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Economist touts natural gas at Utah energy summit

May 21, 2015/in Economy, Over a Barrel Blog lhall /by Landon Hall

The natural-gas industry and people who promote gas as a cleaner fuel alternative need to “manage” environmental concerns about fracking, a key economist said at the fourth annual Governor’s Utah Energy Development Summit.

Dan North, chief economist for the credit-insurance company Euler Hermes North America, said Wednesday that despite the abundance and cheapness of natural gas compared with oil, only 3 percent of natural gas is used in transportation.

He said there are 17 million passenger vehicles around the world that run on natural gas (primarily CNG and LNG), but only 100,000 such vehicles in the United States. “This is an enormous opportunity going forward,” North said. “It’s terrific that we have this cheap natural gas.”

But, he added, “WE do have to manage one thing, which is the environmental concerns about fracking.” After listing all the countries, states and municipalities that have banned the oil-and-gas drilling technique also known as hydraulic fracturing, North said: “Environmental concerns have not been addressed well enough.”

Alternative and renewable fuels: There is life after cheap gas!

February 11, 2015/in Economy, Environment, Featured, Over a Barrel Blog, World mkaplan, newleaf /by Arctic Leaf

Some environmentalists believe that if you invest in and develop alternative replacement fuels (e.g., ethanol, methanol, natural gas, etc.) innovation and investment with respect to the development of fuel from renewables will diminish significantly. They believe it will take much longer to secure a sustainable environment for America.

Some of my best friends are environmentalists. Most times, I share their views. I clearly share their views about the negative impact of gasoline on the environment and GHG emissions.

I am proud of my environmental credentials and my best friends. But fair is fair — there is historical and current evidence that environmental critics are often using hyperbole and exaggeration inimical to the public interest. At this juncture in the nation’s history, the development of a comprehensive strategy linking increased use of alternative replacement fuels to the development and increased use of renewables is feasible and of critical importance to the quality of the environment, the incomes of the consumer, the economy of the nation, and reduced dependence on imported oil.

There you go again say the critics. Where’s the beef? And is it kosher?

Gasoline prices are at their lowest in years. Today’s prices convert gasoline — based on prices six months ago, a year ago, two years ago — into, in effect, what many call a new product. But is it akin to the results of a disruptive technology? Gas at $3 to near $5 a gallon is different, particularly for those who live at the margin in society. Yet, while there are anecdotes suggesting that low gas prices have muted incentives and desire for alternative fuels, the phenomena will likely be temporary. Evidence indicates that new ethanol producers (e.g., corn growers who have begun to blend their products or ethanol producers who sell directly to retailers) have entered the market, hoping to keep ethanol costs visibly below gasoline. Other blenders appear to be using a new concoction of gasoline — assumedly free of chemical supplements and cheaper than conventional gasoline — to lower the cost of ethanol blends like E85.

Perhaps as important, apparently many ethanol producers, blenders and suppliers view the decline in gas prices as temporary. Getting used to low prices at the gas pump, some surmise, will drive the popularity of alternative replacement fuels as soon as gasoline, as is likely, begins the return to higher prices. Smart investors (who have some staying power), using a version of Pascal’s religious bet, will consider sticking with replacement fuels and will push to open up local, gas-only markets. The odds seem reasonable.

Now amidst the falling price of gasoline, General Motors did something many experts would not have predicted recently. Despite gas being at under $2 in many areas of the nation and still continuing to decrease, GM, with a flourish, announced plans, according to EPIC (Energy Policy Information Agency), to “release its first mass-market battery electric vehicle. The Chevy Bolt…will have a reported 200 mile range and a purchase price that is over $10,000 below the current asking price of the Volt.It will be about $30,000 after federal EV tax incentives. Historically, although they were often startups, the recent behavior of General Motor concerning electric vehicles was reflected in the early pharmaceutical industry, in the medical device industry, and yes, even in the automobile industry etc.

GM’s Bolt is the company’s biggest bet on electric innovation to date. To get to the Bolt, GM researched Tesla and made a $240 million investment in one of its transmissions plan.

Maybe not as media visible as GM’s announcement, Blume Distillation LLC just doubled its Series B capitalization with a million-dollar capital infusion from a clean tech seed and venture capital fund. Tom Harvey, its vice president, indicated Blume’s Distillation system can be flexibly designed and sized to feedstock availability, anywhere from 250,000 gallons per year to 5 MMgy. According to Harvey, the system is focused on carbohydrate and sugar waste streams from bottling plants, food processors and organic streams from landfill operations, as well as purpose-grown crops.

The relatively rapid fall in gas prices does not mean the end of efforts to increase use of alternative replacement fuels or renewables. Price declines are not to be confused with disruptive technology. Despite perceptions, no real changes in product occurred. Gas is still basically gas. The change in prices relates to the increased production capacity generated by fracking, falling global and U.S. demand, the increasing value of the dollar, the desire of the Saudis to secure increased market share and the assumed unwillingness of U.S. producers to give up market share.

Investment and innovation will continue with respect to alcohol-based alternative replacement and renewable fuels. Increasing research in and development of both should be part of an energetic public and private sector’s response to the need for a new coordinated fuel strategy. Making them compete in a win-lose situation is unnecessary. Indeed, the recent expanded realization by environmentalists critical of alternative replacement fuels that the choices are not “either/or” but are “when/how much/by whom,” suggesting the creation of a broad coalition of environmental, business and public sector leaders concerned with improving the environment, America’s security and the economy. The new coalition would be buttressed by the fact that Americans, now getting used to low gas prices, will, when prices rise (as they will), look at cheaper alternative replacement fuels more favorably than in the past, and may provide increasing political support for an even playing field in the marketplace and within Congress. It would also be buttressed by the fact that increasing numbers of Americans understand that waiting for renewable fuels able to meet broad market appeal and an array of household incomes could be a long wait and could negatively affect national objectives concerning the health and well-being of all Americans. Even if renewable fuels significantly expand their market penetration, their impact will be marginal, in light of the numbers of older internal combustion cars now in existence. Let’s move beyond a win-lose “muddling through” set of inconsistent policies and behavior concerning alternative replacement fuels and renewables and develop an overall coordinated approach linking the two. Isaiah was not an environmentalist, a businessman nor an academic. But his admonition to us all to come and reason together stands tall today.

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

January 30, 2015/in Economy, What's The Buzz staff /by Fuel Freedom Staff

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.

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)

Fracking offers hope

January 21, 2015/in Economy, Over a Barrel Blog wtucker, newleaf /by Arctic Leaf

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.

New York state bans fracking, citing health concerns

December 17, 2014/in Environment, What's The Buzz /by Fuel Freedom Staff

New York state has banned hydraulic fracturing, the drilling technique known as fracking, citing risks to the state’s air and water, as well as other potential harmful effects on people’s health.

The decision was announced by the administration of Gov. Andrew Cuomo, who had sent mixed signals previously about his intentions.

The New York Times reported:

The question of whether to allow fracking has been one of the most divisive public policy debates in New York in years, pitting environmentalists against others who saw it as a critical way to bring jobs to economically stagnant portions of upstate.

Mr. Cuomo, a Democrat who has prided himself on taking swift and decisive action on other contentious issues like gun control, took the opposite approach on fracking. He repeatedly put off making a decision on how to proceed, most recently citing a continuing — and seemingly never-ending — study by state health officials.

On Wednesday, six weeks after Mr. Cuomo won re-election to a second term, the long-awaited health study finally materialized.

According to ThinkProgress:

… state Department of Environmental Conservation commissioner Joseph Marten said he would issue a “legally binding findings statement” seeking prohibition of the controversial process.

Fracking involves injecting water and chemicals into shale rock to free trapped oil and natural gas. The practice has been in limbo in the state for the past five years, but in June a state appeals court ruled in favor of local governments seeking to ban fracking on their own. In light of that decision, along with proposed bans on fracking near aquifers and in state parks, according to ThinkProgress:

… Marten said that 7.5 million acres, or 63 percent of Marcellus shale [a formation that lies beneath large sections of New York, Pennsylvania and other states], would already be off limits to fracking. Activists say that 170 towns and cities in New York have already passed fracking bans or moratoria.

The acting state health commissioner, Dr. Howard A. Zucker, said the state’s investigation had found “significant public health risks” associated with fracking. The NYT goes on:

Holding up scientific studies to animate his arguments, Dr. Zucker listed concerns about water contamination and air pollution, and said there was insufficient scientific evidence to affirm the long-term safety of fracking.

Dr. Zucker said his review boiled down to a simple question: Would he want to live in a community that allowed fracking?

He said the answer was no.

“We cannot afford to make a mistake,” he said. “The potential risks are too great. In fact, they are not even fully known.”

Whatever OPEC does, U.S. oil companies will keep drilling

November 25, 2014/in Economy, What's The Buzz /by Fuel Freedom Staff

Bloomberg has a story about what U.S. drillers will do in response to whatever OPEC does this week at its regular meeting.

OPEC, led by its top producer, Saudi Arabia, will do one of two things: Nothing, which means the cartel’s output will remain unchanged, and crude prices will say flat (or keep sliding). Or it could cut production, which “would lift prices and profits across the board and help finance further U.S. energy innovation,” the Bloomberg story says.

Either way, U.S. producers will have the same response: Drill on.

“The industry is very resilient, as strong as ever in recent history,” Tony Sanchez III, chief executive of Texas producer Sanchez Energy Corp. (SN), said in an interview. “The technological advances we’ve made underpin virtually everything right now.”

A continued price plunge would put more pressure on U.S. companies, but they’re increasingly insulated by OPEC’s actions, the story says.

The swagger of U.S. producers in the face of plunging oil prices shows the confidence they’ve gained from upending OPEC’s six decades of market dominance with technology that wrings oil from dense rock for prices as low as $40 a barrel. The shale boom has placed the U.S. oil industry in its strongest position since OPEC began flexing its pricing power in the early 1970s.

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

November 24, 2014/in Featured, What's The Buzz /by Fuel Freedom Staff

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

November 13, 2014/in Environment, What's The Buzz /by Fuel Freedom Staff

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.

$fracking graphic$ But 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

November 6, 2014/in What's The Buzz /by Fuel Freedom Staff

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

November 5, 2014/in What's The Buzz /by Fuel Freedom Staff

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.