Posts

Fuel Freedom Staff

More attention paid to all the natural gas we’re wasting

/in , /by

Energy experts are starting to pay more attention to an important byproduct to U.S. oil extraction: the incredible amount of natural gas that gets burned off into the atmosphere, or “flared,” because it’s not profitable enough to capture at the well head.

Forbes contributor Michael Kanellos is the latest to examine the absurd practice, writing:

… the sheer volume of gas that gets flared or emitted into the atmosphere t remains truly astounding. A potential source of profits and jobs is literally transformed in bulk into an environmental hazard and potential liability around the clock.

It’s an environmental hazard because natural gas is made primarily of methane, a greenhouse gas that’s many times worse for the environment than carbon dioxide. Some methane leaks from wells and pipelines, but even when the gas is burned off, it creates some GHG emissions.

Methane has tremendous potential as a commodity, however, because it can be turned into alcohol fuels — ethanol and methanol — to run our cars and trucks. Both fuels burn much cleaner in engines, and can be cheaper for the consumer.

When the price of oil was $115 a barrel, there was little incentives for oil drillers — who put bits in the ground mainly for oil, after all — to capture and store the natural gas, because gas remains stuck in the cellar in terms of pricing. Now that oil has dropped by 60 percent over the past seven months, maybe U.S. drillers will be incentivized to keep more of the gas that comes up in the wells.

(Our blogger William Tucker has written about the flaring issue before. It’s also discussed, along with many oil-related issues, in the documentary PUMP, which is available for download on iTunes now.)

Landfills also emit methane, and much of that is flared as well. If we captured more methane and turned it into fuel, there would be more of a market for it, and the infrastructure for converting it to fuel and distributing it would grow. A whole new generation of jobs could be created in the sector, jobs that by their nature would stay in America.

Kanellos has compiled many fascinating statistics about how much natural gas is wasted by flaring, including these nuggets:

  • Since the beginning of 2010, more than 31% of the natural gas in the Bakken region has been burned off or flared. It was worth an estimated $1.4 billion.
  • Over 150 billion cubic meters, or 5.3 trillion cubic feet, get flared annually worldwide, or around $16 billion lost.
  • Flaring in Texas and North Dakota emit the equivalent amount of greenhouse gases as 500,000 cars.

Related:
Dispute flares over burned-off natural gas (WSJ)

Fracking boom waste: Flares light prairie with unused natural gas (NBC News)

Natural gas flaring in Eagle Ford Shale already surpasses 2012 levels of waste and pollution (Fox Business)

Fuel Freedom Staff

Layoffs piling up as American oil drillers pull back

/in , /by

Communities around the country that drove the surge in U.S. oil production are becoming victims of falling global prices. Already this month, oil-and-gas servicing companies Baker Hughes and Schlumberger announced a combined 16,000 layoffs, owing to the steep drop in oil prices.

“They gave me 24 hours to leave my house,” John Roberts, a van driver for Schlumberger who was let go in Williston, N.D., told CNN Money.

In North Dakota, where work on the Bakken shale-oil formation had attracted thousands of workers amid an economic surge, Jim Arthaud, CEO of MBI Energy Services in Belfield, said up to 20,000 jobs could be lost in that area alone, and just among companies that service oil and gas drillers.

Prof. Bill Gilmer of the University of Houston told Forbes that 75,000 jobs could be lost in Houston alone in 2015. The city has added about 100,000 jobs a year since 2011.

The antidote to this boom-and-bust cycle of volatile oil prices is to provide a steady, dependable supply of cheap transportation fuel to American drivers for the long term. Increasing the use of alternative fuels will reduce our dependence on oil and protect the economy from the oil-market rollercoaster.

The United States has helped bring down the global price of oil by producing more oil – a lot more – here at home. But that oil, extracted from shale rock, mostly in North Dakota and Texas, is expensive to get out of the ground. As the global price of oil has plummeted, so too have the oil companies’ profit margins, and they’re starting to lay off workers on a mass scale.

To promote the use of more alternative fuels, as a counterweight to oil-price volatility, the U.S. should build up its infrastructure for producing and distributing fuels like ethanol and methanol. There are thousands of jobs that could potentially be created. In 2013, for instance, the U.S. produced 13.3 billion gallons of ethanol, which is blended into the gasoline we all use. The ethanol industry supported 86,504 direct jobs and 300,277 indirect jobs, according to the Renewable Fuels Association‘s most recent data. Those are domestic jobs that support American families, and which can’t be outsourced.

The sector added $44 billion to the nation’s gross domestic product and paid $8.3 billion in taxes, without government subsidies.

If we made such alternative fuels more widely available, we could not only reduce our dependence on oil, we’d create a whole new generation of U.S. jobs that would keep investment in the country and strengthen the overall economy.

Fuel Freedom Staff

Yellowstone River oil spill contaminates drinking water in Montana town

/in /by

Residents of the town of Glendive, in eastern Montana, are being told not to drink or cook with water from the city’s supply after a weekend oil spill that send 50,000 gallons of crude into the Yellowstone River.

The river flows downstream from Yellowstone National Park, and the site of the spill is some 400 miles from the park’s entrance, along the border between Montana and Wyoming.

But Saturday’s spill — the equivalent of 1,200 barrels of oil extracted from the Bakken shale-rock formation in Montana and North Dakota — caused elevated levels of the cancer-causing compound benzene to turn up in the local water supply. Officials in the city of 6,000 are trucking in bottled water, and residents were warned not to use water out of the tap.

The Los Angeles Times quoted Glendive Mayor Jerry Jimison:

“It is an inconvenience for everyone in the community, no doubt. But we have truckloads of water being supplied, and the company has taken full responsibility, stepping up to the plate and helping bring everything back to normal.”

The pipeline is owned by Bridger Pipeline, a subsidiary of a Wyoming company called True Cos. That company said in a statement that a 12-inch section of the Poplar Pipeline had breached Saturday at 10 a.m. The company said the pipeline was shut down within an hour of the leak, and that “all relevant local, state and federal authorities” had been notified. More than 50 people were working to clean up the spill, the Times reported.

“Our primary concern is to minimize the environmental impact of the release and keep our responders safe as we clean up from this unfortunate incident,” Tad True, vice president of Bridger Pipeline, said in the statement.

Montana’s Department of Environmental Quality said the city draws its drinking water supply from an intake structure about 14 feet beneath the surface of the river, about 7 river miles downstream from the breach.

“Product sheen has been observed on the river almost to Sidney,” about 50 miles downriver from Glendive, the agency said. “No other community water supplies draw from the Yellowstone River downstream of the release in Montana.”

As National Geographic noted, this is the “second sizable oil spill” on the Yellowstone River in the last four years:

Another spill into Yellowstone River occurred 235 miles southwest of Glendive in July 2011, when an ExxonMobil pipeline broke near Laurel, Montana, and released 63,000 gallons of oil that washed up along an 85-mile stretch of riverbank.

NatGeo says that after the latest spill, “initial water tests showed no evidence of oil, but residents soon complained that their tap water had an unusual odor. The city’s water advisory was issued late Monday. The Times says benzene has a sweet odor and can be hazardous over time.

Arctic Leaf

Fracking offers hope

/in , , /by

I’ve just finished The Frackers, the excellent history of how the United States became the world’s leading developer of fossil fuels, by former Wall Street Journal reporter Gregory Zuckerman.

There are three lessons that can be taken away from this history, all of which relate to the development of alternative sources of energy:

  • The government had very little to do with the development of fracking. It was all done by wildcatters who operated far outside major institutions.
  • The founders of these methods didn’t necessarily get permanently rich. All have done well initially but have been undone by their very success, producing a superabundance of gas and oil that has driven down prices to the point where producers are overextended.
  • The maverick wildcatters who have opened up our gas and oil resources are not necessarily opposed to alternative sources of energy. In fact, they have often become the biggest promoters of wind, solar and alternative fuels for our transport sector.

Let’s examine those myths one by one:

The government should get credit for the breakthroughs. Proponents of big government often try to promote the idea that the fracking revolution never would have occurred without the help of the government. They even argue that government was responsible for the fracking initiative. Three years ago, Ted Norhaus and Michael Shellenberger of the Breakthrough Institute published a piece in The Washington Post in which they practically argued that fracking had been invented in the laboratories of the Department of Energy. George Mitchell, who spent 40 years developing fracking, had simply borrowed a few ideas that the DOE had designed.

Read the opening chapter on Mitchell in The Frackers, and you’ll hardly find one reference to the Department of Energy or government help. At one point the DOE contributed a few million dollars to an experiment that Mitchell had designed, but that was it. The rest of the story tells of Mitchell’s fascination with trying to suck oil out of shale rock, and how he nearly bankrupted his moderately successful oil company in the effort. He had no luck trying to convince the major oil companies that shale could be accessed. At one point, Chevron came very close to fracking the Barnett Shale, where Mitchell had his first breakthrough, but the company gave up on the effort. Harold Hamm experienced the same frustrations in the Bakken, where he alone believed there were vast reserves of oil but couldn’t get anyone to support him, until he finally made a breakthrough. The government had nothing to do with it.

Fracking wildcatters always get rich. The great irony for many of these pioneers is that they are often undone by their own success. Aubrey McClendon built Chesapeake Gas into the nation’s second-largest producer of natural gas but was forced to give up his company because the success of his fracking had driven the price of gas so low that he was overextended. The same thing happened to Tom Ward, an early associate of McClendon’s who had built his own company, SandRidge, based on fracking. Ward was forced out of his ownership by the board of directors. Harold Hamm has been having the same trouble in The Bakken since the superabundance of oil has forced the price down. Developing a new source of energy doesn’t necessarily mean you’re going to be permanently rich.

The developers of new ways to access fossil fuels are opposed to other alternatives. Because they have been so successful in reviving production of oil and gas, the assumption has been that the Frackers are wedded to fossil fuels and are undercutting alternatives. This is not true. The primary motive of all these innovators has been to make America more energy-independent and reduce our reliance on foreign oil. All of them see the development of fossil fuels as only a temporary step, and acknowledge that we must ultimately find some other sources of energy. T. Boone Pickens, the dean of oil magnates, put forth a plan that would try to get the electrical sector to rely on wind so that natural gas could be moved over to the transport sector to replace oil. His Clean Energy Fuels Corporation had some success in building a “natural gas highway” that substitutes compressed natural gas for diesel fuel in long-haul tractor trailers. Both Mitchell and Hamm have been exploring alternative energy, and they’re funding efforts to try to substitute renewables for fossil fuels, both domestic and imported.

As Zuckerman concludes at the end of The Frackers:

The great leap forward should have involved alternative energy, not oil and gas. The U.S. government allocated over $150 billion to green initiatives between 2009 and 2014. … There’s little to show for the investments, however. … Instead a group of frackers, relying on market cues rather than government direction, achieved dramatic advances by focusing on fossil fuels, of all things. It’s a stark reminder that breakthroughs in the business world usually are achieved through incremental advances, often in the face of deep skepticism, rather than government inspired eureka moments.

It’s a lesson worth keeping in mind as we pursue alternative fuels to substitute for foreign oil.

Fuel Freedom Staff

Ben Casselman: The conventional wisdom on oil is always wrong

/in , /by

This is something we knew already: Oil prices fluctuate. Like all commodities, prices go up, and then they go down, and few experts know exactly why, or how far, or for how long trends will endure.

But FiveThirtyEight.com’s Ben Casselman, who used to cover the oil patch for The Wall Street Journal, outlines (in typical well-executed FiveThirtyEight style), all the ways that people have gotten oil predictions so horribly wrong this year.

Here’s one of the many instructive passages from his piece:

It isn’t just that experts didn’t see the shale boom coming. It’s that they underestimated its impact at virtually every turn. First, they didn’t think natural gas could be produced from shale (it could). Then they thought production would fall quickly if natural gas prices dropped (they did, and it didn’t). They thought the techniques that worked for gas couldn’t be applied to oil (they could). They thought shale couldn’t reverse the overall decline in U.S. oil production (it did). And they thought rising U.S. oil production wouldn’t be enough to affect global oil prices (it was).

Now, oil prices are cratering, falling below $55 a barrel from more than $100 earlier this year. And so, the usual lineup of experts — the same ones, in many cases, who’ve been wrong so many times in the past — are offering predictions for what plunging prices will mean for the U.S. oil boom. Here’s my prediction: They’ll be wrong this time, too.

Among the many reasons why pundits’ crystal balls are so often murky: various factors go into the makeup of prices; and the economics of oil-field drilling are complicated, which is why even “break-even” declarations about when oil-shale drilling in Texas or North Dakota might become unprofitable can be off base as well.

As to the first point — all the factors that comprise the fluctuating price of oil — Cassleman writes:

In July 2008, my Journal colleague Neil King asked a wide range of energy journalists, economists and other experts to anonymously predict what the price of oil would be at the end of the year. The nearly two dozen responses ranged from $70 a barrel at the low end to $167.50 at the high end. The actual answer: $44.60.

It isn’t surprising that experts aren’t good at predicting prices. Global oil markets are a function of countless variables — geopolitics, economics, technology, geology — each with its own inherent uncertainty. And even if you get those estimates right, you never know when a war in the Middle East or an oil boom in North Dakota will suddenly turn the whole formula on its head.

But none of that stops television pundits from making confident predictions about where oil prices will head in the coming months, and then using those predictions as the basis for production forecasts. Based on their track record, you should ignore them.

Fuel Freedom Staff

WSJ: Rail companies often keep routes a secret from local officials

/in /by

The Wall Street Journal has a fascinating story about the “virtual pipelines” that hide in plain sight around the country: trains, sometimes up to a mile long, that carry oil from the Bakken shale formation in North Dakota to refineries.

Unlike oil pipelines, like the hotly contested Keystone XL that a Canadian company wants to build from western Canada to Nebraska, no new government hearings or environmental reviews are needed to move oil around the country.

Neither, it seems, is much notice required for local cities and emergency-services agencies. Often, the story states, key information — and even the existence of routes — is withheld by rail companies.

From the WSJ:

Finding the locations of oil-filled trains remains difficult, even in states that don’t consider the information top secret. There are no federal or state rules requiring public notice despite several fiery accidents involving oil trains, including one in Lac-Mégantic, Quebec, that killed 47 people.

The desire for secrecy seems wrongheaded to some experts. “If you don’t share this information, how are people supposed to know what they are supposed to do when another Lac-Mégantic happens?” asked Denise Krepp, a consultant and former senior counsel to the congressional Homeland Security Committee.

She said more firefighting equipment and training was needed urgently. “We are not prepared,” she said.

Fuel Freedom Staff

Cobb: Narrative of American oil self-sufficiency ‘is about to take a big hit’

/in , /by

Kurt Cobb, who writes about energy and the environment, has a piece in The Christian Science Monitor about how OPEC is targeting the U.S. shale-oil “revolution.’

Cobb says it was folly for some proponents of U.S. drilling to think that oil would remain above $100 a barrel indefinitely. At $70, U.S. operations aren’t profitable enough to remain at that output level.

Cobb begins:

To paraphrase Mark Twain: Rumors of OPEC’s demise have been greatly exaggerated.

Breathless coverage of the rise in U.S. oil production in the last few years has led some to declare that OPEC’s power in the oil market is now becoming irrelevant as America supposedly moves toward energy independence. This coverage, however, has obscured the fact that almost all of that rise in production has come in the form of high-cost tight oil found in deep shale deposits.

The rather silly assumption was that oil prices would continue to hover above $100 per barrel indefinitely, making the exploitation of that tight oil profitable indefinitely. Anyone who understood the economics of this type of production and the dynamics of the oil market knew better. And now, the overhyped narrative of American oil self-sufficiency is about to take a big hit.

Fuel Freedom Staff

Is Bakken crude more volatile than other kinds of oil?

/in /by

The Wall Street Journal takes note of an issue that’s growing in importance: Whether crude from the Bakken oil-shale formation is more volatile, and explosive, than other kinds of crude oil that comes out of the ground.

The geological makeup of the oil is crucial to regulators who are in the process of deciding whether to impose additional restrictions on companies that transport Bakken crude by railways.

The WSJ story begins:

Regulators set to decide on crude-by-rail shipping rules are relying on testing methods that may understate the explosive risk of the crude, according to a growing chorus of industry and Canadian officials.

The tests’ accuracy is central to addressing the safety of growing crude-by-rail shipments across the continent: whether Bakken crude contains potentially dangerous levels of dissolved gases. Several trains carrying Bakken crude have exploded after derailing, including a fiery accident last year that killed 47 people in a small town in Quebec.

The North Dakota Industrial Commission is expected to decide Thursday whether to impose new rules on transporting oil on railroads. A study by the state’s Petroleum Council concluded that Bakken crude was no more volatile than other light crudes found in Texas and other fields. But the testing that went into that report might have allowed flammable gases, called light ends, to escape before the samples were collected and processed.

The U.S. Department of Transportation also has proposed new safety rules for oil by rail, including phasing out the aging tanker cars (called DOT 111) used to transport the oil within two years.

Fuel Freedom Staff

Falling oil prices prompt pullback in U.S. drilling

/in /by

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.

Fuel Freedom Staff

North Dakota taking steps to use more of its natural gas

/in /by

North Dakota flares more than 25 percent of the natural gas it extracts from the Bakken oil-shale play. Not only is natural gas cheaper (i.e. not as profitable) than the oil that comes out of the same wells, there’s a lack of pipeline and storage capacity in that region. Texas, by comparison, flares only 1 percent of its natural gas.

But the state is taking steps to build the infrastructure to capture and use more natural gas. As Adam Belz of the Minneapolis Star Tribune notes:

A quiet transformation is underway, however, as the state bids to turn natural gas into a native business and drive down flaring.

A growing network of pipelines and processing plants has made North Dakota a recent target for billions of dollars of investment toward factories that convert natural gas into other products like fertilizer and plastic.