Tag: "fracking"

States vs Local Hydraulic Fracturing Bans

In the past few years, hydraulic fracturing/frac bans have become increasingly common in communities opposed to the drilling practice that extracts oil and natural gas from shale rock by injecting sand, water and chemicals into the ground. Such bans focus on either the actual drilling methods or the transportation of waste from the hydraulic fracturing process.

State legislatures are now finding themselves in a fight against local authorities for control of hydraulic fracturing regulations in their own states. While Vermont and New York have already implemented state wide bans on hydraulic fracturing, Texas has banned local bans and Oklahoma is considering banning local bans on the practice as well.

Current hydraulic fracturing ban legislation:

Over 470 local measures have passed in towns, cities, and counties.
24 states and Washington D.C. have seen at least one such local measure passed.
Oklahoma introduced legislation imposing a ban on local frac bans.

The debate has sparked questions over who has the right to regulate oil and gas activity in the state, state agencies or individual communities. For New York, the state-wide ban followed a court decision that town zoning laws allowed the banning of hydraulic fracturing. In an attempt to achieve a compromise between state and local control, state legislation banning cities and counties from outlawing hydraulic fracturing opens the door for local oil and gas regulations, specifically where it concerns health and safety. Texas House Bill 40, signed into law this week by Governor Greg Abbott, includes a four-part test for determining city drilling regulations while prohibiting hydraulic fracturing bans throughout the state.

Lauren Aragon is a research associate at the National Center for Policy Analysis.

May 20, 2015 | 1 comment | by Lloyd Bentsen

White House Releases Quadrennial Energy Review for Earth Day

Yesterday, the Obama administration released the first installment of the new Quadrennial Energy Review (QER), a four-year cycle of assessments deigned to provide a roadmap for U.S. energy policy. This first installment focuses on the needs and opportunities for modernizing the nationwide infrastructure for transmitting, storing, and distributing energy. Dr. John Holdren and Dan Utech said:

Today, America has the most advanced energy system in the world. A steady supply of reliable, affordable, and increasingly clean power and fuels underpins every facet of our nation’s economy. But the U.S. energy landscape is changing dramatically, with important implications for the vast networks of pipelines, wires, waterways, railroads, storage systems, and other facilities that form the backbone of America’s energy system.

The administration hopes that careful analysis and modernization of energy infrastructure will promote economic competitiveness, energy security, and environmental responsibility.

This first QER installment comes just in time for Earth Day, which has spurred many sectors of the government into action. Over the past two days, the House of Representatives sent an energy efficiency bill to the president’s desk, the Department of Justice and the EPA levied $5 million in penalties against ExxonMobil for a 2013 oil spill, Democratic House members introduced the “strongest anti-fracking” bill yet brought to the House, which would ban fracking on all federal lands. The president is also doing his part, touting his plans to impact climate change at debates in Florida.

Though Earth Day has a tendency to bring out people’s far-fetched energy plans, it does do some good as well. According to the Annual Energy Outlook, improvements in energy efficiency, increases in energy demand, and the stabilization of energy-related carbon dioxide emissions have all benefited since the first Earth Day 45 years ago.

Apr 22, 2015 | Leave a Comment | by Megan Simons

NCPA Hydaulic Fracturing Current and Proposed Restriction/Ban Map

The National Center for Policy Analysis created a national hydraulic fracturing ban and restriction map that shows all of the recent local and state bans, proposed bans and restrictions.

By enacting this these bans, states are forgoing much needed revenue from the production of critical energy resources. The following are some of the states that are forgoing revenue due to current hydraulic fracturing bans:

California	$1,034,471,000
Colorado	$11,836,700
Connecticut	$131,200
Delaware	$96,178,800

Apr 08, 2015 | Leave a Comment | by Lloyd Bentsen

Hundreds of Frac Restrictions Quietly Sweep Across America

Hydraulic fracturing or “fracking” is a well completion technique that is the key to America’s shale boom. Because of hydraulic fracturing, the U.S. has become the world’s top natural gas producer and has gained the capability to become the world’s top oil producer. The shale boom has generated a great majority of jobs created since the recession, and created great wealth for the states where shale deposits are found.

Despite the benefits of energy production, hydraulic fracturing bans and draconian regulations have become more and more common at both the state and local level. To date, greater than 400 municipalities around the country have passed frac restrictions according to Food and Water Watch, an environmental group that tracks anti-fracturing activism. The trend appears to be increasing nationally.

The significance of local bans is little discussed in the energy sector, and underreported, at least from a macro perspective. While the press widely reported that the state of New York passed a statewide moratorium on hydraulic fracturing, few noted that the State was already home to greater than 200 municipal bans on fracking before the state imposed a statewide restriction. Restated, greater than 200 New York communities debated the question of whether to permit hydraulic fracturing and concluded that restricting production and wealth generation was the best policy.

Some industry observer dismiss frac bans as inconsequential because they often pass in areas that have little or no frac activity anyway, such as in the case of the statewide ban in Vermont. “The market will adjust,” is the common mantra among producers. One should note, however, that frac restrictions are concentrated on the West and East coasts, where many of the nation’s rich shale deposits lie, such as the Marcellus (NY) and Monterey (CA). Likewise, the public opinion that is formed in the cities and towns will likely factor into future action at the state level, as we have seen in New York and as we are likely to see in California and Colorado.

Can energy producers rely on the states to override local bans to protect their activity? In Texas, probably yes. In California and Colorado, it is much less certain. If public opinion can be our guide, the outlook is not so good. Countrywide, in November of 2014, only 41% of Americans polled favored the increased use of fracking while 47% were opposed. By contrast less, just one year before, there was more support (48%) than opposition (38%) to the drilling technique. Some surmise that the unpopularity of fracking is limited to the coasts, but the Pew poll of 2014 shows that the most dramatic shift in opinion is seen in the Midwest where support for hydraulic fracturing dropped a breathtaking 16 points from 55% to 39% from 2013 to 2014.

San Benito County, California — one of over twenty localities which have banned fracking activity in the state — is currently locked in a legal battle with Citadel Exploration, an energy company which claims that only the state of California itself (as opposed to municipalities) has the ability to ban fracking. Even if Citadel Exploration prevails, should proponents of fracking feel that California production investments are safe? Barely a year ago, the Californian state Senate nearly enacted a moratorium to ban fracking temporarily. With a final count of 18-16 against the ban, the state only lacked two votes for a majority pass. The same trend has been seen in other states, like New York and New Jersey where the temporary period of inactivity in the gas sector is followed by more outcries from environmentalist groups, and the subsequent drafting of more final, permanent restrictions on hydraulic fracturing.

The cost of these bans is high, especially given the sheer quantity of untapped or undiscovered natural resources. California, Pennsylvania and Colorado are three possible battlegrounds to watch in the future, all of which contain high concentrations of gas resources and formidable past opposition either in their local communities or their state legislatures. The cost of completely eliminating the production of these resources is outlined by the sheer quantity they withdraw for sale on a monthly basis. Based on the graph below, at an average cost of $2.69 per million cubic feet (mcf), the states of CA, PA, and CO would lose almost $1,611,300 in monthly production revenue for natural gas alone, without even considering oil.

The list of counties which have banned fracking is growing on a monthly basis. In addition to state regulations, local government hydraulic fracturing restrictions now number in the hundreds, and are concentrated in CA and along the Eastern Seaboard. Policymakers must adopt an emphasis on balancing socially responsible results with protecting the rights and revenue generating capacities of the industry to insure continued job creation and economic growth.

Mar 18, 2015 | 2 comments | by Santiago Bello

SOTU NCPA: The Invisible Hand and Unabated Oil Production

In OPEC’s 2014 World Oil Outlook (WOO), the energy giant projects sustained oil prices of over $100 per barrel for 2015 with slight drops in future oil prices as low as $95 per barrel…

Recent events have proven their short-run projections to be dead wrong.

In his State of The Union (SOTU) Address, President Obama came well-stocked (though certainly not well-received in the new Republican House and Senate) with good economic news which he readily used as ammunition to suppress critics. However, some of these developments, such as descending oil prices, are difficult to assign responsibility to.

What can easily be correlated is oil prices and popularity.

Throughout the night, the President acted triumphant and suave — touting what CNN claims to be above a 50% approval rating — it was as if President Obama came into Congress surfing on America’s wave of cheap oil. However, a sobering realization is that this same wave is what crashed down on President Jimmy Carter’s political career in 1979, as oil prices rose by approximately $60 a barrel, Carter’s approval rating subsequently sank to new depths below 30%.

Though the President is a fundamental player with substantial power in the private arena as well as the public, history has made it clear that the global forces determining supply and demand still reign supreme.

With respect to the agents of supply and demand: Citi’s New York-based investment bank is sounding the alarm that these oil prices may be here to stay, and in an increasing scramble to create economies of scale, there are increasing murmurs of mergers in the American oil and gas industry. Citi’s claims champion innovations such as hydraulic fracturing and horizontal drilling as being the reasons we can expect full oil and gas independence by 2020, if not sooner.

However, these claims are not without skepticism, after the beginning of the U.S. oil and fracking boom, the U.S. Energy Information Administration (EIA) published a more conservative timeline of U.S. oil import balances. Without omission of data and with proper considerations below, the NCPA has juxtaposed the two forecasts for your own judgment:

Important Disclaimers:

Citigroup’s oil balances study “Energy 2020: Out of America,” was conducted more recently than the EIA’s study, “AEO2014 Early Release Overview.” It is possible that newly available data on the oil and fracking boom made their study more accurate
Citigroup undoubtedly holds financial claims with its affiliates in the crude oil and natural gas sectors, affiliates who may be looking to repeal the 1975 Energy Policy and Conservation Act, an antiquated government policy barring the export of oil from the U.S. If so, Citigroup has both political and financial motives to overstate growth in domestic oil and gas production
Likewise, the U.S. Energy Information Administration (EIA) may have strong political pressures to underestimate future domestic production

What is certain however, is that the collateral effects of a sustained increase in American supply would redefine the global environment for businesses and governments:

Business Insider notes, these low prices make way for the perfect time in which price-distorting subsidies worth billions of dollars could be erased without a major blow to the U.S. economy
Goldman Sachs and Slate.com assert that a decrease in overall drilling activity, while an increase in its efficiency has already amounted to a $75 billion tax-cut for Americans, a growing figure which they believe will become more valuable in the hands of middle-class Americans rather than in oil companies where much of the revenue may be redirected into the pockets of foreign investors. Similarly, during the SOTU Address, President Obama stated “the typical family this year should save $750 at the pump,” which amounts to a little over $80 billion in savings
Reuters proclaimed that new permits issued for oil drilling fell by 40% in 2014, a reflection of oil prices… this is a statistic that also represents the trend of unprofitable prospects in exploration, one which may slow the discovery of large oil reserves and distort “peak oil” claims
During the SOTU Address, President Obama touched upon perhaps the most important point, “we are as free from the grip of foreign oil as we’ve been in almost 30 years.” Indeed, and if Ted Cruz successfully repeals the Energy Policy and Conservation Act, the geopolitical leverage of groups such as OPEC and countries such as Russia would begin to erode in a way we have yet to see, and perhaps permanently

Jan 21, 2015 | 2 comments | by Santiago Bello

SOTU NCPA: Energy Forecast or Lack of One

With the State of the Union Address tomorrow night, we can expect the president to talk about energy and environment ― much more about environment than energy. The president’s actions show how low of a priority our national security and energy independence is on his list of “top issues.” Besides speaking at international climate summits around the world and having a climate change researcher siting with the first lady tomorrow night, the president lists energy #7 out of his 7 top issues. With a listing after climate change, the energy and environment section is then split in half between energy and environment topics with the other half covering climate change.

Here are the very few energy topics listed:

Reducing Our Dependence on Foreign Oil ― the administration admits to current increased amounts of domestic oil production as the factor that is reducing our foreign oil dependence. Increasing that production is the solution, not decreasing carbon emissions and more renewable energy sources.
Safe and Responsible Domestic Oil and Gas Production ― the plan is to aggressively regulate oil and gas production, hydraulic fracturing, artic drilling and rail safety. Regulations will increase inefficiencies and costs.
Carbon Capture and Sequestration Technologies ― more regulations targeting new and existing coal-fired power plants. Already costing billions to implement, such regulations will greatly increase costs for plant operation, weaken the economy and burden taxpayers.
Advancing Clean Energy ― a series of renewable usage in homes goals, tax credits and subsides. All government interference in the energy market is artificial and ends up harming everyone.
Advancing Energy Efficiency ― the administration’s view of energy efficiency is cutting down carbon emissions and reducing the demand for U.S. oil. Energy efficiency should actually be how well developed our energy production, transportation and delivery are with the president’s help. Looks like the president has not been interested in true energy efficiency.
Developing Clean Fuels ― biofuels are extremely costly, unnecessary and weaken the automobile industry that has to keep up with the outrageous Renewable Fuel Standards.

Our energy independence is a geopolitical/national security issue that should be critical to our nation. We must do all we can to let our energy companies produce and export refined and unrefined energy resources. Only then will we be able to keep ourselves off of foreign oil dependence, keep gas prices low for the poor, increase our role in the global energy market and boost our economy.

Jan 19, 2015 | 2 comments | by Lloyd Bentsen

Looking Under the Crust ― Seismic Activity, Fracking and Graphs

Texas has always been a battleground between skeptics and environmentalists, but a developing trend of seismic activity has also turned it into a promising research laboratory for scientists and seismologists.

Volcano Discovery, a group of scientists dedicated towards the global study of volcanoes and earthquakes alike published the following figures which the NCPA has reformatted without tampering or omissions of data:

Important disclaimers include:

the final apparent drop in seismic activity, which may simply be due to the fact that we are only halfway into January
an omission of point for November in 2013, for which there was no data
However, the most important fact uncovered, is that though this chart measured the frequency of the earthquakes, further analysis of data collection methods, times and earthquake locations has led us to believe that there is significant double-counting occurring in this data… Meaning that two or three different cities may have noted the same tremor, yet the data was recorded as multiple bouts of seismic activity.

Regardless of this skew, and the likelihood for overstatement in this data, it is difficult to refute the clear trend in this chart. Indeed, the Dallas Morning News states,

There is evidence that some central and eastern North America earthquakes have been triggered or caused by human activities that have altered the stress conditions in earth’s crust sufficiently to induce faulting.

According to the Dallas Morning News, these activities include what you would expect,

… impoundment of water behind dams, injection of fluid into the earth’s crust, extraction of fluid or gas, and removal of rock in mining or quarrying operations…

But even if these tremors are truly increasing in frequency due to fracking and fuel extraction, is it really a threat to Texas’ lives and infrastructure? There is no recent record of significant damage due to tremors in Oklahoma or Texas, what’s more many of these tremors are occurring in areas where the population density can be as low as five people per square mile… denoting a very rural or sparse suburban setting.

Six months of data from Volcano Discovery’s records were randomly selected and analyzed for changes in magnitude and depth of Texas earthquakes:

Depth has decreased and magnitude has increased, however in assessing these results, we always must prioritize one of the most basic rules of statistics: Correlation is not causation. What’s more, a larger sample of months can give more definitive results. There is still much research to be done on the origin of these earthquakes, and not enough risk to human life and private/public capital given what we know, at least not enough to make drastic decisions set forth by some environmental groups.

Jan 14, 2015 | 5 comments | by Santiago Bello

The Next Saudi Arabia? Lessons from Coober Pedy

In 1977, near the end of a decade of energy headaches, President Jimmy Carter addressed the nation in a speech that would bring the Department of Energy into fruition, give national attention to the need for the development of renewable resources, draw widespread criticism not only from OPEC-supporters but from scorned Americans and perhaps most importantly, state something we now know could be untrue.

World oil production can probably keep going up for another six or eight years. But sometime in the 1980s it can’t go up much more. Demand will overtake production. We have no choice about that.

― President Jimmy Carter

Fast-forward to June 2012. Leonardo Maugeri, a Senior Associate at Harvard’s Belfer School for Science and International Affairs, the Chairman for Ironbark Investments and a world-renowned oil expert published “Oil: The Next Revolution,” a major study that was funded by British Petroleum and utilized datasets and observations gathered by multitudes of oil exploration and extraction companies. Maugeri unflinchingly shattered through public belief regarding impending declining oil production, claiming “oil capacity is growing worldwide at such an unprecedented level that it might outpace consumption.”

But how true were these assertions, and what was his rationale?

Maugeri’s predictions came on the heels of breakthroughs in oil extraction technologies and methods such as fracking and horizontal drilling, but these innovations alone were not enough to explain the increase in supply.

In the analysis, Maugeri states that not only do these technologies allow us to further exploit existing reserves that were deemed inaccessible, but they will also be integral in extracting not millions or billions but potentially trillions of barrels of oil in undiscovered oil reserves “with no [supply] peak in sight.”

Fast-forward again to January 2013. A major oil discovery is found underneath Coober Pedy, Australia. How major? Brisbane Company Linc Energy estimated possible reserves to equal roughly 233 billion barrels of oil, roughly 30 billion barrels short of Saudi Arabia’s massive stock. For many reasons, however, we should be conservative in assessing the actual value of such a find. John Young who is a senior resources analyst at Wilson HTM, a prominent investment and wealth management company, asserts that we must gauge the actual quality of the oil find and determine what portion of the reserve is physically unrecoverable or economically unfeasible to attain as this may affect the yield and value of the find.

Though gargantuan by itself, the value of such a find is not just economic, but also symbolic of the enormous potential for untapped resources that lie undiscovered across the world.

Eerily, Maugeri predicted the discovery of new and huge oil reserves across the world and the rise of American tight-oil which we know as shale oil. Maugeri rationalized that the Brazilian Santos Basin Lula and Campos Basin, which both show extreme promise, as well as the new feasibility of shale trapped in Canada and the U.S. will shift production power to the Western Hemisphere while matching or even outpacing growing demand from developing countries such as China. Additionally, such a find could bring about a stable and long-term decrease in the price of oil. Finds like this suggest we have more time on our clock to deal with the many economic repercussions of energy supply than we originally thought.

–Santiago Bello is a research associate with the National Center for Policy Analysis

Dec 15, 2014 | 4 comments | by Lloyd Bentsen

The Demise of King OPEC

The rise of U.S. shale oil has signaled the beginning of the end for almighty King OPEC. But it has been Saudi Arabia that has hammered the nail in the coffin for the King. OPEC effectively worked in the 1970s influencing world oil supply and price because all members acted as a cohesive unit. Because of the enormous clout of growing U.S. shale oil, the Saudis now realize they can act with OPEC or act in their own self-interest. They can help raise the price of oil or maintain their market share in the United States. The Saudis realized that U.S. shale oil production is not going to decrease but increase in the coming years. Raising prices is a short-term solution that provides no long-term help for when the U.S. replaces Saudi Arabia as the World’s largest oil producer. Thus, the Saudis decided to keep prices low and maintain market share in the United States. With the World’s largest oil producer effectively bailing on the organization, OPEC can be seen as the once great giant that ruled the world with a black fist of gold and has now tumbled from his previously untouchable throne.

-Reeves Favrot is a research associate at the National Center for Policy Analysis

Dec 10, 2014 | 1 comment | by Lloyd Bentsen

The Oil Price War Could Be Bringing About Imminent Change

OPEC has declared open season on U.S. shale oil companies through its decision to leave oil production unrestricted. On separate accounts, Matt Phillips and Steve LeVine insist that “the fallout could create a crisis” in the American banking market as well as the energy industry, while Bloomberg notes how China has capitalized on this escalating feud.

American shale’s rise to power is largely credited to advancements in hydraulic fracturing, a method used by companies attempting to extract the resource from underground, as well as additional funding from junk bond investors who have been attracted by the high returns and low interest rates. Consequently, drilling companies both large and small have had an ample supply of credit and financing, such that 17 percent of the $1.3 trillion market is now financed exclusively by such contributions. With the abundance of equity, falling gas prices were to be expected as a simple byproduct of increased production.

In an unexpected response, OPEC signaled its unwillingness to reduce market share and kept production ― and hence future prices ― constant. Phillips and Levine warn that maintaining competitive prices has forced U.S. companies to dig into their profit margin. Normally this would not be a problem were it not for the prevalence of creditors and private owners bloating market value through their contributions. The desire to be on the energy-boom bandwagon has thus indirectly created a host of unfunded liabilities and nurtured an environment for assets such as receivables to fester and become toxic to the global banking system. Jan Stuart, the Director of Credit Suisse’s investment banking division issued a statement insisting “investors remain hungry for yield” and will remain so, deepening the divide between listed externally acquired funds and suffering shale oil companies’ ability to perform up to par.

While America stares down the looming double-threat, China has quietly begun increasing crude oil stockpiles by as much as seven-hundred thousand barrels per day amidst a fading “golden time window.” Bloomberg notes the steady progress taken by the creeping giant, even despite comparatively lackluster current and future growth of 7 percent as projected by fifty-six independent economists. At the current rate, the opportunist state hopes to stockpile 570 million barrels of crude by 2020, reserves equal to about 100 days of their domestic demand.

American lenders and shareholders must necessarily become more stringent with their credit and their capital when assessing companies. Phillips and Levine warn that there are negative “implications for everyone” from hydraulic fracking fields to Wall Street if financing dries up or if OPEC succeeds in destabilizing American shale, but in a time when the rising industry could be facing one of its greatest global triumphs or defeats, this is clearly an understatement.

Santiago Bello is a research associate at the National Center for Policy Analysis.

Dec 08, 2014 | 2 comments | by Lloyd Bentsen

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