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Natural Gas Glut: Shame on US

April 16, 2012 Leave a comment

It wasn’t long ago that the United States realized that it had a huge problem: the amount of natural gas we used for utilities was too large for our production numbers to shoulder. We couldn’t produce enough Natural Gas to meet a growing demand so we were looking at importing natural gas at record high prices.

Prices trended upward long before Hurricanes Katrina and Rita ravaged the Gulf Coast. At the time before the storms, natural gas demand rose because of economical growth and the increase of electricity produced using natural gas.

2005 marked a rise in costs that made us sweat. Futures’ prices had risen from $6.00 per MMBtu to $9.00 per MMBtu. An increase of 50% was realized before August of the same year. Following the storms, which, in effect locked up GOM production, prices rose an additional 65%, eventually rising to the point where $6.00 per MMbtu reached $16.00 for the same volume in the same year. (The MMBtu equivalent to mcf is 1 MMBtu=0.9649 mcf…the equivalent price was $15.44 per mcf).

The equivalent would be if gasoline prices went from $3.90 in 2012 to $5.85 by August before rising to $15.56 per gallon, all in the same year.

According to this report from FERC (Federal Energy Regulatory Commission), we were scrambling. Part of FERC’s strategy included approving “applications for a substantial expansion of the Nation’s LNG terminals for overseas gas.”

We geared up for imports at sky high costs because there was no alternative that could effectively meet the demand. Such was the price of power and growth. According to FERC, natural gas prices had been “spiky” by nature and the upward sweeping trend was expected to grow throughout the winter when gas usage increased.

The prospect for natural gas and its relationship with the United States was terrible because we needed it as a supplier of power. Natural gas use seemed to be going the same path as oil: increased imports to feed our growing energy needs at high cost to the US.

Then, something unexpected and extraordinary happened: We learned that the fear associated with our growing need to import natural gas was for naught.

We discovered the equivalent of “two Saudi Arabia’s worth of natural gas” beneath our feet. We saw that there would be no need to import all of the expensive foreign fuel. We’d be enabled to produce all of the natural gas we needed and much, much more. Almost overnight, we had a method to extract massive quantities of natural gas. Instead of importing natural gas, we’d be capable of exporting out of the abundance of our native supply.

This meant energy, cheap energy. Our production caused our natural gas prices to be among the lowest on this earth.

So, we started producing natural gas in record volumes. Productions numbers repeatedly surpassed geological estimations. Natural gas became the largest contributor to the total primary energy (TPE) in the United States virtually overnight.

The industry specific growth created tens of thousands of new, high paying jobs; this amidst the devastating recession that came home to roost as a result of the housing bubble in 2008. Despite this recession, the natural gas industry continued to thrive. We were going to be able to meet our increasing demand for power and create new money when the economy was on the ropes.

All of this was the result of Hydraulic Fracturing. Things were looking great. We had a great answer to our great need and now, for the first time, we were more than capable of satisfying our growing need for cheap power. This was phenomenal news. The natural gas industry was a bright spot in a dismal world.

Then a film called GasLand came out showing flaming tap water and residents whose lives appeared to have been destroyed by water contamination. The NYT ran an entire series of stories penned by yellow journalist Ian Urbina. The press jumped on board a destructive train and began to malign the industry. They said we took advantage of land owners with our fast talking land men. They said we lacked accountability for our lax safety practices and that we were the environmental titan hell bent on profiteering at the cost of mother earth and her residents.

The EPA (a government agency) joined in and began its quest; not to neutrally assess the risks associated with Hydraulic Fracturing but to prove that Hydraulic Fracturing contaminated groundwater.

The industry was forced into a corner and stuck in a defensive posture.

Then BP spilled a bunch of oil in the Gulf of Mexico and natural gas producers were lumped in with the rest of the O&G industry. Our public persona was tainted even worse than it had been previously. Obama declared a moratorium in the GOM and the bar for penalty was set far too high.

The wonderful potential of natural gas was lost in the mire and the press and our government was to blame.

Instead of developing new ways to utilize this resource, create more jobs, lower fuel prices, and save money, we’ve instead chosen to ignore the potential of our resource.

Now, in 2012, natural gas prices have dipped to an ten year low. It is becoming financial suicide to continue producing natural gas. This is a hard pill to swallow considering that oil wells contribute to the glut by producing natural gas as well as oil.  We have so much natural gas that we are plugging wells, moving equipment off of production sites, and curbing our production.

Demand for power has never been higher, nor has the supply of natural gas.

Instead of creating outlets for this abundance, we are choosing to spend $3.907 per gallon for regular, $4.046 for mid-grade, $4.178 for premium, $4.147 for diesel, and $3.338 for E85.

We currently pay $4.13 per mcf of natural gas.

The equivalent of 1000 cubic feet to US liquid gallons is (1)mcf=7480.519 US liquid gallons.

7480.519 gallons of regular gasoline (at $3.90) costs $29,174.02.

7480.519 gallons of diesel (at $4.14) costs $ 30,969.34.

1000 cubic feet of natural gas costs $5.45.

Instead of changing the infrastructure to supply fleet vehicles and long range truck with fueling stations, we are sticking with gasoline and diesel. We are using coal fired power plants instead of a much cleaner fuel source. We keep investing billions in failing solar and wind companies. We pay farmers to grow corn to create a corrosive fuel in ethanol that destroys the engines in which it fires by gathering moisture and melting seals and rings.

We should not have a glut of natural gas.

With all of the need for power, we should be using this resource to meet that need. The economic benefits are tremendous.

A glut of natural gas is a tragedy. We have the means to provide the kind of power we’ve always dreamed of. Our desperate needs are capable of being met with our own resources and rather than using them, we are moving in a direction of forgetting they exist.

Shame on us.

Other countries like Japan and Spain hold natural gas so dear that they are willing to pay $18.00 per mcf. Rather than exporting this resource, (because we’ve refused to use it) we’re doing nothing pending more environmental impact studies. The nearest export facility could potentially come online no earlier than 2015 pending FERC’s approval.

Shame on us. Shame on the US.

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A Needed Economics Lesson About Shale Gas

December 21, 2011 Leave a comment

To this point, I have not dealt with Shale Plays from an economic perspective. I must admit that I feel ashamed of this fact because it is the most important consideration pertaining to the various Shale Plays. Not only is the Economic consideration of Shale the most important, it is also the most obvious; so in effect, I can not give an excuse as to why the origin of this blog did not find its genesis in light of Economic Considerations.

With that being said, I feel that the only lens through which we should view Shale Gas is founded upon the Economic Principles that govern our country.

A concise definition of Economics can be found in the one-stop-shop, Wikipedia. Wikipedia defines Economics as “the social science that analyzes the production, distribution, and consumption of goods and services.”

An objective and inescapable reality is that the Capitalist mentality is inseparable from the DNA of the United States. This has been, and hopefully will continue to be, a country made great by Capitalism.

Within this lesser context, exists a greater system of core economic principles which govern the actions of businesses nationwide. Economics are all about “the consumption of goods and services.”

Poor adherence to governing economic principles will result in financial collapse. We have experienced this stateside when the housing bubble busted and this poor adherence is immediately responsible for the foreclosures and bankruptcies that plague us. When one continually spends more than they earn, the debt will crush him/her. This being said, our poor adherence cannot continue if we expect to continue as a prosperous nation.

On a historical note, great civilizations often collapse not because of military might or disease but because of economic degradation. We currently sit on the brink of such a collapse. The United States of America can not continue illogical economic practices if we expect to enjoy the quality of life we’ve previously enjoyed to this point. This fact, should sober us. For those who have a firm grasp of economics, there is reason for alarm, particularly when the brightest prospect for our struggling economy is being opposed and inaccurately covered by major media.

Our economy has the equivalent of a terminal illness. Though the treatment may be daunting, it is entirely necessary.

My concern is rooted in the personal belief than in all of the freedom we are provided, we have, in the post-modern school of thought, decided that we will determine our own reality at the cost of a concrete reality. I mean that attempting to remedy our current woes is not feasible without Shale Gas being a major part of the plan.

My fear, is that differences in ideologies and abstract thought will stymie economic growth to the point of no return.

Our modern world is not familiar with this concept. Economically, we often act like there is always a point of return. The US’s interrelation with global markets dictates that this is not the case. We must alter our current practices or we will crash and burn. A ideological objection to “cracking a few eggs to make an omelet” will result in a collapse.

The first economic principle that I will treat rests squarely on the shoulders of human nature. People want. Economically, this is referred to as demand. To illustrate this point during Christmas season, we need look no further than a line at a toy store.

You may remember “Tickle Me Elmo”.

The toy was introduced in the United States in 1996, quickly becoming a fad. Some parents literally fought other parents in stores to purchase one for Christmas. The dolls’ short supply due to the unexpected demand lead stores to increase their price drastically. Newspaper classifieds sold the plush toy for hundreds of U.S. dollars. People reported that the toy, originally sold at US $28.99, fetched as much as $1500.[1]

The reality that People Want (Demand) correlates directly with the economic reality of scarcity. Scarcity paired with demand creates cost. “Tickle Me Elmo” may be a miniature example that betrays a larger principle buts its effectiveness in revealing the truth of how economics work is nonetheless potent.

Larger and less microcosmic examples include gold and platinum. For the ancient Romans, this included salt. In this contemporary time it includes Oil and Gas. Current demand for and the scarcity of Oil and Gas globally makes it extremely valuable to the world. We can and should take advantage of this situation because unlike Elmo, when fuel production stops, commerce stops.

Continuing in the vein of the ancient Romans, it is necessary to cite the fact that “scarcity paired with demand creates cost” in terms of imperialism.

Empires expanded because of limited access to resources. Land was worth lives and military exploits because of demand. In their eyes, the cost was worth the reward and the rule (which hints at another economic principle) was to choose the means that provided the most benefit with the least cost.

There is simply more energy potential in Oil and Gas than there is in alternative energy. I am not solely realizing the monetary potential. I mean energy producing potential in the atomic sense. There is, simply put, such a tremendous amount of energy potential in the molecules of fossil fuels. This is how jets thrust off of the ground and how trains pull so many tons. There is a cost for these fuels but for the same amount of power, there is no present alternative.

So, if I may tie that last sentence to another economic principle, it is that there is always a cost. All choices cost. If I have five dollars to spend and there are two items that cost five dollars in front of me, I am faced with a choice because I can not purchase both. So, in terms of economic governance, I will choose what I believe will benefit me more. If I spend my five dollars on Oil and Gas, I will get a lot more bang for my buck than I would with Green Energy.

Robert Frost, in his famous poem The Road not Taken astutely recognized this truth in the final stanza:

I shall be telling this with a sigh

Somewhere ages and ages hence:

Two roads converged in a wood, and I-

I took the one less traveled by,

And that has made all the difference.

We, the reader, are left to interpret whether or not the difference was to a good end or bad. I believe Frost was not requiring that we discern the end, he was observing a reality. There is always a choice, there is always a cost, and for good or for bad, those choices make all the difference in the world. Even if there is no monetary or itemized consequence for the choice, there is still a cost.

So what does this choice have to do with Shale and economics?

Everything.

I have heard it often asked “Do the benefits of Shale Outweigh the Risks?” There have been at least a dozen headlines that have read as such.

On one side, Environmental Activists believe that a finite resource like Fossil Fuels are an inferior choice for two basic reasons.

1.) They believe in climate science and believe that decreasing our carbon footprint for the purpose of “saving our planet” is important.

2.) They believe the utilization of a finite resource is irrational. They ask “Why would we continue to use fossil fuels, which are limited, when we have an abundance of free wind and sun to power the same things for which we use Fossil Fuels?”

All of these objections to the utilization of Shale exist within the framework of economic realities that do exist. People fly. Trains pull. Ships motor across the oceans. There is commerce dependent upon the movement that fossil fuels provide and the energy they produce. I want you to notice that I did not say “must exist”. They do exist. The objections cannot supersede or circumvent economic considerations as if the entire known world is void of an economic skeleton dependent upon actual businesses and an actual demand for their goods and services.

These objections cannot exist without admitting that the current world runs on Oil and Gas (demand) and that companies that are largely profitable (because of their understanding of economic principles) are a large and pivotal part of that skeleton.

Calling for an immediate end to Oil and Gas usage is foolish. It is out of touch with reality. Moving to renewables may be the end game but it cannot happen overnight. This would be the equivalent to believing that life can and will continue if we rip the heart out of and drain the blood from the economic body. It’s simply ridiculous.

So, from an economic standpoint, I would like to address what I believe are their larger objections one by one. I will address them respectively after the numbers that correspond to the Environmentalist position.

1.) Saving our planet is important. Excluding those that completely discredit climate science and refer to it as a myth, Oil and Gas companies are moving toward renewable resources and they are moving toward more environmentally friendly practices. This is a fact. When I say moving forward, I mean they are spending more money on renewables than anyone else. If they continue to run their companies as well as they have in the past, when renewables become a larger part of the market, names like Shell, BP, Exxon Mobil etc. will become synonymous with Green energy like they have with fossil fuels.

Along with RFK Jr.’s VantagePoint Capital Partners, Brightsource’s major investors also include Chevron, BP, and Statoil. Oil and Gas companies are simply not the evil polluters as they are depicted, they have the money to fund the progression of Green Energy, and they do. What they understand, economically, is that Green Energy is not nearly as profitable as Oil and Gas. That does not mean that it will never be as profitable or useful, it means that it is not right now. Smart companies don’t put all of their eggs in the basket of unrealized ideas. They live firmly in the here and now and wisely plan for the future without acting insane. Because of the tremendous economic impact that the development of Shale could have, these companies would be counterproductive (and so would our country for that matter) to leave the potential unrealized. For a country that is in the worst of financial conditions, all of the Shale money can not be left on the table while the Greens attempt (and they would fail) to turn a massive ship, with tremendous momentum, instantaneously. Trying to turn a car or a boat too quickly results in wrecking. These businesses will pay a lot of money to play ball. If the United States won’t allow them to play, they will find another field and other countries will profit from their resources (like China: who already has America by the scruff of the neck).

2.) When speaking of “finite resources” vs. “infinite resources” this is where the economics lesson is most necessary. There is no such thing as an infinite resource. For example, wind and solar may be “infinite” as Environmentalists choose to represent it.

Wind and Solar are subject to inefficient and cost ineffective irregularities that do not consistently meet demand. Although it is the age old argument, Wind and Solar are simply not consistent enough to meet current or increasing demands for energy. They don’t have the muscle. For the regular Joe, that $30-60,000 investment is impossible, therefore, the initiative to use widespread Green Energy is also impossible regardless of whether or not it is a “good idea”. To further consider this point, if Wind and Solar were responsible for meeting our energy needs, this whole country would be covered with Wind Farms and Solar Arrays.

Second, Green Energy is anything but free. China is responsible for mining the majority of the rare earth minerals needed for Green Energy. They have an abundance of them and they lack the regulations associated with the risks of mining rare earth. If they have an abundance, while we have scarcity in this country, what do you think is going to happen if demand for rare earth minerals increases along with a Nationwide Green emphasis? Increased demand married to scarcity increases cost. Those costs will increase as the level of demand increases

If we don’t utilize our own energy resources for a profit, and we continue to grow in being a culture that exports nothing and imports everything at a loss, then we will get the same problem we already have with OPEC; except all of that money will be going to China.

In the economic game of life, refusing to capitalize on Shale plays would be the equivalent of leaving your ringer on the bench during the big game. We are playing the largest of games right now. We need to put our ringer in.

Shale Plays represent the potential to increase our energy output (by exporting) while also creating jobs and money within our country by processing the Oil and Gas we already have at home. By doing so, we decrease our imports. This is a model for economic success. We meet demand with vast supply. This helps eliminate the problem of scarcity for our country while benefiting from the increasing demands in other countries.

In summary, Shale Plays can decrease imports, increase exports, and create jobs at home. These are all positive revenue streams. Any economist will tell you that this is sound thinking.

Refusing to utilize Shale Plays means increasing imports (and our dependence on OPEC and for rare earth, China), decreasing exports (because if we don’t utilize Shale Gas, we won’t be exporting it), escalating our scarcity (whether it be for fossil fuels or rare earth), thereby increasing our costs. All the while, the population is not decreasing. This means that the number of consumers is growing and increasing demand.

Economically, Shale Oil and Gas makes sense. In the Bakken, there are currently 18,000 jobs available for folks willing to relocate to North Dakota. These jobs pay around $100,000 annually and are accompanied by benefits.

If we don’t benefit from our own resources, someone else will benefit from our demand. If we can solve our major economic problems with our own two hands, we should.

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Hydraulic Fracturing Series: Why I Don’t Believe Ian Urbina

October 21, 2011 Leave a comment

On occasion, I am afforded to opportunity to converse, in a manner, with those with opposing views through the avenues of Social Media.

I had a bit of a Twitter conversation with @WaterCitizen recently.

I surmise that I tweeted something to Mark Ruffalo (Fractivist Celebrity @Mruff221) concerning his characteristic support of NYT journalist Ian Urbina because of a plug he issued for Urbina’s latest article.

I asked Ruffalo if he was comfortable with aligning himself with Urbina when he has been outed for having questionable reporting methods by the NYT own public editor, Arthur Brisbane.

Ruffalo responded by tweeting “@TheFracDog No one outed him for anything but true reporting. He was completely exonerated by the NYTimes. Industry whiners need outing.

It was at this point that @WaterCitizen came into the conversation and asked that I more thoroughly treat my refusal to trust the reporting of Ian Urbina because I deemed him unreliable. @WaterCitizen responded by asking me to review (specifically) the last article Urbina had written about mortgage complications.  I told @WaterCitizen that I would write a blog about my reasoning concerning Urbina’s integrity because that is what I have a problem with.

My over-arching questions are with his shaky methods and therefore the character of Ian Urbina as a reporter.

Urbina has recently come under heavy fire both by those in industry and by those at the NYT for poor citation, including the utilization of redacted emails and intentional misrepresentation of a single source.

There have been two separate write-ups by the NYT’s Public Editor that questioned the clarity of Urbina’s stories and the truth behind his claims.

The first can be found here and the second here.

Regardless of the issues about which Urbina writes, his practices are unethical for a journalist.
Part of the bedrock for Urbina’s Behind Veneer, Doubt on Future of Natural Gas article was an EIA intern named C. Hobson Bryan.  Urbina referred to Bryan as “one official”, an “energy analyst”, and as “one federal analyst.” He also used redacted emails under the guise of “protecting sources.”  Compare those with these originals and decide more clearly for yourself whether or not his practice is questionable.

The difficulty I have with Urbina is that I refuse to believe that a person who makes his living with his pen and his ability to articulate failed to realize, that without differentiating titles used for one person, he would open himself to the possibility of being interpreted as if he had used multiple sources. He is a professional writer for the New York Times who forms a strategy about how he can grip readers. He does not get to feign ignorance.

The strategy he employed would also serve his purpose in over-qualifying one who was an intern.  I was not the only one to recognize this as Brisbane said:

Without ample descriptions of the unnamed sources, readers couldn’t know who was speaking and could not judge for themselves the merits of what was said. In the case of the redacted e-mails, the descriptors tended to obscure how many E.I.A. staffers were involved and when an intern was the e-mailer.

Urbina also “invoked” comparisons to Enron, Ponzi schemes, and dot-coms when talking about what he believed to be false faith in Shale Gas production.

He knew what he was doing and as has been noted in Brisbane’s criticisms, Urbina was outed, at the very least for being irresponsible in his methods, if not intentionally misleading.

This is not “completely exonerated by the New York Times” as Ruffalo claimed.

The most pointed criticism I would make of Urbina can be drawn from a quote by Michael Crichton on the Gell-Mann Amnesia effect.

“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them. In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”

Urbina can write. He makes his living doing so. To industry folks, he sounds like a Yellow Journalist.

I will use three examples to explain. The three examples are articles printed on the same day: Aug. 24, 2011.

In Urbina’s Article, his headline is Geologists Sharply Cut Estimate of Shale Gas. He then says

“The shale formation has about 84 trillion cubic feet of undiscovered, technically recoverable natural gas, according to the report from the United States Geological Survey. This is drastically lower than the 410 trillion cubic feet that was published earlier this year by the federal Energy Information Administration.”

That was Urbina’s take.

What he did not report or clarify is that this does not include currently producing wells; which, by the way, are all producing more than originally projected.

For the sake of rounded comparison, here are articles about the same issue PUBLISHED ON THE SAME DAY by The Huffington Post entitled Marcellus Shale Gas Region Has More Natural Gas Than Previously Estimated, USGS Reports and on NPR’s website entitled Department of Energy Defers to USGS on Shale Gas Estimates.

Both of these articles, in contrast to Urbina’s, note that the current projection of the USGS is 40 times more than what their projection was in 2002.

Urbina intentionally leaves this out and compares the estimates of the USGS to those of the EIA.

Industry folks know that Geologists know what they are talking about. That is why we employ more of them than any other industry. Our profitability hinges on their accuracy.

What is most ironic is that Urbina rolls the EIA under the bus for miscalculating the volume of Marcellus Gas (410 trillion cubic feet) by granting more legitimacy to the USGS’s estimate of 84 Trillion cubic feet.

If you will remember from earlier in this blog, where we mentioned Urbina’s article Behind Veneer, Doubt on Future of Natural Gas, the “one official”, “energy analyst”, and “one federal analyst” was none other than C. Hobson Bryan:  EIA Intern.

Is the EIA respected enough to produce interns worth building articles around but not credible enough to beat out a group of geologists? Spurious.

It begs questions concerning the journalistic integrity of Urbina.

We in industry know this and understand it. Those in the general public don’t and as Brisbane noted, this does not exempt those in a position to create laws.

I don’t trust Urbina because he cannot accept the possibility that he could be wrong, he repeatedly questions a different aspect of industry in the form of an attack, and he repeatedly formulates his arguments without much of a voice from those who would disagree with him.

I don’t trust his definition of “true” because I have far too many reasons to doubt him and because Ruffalo gets his information on the cheap secondhand, I don’t trust what he deems “true” either.

Wikipedia has the following write-up on Yellow Journalism.

Yellow journalism or the yellow press is a type of journalism that presents little or no legitimate well-researched news and instead uses eye-catching headlines to sell more newspapers.[1] Techniques may include exaggerations of news events, scandal-mongering, or sensationalism.[1] By extension “Yellow Journalism” is used today as a pejorative to decry any journalism that treats news in an unprofessional or unethical fashion.

A fleeting glance at his headlines will show you that they are intentionally sensational.

  • Behind Veneer, Doubt on Future of Natural Gas – June 26, 2011
  • Insiders Sound an Alarm Amid a Natural Gas Rush – June 25, 2011
  • Millions of Gallons of Hazardous Chemicals Injected into Wells, Report Says – April 17, 2011
  • E.P.A. Struggles to Regulate Natural Gas Industry – March 4, 2011
  • Gas Drillers Recycle Wastewater, but Risks Remain – March 2, 2011
  • Regulation Lax as Gas Well’s Tainted Water Hits Rivers – Feb. 27, 2011

So @WaterCitizen, that is why I don’t believe Ian Urbina. I believe he is the quintessential Yellow Journalist and he has limited accountability.

For him to be right, a lot of brilliant scientific minds and those responsible for the future of billion dollar companies would need to be completely wrong.

To quote Jim Cramer, the host of “Mad Money” on CNBC

“Thank you for calling attention to Ian Urbina’s confused reporting about the transformational oil shale business and his insistence that natural gas executives may be exaggerating the reserves.

First, there is an immense glut of natural gas in this country, as witnessed by the failure of natural gas to spike in record cold and record heat, as it always did before the shale discoveries.

Second, we now have discovered so much natural gas in this country that oil and gas companies are mothballing gigantic facilities that were built to import natural gas from overseas. Many industry executives now expect that we will be exporting natural gas, as our production costs are now the lowest in the world.

Third, Mr. Urbina asserts that shale production falls rapidly after a short time. Actually, the production has increased over time and the initial projections in all the major shales have gone up, and up dramatically, from their initial discoveries. Fourth, both national oil companies and major integrated oils, including Korean, Japanese, Chinese, Norwegian and Indian companies as well as Exxon Mobil, have spent tens of billions of dollars buying up domestic shale properties.

Could all of these entities be wrong and Mr. Urbina right? I don’t think so.”

Conversely, I would ask you “How can you justify believing him?”

Hydraulic Fracturing Series: The Press (To Be Reckoned With)

October 20, 2011 Leave a comment

In his play Richelieu, written in 1839, Edward Bulwer-Lytton forever pressed an adage into the memory of the modern world when he scribed:

True, This! —
Beneath the rule of men entirely great,
The pen is mightier than the sword. Behold
The arch-enchanters wand! — itself a nothing! —
But taking sorcery from the master-hand
To paralyse the Cæsars, and to strike
The loud earth breathless!

In 1870, a literary critic named Edward Sherman Gould wrote that Bulwer “had the good fortune to do, what few men can hope to do: he wrote a line that is likely to live for ages.”

That line, as you may have guessed, is “The Pen is mightier than the sword.”

Although I do not believe that the Green press could be considered “men entirely great“,  I do believe that the momentum they have gathered and the ground they’ve gained needs to be fully recognized by our industry.

They are very aware of their power. Their office is established and they know how to use that leverage.

And while we do not write for National newspapers or magazines, we do not make films, we do not influence the lens of public perception; many of them do.

Similar to the way that historians are responsible for the accuracy of the accounts which they tell on behalf of the dead, those authors in the press are the gate-keepers to the public concerning information and if we provide no alternative, then the people, including the law-makers will make decisions based on what they’ve heard.

The arch-enchanters wand! — itself a nothing!” calls to the ears of their readers declaring “This is an issue which needs your attention! This is why, They are poisoning your families and pillaging your lands!”

So some lawmakers bought it and started pushing for bans, listening to the cries of “Wolf, Wolf!”.

The press concerning the Hydraulic Fracturing Industry is a Siren’s song; one if heeded could be disastrous. The Green press will not be satisfied until sailors are drowning and masts splintered, until laws are passed to destroy the Hydraulic Fracturing Industry and with it, all of of the benefits, which are considerable.

What do we know that we need to tell the people?

Hydraulic Fracturing has been in use for over 60 years. Over 1 million Frac jobs have been performed with zero confirmed cases of groundwater contamination.

The EPA admits this.

In the case of a well blowout in the Luther Township of Pennsylvania, their Pens wrote “thousands of gallons of frack fluid” would contaminate water wells and tributaries to the Susquehanna river, and finally, Chesapeake Bay.

A 179 page report paid for by Chesapeake, and created by the SAIC reported that the spill in Bradford County had “no environmental impact” after extensive sampling. The report met and was acceptable to the Department of Environmental Protection.

Regardless of the baseless nature of their criticisms, their caustic approach has already done notable damage.

Our industry started PR campaigns to combat the damage done by false information. By false information, I mean outright, unapologetic, and strategic misrepresentation for the purpose of stirring controversy by lying to the public.

They do the same thing they accuse those in industry of doing.

This is called hypocrisy.

I can assure you that the Green Press will continually call for the head of Natural Gas drillers in the feigned fear of the possibility of contamination.

They will go on hunting Snipe forever.

They talk about the potential fish kills and water contamination in the face of reports from Agencies (they rally behind, ironically) that disagree with them and still, they call frac fluids “poison” or a “cocktail” of dangerous fluids.

They always mention benzene or toluene without mentioning that toluene was used in the creation of Coca Cola for years or that benzene is used as an intermediate to create other chemicals. Its derivatives include styrene, used to make plastics and polymers, phenol for resins and adhesives, and cyclohexane, which is utilized in the manufacture of Nylon.

What we have brought attention to before and will again is that they always seem to turn a blind eye to both perspective and a realistic pursuit of an objective.

Aristotle said “Fear is pain arising from the anticipation of evil.”

And this is what Yellow Journalists have done. They have attempted to eviscerate the public image of Oil and Gas companies and talk about Oil and Gas companies like they are inherently evil. They have systematically attacked every aspect of industry from the content of fluids, to water usage, to disclosure.

They call for heavier regulation and taxation without noting that the Oil and Gas Industry is already the most taxed business on earth and one of the most heavily regulated.

Winston Churchill once said “The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.”

For whatever reason, the attack of the press reminds me of the Wizard of Oz. They bark a great deal, they say mighty things, but in the end, they must admit reality and be exposed for what they are:

A little old man behind a curtain that has nothing to say but a powerful way to say it.

Hydraulic Fracturing Series: Green Energy (Solar)

October 6, 2011 Leave a comment

Hello all,

If you are reading this post, we would like to inform you that this is the third in a series entitled “Hydraulic Fracturing Series”.

In this series, we will attempt to question the claims of those who are opposed to Hydraulic Fracturing and ask some questions of the detractors.

In our previous posts we have addressed the issues of their Water Usage claims and their call for a Fracturing Ban.

In the Water Usage post, we hoped to put the water used in Hydraulic Fracturing into perspective in terms of normative water usage.

In the Fracturing Ban post, we attempted to examine the fuller ramifications of what a Fracturing Ban could mean.

In this third post, we will address the complications of their claims concerning Green Energy as the sole method for energizing America.

It should be noted that we are absolutely for Green Energy. We want it to improve, become more cost effective, more efficient, and in turn, a realistic option.

What we are adamantly opposed to is holding up Green Energy as the “end all” solution for America’s current or future energy demands and the idiocy associated with those who want all petroleum related or natural gas related industry shut down immediately in the name of radical environmentalism.

Sadly, these folks get lots of press.

Throughout this blog, two of the drums that we beat the most often are the drums of reason and realism. We believe that it is unreasonable to call for a Fracturing Ban when one of the primary methods utilized in the extraction of Natural Gas and Oil is Hydraulic Fracturing. Without Hydraulic Fracturing, the volume of recovery is much lower.

So, as always, we intend to put this into perspective for the purpose of clarity and good, old-fashioned common sense.

Green Energy (Solar):

We hear that through a combination of Wind-Farms and Solar Panels, that we will be able to supply the energy needed to power America.

And, according to the majority of the Twitter feeds and Blogs we read, these are the only viable options available (in terms of what is represented in the press).

So what is the problem with “Clean” energy?

Some of the arguments that Greens apply to “Dirty” energy apply to what could be deemed “Clean”.

They do not draw attention to the parallels.

Again, we want to emphasize that we are not calling for an end to Green Energy.

Our industry puts more money toward the advancement of Green Technology than anyone, including cause seeking celebrities.

What we are saying is that Green Energy has some huge hurdles and they are often overlooked by those who report that they are superior options.

Solar Panels are very apparently not cost effective, nor are they profitable.

If the debacle with Solyndra taught us anything, it is that selling and manufacturing solar panels (as of now) is not profitable or more accurately, it is not cost effective.

One of the largest problems with the push for Green Energy is that although the press is outspokenly for it, the United States, in its current state, cannot effectively use it. Proof of this is the poster child for misappropriated guaranteed government loans.

According to the reports from PricewaterhouseCoopers and the SEC, Solydra sold $58 million dollars worth of solar panels in the nine months that preceded October of 2009.  They cost $108 million to manufacture and it cost an additional $115 million to market the panels and run the company.  That means that in a 9 month period, Solyndra lost nearly $200 million dollars. That was just in 2009. They reported net losses of $114.1 million in 2007, $232.1 million in 2008, and $172.5 million in 2009.

Solyndra reported a deficit of $557.7 million by January 2, 2010.  Four months before that on September 9, 2009, the US Government guaranteed a loan of $535 million dollars for the construction of a second Solyndra production facility when the company would report a deficit greater than the amount of that guaranteed loan.

Greens like to tout conspiracy theories that include campaign donations and under the table handshakes between government and Oil and Gas companies.

What part of a guaranteed $535 million dollar loan to a solar panel company $557.5 million dollars in the red doesn’t look sketchy?

Where does government money come from? How much did this cost tax payers?

Pennsylvania received over a billion dollars in taxes in a twelve month period because of drilling in the Marcellus largely because of Hydraulic Fracturing.

The bottom line is that the press may believe in Green Energy like Solar Panels but Americans won’t spend money on them nor are they cost effective to produce.

The Problem that America currently faces is fiscal. We need to fix it. Acting like O&G companies are opposed to the advancement of clean energy so they can remain the antagonist and calling for their heads is not an answer. It is misdirected, uninformed fire.

They are far more cooperative and far more regulated than most companies because of Green watchdogs. Let’s not go overboard with all of this animus and forget that our current economic situation is dire and they are the key to getting out of the hole. Our problem is not ideological, it is $114.5 trillion in unfunded liabilities. We can’t afford to waste money on Solyndra while Oil and Gas companies are profitable and their compliance is growing.

According to Forbes magazine “Chesapeake boasts a $17 billion market cap, on track to generate $2 billion in profits on $9.5 billion in revenues. It employs 12,000 people, including 4,500 land scouts scouring every acre of America for drilling potential and added 3,300 employees so far this year.”

What does this mean? It means that companies like Chesapeake do not need government guaranteed, tax-payer funded loans to be profitable.

They can make their own money.

If solar energy was as easy and cost effective as is misrepresented, then everyone would own it.

Until it is both cost effective and a viable option it will not be profitable and it will not swim in an economically stormy sea.

More to come soon, stay tuned.

Hydraulic Fracturing Series: The “Frack” Ban

September 28, 2011 Leave a comment

If you are a regular here at the Frac Tank then you will know that this post is the second in a series we’ve called our “Hydraulic Fracturing Series”.

This series is all about dealing with the issues that fractivists have with Hydraulic Fracturing or their proposals on how to deal with Hydraulic Fracturing.

Last week, we endeavored to put the Green’s water usage arguments into perspective.

This week, we will address the issue of the Fracturing Ban. Why are we addressing the “Frack Ban”?

If you look around for images associated with the Fractivist movement that regularly marches around with signs and speaks through megaphones at Oil and Gas conferences all over the country you will notice a common theme.

“Ban Fracking!”

The all out ban seems to be the only option in the playbook of the Greens who oppose Hydraulic Fracturing. They don’t trust regulations. They report that there are no regulations or not enough inspectors to regulate. They report that there will never be sufficient regulation nor can there ever be sufficient regulation.  They don’t believe in technological advancement, meaning they don’t believe that technology could ever create safe practices that wouldn’t require an all out ban. And finally, they don’t trust these O&G or E&P companies to move towards safer practices.

They don’t believe in reason or realistic strategies either.

Would anyone like to take a crack at what the grave economic results of an instant “Frack Ban” would be?

When has technology regressed in the history of the world because inventors wanted to make something work less efficiently?

According to DEC’s website (this is for the State of New York alone) there are currently 14,000 active wells in New York State. The extraction of Oil and Gas in these wells provides the state with half a billion dollars each year.

The DEC says

“DEC’s Division of Mineral Resources administers regulations and a permitting program to mitigate to the greatest extent possible any potential environmental impact of drilling and well operation.”

The DEC says they regulate the wells.

They also say

“In addition, the Division protects the correlative rights of mineral owners and ensures that oil and gas reserves are developed such that a greater ultimate recovery can be achieved. This is accomplished through well spacing and compulsory integration.”

They claim not only to regulate Oil and Gas drilling in the state of New York but that they also defend the owners so that they can achieve maximum profitability.

According to the American Petroleum Institute:  281, 267 jobs were supported by the Oil and Gas Industry in 2009 stating “These jobs annually add 36.3 billion to the gross state product, or 4.8% of its wealth. ”

Those figures are from New York alone, a state familiar with Fractivists and currently hamstrung in terms of production in the Marcellus.

On a national level, America’s O&G industry supports 9.2 million jobs (7.5% of GDP) with the annual salary being more than double the national average at $96,844 or $47.00 per hour.

These figures are for one year: 2009.

Other facts that Fractivists don’t report is that O&G companies spent $58 billion dollars on low and zero carbon emissions technologies between 2000-2008.

They spent $1.7 trillion since 2000 “in U.S. capital projects to advance all forms of energy, including alternatives, while reducing the industry’s environmental footprint.”

Greens could never generate the amount of money that the O&G industry spends to support their token causes. The O&G industry is more of a proponent of low and zero emissions and clean energy than they could ever be.
Why?
They have the money to spend and they spend it because good regulations, low emissions, and developing a sound American Energy Strategy are in their best interests too.
BP would like to have the billions of dollars back that they’ve spent on the oil spill in the Gulf of Mexico.
Problems like that cost these companies large amounts of money and better regulation keeps this from happening. They benefit more from fixing these problems than anyone and they are then willing to spend that money to improve technology for lower emissions and green energy.
Chesapeake just spent $155 million to gain a majority interest in a company that creates green fuel.
ridiculous (adj.) : arousing or deserving ridicule : extremely silly or unreasonable : absurd, preposterous.
The above definition was provided by Merriam-Webster and they should have a picture of a fractivist next to it.
What Fractivists don’t realize is that Hydraulic Fracturing is not utilized solely in Natural Gas production. Its use is widespread and this form of stimulation is used in many wells including oil wells.
Imagine a widespread, federally enacted Fracturing Ban that would cripple the 9.2 million jobs O&G supports and decimate that 7.5% GDP with a current unemployment rate of over 9.0%.
Is that really what is best for America?
No, it is ridiculous and it would cause our economy to literally spiral out of control and be entirely irrecoverable because this world runs on money and O&G makes money.
We are currently one of the Top Five producers of Oil and Gas in the world.
Without Hydraulic Fracturing, this would be impossible. Without Hydraulic Fracturing we would not be able to enjoy America the way we currently do.
Fractivists simply haven’t considered the full consequences of what they fight for and we would argue that it would be impossible to do so.
Imagine all of the companies that would have to leave the table for greener pastures if the US ever approved a Fracturing Ban. Want to guess what it would mean for the American Economy if companies like Exxon Mobil, Chesapeake, Schlumberger, Halliburton, Baker-Hughes and Weatherford couldn’t proceed with frac’ing in the US?
It would be no less than catastrophic.
So, the next time you see a Green marching around with a “FRACK NO!” sign, ask them if they have any idea what they are doing.
Because if they do have an idea what a “Frack Ban” would do to our country, then they should be tried for treason because a ban like that would do nothing less than cause our current unstable economy to crash.

Hydraulic Fracturing Series: Water Usage Objections

September 21, 2011 2 comments

As the debates concerning Hydraulic Fracturing heat up and the protestors circle with brightly colored signs and chants, we thought it would be a good idea to take each objection/issue presented by “Fractivists” to give them a treatment and present some thoughts about their objections.

We will take on each issue individually, taking care to ask some important questions of them.

This is the first blog in what will be a series.

1.) Water Usage Objections

There are objections in the anti-fracturing community about the usage of water in the fracturing of wells.

The arguments hoist water up as the sacred life blood of the earth and they treat the water as if it is in poor supply. They report that millions of gallons are used to Frac each well and then they attempt to explain how this is such a terrible waste of a precious natural resource.

They are accurate in their report that millions of gallons of water are used in the fracturing of a well.

What they don’t report, which I am beginning to believe is the greatest crime they commit, is how much water fracturing utilizes in comparison to other uses for water.

A million sounds like a lot when we think in terms of human consumption.

Drinking a gallon of water a day means drinking a lot of water and a family with 12 people in it would only consume 12 gallons of water per day. Millions of gallons of water compared to human consumption (which outside of industry is really the only reference point we have for water usage) is a staggering comparison.

But, when we consider both normative human usage and consumption and then compare the millions of gallons of water used in hydraulic fracturing to other non fracturing usages, there is no comparison.

According to an article by Popular Mechanics,

“…of the 9.5 billion gallons of water used daily in Pennsylvania, natural gas development consumes 1.9 million gallons a day (mgd); livestock use 62 mgd; mining, 96 mgd; and industry, 770 mgd.

9.5 billion gallons of water are used everyday.

Only 1.9 million gallons of that water is used in fracturing. Wanna calculate that percentage?

To give this more clarity, we are going to use some round numbers. Feel free to check this.

According the Eartheasy.com, the average American uses 100 gallons of water per day (Shower, Toilet, Sink, Wash, Watering, Drinking etc.) in a normal day.

Using these figures, this is 700 gallons per week per person, or 36,500 gallons per person, per year.

If the average family is four people, these numbers are multiplied by four, which equates to 400 gallons per family per day, 2,800 gallons per week, and 146,000  gallons per year.

According to the US Census Bureau, 12,702,379 people lived in Pennsylvania in 2010.

This math means that, in terms of normal use, Pennsylvanians use 1,270,237,900 gallons of water per day or 8,891,665,300 gallons per week, or 462,366,595,600 gallons per year.

This is for normal usage.

This is showering, using the restroom, brushing teeth, washing hands, doing dishes, washing laundry, watering the garden and the like.

Hopefully your head isn’t swimming with all of the numbers.

Granted, these are ball park figures but there is a question that begs to be asked.

How can Green groups legitimately act like water usage for frac’ing is a problem when the actual usage of water is less than fractional in terms of overall water usage?

People flush more water down the toilet than the Fracturing industry uses to frac wells.

If every person who flushes uses a water friendly toilet at 1.6 gallons per flush rather than the old 5 gallons per flush and those same Pennsylvanians use the restroom the national average of 8 times per day, that is 162,590,451.20 gallons of sewage per day.

The (sewage) contaminated water has to be processed as well, yet they want to interpret what is necessary for life when they protest. They don’t believe Natural Gas is necessary to maintain their quality of life.

When Steel was blowing and going in Pennsylvania, the state had no problem with it. They named a football team after the industry. With the decline of Steel in the state, the water that Steel is no longer using is being utilized by Fracturing companies.

Why don’t they name their football team the friggin’ Frac’ers?

The protestors never provide perspective because as soon as it is provided, their objections are ridiculous.

So, the next time they go to the bathroom and flip on the light (30% of electricity comes from Natural Gas) and use the facilities and use toilet paper (which requires natural gas to make) and flush 1.6 – 5 gallons of waste-water down the toilet (with an average of 8 flushes per person per day) or take that warm shower (also heated by natural gas either through gas powered electricity or water heaters using natural gas) for 8 minutes (at 20-40 gallons per shower), they should think about what the end of fracturing would actually mean.

They should put it in perspective.

It is what they need more than anything else.