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Mon, 2014-02-24 05:00Sharon Kelly
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Cold Weather Brings Wild Swings in Natural Gas Prices Despite Shale Gas Rush

Last year, natural gas prices hit record lows and shale gas promoters confidently predicted a bright future of stable low prices, making the fuel the best choice for home heating and electrical generation alike.

But last year was also marked by an unusually mild winter amid a still-sluggish economy. This year, cold winter weather returned across much of the U.S.– and consumers and utilities have begun to confront a strikingly different reality. Natural gas prices immediately spiked as high as $8.15/mmBTU Henry Hub this month – the most expensive prices seen since the 2008 economic collapse – as demand for power and heat surged.

And that $8.15 represents the daily price at a Louisiana pipeline hub often referenced by traders and federal energy analysts; regional prices have spiked far more dramatically. In the frigid Northeast, local prices have skyrocketed this year, with some operators paying up to $120 per mmBTU. “I’ve never seen anything like this,” one New Jersey power company executive told Bloomberg Businessweek in January. The spike’s effects have even reached as far south as East Texas, where spot prices topped $40/mmBTU, nearly reaching the highs seen in 2004 when the current onshore drilling rush began in the Barnett shale.

Keep in mind that the same amount of natural gas cost only $1.92 in April 2012.

That’s a little like suddenly finding out that a McDonalds burger that used to be 2 bucks will now cost you as much as full dinner at a five star restaurant.

These massive fluctuations in natural gas prices over the past year drive home a vital point: natural gas has always been prone to sudden booms and busts. The idea that shale gas – less than ten percent of the nation’s natural gas production and some of the most expensive to produce – could fundamentally transform the natural gas market, keeping prices consistently low, now seems more like a pipe dream than ever before.

Already, utilities and their customers are paying the price.

Fri, 2014-02-14 12:40Sharon Kelly
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New Study Shows Total North American Methane Leaks Far Worse than EPA Estimates

Just how bad is natural gas for the climate?

A lot worse than previously thought, new research on methane leaks concludes.

Far more natural gas is leaking into the atmosphere nationwide than the Environmental Protection Agency currently estimates, researchers concluded after reviewing more than 200 different studies of natural gas leaks across North America.

The ground-breaking study, published today in the prestigious journal Science, reports that the Environmental Protection Agency has understated how much methane leaks into the atmosphere nationwide by between 25 and 75 percent — meaning that the fuel is far more dangerous for the climate than the Obama administration asserts.

The study, titled “Methane Leakage from North American Natural Gas Systems,” was conducted by a team of 16 researchers from institutions including Stanford University, the Massachusetts Institute of Technology and the Department of Energy’s National Renewable Energy Laboratory, and is making headlines because it finally and definitively shows that natural gas production and development can make natural gas worse than other fossil fuels for the climate.

The research, which was reported in The Washington Post, Bloomberg and The New York Times, was funded by a foundation created by the late George P. Mitchell, the wildcatter who first successfully drilled shale gas, so it would be hard to dismiss it as the work of environmentalists hell-bent on discrediting the oil and gas industry.

Thu, 2014-02-06 08:58Sharon Kelly
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In Pavillion, Wyoming Water Contamination Case, Questions Continue To Swirl About Oil and Gas Industry's Role

A funny thing happened when Idaho Dept. of Lands Oil and Gas Program Manager Robert Johnson stepped to the microphone at a public hearing this past fall. He said something that many have long suspected, but few officials have actually been willing to say bluntly and publicly.

He said that the oil and gas industry was responsible for the contaminated groundwater in Pavillion, Wyoming — referring to a high-profile case where environmentalists have alleged oil and gas drilling and fracking caused a town’s water supplies to go bad.  

Everybody's heard of Pavillion, Wyoming,” Mr. Johnson said. “OK. Pavillion was a leaking above ground pit that was not lined.”

Did the industry cause it?” Mr. Johnson said. “Yes they did.”

Later in his talk, Mr. Johnson also pointed to a faulty cement casing in a natural gas well as another factor in the case, describing EPA data showing pollution was caused “by a bad cement job on an Encana well that was drilled in 1985.”

His statement is noteworthy because, before coming to Idaho, Mr. Johnson was directly involved with the Pavillion investigation. He worked for the groundwater division of the Wyoming State Engineer’s Office, which has taken the lead role in the contamination investigation.

The comments, which were recorded by county officials and distributed by anti-drilling advocates, were also significant because they were so candid and because the state of Wyoming maintains that more study is needed before blame can be assigned. The state is currently investigating the Pavillion incident and expects to publish a report in September of this year.

Asked about the comments, Idaho state officials said that the remarks about wastewater pits were intended “to illustrate that the State of Idaho requires lined pits to avoid surface contamination,” adding that Mr. Johnson, an Idaho official, was not speaking on behalf of the State of Wyoming. Mr. Johnson worked for the oil and gas industry before joining the Wyoming State Engineer’s Office.

Wed, 2014-02-05 05:00Sharon Kelly
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At State and Federal Level, Regulators Continue to Struggle With Fracking Wastewater

The oil and gas industry often complains about the patchwork of rules that exist from state to state and county to county. They say that the rules are so variable that it’s like having to get a new driver’s license every time you drive across a state line. Public safety advocates suggest a simple fix: federal oversight of drilling. Standardize the rules. But the drilling industry recoils at the very notion.

Several recent developments illustrate exactly why. Witness the two diametrically opposed directions federal and state regulators are heading. Officials at the U.S. Environmental Protection Agency, on the one hand, are considering strengthening rules on how oil and gas wastewater is handled by classifying some of it as hazardous waste. Meanwhile, state regulators in Pennsylvania, where the most active Marcellus shale drilling is currently underway, are considering a move to loosen wastewater rules.

Pennsylvania is currently poised to enact rules that would encourage oil and gas companies to use the heavily polluted wastewater from abandoned coal mines, called acid mine drainage, instead of fresh water. While supporters of this rule change say it’s a win-win situation for the environment and for drillers, opponents of the bill say that a key incentive in the bill goes overboard and could wind up creating worse problems down the road.

Tue, 2014-02-04 20:29Sharon Kelly
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Risks of Fracking Boom Draw Renewed Attention from Investors

A coalition of investors called out five oil and gas companies for failing to measure or reduce risks associated with fracking on Tuesday, singling out companies both large and small for how they’ve handled the myriad risks associated with shale oil and gas extraction.

Shareholders in five companies — ExxonMobil, Chevron, EOG Resources, Occidental Petroleum and Pioneer Resources — filed resolutions objecting to the ways that the companies describe the risks of hydraulic fracturing and their failures to reduce the environmental and social impacts of fracking.

“The damaging impacts of hydraulic fracturing on air, water, and local communities have made the public understandably nervous and resistant to permitting this controversial industrial activity,” said Leslie Samuelrich, President of Green Century Capital Management, which together with the New York State Comptroller Thomas DiNapoli, filed the resolution at EOG Resources.

“Companies that fail to demonstrate a public commitment to identifying and mitigating their impacts will fail to earn the public trust,” she added, “and may put shareholder value at risk.”

Four of the five companies – ExxonMobil, Chevron, EOG Resources, and Occidental Petroleum –  received failing scores in a recent report that examined how companies disclosed the impact of fossil fuel extraction and graded their efforts to mitigate risks. Disclosing the Facts: Transparency and Risk in Hydraulic Fracturing Operations focused on 24 companies that use fracking, assessing the ways each handled toxic chemicals, water and waste, air emissions, community impacts, and governance. EOG Resources received a score of 6 out of 32, Chevron a score of 3, ExxonMobil and Occidental Petroleum each got a score of just 2.

That has some investors, including those overseeing New York City’s pension fund, worried.

Mon, 2014-02-03 11:59Sharon Kelly
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Keystone XL Decision Highlights Coziness Between Oil and Gas Industry, Obama Administration

This past week was good to the oil and gas industry. First, President Obama talked up jobs gains from drilling and labeled natural gas a “bridge fuel” in his State of the Union address, using terminology favored by natural gas advocates.

Then, on Friday, the Obama administration released a much-awaited assessment of the Keystone XL pipeline’s environmental impacts which concluded that pipeline construction “remains unlikely to  significantly impact the rate of extraction in the oil sands,” effectively turning a blind eye to the staggering carbon emissions from tar sands extraction and expansion plans.

While Mr. Obama’s warm embrace of fossil fuels surprised some environmentalists, it should come as little surprise in light of prior comments made by the CEO of the American Petroleum Institute (API).

“It's our expectation it will be released next week,” Jack Gerard confidently told Reuters, referring to the Keystone XL assessment, while many were still speculating that the report might not be issued until after the November mid-term election. “We're expecting to hear the same conclusion that we've heard four times before: no significant impact on the environment.”

Mr. Gerard added that these predictions were based on sources within the administration.

In fact, as the Keystone decision-making process has unfolded, the oil and gas industry has had — as they’ve enjoyed for decades — intensive access to decision-making in the White House.  This access has helped form the Obama administration’s schizophrenic energy policy, in which the President backs both renewable energy and fossil fuels without acknowledging that the two are competitors. When fossil fuels gain market share, renewables lose.

While even the World Bank has called for immediate action on climate change, the API, which has worked hard to shape Obama’s views on fossil fuels, has also worked to create doubt around the very concept of fossil-fuel-driven climate change and to downplay the impact their industry has had.

There’s no question that the oil and gas industry wields enormous sway inside Washington D.C.

The API has spent $9.3 million dollars this year alone on reportable lobbying expenses, the highest amount in the group’s history, according to data from OpenSecrets.org. This summer, a DeSmog investigation found that API spent $22.03 million dollars lobbying at the federal level on Keystone XL and/or tar sands issues since June 2008, when the pipeline project was first proposed.

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