Posts

New York Times launches series looking at N.D. oil industry

You won’t be fully up to speed on how oil production, and hydraulic fracturing, has transformed the rural communities of North Dakota unless you read Deborah Sontag’s exhaustive piece in The New York Times.

Sunday’s Part I of a series, “The Downside of the Boom,” includes video, satellite maps and other visuals to complement its reporting.

At the heart of Part I is the way land has been “sliced and diced” in North Dakota for years, and rights to the surface don’t necessarily mean the landowner has control over the resources that lie beneath.

Given that mineral rights trump surface rights, this made many residents of western North Dakota feel trampled once the boom began.

In 2006, a land man for Marathon Oil offered to lease the Schwalbe siblings’ 480 acres of minerals for $100 an acre plus royalties on every sixth barrel of oil.

“Within a few years, people were getting 20, 30 times that and every fifth barrel,” Mr. Schwalbe said. But the Schwalbes did not expect “to see any oil come up out of that ground in our lifetime.”

Oil companies were just starting to combine horizontal drilling with hydraulic fracturing to tap into the mother lode of Bakken oil. “We didn’t really know yet about fracking,” he said.

The Schwalbes’ first well was drilled in 2008, their second the next year. Powerless to block the development, Mr. Schwalbe and his wife, nearing retirement, took some comfort in the extra income, the few thousand dollars a month.

Then that was threatened, too.

Pew: Support for fracking slipping, but Keystone XL still popular

A Pew Research Center survey shows that support for hydraulic fracturing, or “fracking,” a technique for freeing oil and natural gas trapped within layers of shale rock, is falling among Americans.

As the graphic shows, 41 percent of Americans supported the drilling technique in the recent survey, down from 44 percent in September 2013 and 41 percent in March 2013.

fracking graphicBut the proportion opposed also decreased, from 49 percent in September 2013 to 47 percent. It’s the “I don’t know” response that’s on the upswing, from 7 percent to 12 percent.

The fracking survey was a key data point among a wide-ranging set of opinions Pew solicited from Americans on their views about the midterm elections and about political leaders of both major parties.

Construction of the Keystone XL pipeline, which would deliver oil from Canada’s oil-sands formations to refineries on the U.S. Gulf Coast, still enjoys majority support. According to Pew, 59 percent of respondents support its construction. But that’s down from March 2013, when 66 percent supported the project.

Currently, 83 percent of Republicans surveyed support it, compared with only 43 percent of Democrats.

 

Falling oil prices prompt pullback in U.S. drilling

The Wall Street Journal reports today that U.S. oil drillers are scaling back on plans to drill new wells, amid the plunge in global prices.

Nymex crude dropped 77 cents a barrel to $77.91 Thursday.

Crude is down more than 25 percent since June, making it much less profitable to drill for oil in shale-rock plays.

As WSJ (subscription required) notes:

Continental Resources Inc., a major oil producer in North Dakota’s Bakken Shale, said Wednesday that the company wouldn’t add drilling rigs next year. ConocoPhillips Co. said that next year’s budget would fall below the $16 billion spent this year, dropping plans for some new wells in places such as Colorado’s Niobrara Shale.

Pioneer Natural Resources Co. signaled that it might delay adding rigs in Texas unless oil prices rebound.

“We’re in a battle with Saudi Arabia in regard to market share,” Pioneer Chief Executive Scott Sheffield told investors Wednesday. The Irving, Texas, company hasn’t announced its drilling plans for next year, but Mr. Sheffield said they would hinge on where oil prices stand in the next few months.

2 fracking bans pass in California, while a third fails

San Benito and Mendocino counties voted Tuesday to ban fracking in their counties, but an important third measure on the ballot — in Santa Barbara County — failed.

As Huffington Post points out, the state Senate earlier this year narrowly voted down a measure that would have placed a moratorium on the oil-extraction practice in the state. Santa Cruz County and the city of Los Angeles have bans in place.

More from HuffPo:

Both counties [San Benito and Mendocino] lie on the Monterey Shale, a gigantic rock formation beneath the earth’s surface that’s estimated to contain more than 10 billion barrels of oil. Voters in Santa Barbara county, where oil and gas companies spent $5.7 million in support of fracking, defeated a similar initiative.

Texas town bans fracking, but lawsuit already filed

Denton, Texas, became the first city in the United States to ban hydraulic fracturing. The measure in the north Texas town was approved by 58.64 percent of voters Tuesday, at last count. But the measure already is being challenged: As The Dallas Morning News reported, the Texas Oil and Gas Association filed for an injunction in state court in Denton on Wednesday, seeking to block the ban from going into effect.

“TXOGA believes that the courts of this State should give a prompt and authoritative answer on whether Denton voters had the authority under state law to enact a total ban on hydraulic fracturing within the city limits,” attorney Thomas R. Phillips, former Chief Justice of the Supreme Court of Texas said in a statement. “A ban on hydraulic fracturing is inconsistent with state law and therefore violates the Texas Constitution.”

As the Texas Tribune noted, some state lawmakers in Texas also have vowed to fight to overturn the ban at the Legislature.

A city of 123,000 with more than 270 gas wells scattered among its neighborhoods, Denton is one of several cities that have tried to ban fracking, including communities in New York and Colorado. But the prospect of such a ban in Texas — a state built on oil and gas — put Denton in a bright spotlight, rankling industry leaders and the state’s Republican leadership.

That Colorado ban was put in place by voters in the city of Longmont in 2012, but a judge overturned it earlier this July, saying it conflicted with the state’s interests. In overturning the ban, Boulder County District Court Judge D.D. Mallard said:

“While the court appreciates the Longmont citizens’ sincerely held beliefs about risks to their health and safety, the court does not find this is sufficient to completely devalue the state’s interest,” Mallard wrote.

(Photo: An oil well in central Colorado. Credit: Shutterstock)

Investor: If oil drops to $70, ‘bye, bye fracking’

Other analysts and experts have been more circumspect about what will happen to U.S. shale-oil drilling operations is the price of crude continues to drop, from the current level of $80 a barrel. But bond investor Jeffrey Gundlach is more blunt:

“I think it’s going to $70 and if it does, it’s bye, bye fracking. Goodbye all of the great job creation from fracking because fracking becomes too expensive if you can buy oil at $70 a barrel,” Gundlach said on Wednesday at ETF.com’s Inside Fixed Income Conference.

Read the whole story on CNN Money.

(Photo credit: CNBC)

Analyst doubts low oil prices will hamper U.S. production

Whenever a petroleum analyst writes a sentence that begins: “I can still recall when prices collapsed in 1986 …” you know he’s seen just about everything in the global oil market. Michael Lynch has some sage words for those who are predicting slashed U.S. production (and accompanying job losses) owing to the rapidly falling price of crude oil.

Writing in Forbes, Lynch opines (emphasis added):

“Various arguments are being made now about how expensive oil has become to produce and the manner in which this will support prices, but this is much more valid in the long-term. … It is hard to imagine that a multi-billion dollar deepwater platform would be abandoned because of a six-month price drop.

“Other factors will prevent a decline in production from lower oil prices. Companies with contracts renting rigs won’t just cancel them, laying off employees is a near-last resort, and leases must often be drilled in a certain period to hold them. Abandoning wells also has a cost, and oil price drops that are thought to be brief won’t cause many companies to do that.”

Detroit News: This time, cheaper gas may fuel trouble

A story in The Detroit News poses a troubling potential downside to the global drop in oil prices: “… most of the new production [in the U.S., with help from the fracking revolution] only makes economic sense at high prices. That is, it’s expensive to get the oil out of the ground, so if prices fall too much, it will cost more to get it than it’s worth.” That reality could put jobs in peril.

Budweiser trades Clydesdales for natural gas

The famous Clydesdales that have hauled Budweiser’s barrels of beer since the 19th century are finally being replaced by 21st century compressed natural gas-driven vehicles.

Well, it isn’t quite that simple. There’s been an 80-year interval between the 19th and 21st centuries, when Budweiser’s trucks ran on gasoline and diesel fuel. But for 66 trucks at Budweiser’s Houston brewery, the 53-foot trailers loaded with 50,000 pounds are now going to be hauled by trailers running on compressed natural gas.

Anheuser-Busch actually has plans to convert its entire fleet to natural gas, according to James Sembrot, senior transportation director. “It’s significant that A-B feels comfortable swapping for an entire fleet that runs on CNG,” Christopher Helman wrote in Forbes. According to Sembrot, “the intention of shifting to natgas…is to reduce carbon emissions and fuel costs, while doing something green(ish).”

“The Houston brewery is among the biggest of the 14 that A-B operates nationwide. The closest breweries to this one are in Fort Collins, Colo., and St. Louis. Each truck rolls virtually around the clock — traveling in an average of 140,000 miles in a single year hauling beer to wholesalers. They move 17 million barrels of beer each year.” That’s a lot of beer running on natural gas.

Actually, it’s not Anheuser-Busch that is taking the initiative on Budweiser. The natural gas vehicles are being made available through Ryder, the nation’s largest trucking company since merging with Budget Truck Rental in 2002. Budget now has 2,800 businesses and 132,000 trucks around the country. Although only a small percentage run on natural gas, the company is dedicated to converting its fleet with all due dispatch, and the savings may prove to be extraordinary. According to Helman, “Sembrot tells me that the old trucks were getting 6.2 miles per gallon of diesel and running 140,000 miles per year. That equates to 1.45 million gallons of diesel to go 9.2 million miles. At about $3.80 per gallon, that’s roughly $5.5 million in total diesel costs per year. If they save about 30 percent per ‘gallon equivalent’ when buying CNG, that’s a savings of about $1.65 million per year.” That’s a lot of money save for switching to natural gas.

But it’s not just Budweiser and Ryder and a few forward-looking companies that are pushing ahead with natural-gas vehicles. The whole state of Texas seems to have gotten the bug. The Lone Star State now has 106 CNG filling stations, the most in the country. Forty are them are open to the public, while the others are fleet vehicles where vehicles from Anheuser-Busch and Ryder can fill up. Actually, far ahead of these innovators are FedEx and UPS, which have not converted their fleets for many years. And hovering in the background is T. Boone Pickens and his “hydrogen highway,” which is installing huge natural gas depots at key truck stops along the Interstate system. Much of this is aimed at Texas and the first complete link has joined San Diego to Austin in a seamless string of stations that will allow tractor-trailers to make the whole trip on natural gas.

All this has done wonders for Texas tax collections. At the start of the year, the Texas Controller’ Office was anticipating revenues less than $ million from excise taxes. Yet by July 31, 2014, collections were 220 times of that anticipated, and the Texas Controller’s office had collected $2,178,199. “These collections are more than double the estimated amount,” said David Porter, Texas Railroad Commissioner. “At 15 cents per gallon equivalent, $2 of motor fuels tax equals sales of 14,521,326 gallon equivalents of natural gas.”

Texas may be famous for fracking and producing more oil than Iraq, but they do not hesitate to look for new uses for gas and oil as well.

 

Photo by by Paul Keleher from Mass, US.

Hannity on PUMP: A story ‘America needs to know’

Sean Hannity is a big fan of the message contained within the documentary film PUMP, because it’s one he’s been promoting himself for years.

The conservative radio and Fox News host welcomed Fuel Freedom chairman and co-founder Yossie Hollander and board adviser John Hofmeister on “The Sean Hannity Show” on radio Thursday.

Hannity primed the pump for PUMP’s theatrical release Friday with this introduction:

“How many times have I said on this program that oil, energy, is the answer to all of our problems? I’ve said it so often. Well, now there is an eye-opening documentary that I want you to go see. … I have no [rooting] interest in this movie, except that it tells the story that I have been trying to tell you now for such a long period of time about America and how we can become energy independent, about how there’s a lot going on in the oil industry, where we all pay more. How we are all dependent on oil from countries, many of whom just kind of hate our guts. And it’s been put together in a fabulous documentary that is now gonna be released in movie theaters around the country [Friday].

Read more