drilling, the company announced. The company plans to spend more than $1.1 billion to drill in 2014, nearly all for Appalachian shale gas. That’s up from the $935 million it had planned to spend in 2013. Coal spending will drop by about $100 million to less than $400 million. For more information, please contact us.
RSP Permian Inc., a shale oil and gas explorer backed by private-equity fund Natural Gas Partners LLC, and existing owners raised $390 million after pricing an initial public offering toward the low end of a marketed range. The company, which explores in Texas’s Permian Basin, and shareholders sold 20 million shares at $19.50 each, after offering them for $19 to $21 apiece, according to terms for the deal obtained by Bloomberg News. The shares are expected to begin trading tomorrow on the New York Stock Exchange under the symbol RSPP. At the IPO price, Dallas-based RSP Permian has a market value of $1.41 billion. NGP, founded in 1988, manages about $10.5 billion in funds that invest in oil and gas production, oil-field service and power companies, according to its website. The firm sold shares in the offering to cut its stake in RSP Permian from 45 percent to about 26 percent, according to filings.
Rep. Jim Keffer (R, District 60), chairman of the Texas House Committee on Energy Resources, has established a new subcommitte to investigate earthquakes in oil-and-gas drilling areas. Keffer named three Republicans and one Democrat to the newly formed Subcommittee on Seismic Activity. State Rep. Myra Crownover (R, District 64) will serve as chairwoman. “The recent rise of seismic activity in Texas has caused much debate, and assumptions to be made with regards to oil and gas production and disposal wells,” Keffer said in a written statement. “I believe that with the help of the Texas Railroad Commission we can study and find the cause for the seismic activity base on scientific facts.” The Texas Railroad Commission also says it’s examining the possible link between oil drill and recent small earthquakes around the state. While the most prolific seismic activity has been in North Texas, a recent University of Texas research paper says oil extraction also may be causing quakes in the Eagle Ford Shale.
The University of Texas at San Antonio, responding to the need for oil and gas engineers in the Eagle Ford and Cline shales, has introduced a new oil and gas certificate for undergraduates. The certificate, offered through UTSA’s Department of Mechanical Engineering, prepares degree-seeking students with fundamental engineering knowledge needed for an oil-and-gas industry career, university officials say. “This certificate will signal to employers that graduates of this program have received top-tier training and exposure to the real world engineering challenges encountered in the oil-and-gas industry,” UTSA Department of Mechanical Engineering chairman Harry Millwater said in a written statement. To earn the certificate, students must complete 15 credit hours, which include required courses in measurements and instrumentation as well as machine element design, plus three industry-specific electives. For more information, please contact us.
The Shore Exploration and Production Corp. has leased 84,000 acres of land in Virginia in relation to the Taylorsville basin, but has not begun drilling. The basin, though mostly in Virginia, runs in Maryland through most of Charles County and also goes into St. Mary’s, Prince George’s, Calvert and Anne Arundel Counties. A 2012 study by the U.S. Geological Survey that assessed several basins in the eastern United States, including the Taylorsville basin and four others in Maryland that are not a part of the Marcellus Shale region. The study estimated that there are 1.064 trillion cubic feet of natural gas in the Taylorsville basin, a small number compared to the Marcellus Shale basin which has an estimated 84 trillion cubic feet of gas. For more information, please contact HBW Resources.
Abundant, low-cost energy courtesy of the shale revolution incentivizes chemical producers and manufacturers to shorten their respective supply chains and return production facilities to the United States. As a result, railroads, trucking companies, marine shippers and even airlines are well-positioned to enjoy new growth opportunities. So says PricewaterhouseCoopers (PwC), which recently released a study outlining how transportation and logistics companies should benefit from oil and gas production from shale plays. Key conclusions of the report, “Shale energy: A potential game-changer,” include:
- In addition to moving greater volumes of crude oil from shale plays, railroads provide a flexible and cost-effective option for carrying chemicals and waste products.
- Trucking companies haul fresh water, frac sand, waste products and heavy equipment associated with producing oil and natural gas from shale plays. Also, the relative low cost of liquefied natural gas (LNG) compared to diesel fuel is spurring some of these fleet owners to power their vehicles with LNG rather than diesel. PwC notes, however, the adoption of LNG in trucking hinges on the rollout of LNG fueling infrastructure nationwide.
- With four LNG export terminals under development in the United States and others awaiting approval by the U.S. government, growing demand for outbound capacity on LNG tankers will create new business within the marine shipping industry.
- As airlines continue their quest for cheaper and cleaner-burning alternatives to jet fuel, LNG deserves serious consideration. Although such a scenario is years away given the lack of LNG fueling infrastructure within the aviation sector, in the near term airports and air carriers benefit from transporting more people to and from shale-producing regions. For instance, the PwC report indicates that flights originating in North Dakota airports near the Bakken shale play are fuller than they were 5 years ago because traffic has nearly doubled.
The regulatory process for building new infrastructure to serve the energy needs of the Northeast US needs to be “streamlined” to allow the region to enjoy the benefits of the shale gas boom, officials with the American Petroleum Institute said. In a conference call, John Felmy, API chief economist, said the spikes in the price of natural gas during the recent spell of frigid weather from the polar vortex point to the need for the construction of more pipeline infrastructure to bring more gas to New York and New England. “The recent cold snap provided a chilling reminder of what happens when demand approaches the limit of our current ability to bring abundant US supplies to the regions that need it most,” he said. He pointed to a US Energy Information Administration report that said that in New York, gas spot prices jumped from $12.83/MMBtu to $47.80/MMBtu on January 6. For more information, please contact us.
Regulations that could force oil companies to use stronger rail cars to move crude likely will be ready in 2015, according to a schedule released by the U.S. Department of Transportation. Oil companies have increasingly used rail cars to move crude, but recent disasters, including a derailment and massive explosions in North Dakota last month, have drawn attention to the cars’ vulnerabilities. New regulations that could force older tank cars to be upgraded or phased out are under development, but will not be proposed until Nov. 12 and will be subject to a public comment period until Jan. 12, 2015, according to the Department of Transportation.
The price of U.S.-produced natural gas will remain stable and relatively low for at least the next two decades, boosting opportunities for exploiting the fuel’s economic and environmental benefits, according to an industry-supported report. The report by IHS projects that natural gas will sell for an average $4-$5 per million British thermal units, adjusted for inflation, through 2035. The price of crude oil will remain three to four times higher on an energy-equivalent bases, IHS said. Advances in horizontal drilling and hydraulic fracturing have led to a dramatic turnaround in natural gas production over the past few years. Viewed as increasingly scarce just a decade ago, when its price rose above $15 per million Btu, natural gas produced from unconventional tight reservoirs now is plentiful and cheap, leading to reassessments of the entire U.S. energy landscape. For more information, please contact HBW Resources.
America’s shale boom is providing an unintended benefit to U.S. government bonds. With the U.S. economy relying less on oil and gas imports than at any time in two decades, energy expenses for Americans have fallen and cut into inflation more than any other living cost in the past year, according to data compiled by the Labor Department. Economists say consumer prices will rise less than 2 percent for a second straight year in 2014, the first time that’s happened during an expansion in a half-century. Slowing inflation, which increases the purchasing power of fixed-rate payments, would give support to Treasuries after the Federal Reserve’s plan to curtail its unprecedented bond buying ignited their first annual losses since 2009. Ten-year notes yielded 1.76 percent last month after deducting inflation, close to the highest since 2011. Spending fewer dollars on foreign oil also means that any gain in crude prices no longer leads to a weaker greenback, upending a decade-long relationship that may strengthen the value of U.S. assets. Rising U.S. oil production means “lower inflation than it would otherwise be, lower interest rates than would otherwise be,” David Kotok, the chairman and chief investment officer of Sarasota, Florida-based Cumberland Advisors Inc., which manages $2.2 billion, said in a Jan. 16 telephone interview.
Global energy demand continues to grow but that growth is slowing and mainly driven by emerging economies – led by China and India – according to the BP Energy Outlook 2035. Shale gas supplies are expected to meet 46% of the growth in gas demand and account for 21% of world gas and 68% of US gas production by 2035. North American shale gas production growth is expected to slow after 2020 and production from other regions to increase, but in 2035 North America is still expected to account for 71% of world shale gas production. For more information, please contact HBW Resources.
Federal regulators said railroads and energy companies agreed to take significant steps to make shipping crude oil by rail safer after a string of accidents and explosions prompted rising fears in cities and towns across the country. The voluntary changes, which include improving the safety of tanker cars, were announced after a meeting convened by the U.S. Department of Transportation that included top agency officials, executives from the big freight railroads and members of the American Petroleum Institute, the oil industry’s chief lobbying group. Any steps the industries take voluntarily would occur much faster than changes imposed by regulators. According to a schedule published in the Federal Register, it would take the Pipeline and Hazardous Materials Safety Administration, the unit of DOT that regulates hazardous-material transport, more than a year to institute new safety rules for tank cars. Anthony Foxx, secretary of the Transportation Department, said the railroads agreed to take steps to avoid derailments and reroute trains around high-risk areas. They have 30 days to study the routing protocols applied to the most hazardous loads they carry, he said. Those routes take into account 27 factors, according to a spokeswoman for the Association of American Railroads, one of which is population density. The railroads also agreed to “work on a speed reduction plan” for high-risk areas, Mr. Foxx said. The energy and rail industries also agreed to come up with new recommendations for tank-car fleets in the next 30 days, he said. The petroleum industry will share information on the content of the oil coming from the Bakken oil fields with PHMSA, which has been doing its own studies, according to the agency’s administrator, Cynthia Quarterman. The agency expects to have final results soon, she said. After that, the agency will meet with the American Petroleum Institute to decide how to classify the crude oil, which will determine how it is loaded and what kind of tanker car should transport it. The department also called for devoting more resources to safety inspections. Currently, there are about a million hazardous shipments transported daily, but only 50 PHMSA safety inspectors. For more information, please contact us.
The Obama administration is seeking to reassure the environmental community that U.S. EPA is on top of the shale drilling boom, even though it has bailed out on three major enforcement cases. In letters being sent to the leaders of national environmental groups, EPA Administrator Gina McCarthy is stressing its efforts to raise standards industrywide. McCarthy says her agency is developing model regulations for hydraulic fracturing in the form of guidance, is assisting the Bureau of Land Management with rules for fracking and drilling on public land, and is working closely with state agencies. “We are continuing to look at further opportunities for the EPA to support implementation by states and industry of hydraulic fracturing best practices,” McCarthy wrote to Natural Resources Defense Council President Frances Beinecke. It was sent in response to a Sept. 13 letter from Beinecke asking about the three dropped enforcement cases concerning drilling and water contamination in Dimock, PA; Parker County, TX; and Pavillion, WY. Beinecke’s letter was not made public.
The FBI’s possible plan to station permanent agents in the Bakken oil patch of Montana and North Dakota as the drilling boom drives crime rates higher has sparked a dispute between lawmakers from the two states over where the agents should be located. Crime on both sides of the states’ border has spiked as thousands of new workers brings drug traffickers in their wake. Since July, two FBI agents and an agency intelligence specialist have been stationed in Sidney, Mont., according to authorities. But those postings have been temporary, and a request is pending to make them permanent, FBI spokesman Kyle Loven in Minneapolis said. North Dakota Sens. Heidi Heitkamp and John Hoeven want the agents moved about 45 miles northwest to Williston, N.D., considered the heart of the oil patch. Montana Sen. Jon Tester and Rep. Steve Daines want the agents to remain in Sidney. Loven said a final decision will be up to FBI headquarters. He could not offer a timetable.
GE Oil & Gas and Cameron, a Houston-based provider of flow equipment, systems and services, announced that GE has agreed to acquire Cameron’s Reciprocating Compression division for $550 million. The division provides reciprocating compression equipment and aftermarket parts and services for oil and gas production, gas processing, gas distribution and independent power industries. Cameron’s Reciprocating Compression division, which generated sales of approximately $355 million in 2012, has approximately 900 employees and operates from 20 global locations. The acquisition is expected to close later this year subject to regulatory approval. High-speed reciprocating compressors are used in several applications from gas gathering, gas lift and injection, as well as transmission and storage. The development of shale oil and gas fields, particularly in North America, has increased demand for high-speed reciprocating compressors. As shale continues to develop in other regions of the world, such as Asia and South America, the acquisition will position GE to serve the industry globally. After closing, Cameron’s Reciprocating Compression division will become part of GE’s Oil & Gas recently formed Downstream Technology Solutions business in order to better serve the $11 billion downstream and distributed gas segments. The new business is designed to deliver products, services and packaged solutions for both the traditional downstream and the evolving unconventional oil and gas space.
The Center for Sustainable Shale Development is expected to announce Philadelphia lawyer and former EPA official Susan P. LeGros as its first executive director. The center, which is backed by several energy companies and the Heinz Endowments, said it also has started its third-party certification and verification program and hired Bureau Veritas to audit. For more information, please contact HBW Resources.
U.S. natural gas in storage will end the winter below 1.4 Tcf because of unusually cold weather in key consuming regions and record withdrawals, Goldman Sachs analysts said. The latest projection is 228 Bcf below what Goldman forecast in December. An end-of-season March storage figure of 1.4 Tcf would be 298 Bcf below the five-year average, 323 Bcf below last year’s finish and 141 Bcf below the US Energy Information Administration’s 1.541 Tcf projection for March.
Citing economic and national security woes, more than a dozen European nations are ramping up pressure on Washington to open wider its federally restricted spigot of natural-gas exports. The countries, which primarily include Eastern European nations heavily dependent upon Russia for their energy supplies, are working with a Washington-based government-affairs firm to launch a lobbying coalition, in the next month with American energy companies, primarily through two major trade associations: America’s Natural Gas Alliance and the American Petroleum Institute. The coalition, whose name will be LNG Allies, will lobby Washington on allowing these countries easier access to natural gas from the United States, where supplies have ballooned in recent years and domestic prices have plummeted compared with the rest of the world. Right now, federal law significantly restricts U.S. companies from exporting natural gas to countries that are not free-trade partners with United States, which includes Europe. “These countries are all still very heavily dependent upon Russia, and they’re excited about getting into the LNG [liquefied natural gas] marketplace, and are looking for not only U.S. gas, but good, solid business relationships,” said the coalition’s organizer, who works for the firm launching the coalition. Countries likely to participate include Austria, the Czech Republic, Estonia, Finland, Latvia, Lithuania, Poland, Romania, the Slovak Republic, Croatia, Hungary, Slovenia and Greece.
The Waltham Forest Council has refused permission to allow the exploration of shale gas in the borough. The controversial practice of hydraulic fracturing, involves drilling and injecting fluid into the ground at high pressure to extract natural resources. David Cameron recently announced plans to reward councils with financial incentives if they agree to the exploration of shale gas in the community. Under the plans, local councils will be allowed to keep 100 per cent of the business rates shale operators pay, and could bring in an estimated £1.7 million a year from drilling in one site. Deputy leader and cabinet member for environment, Cllr Clyde Loakes, said, “In Waltham Forest we have no intention of allowing fracking. Regardless of what financial benefits might be on offer, we will not compromise the safety and wellbeing of our current or future residents.” He also labelled central government’s attempt to win over councils by offering financial incentives as a “crude manoeuvre.” For more information, please contact HBW Resources.
An extensive study published by the Chartered Institution of Water and Environmental Management (CIWEM) has assessed the likely viability, scale and timing of shale gas exploitation in the UK. The study found that “compared to other fossil fuels, the overall water use intensity of shale gas is low” and “claims by some opponents that the industry represents a threat to the security of public water supplies are alarmist.” It was in December 2013 when water industry body Water UK and the UK Onshore Operators Group (UKOOG) signed a Memorandum of Understanding (MoU) to cooperate throughout the shale gas exploration and extraction process. A key aim of the signed MoU was to give the public “greater confidence and reassurance that everything will be done to minimize the effects on water resources and the environment.” At the time Water UK said it had reviewed recent reports into shale gas extraction and said that “while there are potential risks to water and wastewater services, these can be mitigated given proper enforcement of the regulatory framework.” CIWEM said that the study “found that at the exploratory phase water demand is not likely to be significant compared to other users and it is likely that operators will continue to source water on a site by site basis depending on where the closest source is and how easy it is to transfer.” Estimates show that to meet 10% of the UK gas demand from shale gas over 20 years would require 1.2 – 1.6 million m3 water per year3. When compared to the volume of water that is licensed to be taken from the environment each year in England and Wales, it equates to less than 1/10th of one per cent of total abstraction. CIWEM’s interim chief executive, Nigel Hendley said: “The recent Memorandum of Understanding between the industry groups UKOOG and Water UK should assist in planning water resources in the future for the industry.
For additional information, please contact Bo Ollison with HBW Resources. His contact information is below.
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