Tag: "energy"

Natural Gas Supply and Demand — A Structural Problem in the Northeast

The cost of residential heating and cooling in the Northeast is comparatively high, with no clear end in sight. Fracking regulations and outright bans are pushing whole industries out of densely populated municipalities as well as entire states such as New York, where the extraction methodology has met strong opposition at each level of government. Even the importation of natural gas from other states such as Pennsylvania — which remains very active in tapping Marcellus shale deposits — is becoming difficult, with neighborhood groups and city governments opposing pipelines and other forms of infrastructure to support burgeoning energy demand.

Vocal adversaries of gas withdrawals and transport site two reasons for supporting gas restrictions:

  • the danger to the environment through the practice of fracking and the construction of gas pipes
  • falling property value due to aesthetic degradation from pipelines around residential areas

Unfortunately these opponents still pay a hefty premium on limiting the availability of gas through higher residential heating and cooling prices. Below, northeastern states are compared to Texas, Louisiana, Wyoming, Colorado and Oklahoma, some of the top natural gas producing states.

Natural Gas Prices

Even despite more temperate summers, colder winters contribute to the fluctuating above-average heating costs faced by many residents in the Northeast. Placing restrictions on sources of heating is therefore likely to have a negative synergistic effect — at least financially — on many locals.

In conclusion, crowded regions that pine for their power needs to be met are ironically, unable to make concessions for it with $700 million projects such as the Constitution Pipeline between Pennsylvania and New York being put on hold. With virtually incomparable levels of population density, Southern and Midwestern states do not suffer from the congestion which limits gas transfer. Logically, New Englanders were found to be overpaying for gas by $3.58 per thousand cubic feet of gas by the Energy Information Administration. This amount may seem trivial, but for long-term residents and businesses, it represents a huge cost.

Apr 01, 2015 | 1 comment | by

Energy Giants Mull Over a Huge Discovery in Russia

In late September 2014, ExxonMobil and Rosneft — Russia’s largest state-owned oil company — announced the find of a huge oil and gas reserve in the Kara Sea between Russia and the Arctic. So large in fact, International Business Times says, “deposits are estimated to be worth $900 billion and comparable in size to Saudi Arabia’s vast onshore deposits.” The operation was headed by the Arctic Research and Design Center for Offshore Developments, an organization created jointly by ExxonMobil and Rosneft to handle the logistical steps for specialized ice-platform drilling, adherence to environmental regulations and further research on yields for Arctic exploration.

Apart from throwing another wrench into the peak oil argument, the claim is a sign that controversial Arctic exploration and drilling could be immensely profitable.

In the wake of immense possible gain, the two energy titans’ hands have been tied by politics and conflict. ExxonMobil was forced to abandon a $700 billion exploration project — of which they own 33 percent — due to the escalating tension amid the U.S. and Russian administrations. As a result, the Exxon-led project has come to a standstill, depriving Russia of possible buffer against its rapidly shrinking oil and gas fields. Is if this weren’t enough of a damper on public-private relations, ExxonMobil’s CEO, Rex Tillerson, returned to Russia to personally address the future of the wells and the company’s grievances against the Russian government, which include over-taxing Exxon during its discovery and drilling operations.

Rosneft had hoped to continue exploration activities and begin expanding into other sectors of the Arctic Ocean, as the potential to find reserves of unprecedented scale still remains very high. Sadly, it is becoming more and more apparent that for years to come, American participation and the profitability of these ventures, will remain largely dependent on Washington and Moscow’s relationship.

Mar 23, 2015 | Leave a Comment | by

The Case for Lifting the Crude Oil Export Ban

The United States is running out of room in its crude oil storage facilities and the question is ― where does the crude go now? As domestic crude oil production continues to rise, it has no place to go due to an obsolete ban on the exportation of crude oil in the U.S.

The International Energy Agency said in its monthly oil market report that U.S. supply shows no signs of slowing down, an assessment that pushed the price of crude below $57 a barrel and lowered gas prices at the pump. Low gas prices led to record amounts of driving in 2014, culminating in a record-breaking December, new federal data shows.

With the U.S. now producing more oil and natural gas than Russian and Saudi Arabia, over 11 million barrels a day (55 percent increase from five years ago), lifting the U.S. oil export ban would:

  • Add over $1 trillion in government revenues by 2030.
  • Create 300,000 more jobs a year.
  • Increase current U.S. production from 8.2 million B/D currently to 11.2 million B/D.
  • Cut the U.S. oil import bill by an average of $67 billion per year.
  • Lower gasoline prices by an annual average of 8 cents per gallon.
  • Save U.S. motorists $265 billion for during the 2016-2030 period.

Despite the fact that oil imports are at the lowest level since 1985, the U.S. still imports 33 percent of its oil from foreign sources. A broad view by the public is that U.S. oil should stay at home will test export proponents. A majority of voters, 53 percent, opposed exporting oil. At present, the current policy is discouraging additional crude oil supplies from being brought to market, which actually makes gasoline prices higher than they otherwise would be. The increased economic activity resulting from the rise in crude production would support an average of 394,000 additional U.S. jobs over the 2016-2030 period, with a peak of 964,000 jobs in 2018.

Doing away with exports restrictions would also generate added benefits to U.S. household income, gross domestic product (GDP) and government revenues. The average disposable income per household would increase by an additional $391 in 2018 as benefits from increased investment.

The current hydraulic fracturing and American energy boom is reducing oil imports by 22 percent next year. Lifting the crude oil export ban would increase the energy boom. This boom could also reduce the oil imports of European countries. The United States could replace Russia title as “Europe’s gas station” and provide all of Europe’s energy needs.

Mar 18, 2015 | 3 comments | by

Federal Land Regulation Continues to Strangle Energy Production…

Federal land ownership in the United States continues to grow despite the federal government already owning more than half of most of the western states. While some have been advocating for the return of this land to the states or protect it from being closed off from oil and gas operations, the Obama Administration has worked just as hard to increase the federal government’s land grab. Contrast:  As President Bush’s second term as president was coming to an end, 4 million acres of land in Alaska was released by the Bureau of Land Management (BLM) for drilling and exploration. Seven years later, President Obama has proposed to set aside 12 million acres in Alaska, designating it as “wilderness” and off-limits to up to 42 billion barrels of oil.

Most recently, the Obama administration has proposed the largest critical habitat designation ever, setting aside 226 million acres of ocean off Alaska’s coastline (an area twice the size of California) to protect the Arctic ringed seals who were listed as “threatened” under the Endangered Species Act in 2012 after environmental activists petitioned the Obama administration.

Even though NOAA says that oil and gas activities have occurred in areas with protected species in the past, designating these Alaskan waters as a critical habitat would mean that all oil and gas activity would have to be evaluated based on how much it would impact ringed seals. Alaska’s outer continental shelf is considered to be one of the world’s largest untapped oil and gas reserves boasting as much as 27 billion barrels of oil and 132 trillion cubic feet of natural gas.

Other federal lands expansion that slipped into the National Defense Authorization Act (NDAA) would add 250,000 acres of new wilderness in western states and put thousands more acres off limits to drilling and mining in states.

In 2011, the U.S. Forest Service originally tried to ban fracking in the 1 million acre George Washington National Forest, but failed. It would have been the first outright ban on the practice in a national forest.

Much of the land targeted for government takeover holds great oil and natural gas resources which could provide jobs in the energy industry and a flow of resources from our own American supply. Once those lands become “monuments,” access to those natural resources is limited and in the hands of the federal government. The government currently owns 650 million acres, or 29 percent of the nation’s total land.

The Omnibus Public Land Management Act of 2009 and the Northern Rockies Ecosystem Protection Act (NREPA). The Omnibus bill was passed with over 100 land grab measures. The NREPA included federal takeover of nearly 24 million acres of land in the American west and northwest; however, NREPA never made it out of the House subcommittee.

The ability of the White House to simply snatch land from under the feet of the American people comes from the Antiquities Act of 1906. The Act was initially intended to set aside small portions of land for monuments and national parks, but has since been abused by lawmakers to control large quantities of property. Federal government land control and land acquisition takes away opportunities for development, particularly when it comes to much needed energy resources. The land designated as “monument” space could have created jobs, boosted the economy and enhanced our energy security.

Mar 16, 2015 | 2 comments | by

Sand Dune Lizard and Lesser Prairie Chicken Could Halt Industry

The plight of two species is putting thousands of acres and the future of the oil and gas industries at risk. If put on the endangered species list, the sand dune lizard and the lesser prairie chicken could block off land from oil and gas companies across multiple states.

The lesser prairie chicken was added to the threatened species list after a court ruling in March 2014. The chicken has known habitats in Colorado, Kansas, Oklahoma, Texas and New Mexico, and land management decisions could impact over 100 million acres across the five states.

The sand dune lizard is posing particular problems for the oil industry in West Texas. The lizard’s 800,000 acre habitat spans Southeastern New Mexico and West Texas and just happens to sit right in the middle of Texas oil country.

Given the Obama administration’s recent demonstrations of its willingness to put potentially beneficial land under federal protection, many in the oil and gas industries are concerned that even the potential presence of these species could shut down oil and gas rich areas from exploration or further development.

Shutting down oil-rich areas to protect these species isn’t just bad for the oil and gas industry ― it’s bad for its employees as well. Texas state officials and energy executives have warned that classifying the sand dune lizard as an endangered species could cost thousands of Texans their jobs.

Mar 11, 2015 | 2 comments | by

Oil and Gas v. Green Jobs

On February 24th, President Obama vetoed the Keystone Pipeline, citing that such a project is “not in the national interest” ― and instead the President has been a vocal proponent of creating green jobs in alternative energies. However, it is vital to analyze the quality and effect of these jobs. When comparing the jobs created by the oil and gas industry to the emerging green energy industry, what considerations should be made?

The first and most simple is salaries:

Oil Gas vs Green jobs

It doesn’t take a scientist to see that typically, members of the oil and gas industry are paid much more than their counterparts in green-collar jobs. It’s extremely important to note that above “Oil & Gas Financial Analyst,” jobs are no longer directly comparable, because they’re more specialized blue-collar jobs.

Ironically, apart from being paid less than other jobs in oil and gas, every single blue-collar job in the green energy sector required an undergraduate degree (except for “Wind Turbine Service Technician,” which only required work experience or specialized certifications). From a purely financial point of view, it’s a significant investment with a lower return. Oil and gas lend greater support to unskilled, blue-collar workers. What is this higher pay in oil and gas attributed to? Is the oil and gas industry simply more lucrative? Conventional wisdom may lend itself to this idea, but there is also another component in the equation.

Industry reports from the Bureau of Labor Statistics (BLS) seem to point to a high risk premium that is implicitly included in the pay for oil and gas workers. The Survey of Occupational Injuries and Illnesses by BLS shows that workers in the oil, gas and mining industry have a probability of nonfatal injuries that can be as high as 36 percent, particularly in smaller companies. This statistic, translates into a higher than average probability of injury, disability, chronic illness and death for workers within the sector. Employees in the oil and gas industry also report lower levels of job satisfaction. From a quantitative perspective, the decision to be for or against nonrenewable energy is clear. From a qualitative perspective, we should at least give this question pause.

Mar 09, 2015 | 3 comments | by

The Effect of President Obama’s Keystone XL Veto

President Obama officially vetoed the Keystone XL pipeline project after bipartisan votes by both the House and Senate landed the bill on his desk. Without the Senate to block legislation from getting to his desk, the president is now planning to veto many bills that pass both houses. Veto-proof coalitions are now needed to pass legislation that provides benefits like the Keystone XL project.

The entire Keystone pipeline system is almost complete, the fourth and final phase of the system is known as Keystone XL. The Keystone XL Pipeline is a proposed 1,179-mile (1,897 km), 36-inch-diameter crude oil pipeline beginning in Hardisty, Alberta and extending south to Steele City, Nebraska. This pipeline is a critical infrastructure project for the energy security of the United States and for strengthening the American economy. The Keystone XL pipeline would have the capacity to transport 830,000 barrels of oil per day to Gulf Coast and Midwest refineries.

Approving the estimated $5.3 billion Keystone XL project would create approximately 9,000 construction jobs. When combined with the southern portion of the Keystone pipeline (the Gulf Coast Project), it is estimated that the total $7 billion pipeline could:

  • Create 13,000 construction and 7,000 manufacturing jobs.
  • Add $20 billion to U.S. GDP.
  • Add $5 billion in taxes revenue to local counties.
  • Generate as much as $5.2 billion in property tax revenue for Montana, South Dakota, Kansas, Oklahoma, Nebraska, and Texas collectively.
  • Over 2.6 million miles of pipeline in the United States that deliver both liquid petroleum products and natural gas, while the Keystone XL portion of the Keystone pipeline is less than 1,200 miles long.
  • The Canadian Energy Pipeline Association predicts that pipeline projects are worth $1.298 trillion dollars to the Canadian economy and $15.52 billion dollars in additional salaries to its citizens.
  • The U.S. State Department reported an increase of 42,000 jobs during the construction process, and roughly 118,000 jobs to maintain the pipeline and the refineries.
  • 70 percent of petroleum and crude oil are currently shipped by pipeline, which in recent years has proven to be safer than shipping oil by rail.

A recent study by the Fraser Institute affirms their safety by reporting pipeline accidents are a staggering 30 times less harmful than by train. According to a study by Southern Methodist University’s Maguire Energy Institute, there are substantial economic benefits with the TransCanada Keystone Pipeline System.

The United States’ State Department issued a multi-thousand page report which took years of research, compilation and coordination to produce which concluded definitively that the Keystone pipeline would be safe ― it would have “no significant impacts.”

Feb 25, 2015 | 2 comments | by

Apple Ventures into Solar Power

Apple’s CEO Tim Cook threw his weight behind solar energy with an $850 million deal to buy power from First Solar, the biggest developer of solar farms in the U.S. This new pledge puts Apple on the same page as other big businesses, including Google, Microsoft and Amazon, who have also bought into solar power in a big way.

With this new purchase, Apple will get 130 megawatts of solar power, enough to power “60,000 California homes.” This new purchase isn’t Apple’s first foray into solar energy; Apple already has two 20 Mw plants in North Carolina, two more in development, and currently powers all of its data centers on renewable energy.

Though Cook stresses his belief in climate change, he emphasizes that Apple’s investment in solar is a good business deal.

Apple isn’t investing in solar as a gift to humanity. It’s doing it because it’s a good business deal, “We expect to have very significant savings,” Cook stressed at the Goldman Sachs conference. The $850 million agreement is expect to supply enough electricity to power “all of Apple’s California stores, offices, headquarters and a data center.”

With the price of solar dropping quicker than that of wind, Apple’s big deal could be “a milestone on the road to cheap, unsubsidized power from the sun.”

Feb 25, 2015 | 1 comment | by

Person-to-Person Energy Market

With ridesharing services like Lyft and Uber and travel services like Airbnb, the person-to-person market is gaining more and more traction in the American market. In Europe, the idea is gaining even more of a foothold ― starting with the energy sector.

Vandebron is an Amsterdam-based person-to-person electricity service. The service provides a platform for small energy producers to connect directly to consumers. The producers give their price and type of energy, then sell spots until they reach their production capacity. The platform also gives consumers a chance to see directly where their energy is coming from, meet their providers, and make an informed decision regarding their energy choices.

While some places in the U.S. offer some price comparison options ― Texas, for instance, offers a site that allows you to compare prices from different energy companies ― consumers have very little access to the kind of transparency that person-to-person electricity markets offer.

Giving consumers more control, opening up markets, and empowering consumers to make informed decisions are key elements to increasing competition. Making room for person-to-person markets in the energy sector could drive energy prices down ― and innovation up.

Feb 11, 2015 | Leave a Comment | by

Upheaval — Natural Gas Growth Could Redefine Decades

Over the past few years, natural gas growth has been an energy investor’s fallback strategy. With a historically positive growth in almost every company’s stock and unperturbed fundamentals — promoted by technological advances — it is highly unlikely that such an industry trend is cyclical.

Some of gas’ most representative stocks (as deemed by the New York Stock Exchange) for companies such as Sempra Energy, Intergys Energy Group Inc. and AGL Resources Inc. were reformatted and indexed by the NCPA:

Gas Index

An unusually warm winter reduced energy demand and put a damper of gas prices, which suppressed growth towards the end of the graph in 2014. However, projections made by the Energy Information Administration (EIA) show that the sector will continue to expand at a stable rate throughout 2015 — supporting the theory that the market growth is due to a structural change.

In the case of the United States, this may be our golden age of natural gas. The U.S. is ready to be a net gas exporter by the end of this year, Market Realist proclaims “Some of the higher production in the Eagle Ford Shale in South Texas will be set to export to meet the growing demand from Mexico’s electric power sector.” On the other side of the Pacific, the same kinds of environmental laws that brought American coal to heel, such as the Clean Air Act (CAA), have come into effect as of January in China. The most prominent of which are the Chinese Air Pollution Prevention and Control Law’s amendments, which were made in response to deteriorating atmospheric quality over the country and the recent environmental initiatives taken between the United States and China. Thus, coal’s rising costs have instigated a shift in demand, one that will start favoring gas — this is a trend that could soon be seen globally.

But where do we stand as gas producers, and why does that matter?

world gas production

wold gas reserves

The United States is by no means the owner of the world’s largest natural gas reserves, however from the EIA’s datasets, one can intuitively see that for its reserves, the U.S. has an overwhelmingly dominant production capacity — meaning we have the most resources to extract and process gas. Should private and public players move to ease trade barriers between the countries, this is an advantage that the U.S. is unlikely to lose for years given China and other BRIC countries’ surging energy demands. Specifically, China’s policy changes have provided a niche for emerging American liquefied natural gas (LNG) vendors to seek partnership. We will not have a production advantage over other countries forever, and as the chart Known Natural Gas Reserves Across the World shows, a failure to capitalize on this opportunity would be a serious blow to American leadership and competitiveness on environmental, energy security and economic fronts.

 

Feb 11, 2015 | Leave a Comment | by
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