Since 2009, oil prices have enjoyed a prolonged period of remarkable stability characterized by annualized volatility significantly below its long-term average. And though volatility has ticked up markedly in recent months due to the escalating conflicts in Russia and Iraq, oil prices haven’t risen much above $115 a barrel and have actually declined sharply in recent weeks.
The federal government has sold more than 400,000 acres in the Gulf of Mexico off the Texas coast for oil and gas exploration and development, an official with the Bureau of Ocean Energy Management said Wednesday.
Walter Breidenstein may be the only CEO in America who still answers the company phone himself. If his operation is still something of a shoestring, it’s because he’s spent four years trying to duel with perhaps the most formidable foe in the country, the oil companies.
“I’ve been trying to get into North Dakota for four years to show them there’s a way to make money by stopping flaring,” says the 48-year-old who started his entrepreneurial career at 15 by washing dishes. “The oil companies have done everything they can to keep me out of the state and the bureaucracy has pretty much goes along with them. The companies know that as soon as they acknowledge we’ve got a workable system here, they’d have to buy one of our rigs for every well in the state.”
North Dakota, in case you haven’t heard, has become one of the biggest wasters of natural gas in the world by flaring off $1 billion worth a year while producing carbon emissions equal to 1million automobiles. But oil is what the drillers are after and, as it was in the early days of the oil industry; gas is regarded pretty much as a nuisance. The result is gas flares that make the whole state look like neighboring Minneapolis from outer space.
The flaring has generated a lot of negative publicity, environmentalists are up in arms and landowners have sued over lost royalties. The big guys are starting to move into the state. The New York Times ran an article this week about new pipeline construction, fertilizer factories and GE’s “CNG in a Box,” which will capture flared gas and sell it asnatural gas.
Breidenstein has a different idea. “Somewhere around 2000 I started reading about methanol technology and realized it was a very undervalued resource,” he says. “Then I read George Olah’s The Methanol Economy in 2006 and that convinced me. At Gas Technologies we’ve been trying to put Olah’s vision into practice.”
Gas Technologies has developed a $1.5 million portable unit that captures flared gas and converts it to methanol. “It’s a very accessible device,” says Breidenstein. “You can move it around on a flatbed truck.” The company ran a successful demonstration of a smaller unit at a Michigan oil well last fall but still hasn’t been able to break into North Dakota.
“The oil companies’ attitude is that money is no problem as long as they don’t have to spend it,” says Breidenstein. “I’ve been in the business 25 years and I know where they’re coming from. But the problem is no one is forcing them to deal with flaring. And as long as they can keep throwing that stuff into the atmosphere for free, nobody’s going to look for a solution.”
You’d think with a billion dollars worth of natural gas being burning off into the atmosphere each year, though, there’d be some say to make money off it and that’s what frustrates Breidenstein.
“Our rig costs between $1 and $2 million dollars,” he says. “But by capturing all the products of flared gas, you can make around $3500 per day. That puts your payback at around three to four years. But the oil companies don’t think that way. They won’t look at anything that goes out more than six months.
That puts things in the hands of state regulators and so far they have sided with the oil companies. “By statute, the oil companies are allowed to flare for a year it there’s no solution that’s economical,” says Alison Ritter, public information officer for the North Dakota Department of Mineral Resources. “There’s nothing we can do to require them to buy from one of these boutique firms. Many oil companies have already committed their gas to pipeline companies and they can’t back out of those contracts.” Still, the pipelines may not be built for years. “You have to understand, the Bakken Oil Field is 15,000 square miles, the size of West Virginia,” adds Ritter. “It’s hard to service it all with infrastructure. We’re building pipelines as fast as we can.” Of 40 applications for flaring exemptions submitted this year the state has approved two and denied one, with the other 37 pending. While they are pending, flaring goes on.
Of course if Gas Technologies were to start receiving orders right now, they’d be hard pressed to produce a half-dozen of them let alone the 500 that the state might require. “We’ve had talks with venture capitalists but if you’re not from Silicon Valley, they’re not interested,” says Breidenstein. “But we’ve got a business model here and we know it can work.”
At least someone has taken notice. This year Crain’s Detroit Business rated Gas Technologies Number One in the state for innovative technology, ahead of 99 other contenders, including General Motors, Ford, Volkswagen, Whirlpool, Dow Chemical and the University of Michigan. “Because the Walloon Lake company’s patents are potential game-changers, its patents rank high on the value meter with a score of 156.57 (anything over 100 is considered good),” said the editors.
It may not be long before others start noticing as well.
Radio host Dennis Prager speaks to Fuel Freedom Foundation cofounder, Yossie Hollander, about how the organization is planning to end America’s addiction to oil by opening the fuel market to American-made replacement fuels that are cheaper and cleaner. Hollander discusses the alternative fuels, the current regulatory environment and dispels some common myth surrounding the price of oil.
