IPAA: Impact of the American Natural Gas Resurgence

Wednesday, January 29th, 2014


WASHINGTON, D.C.—  In our previous article, we focused on how the rising trend for domestic production, especially for oil, was benefiting the U.S. economy with increased jobs, and at the same time improving the country’s trade balance, its geopolitical standing, and its economic impact on world energy markets. Our focus now shifts to the parallel stimulus from the dramatic revival of American natural gas production.

As noted in the prior article, U.S. natural gas production reached an all-time high in 2011, and then surpassed that in 2012 at 25.3 trillion cubic feet, its seventh annual increase in a row. Marketed production for January-October 2013 (latest available) is maintaining, if not exceeding 2012’s level. In addition to dry natural gas produced from natural gas wells, these production figures include natural gas produced as a by-product from oil wells, known as “associated gas.” It also reflects the production from “wet” natural gas wells, the economics of which are strongly influenced by the potential value of extracted natural gas liquids (NGLs) in addition to the natural gas itself.


Miller Energy Company Announces Management Team Addition

Tuesday, January 14th, 2014



Miller Energy Company (MEC) names Joe L. Holsen as Engineering Manager, where he will be responsible for handling all facets of reservoir appraisal and engineering pertaining to new ventures and existing assets.  Holsen will join the management team in growing the company’s net asset value by sourcing acquisition opportunities aligned with company objectives.

“Joe’s strong technical skills, A&D experience, and entrepreneurial spirit make him a great fit for our company culture and complement the depth of experience we have on our team,” Michael J. Miller, President & CEO, said.

Holsen has more than 23 years of diversified experience in the oil and natural gas industry including production, drilling, and reservoir engineering.  His expertise includes acquisitions and divestures, field development design and operations, reserves, economic evaluations and business development.  Joe has worked in numerous areas throughout the United States, such as the Appalachian Basin, Texas, Louisiana, Colorado, Oklahoma and Utah.

Most recently, Holsen was Executive Vice President of Reservoir and Production Engineering for PetroEdge Energy.  While at PetroEdge he was responsible for designing and managing field development and operations, as well as evaluating acquisition and divestiture opportunities which included direct participation in successfully closing deals totaling $280 million.  PetroEdge recently sold its assets to StatOil, and Joe has been assisting with the transition while considering new opportunities.

“Joe joins MEC at a strategic time as we look to continue to grow our company in a way that capitalizes on our longstanding reputation in the industry by acquiring and developing onshore domestic oil and natural gas properties,” Miller added.

Miller Energy is an oil & gas exploration and production company that is dedicated to finding and developing our nation’s energy needs. With offices in Houston, TX and Kalamazoo, MI, Miller Energy, originally Miller Brothers, was founded by John and Gene Miller, both of whom have been pioneers in the oil & natural gas industry. Today, Miller Energy continues its fourth generation of outstanding industry leadership.

# # #

For further information contact:

Luke Miller

Miller Energy Company


Miller Energy Sponsors Hydraulic Fracturing Panel at Kalamazoo Nature Center

Monday, September 16th, 2013

Miller Energy has agreed to sponsor and will be apart of a three person panel discussion on the topic of Hydraulic Fracturing.  The panel discussion, organized by the Southwest Michigan Sustainable Business Forum, will take place on Thursday, September 19, 2013, at the Kalamazoo Nature Center at 12 pm.  

For registration, fees, and more information please click here.

Michigan Chamber of Commerce Launches Statewide Campaign to Protect Michigan’s Energy Future

Wednesday, August 7th, 2013


Interesting video that shows there are always 2 sides to every story

Tuesday, July 30th, 2013

Fracking fables refuted

Thursday, July 25th, 2013

Gasland II’s Luddite Slander of ‘Fracking’ Is The Latest Technophobe Attack on Progress – Forbes

Tuesday, July 23rd, 2013



Energy In Depth: New Federal Study: Fracking Did Not Pollute Groundwater

Tuesday, July 23rd, 2013

9:09am EDT July 19, 2013

by Dana Bohan, Washington, D.C.

It’s the linchpin argument of the anti-fracking movement, and federal researchers are once again saying it’s without merit.

New research from the National Energy Technology Laboratory, part of the U.S. Department of Energy, has found that fluids used in the hydraulic fracturing process (often called “fracking”) did not contaminate drinking water aquifers. As reported by the Associated Press:

Drilling fluids tagged with unique markers were injected more than 8,000 feet below the surface, but were not detected in a monitoring zone 3,000 feet higher. That means the potentiallydangerous substances stayed about a mile away from drinking water supplies.

Eight new Marcellus Shale horizontal wells were monitored seismically and one was injected with four different man-made tracers at different stages of the fracking process, which involves setting off small explosions to break the rock apart. The scientists also monitored a separate series of older gas wells that are about 3,000 feet above the Marcellus to see if the fracking fluid reached up to them.

The industry and many state and federal regulators have long contended that fracking itself won’t contaminate surface drinking water because of the extreme depth of the gas wells. Most are more than a mile underground, while drinking water aquifers are usually within 500 to 1000 feet of the surface.

On his “Frequently Asked Questions” page, Josh Fox – director of Gasland and Gasland Part II – claims the threat of water contamination from hydraulic fracturing is “very serious” and that fracking fluids “seep into the water supply.” Today’s findings – based on actual research in the field – appear to directly contradict that claim.

This latest research from NETL also adds to an extensive list of expert testimony and research from federal agencies and regulators that similarly yielded no evidence of hydraulic fracturing contaminating groundwater.

For example, Lisa Jackson – President Obama’s former EPA administrator – said last year that “in no case have we made a definitive determination that the [fracturing] process has caused chemicals to enter groundwater.” A year earlier, she told a congressional panel that she was “not aware of any proven case” where such an incident had occurred. Prior research from the EPA also noted there were “no confirmed cases” of hydraulic fracturing contaminating drinking water supplies.

In 2009, the U.S. Department of Energy released a report (in partnership with the Ground Water Protection Council) that made a similar conclusion:

“[B]ased on over sixty years of practical application and a lack of evidence to the contrary, there is nothing to indicate that when coupled with appropriate well construction; the practice of hydraulic fracturing in deep formations endangers ground water. There is also a lack of demonstrated evidence that hydraulic fracturing conducted in many shallower formations presents a substantial risk of endangerment to ground water.” (p. 39)

Meanwhile, state regulatory agencies across the country – who are the entities tasked with actually regulating hydraulic fracturing – have consistently affirmed that the process does not pose a credible risk to drinking water aquifers.

SOURCE: American Petroleum Institute

SOURCE: American Petroleum Institute

It’s worth pointing out that NETL’s research is still ongoing, which means there will be additional findings to help inform the discussion over the safety of hydraulic fracturing, and indeed shale development as a whole. But today’s research is certainly “good news,” as Duke University’s Rob Jackson noted.


Wall Street Journal: Oil Boom Gives U.S. More Policy Options

Friday, July 5th, 2013
 Bloomberg       The Suncor Energy Inc. base plant

Growing North American oil supplies promise to bolster U.S. energy security, but they already are helping deliver a more global benefit: stable oil prices.

Chip Cummins explains how North America’s oil boom is acting as a shock absorber to global price hikes and how it has given policy makers a new set of governing options. Photo: Getty Images.


Among the beneficiaries of that are policy makers in Washington, who have less need to worry about the market impact of decisions they make.

On Jan. 15, the operator of a North Sea pipeline shut the system down after a leak, bottling up oil output from nine offshore production platforms. In years past, such an outage might have sent oil prices hurtling higher. Yet prices that day actually declined a bit.

Crude prices have remained remarkably stable over the past year in the face of a long list of supply disruptions, from Nigerian oil theft and Syrian civil war to an export standoff between Sudan and South Sudan. The reason in large part is a thick new blanket of North American oil cushioning the markets. This has “moderated” the market effect of recent outages, said Adam Sieminski, administrator of the U.S. Energy Information Administration.

The new supply isn’t yet pushing prices lower, and analysts differ over whether it will. But it is acting as a shock absorber in a global supply chain that pumps 88 million barrels of oil to consumers each day.

That helps everyone from manufacturers to motorists, by steadying fuel prices and making budgeting easier. And in a less-noticed effect, it provides new geopolitical leverage to the U.S.

The increasing U.S. energy supply “helps reduce our vulnerability to global supply disruptions and price shocks” and thus “affords us a stronger hand in pursuing and implementing our international security goals,” Tom Donilon, the White House national-security adviser until recently, said in April.

Exhibit A: Washington’s success last year in pushing through tough new economic sanctions against Iran to blunt its nuclear ambitions. U.S. and European Union sanctions reduced Iran’s oil exports by about a million barrels a day last year, according to the EIA. The drop had little lasting impact on prices—an outcome that would have been practically unthinkable a few years ago, said John Hannah, national-security adviser to Vice President Dick Cheney in the second George W. Bush term.

The Bush administration had been wary of moves that could cut Iran’s oil exports because of the likely effect on markets and price volatility, according to Mr. Hannah. “To be able to do what we did last year with [that] kind of relative price stability…was a real eye-opener for people in the national-security community,” he said.

Higher global oil inventories and output, including from the world’s top swing producer, Saudi Arabia, helped moderate market reaction to the lost Iranian barrels. But new U.S. shale-oil and Canadian oil-sands output provided an extra cushion amid a handful of production outages around the world.

Carlos Pascual, the State Department’s top energy official, said increased oil supplies, especially in the U.S., “have been absolutely essential at being able to undertake the kind of negotiations that we have had with countries around the world to reduce their imports of crude oil from Iran.”


In the late 1990s, oil prices started a long rally, climbing more than tenfold over a decade as demand outstripped production growth. Though prices plunged during the 2008 financial crisis, they soon started up again. The near-perpetual tightness conditioned markets to expect price jumps after even minimal supply interruptions. That is starting to ease, as U.S. benchmark oil moves in a relatively tight range between roughly $90 and $100 a barrel—closing regular trading Tuesday at $99.60 a barrel.

Big disruptions can still move the price of oil. U.S. benchmark crude topped $100 a barrel later Tuesday partly on worries about Mideast supply amid protests in Egypt and the threat that the military could intervene there.

Still, price volatility was the lowest last year since at least 2000 for the U.S. and European crude-oil benchmarks, according to an analysis by The Wall Street Journal that was reviewed by University of Houston professor Craig Pirrong, who studies commodities pricing. So far this year, price volatility has fallen further. The daily fluctuation is about half that of the early 2000s, Mr. Pirrong said.

North America has added about 1.8 million barrels of daily oil production in the past two years. The Paris-based International Energy Agency forecasts the continent as a whole will add a further 3.9 million barrels of daily output by 2018.

In the U.S., the growth is largely due to new drilling methods that reach oil trapped in shale and other rock. In Canada, an explosion of new investment has flowed into extracting heavy crude from quartz-sand deposits. Mexican production has been basically flat.

Though most large oil-consuming nations hold emergency stockpiles, economists track spare production capacity as the most reliable cushion for supply shocks. Idle pumping capacity that can be called upon quickly resides primarily with members of the Organization of the Petroleum Exporting Countries.

The new North American oil production has reduced U.S. imports from OPEC members—in effect giving OPEC more spare capacity. Economists at Barclays BARC.LN +0.79%PLC figure global spare capacity at about 2.7 million barrels a day, up sharply from 1.5 million barrels a year ago.

Certain developments could change this picture. If oil prices start falling, as some economists forecast, OPEC members would have less incentive to do the spending that keeps so much unused capacity at the ready. Alternatively, if a pickup in economic activity in big consuming countries drove up their demand, this could reduce the new global cushion.

There also are questions about the economics and geology of the U.S. oil boom itself. The cost of producing oil in America’s hottest fields is unsettled, and varies widely. If costs generally end up on the high side, producers will need higher global prices to justify continued drilling. In addition, U.S. shale-oil wells have tended to deplete quickly, raising questions about the sustainability of the recent production growth.

The market’s calmer tone is striking. Royal Dutch Shell RDSB.LN +0.46%PLC in April knocked out 150,000 barrels of daily production when it closed a pipeline in Nigeria amid rampant oil theft. It declared force majeure, invoking a common contract clause that frees parties from liability because of a circumstance beyond their control.


In the recent past, this would have caused Nigeria’s crude-oil benchmark price to shoot up against international benchmarks, said Miswin Mahesh, a commodities analyst at Barclays. But a decline in American imports from Nigeria has left more Nigerian crude sloshing around. “Now, even with a force majeure, the price differentials don’t move,” Mr. Mahesh said.

In the case of the North Sea pipeline shutdown in January, the effect on the well-cushioned market was so small that a technical trading issue overshadowed it and allowed prices to decline that day.

The new stability is a potential boon for a company such as Dow Chemical Co., DOW +0.36%one of the world’s largest industrial buyers of petroleum products. In the past, Dow sometimes changed prices for the petrochemicals it makes several times a month as it tried to keep up with the rapidly shifting cost of inputs. Now, “we are cautiously optimistic that new supplies will have the capability to make more secure prices, which can be very helpful for our company,” said Brian Ames, president of a Dow unit that makes olefins, which are used in such things as shoe soles and insulated wire.

A Washington think tank called Securing America’s Future Energy took up the energy-security issue in 2005 as worries spiked. U.S. engineers were struggling to restore Iraq’s oil industry. Big chunks of Nigerian output were off the market because of militant attacks.

The group, made up of business executives, former diplomats and retired military leaders, hosted “Oil ShockWave” simulations, inviting former senior policy makers to role-play responses to hypothetical oil-market disruptions. Former Treasury Secretary Robert Rubin played the part of the president’s national-security adviser in a 2007 simulation in which unrest closed a pipeline linking the Caspian and Mediterranean seas while Venezuela and Iran cut output to protest sanctions on Iran, sending global oil prices soaring.

Since then, the new North American production has been “giving us flexibility,” said Sam Ori, executive vice president of the think tank, in what he called a “national-security dividend.” He said the exercises are still worth doing, as the global economy remains vulnerable to both supply and demand shocks.

The group plans to resume its emergency simulations at some point, but isn’t planning one this year. “Is it harder to do? Yes,” Mr. Ori said. “You have to have a much bigger supply disruption.”

—Keith Johnson and Sarah Kent contributed to this article.

Write to Chip Cummins at and Russell Gold at

A version of this article appeared July 3, 2013, on page A1 in the U.S. edition of The Wall Street Journal, with the headline: Oil Boom Gives U.S. More Policy Options.

Energy in Depth: USGS Finds Methane in Pa. Water Unrelated to Drilling

Thursday, June 27th, 2013
by John Krohn , Washington, D.C.

Weeks after the release of a peer-reviewed study that found methane is “ubiquitous” in the groundwater of Susquehanna County, Pa., a new U.S. Geological Survey (USGS) review shows this phenomenon isn’t limited to just one Pennsylvania county.  In fact, the USGS examination lends further scientific credence to the fact that methane in the Commonwealth’s groundwater is a fairly widespread occurrence – even in areas without any Marcellus Shale gas wells.

The USGS study sampled 20 water wells in Sullivan County in an area that hasn’t seen any shale development. Their results were both alarming and enlightening.  For those unfamiliar, Sullivan County is due south of Bradford County, which is the most heavily drilled county that sits atop the Marcellus Shale.

Specifically, 30 percent of the samples contained detectable levels of methane, and ten percent had levels above one milligram per liter (mg/L). In fact, measurements ranged as high as 51.1 mg/L.  What’s more?  The USGS researchers also conducted isotopic testing on the samples with the highest recorded methane levels, concluding that “the isotopic ratio values fell in the range for thermogenic (natural gas) source.” Such a finding appears to contradict Duke University’s previous research on methane in Pennsylvania groundwater which surmised that methane in groundwater was attributable to Marcellus Shale development. The Duke study alleged that the thermogenic origin of the methane suggested a link to gas wells – and yet the latest USGS findings showed thermogenic methane in pre-drill testing!

The USGS analysis also found the wells registering high levels of methane also had the highest concentrations of arsenic, boron, bromide, chloride, fluoride, lithium, molybendum, and sodium.  If these contaminants sound familiar, they should.  They, in addition to thermogenic methane, have been touted by anti-fracking activists as examples of “contamination” from shale development in nearby Susquehanna and Bradford counties. Is it possible that critics of hydraulic fracturing are peddling phony science?

Nor were those the only contaminants the USGS researchers found.  The testing also uncovered concentrations of gross-alpha radiation and radon-220 that exceeded maximum contaminant levels (MCL) set by the U.S. Environmental Protection Agency. One sample tested for gross-alpha radiation at twice the level of EPA’s primary threshold, and 17 of the 20 wells sampled contained levels of radon-220 above EPA’s proposed MCL of 300 pCi/L.

As if methane, radiation and a host of other contaminants weren’t enough, the researchers also found that 20 percent of the samples exceeded EPA’s secondary MCL of 300 ug/L for iron. Manganese concentrations also exceeded EPA’s secondary MCL of 50 ug/L in 35 percent of the samples.

In sum: groundwater in Sullivan County, like so many counties in northeastern Pennsylvania, naturally contains methane, radon and a whole host of contaminants that have nothing do with Marcellus Shale development.

Niobrara Report (EID’s Lomax): Gasland sequel cements Fox’s status as fringe player

Wednesday, June 19th, 2013



Energy in Depth – Blog Archive Wall Street Journal: U.S. Oil Notches Record Growth Thanks to Shale

Tuesday, June 18th, 2013


U.S. crude-oil production grew by more than one million barrels a day last year, the largest increase in the world and the largest in U.S. history.

The U.S. last year posted the biggest increase in oil production in the world and largest increase in U.S. history. But is there a shadow in the form of a central bank looming oil prices? Heard on the Street editor Liam Denning reports.

In the latest sign of the shale revolution remaking world energy markets, crude production in the U.S. jumped 14% last year to 8.9 million barrels a day, according to the newly released Statistical Review of World Energy, an annual compilation of industry trends published by BP BP.LN +0.48%PLC for more than six decades.

The wave of new crude, flowing in oil fields from North Dakota to south Texas, helped keep the global market adequately supplied and helped markets weather declining oil production elsewhere in the world.


“The growth in U.S. output was a major factor in keeping oil prices from rising sharply, despite a second consecutive year of large oil supply disruptions,” said BP Chief Executive Bob Dudley.

In volume terms, last year’s U.S. production gain of 1.04 million barrels a day surpassed the earlier biggest annual increase of 640,000 barrels per day, recorded in 1967.

Most of this new production is coming from dense shale-rock formations, such as the Bakken Shale in North Dakota and the Eagle Ford Shale in Texas. In recent years, the oil industry has developed techniques to hydraulically fracture, or frack, these shales, freeing up previously trapped oils.

Beyond the U.S., oil production increased almost 7% in Canada, raising North America’s profile as a global oil producer.

The boom in the North American oil patch contrasts sharply with developments in many big oil-producing countries such as Nigeria and Venezuela, where aging oil fields and political strife led to steep declines.

Despite rising U.S. production, the nation remains a large crude importer. However, it is bringing in fewer barrels than at any time since the mid-1990s. That is freeing up some traditional suppliers to ship their barrels elsewhere and satisfy rising demand in Asia and Latin America.

This surge of U.S. oil output is expected to have only a modest impact on global prices. The U.S., the third-largest global crude producer behind Saudi Arabia and Russia, still pumps only about one of every 10 barrels world-wide. What’s more, restrictions on exporting crude oil from the U.S. have muffled its potential impact.


U.S. crude-oil production has raced ahead of new pipeline infrastructure to move it from oil fields to refineries. This has created regional gluts, such as in a major trading hub in Oklahoma, and driven down prices there. But it hasn’t spilled over to depress global prices or deliver substantial amounts of cheap oil and fuel to consumers. The average crude price at a major benchmark hub in Europe last year was $111.67 a barrel, compared with $94.13 in Oklahoma.

This could change as production rises and more pipelines are built—and as railroads move more crude around the country. “Growth in U.S. shale-oil production could have the most significant long-term impact on oil prices of any supply event in recent decades,” noted a report from Pacific Investment Management Co., which runs one of the world’s largest commodity funds. But current output “has not yet been sufficient to meaningfully weaken oil prices.”

While the U.S. shale boom increased production, many other oil-producing regions struggled with declining volumes. U.K. production fell 13.4% in 2012, as some of its North Sea oil fields near their fourth decade of life. Former OPEC member Indonesia experienced a 3.9% decline.

Libya grew its production from 479,000 daily to 1.5 million, mostly because it was able to restart output following disruptions related to its civil war. Powerhouse Saudi Arabia raised its world-leading output almost 4% to 11.5 million barrels per day.

The fracking techniques that have unleashed so much crude in the U.S. haven’t yet had an impact overseas. However, recent government reports suggest that Argentina and Russia could have enormous deposits of crude oil accessible through fracking. Development of these resources has been slowed by government policies, competition from less expensive fields and a scarcity of specialized equipment.


Bloomberg News

David Vannapha, left, Mario Ramos, center, and Jose Garza work on the Orion Perseus drilling rig in Webb County, Texas.

The extra North American supply made it easier for the U.S. and Europe to impose tough sanctions on Iranian oil exports in a bid to hamstring its nuclear-weapons development. Iranian oil production fell 16% to 3.7 million barrels per day, the largest drop among major producers, BP said. Other oil-market analysts have said Iranian exports have fallen by more than one million barrels per day since sanctions took full effect last summer.

Additional supplies also make it easier to deal with rising demand from energy-hungry countries such as China, whose quest to lock up oil and gas resources has been a source of friction. Much of the recent tension in the South China Sea, for example, is due to China and its neighbors eyeing potentially rich underwater hydrocarbon reserves.

“A better-supplied world is a safer world,” Daniel Yergin, vice chairman of energy consultancy IHS, said at a conference Wednesday.

Improved energy efficiency and Europe’s weak economy kept a lid on demand in 2012. BP said world consumption grew 0.9%. Europe and North America used less oil, while the rest of the world, led by China, used more.

While the U.S. gusher tamped down the effect of supply problems elsewhere, BP noted average oil prices remained at record-high levels last year. The prices reflect relentless demand for oil from developing countries, including China, India and most of the Middle East.

Measured in 2012 dollars, the average oil price last year of $111.67 per barrel of Brent crude was just $2 lower than in 2011, which was the highest price at any time since the post-Civil War boom in Pennsylvania in the 1860s, BP said. Both prices were higher than such watershed years as 2008, when oil nearly hit $150 a barrel in the summer and the average was $103.71 a barrel in current dollars; 1979, when the Iranian revolution roiled markets; and 1973, the year of the Arab oil embargo.

On Wednesday, the World Bank forecast global oil prices would drop to $102 a barrel this year from $105 last year, based on an average of global benchmarks. It added that “over the longer term, oil prices are projected to fall” as supply growth from shale-rock deposits accelerate.

—Jerry A. DiColo and Selina Williams contributed to this article.

Energy In Depth: Another Hypocritical PR Stunt from Patagonia

Tuesday, June 18th, 2013

As an oil and gas industry advocate, I’m always on the lookout for activist misinformation when I’m reading the newspaper, watching TV and surfing the Internet. But I was completely caught off guard recently while flipping through the pages of a retail catalog.

The latest Patagonia catalog includes a glossy, two page spread on hydraulic fracturing. The piece, penned by Casey Sheahan, the CEO of Ventura, Calif.-based Patagonia, makes numerous false claims to mislead readers into thinking hydraulic fracturing is scary and unsafe.

If you’re a casual catalog shopper, you may not be aware that Sheahan is an established anti-oil and gas activist who has been critical of the industry in the press, and sells copies of Gasland on the Patagonia website. Using the catalog to push activist talking points indicates a whole new level of desperation by Sheahan to be taken seriously.

But the hypocrisy here is astounding. Despite their best efforts to publicly distance themselves from fossil fuels, Patagonia’s stores are filled with clothes and other products made from petroleum-based products, such as polyester and nylon. But more importantly, those products are made in factories powered by fossil fuels and shipped to stores and homes in boats, planes, trains and trucks that run on fossil fuels. For example, Patagonia’s factories in China run off a power grid that gets 65 percent of its electricity from coal. For comparison’s sake, in America about 37 percent of electricity comes from coal. And to get Patagonia’s products from China to the U.S. requires shipping them more than 6,000 miles across the Pacific Ocean. Then there’s all the transportation required from West Coast port to the rest of the country, and all the additional energy that’s required to light, heat and cool Patagonia’s retail stores. At best, a tiny fraction of this energy comes from wind turbines and solar panels.

It takes a lot of energy to make and distribute Patagonia’s products, and we are proud that fossil fuels can power so many businesses, provide economic opportunities, and support thousands of jobs at companies just like Patagonia. But if Sheahan really felt that the oil and gas industry should be shut down, he should stop production on all Patagonia petroleum-based products, at the very least. We know that won’t happen, because while he’d like his activist friends on the East and West coasts to think he’s one of them, he’s also a shrewd businessman who recognizes that his brand cannot exist without oil and natural gas.

Beyond this hypocrisy, Sheahan’s diatribe against the oil and gas industry contained plenty of misinformation. Here are some of the worst examples:

Claim: Hydraulic fracturing is “…a water-and chemical-intensive method…” and “One fracking well uses and average of 2 million to 8 million gallons of water and 10,000 to 40,000 gallons of chemicals.”

FACT: It’s easy to claim that hydraulic fracturing is a water and chemical intensive process, but the facts tell a different story. In Colorado, hydraulic fracturing accounts for a mere 0.1 percent of total water use. Just for comparison, agriculture accounts for more than 85 percent.

The U.S. Department of Energy confirms the miniscule impact hydraulic fracturing has on state water use:

“The amount of water needed to drill and fracture a horizontal shale gas well generally ranges from about 2 million to 4 million gallons, depending on the basin and formation characteristics. While these volumes may seem very large, they are small by comparison to some other uses of water, such as agriculture, electric power generation, and municipalities … Calculations indicate that water use for shale gas development will range from less than 0.1% to 0.8% of total water use by basin.”

The amount of chemicals in the hydraulic fracturing fluids accounts for less than 1 percent of the total volume. About 99 percent of that fluid is just water and sand, and remaining additives aren’t anywhere near as scary as the activists would have you believe. You’ll find many of the same substances in products used around the house, such as disinfectant, laundry detergent or toothpaste.

And while I don’t condone this kind of fear mongering, the activists at Greenpeace have also made some pretty scary claims about the “chemistry” of outdoor clothing, including the Patagonia brand. Having been the target of these kind of scare tactics against an industry, it’s even more disappointing that Patagonia chooses to use them against oil and gas.

Claim: “According to a new Cornell University study, the sum process appears to be worse for climate change than the coal industry and is more toxic to the environment and human health.”

FACT: Put simply, the oil and natural gas industry doesn’t make global warming worse. In fact, thanks to hydraulic fracturing, we are using more natural gas and less coal. As a result, we’re actually cutting our carbon emissions faster than any other nation.

As for the Cornell study referenced, it’s been debunked time and time again by authoritative sources. For example, Carnegie Mellon University’s research (which, we will note, was partly funded by the Sierra Club) concluded that “We don’t think [the authors are] using credible data and some of the assumptions they’re making are biased. And the comparison they make at the end, my biggest problem, is wrong.”

The authors of the discredited paper, Robert Howarth and Anthony Ingraffea, were even harshly criticized by other researchers at Cornell, who said “Here we reiterate and substantiate our charges that none of [these] conclusions are warranted.”

CLAIM: “Sixty percent of those chemicals can harm the brain and nervous systems, 40 percent are known endocrine disrupters, 30 percent are suspected carcinogens, 30 percent are developmental toxicants.”

FACT: Though Sheahan never cites any sources for his bold claims, this appears to have been pulled from materials by known anti-industry organization, The Endocrine Disruption Exchange (TEDX).

- See more at:


Merrill Matthews: About Those Tax Breaks for Big Oil……

Thursday, April 4th, 2013

by:  Merrill Matthews

President Obama has been telling America for months that special tax breaks for the oil and gas industry must come to an end. The presidential demand always prompts puzzled gazes among tax and energy-industry experts, who ask: What special tax breaks?

Thanks in part to a bill sponsored by Rep. Chris Van Hollen, a Democrat from Maryland and ranking member on the House Budget Committee, it’s all much clearer now. The congressman has inadvertently called attention to the fact that those special tax breaks just for the oil and gas industry don’t exist. Mr. Van Hollen proposes to create some very special punishments instead. Regardless of the bill’s fortunes on Capitol Hill, it has already performed a public service by illuminating the fallacy behind assaults on the industry.

Mr. Van Hollen’s ”Stop the Sequester Job Loss Now Act” would raise taxes on individuals—what he calls the “Fair Share on High-Income Taxpayers”—and effectively hike taxes on the oil and gas industry by changing the way their taxes are calculated. The problem with the bill is that the so-called tax breaks the industry would lose are not specific to oil and gas at all. They are widely available to lots of industries.

Title III of the act goes after oil and gas with: a limitation on the section 199 deduction; a prohibition on using last-in, first-out accounting for major integrated oil companies; and a modification of the foreign tax-credit rules.

Section 199 is part of the domestic production activities deduction that was included in the American Job Creation Act of 2004, which passed with strong bipartisan support, especially in the Senate. It currently provides a 9% tax deduction from net income for businesses engaged in “qualified production activities” in the U.S. Those activities include manufacturing a product, selling, leasing or licensing it, and engineering and software activities related to that production. The deduction was intended to encourage domestic manufacturing, and in the hope that the tax break could provide a slight competitive advantage against foreign competition.

The oil and gas industry, especially in its extracting and refining, is heavily involved in U.S. manufacturing. Congress already penalizes the industry by only giving it a 6% deduction, rather than the 9% that other industries receive.

But whatever the percentage allowed, this isn’t a special deduction for oil and gas. Many other manufacturing industries—including farm equipment, appliances and pharmaceuticals—take the deduction. Mr. Van Hollen’s bill refers to the disqualification of two industries from these benefits as a “Special Rule for Certain Oil and Gas Companies.” In terms of fairness, it’s like telling oil company workers that they can’t take the home-mortgage deduction anymore because they work for politically targeted companies.

Mr. Van Hollen also draws a bead on the last-in, first-out accounting method known as Lifo. Those who had accounting classes will recall that there are several widely accepted ways to value a company’s inventory. Lifo is one of them. It assumes that the last inventory in is the first used, sold or distributed—an accounting method often used by commodity-type industries. Mr. Van Hollen proposes to reduce those inventory options available to the oil and gas industry, even though they are, and will remain, widely available to most U.S. companies.

Critics of the industry claim that there are other ways of appraising oil and gas inventory that would result in a higher value, and thus companies would have to pay more taxes. But that’s like offering individuals the choice of taking the standard deduction or itemizing on their returns, and then demonizing a subset of people who choose the approach that minimizes their income tax obligation.

The third provision of Mr. Van Hollen’s bill seeks to change the foreign tax-credit rules—but only for integrated oil and gas companies. American companies operating in foreign countries have to pay the taxes imposed by those governments. The U.S. government generally gives companies operating in foreign countries a tax credit to offset the foreign taxes paid, so the companies are not taxed twice on the same foreign income. That generally includes royalties paid to foreign countries.

Mr. Van Hollen’s way of repealing this tax break for one particular industry is to assert that the royalties cannot be called a tax when they apply to that industry: “Any amount paid or accrued by a dual capacity taxpayer which is a major integrated oil company to a foreign country or possession of the U.S. for any period shall not be considered a tax.”  If an oil company can’t call a foreign royalty a tax, then it can’t get the foreign tax credit.

Ironically, USA Today just published the top-10 list of companies that paid the highest U.S. income taxes as of 2012, and oil industry companies took three of the slots. Number one was Exxon Mobil at $31 billion, followed by Chevron at $20 billion, and sixth was ConocoPhillips at $8 billion. That is about $60 billion in taxes among them, more than the other seven companies on the list—including Apple and Microsoft —combined. Don’t look for a presidential attack on Apple or Microsoft anytime soon.

Mr. Matthews is a resident scholar at the Institute for Policy Innovation in Dallas.

A version of this article appeared April 3, 2013, on page A17 in the U.S. edition of The Wall Street Journal, with the headline: About Those Tax Breaks for Big Oil . . ..

Silly celebrities! Fracking is for everybody

Monday, March 25th, 2013

Celebrities are now upset about fracking, the injection of chemicals into the ground to crack rocks to release oil and gas. With everyone saying they want alternatives to foreign oil, I’d think celebrities would love fracking.

I’d be wrong. Lady Gaga, Yoko Ono and their group, Artists Against Fracking, don’t feel the love. Yoko sang, “Don’t frack me!” on TV.

Stopping fracking is the latest cause of the silly people. They succeeded in getting scientifically ignorant politicians to ban fracking in New York, Maryland and Vermont.

Hollywood gave an Oscar to “Gasland,” a documentary that suggests fracking will shove gas into some people’s drinking water, so the water will burn. It’s true that some water contains so much natural gas that you can light it.

But another documentary, “FrackNation,” shows that gas got into plumbing long before fracking came. There’s gas in the earth. That’s why it’s called “natural gas.” Some gets into well water. Environmental officials investigated the flames shown in “Gasland” and concluded that the pollution had nothing to do with fracking.

“FrackNation” director Phelim McAleer tried to confront “Gasland” director Josh Fox about this, but Fox wouldn’t answer his questions. Instead, he demanded to know whom McAleer works for. He also turned down my invitations to publicly debate fracking. Many activists don’t like to answer questions that don’t fit their narrative.

Even some homeowners who filed a lawsuit claiming that their water was poisoned by fracking weren’t happy to learn that their water is safe. I’d think they would be delighted, but “FrackNation” shows a couple reacting with outrage when environmental officials test their water and find it clean.

The real story on fracking, say scientists, is that the risks are small and the rewards immense. Fracking lowered the price of natural gas so much that Americans heat our homes for less, and manufacturing that once left America has returned. For those concerned about global warming, burning gas instead of oil or coal reduces CO2 emissions.

“Skeptical Environmentalist” author Bjorn Lomborg points out that “green” Europe promised to reduce emissions, but “only managed to cut half of what you guys accidentally happened to do when you stumbled on fracking.”

Still, the process sounds dangerous. It requires chemicals and explosions. So fracking is now scapegoated for the usual litany of things that peasants feared when threatened with curses centuries ago: livestock dying, bad crop yields, children born with deformities.

None of it is backed by scientific evidence. Even environmentalists who usually are too cautious (by my standards) see little danger. President Obama’s first EPA administrator, Lisa Jackson, told Congress that the EPA cannot show “that the fracking process has caused chemicals to enter groundwater.”

One of the more outlandish fears is that fracking will cause earthquakes. Silly people at MSNBC say fracking creates “a skyrocketing number of earthquakes.” Yes, cracking rocks does cause vibrations. But then, so does construction with dynamite or jackhammers — not to mention trucks on the highway.

Time and again, as humans make a good-faith effort to find new, cleaner ways to produce the energy a growing population needs, environmentalists find a reason — often very small or non-existent — that makes the new method unacceptable.

They say coal is dirty and normal oil production might overheat the planet. Hydroelectric dams kill fish. Nuclear plants could suffer meltdowns. Windmills kill birds.

Some won’t be happy unless we go back to what we did before industrialization: burn lots of trees and die young.

Nothing is completely risk-free. Companies make mistakes. Chemical spills happen.

But those risks are manageable. They are also far preferable to the risk of paying more for energy — thereby killing opportunities for the poor.

So far, most regulators outside New York, Maryland and Vermont have ignored the silly people. So thanks to fracking, Americans pay less for heat (and everything else), the economy is helped, new jobs get created, we create less greenhouse gas, and for the first time since the 19th century, America may become a net exporter of energy.

Good things happen if the silly people can’t convince all politicians to ban progress.


Article written by:  John Stossel, and appeared in the Opinion Section of the  Kalamazoo Gazette, Sunday, March 24, 2013

The article can also be viewed on-line at

Are celebrity “fractivists” overlooking science in their condemnation of the fracking industry?

Wednesday, March 6th, 2013

The scene: a Manhattan art-house theater. The cause: a campaign against the gas drilling process known as fracking that’s being led by more than 100 celebrities, including Yoko Ono, Sean Lennon, Robert Redford, Mark Ruffalo and Mario Batali.

Outside, demonstrators in hazmat suits circle the theater. Inside, actress Scarlett Johansson attends a benefit screening of “Gasland,” the documentary film that has become the movement’s manifesto. Johansson tells The Associated Press that her “Avengers” co-star Ruffalo introduced her to the cause, and that she found the film “incredibly shocking.”

The campaign has galvanized hundreds of thousands of followers, but as with many activist causes, the facts can get drowned out by the glitz. Now, some experts are asking whether the celebrities are enlightened advocates or NIMBYs — crying “Not in my backyard!” — even as their privileged lives remain entwined, however ruefully, with fossil fuels.

Much of the anti-fracking activism is centered in New York City, where concerts, movies and plays use huge amounts of energy, gourmet chefs including Batali cook with gas, and most people — the glitterati included — heat with gas.

There’s no doubt that critics of hydraulic fracturing — a practice colloquially known as fracking that involves injecting water, sand and chemicals into underground rock to free vast reserves of gas — have some legitimate concerns. There have been documented cases of leaking gas ruining nearby well water, of air pollution and of problems from the waste the drilling generates. Experts say those are important parts of the story — but far from the whole story.

“With proper regulation and enforcement, gas provides a very substantial health benefit in reducing air pollution,” compared with coal-fired power plants, said Daniel Schrag, director of Harvard University’s Center for the Environment.

That is a theme not adequately covered in the debate over fracking, agreed Michael Greenstone, an environmental economics professor at the Massachusetts Institute of Technology and a former top adviser to the Obama administration. Greenstone is studying the local health effects of fracking, but he said it’s not scientifically accurate to ignore “the tremendous health gains” from the coal-to-gas shift.

“Honestly,” he said, “the environmentalists need to hear it.”

The main celebrity anti-fracking campaign took off last summer when Ono and Lennon, her son, founded Artists Against Fracking. Their family farm sits near gas reserves in New York, and they fear fracking might be allowed in the area. Some celebrities also speak out independently, or through other groups. Among the claims:

— Ono, at a news conference: “Fracking kills. And it doesn’t just kill us, it kills the land, nature and eventually the whole world.”

— Robert Redford, in a radio ad: “Fracking is a bad deal for local communities. It’s been linked to drinking water contamination all across the country. It threatens the clean air we breathe.”

— Alec Baldwin, in an editorial in the Huffington Post, described a scenario in which companies promise people “some economic benefit, deliver a pittance in actual compensation, desecrate their environment and then split and leave them the bill.”

— Josh Fox, the director of “Gasland,” to the AP: “We have the capability of running everything in this country — including our fleet of 240 million cars — off of electricity from wind and from solar and from hydropower.” Fox said that society should be changing over “to renewable energy and doing it vigorously and quickly. And we could be doing that in New York.”

While such claims may contain a kernel of truth, they are at best subjective and at worst misleading or even hypocritical, some environmentalists say.

“In truth, celebrities are rich, and they use far more energy and resources than anyone else. There’s this grass-roots NIMBY revolt against fracking,” said Michael Shellenberger, who heads the Breakthrough Institute, a nonpartisan Oakland-based environmental think tank that is releasing a report this month on the environmental benefits of natural gas.

Many self-labeled “fractivists” say drilling ruins drinking water and farms — think the fictional disaster spun in the Matt Damon vehicle “Promised Land” — and makes no sense, since it’s possible to quickly transform our society to one that’s powered by clean, renewable energy such as wind and solar.

Yet the boom has created jobs, reduced imports of oil and gas, and lowered energy bills. In contrast with Baldwin’s claim, local landowners have received billions of dollars in royalties, and the typical royalty of 18.75 percent is higher than what many novelists, actors or musicians are paid.

Pennsylvania dairy farmer Shawn Georgetti said he was struggling before signing a gas lease. Now, he’s been able to buy better and more fuel-efficient equipment and says the drilling hasn’t caused any problems. “It’s a lot more fun to farm,” he said.

As for Fox’s claim about the ease of shifting to wind, solar and hydropower, “if that was true, we’d be doing it,” said Stephen Ansolabehere, a Harvard University professor who has studied public attitudes toward renewable energy. “People think wind and solar are cheap; it’s just not right. They see what the prices are, and the support drops.”

Wind energy currently provides about 2 percent of total U.S. energy, and solar less than 1 percent. Hydropower is about 3 percent, and building more dams would also have environmental effects. In practical terms, it will take decades of nonstop solar, wind and other renewable investment to phase out fossil fuels.

Many celebrities are just beginning to embrace renewables. Sean Lennon told the AP in January that the family farm in upstate New York is still conventionally powered.

“I’m actually looking into it. It’s a long process,” Lennon said. “I’ve met with a lot of solar companies. I’m looking for the best possible solution, and there are a lot of options out there.”

Redford spokeswoman Joyce Deep wrote in an email that he installed passive solar in his home in the mid-’70s, but she didn’t know details about more recent installations. “Passive solar” means using windows or other materials in an energy-conscious way, not solar panels. Deep noted that Sundance, the Utah resort Redford helped found, uses some renewable energy.

Baldwin declined to comment about how much renewable energy he had installed, and Ono’s spokesperson said Lennon spoke for her, too.

Ruffalo, an Academy Award-nominated actor, made the switch to solar last year on his property in New York’s Catskill Mountains, also near gas reserves. “In fact, I have a 14 KW system on my single property,” Ruffalo wrote in an email. “It is a beautiful system.” And Fox said he uses electricity from wind power on a Pennsylvania property.

But experts note that even renewables need conventional backup, since the sun doesn’t always shine and the wind doesn’t always blow.

“It demonstrates the ignorance of renewable power advocates to suggest that renewables can run without gas. We don’t get to say, ‘I only want solar and wind,’” Shellenberger said.

Even the success that turns people into celebrities often involves tremendous amounts of energy. Restaurateur and Food Network star Batali started with one restaurant. He now has 16 — in New York, Las Vegas, Los Angeles, Hong Kong and Singapore — all using natural gas to cook.

Some of his restaurants “use a percentage of green power to help offset some of our non-renewable energy consumption, and we are looking to do more in the future,” Batali spokeswoman Elizabeth Meltz wrote in an email.

Some celebrities acknowledge the complexities.

“Obviously the entire society is addicted to fossil fuels, and the reason that we’re fractivists is to try to move toward a renewable economy,” Lennon said. “That doesn’t mean that any of us have extracted ourselves completely from the society itself, because the entire city’s running off of oil and gasoline.”

March 5, 2013 – Associated Press


Americans Back Keystone XL; Kerry Promises Action In ‘Near Term’

Tuesday, February 26th, 2013

Americans overwhelmingly favor construction of the Keystone XL pipeline, a poll has found, and a decision could be coming soon on TransCanada’s (NYSE: TRP) proposed $7 billion project.

A Harris Interactive Poll released Feb. 13 found that 69% of voters favor building the Keystone. Another 83% think the pipeline would strengthen domestic energy security and 92% think jobs are an important factor in considering the project. The poll was conducted on behalf of the American Petroleum Institute (API) and has a margin of error of +/-3.0%.

“The Keystone XL wraps new American jobs and energy security into a single common sense package,” said API President and CEO Jack Gerard. “That’s why voters overwhelmingly back it, and that’s why the nation needs it and why the administration should approve it. Millions of people are still looking for jobs in the United States, and we still import nearly half our oil, much from suppliers far less reliable and friendly than Canada.”

The pipeline’s fate appears to be near at hand. At a Feb. 8 meeting with Canadian Foreign Minister John Baird, U.S. Secretary of State John Kerry said the department has put in place a fair, transparent and accountable process that he is committed to seeing through.

“We hope that we will be able to be in a position to make an announcement in the near term,” Kerry told reporters. “I don’t want to pin down precisely when, but I assure you, in the near term.”

Baird said he and Kerry had a good discussion about energy policy.

“Obviously the Keystone XL Pipeline is a huge priority for our government and for the Canadian economy, and I appreciated the dialogue we had on what we can do to tackle environmental challenges together,” Baird said.

The U.S. House committee on Energy and Commerce has taken to needling PresidentObama about the long delay in making a decision. The committee has created a Keystone clock with an up-to-the second count of how much time has passed since the pipeline’s application was first submitted to the State Department about four years ago.

In a recent Twitter post, the committee wrote, “It took Lewis & Clark 1,121 days to explore the American West.  The white house  continues to delay  Keystone XL  after 1,600 days.”

According to the Department of Energy, Keystone XL would be able to move up to 830,000 barrels of oil per day, equivalent to about half of what the U.S. imports from the Middle East.

Pipeline construction would create 20,000 jobs, according to the committee, and collectively boost Gross State Product by billions of dollars.

TransCanada has said the pipeline would create 13,000 construction and 7,000 manufacturing jobs.

However, a widely cited Cornell University Global Labor Institute study by Lara Skinnersays the project will create no more than 2,500-4,650 temporary direct construction jobs for two years, according to TransCanada data supplied to the State Department.

TransCanada’s current application cites the 20,000 jobs figure.

The Canadian Energy Research Institute says the pipeline could support 117,000 new American jobs associated with oil sands development by 2035, Gerard said.

A bipartisan majority of U.S. Senators and a bipartisan group of 146 House members have recently written to the president calling on him to approve the project, he said.

Nevertheless, tensions continue to brew over the pipeline.

The same day API released its poll, the Sierra Club engaged in a protest at the White House in which they demanded that Obama deny the Keystone application.

Several activists were arrested, including Michael Brune, executive director of the Sierra Club; Julian Bond, former president of the NAACP; and actress Daryl Hannah.

At the Association of Equipment Manufacturers (AEM), president Dennis Slater was also agitating against Obama following the State of the Union address.

“The president stressed the need to become energy independent, but failed to mention any plan to approve the Keystone XL pipeline,” Slater said. “Thousands of jobs are waiting on the Obama Administration to approve this pipeline so that more Americans can get to work.”

The Sierra Club says the pipeline would boost carbon pollution by triggering a boom of growth in the tar sands industry in Canada, and greatly increasing greenhouse gas emissions.

The Environmental Protection Agency (EPA) has estimated that “this tar sands pipeline will boost annual U.S. carbon pollution emissions by up to 27.6 million metric tons (MMmt),” the Sierra Club says.

Gerard, however, said in a letter to the State Department that its final assessment of emissions found an increase could range widely: between 3 and 21 MMmt. He noted thatIHS CERA has said that the high end of those estimates may be overstated.

TransCanada has also agreed to 57 special conditions beyond what’s required by law to ensure the highest level of safety, Gerard said.

And Gerard noted that the demand won’t change if the pipeline application is denied.

“The environmental footprint can be most effectively minimized by brining Canadian oil to the U.S.,” he said. “Otherwise, Canada will find more distant, willing markets to sell its crude.”

Article written by:  Darren Barbee,  Hart Energy 


Environmental Protection Agency Data Show 66% Drop in Methane Emission from Oil and Gas

Thursday, February 7th, 2013

The U.S. Environmental Protection Agency’s latest report on greenhouse gases (GHGs) shows a significant drop in methane emissions from natural gas development, as compared to EPA’s prior data. The latest reporting from EPA suggests methane emissions from petroleum and natural gas systems were 82.6 million metric tons of CO2 equivalent in 2011. Last year, EPA’s GHG Inventory – which assessed data for 2010 – estimated that natural gas systems alone emitted more than 215 million metric tons, while petroleum systems added another 31 million metric tons.

Taken together, EPA’s latest data on petroleum and natural gas suggest a 66 percent decline in methane emissions from the agency’s prior estimates. Here are some other noteworthy findings from EPA:

  • Oil and natural gas systems now emit fewer methane emissions than waste facilities, which include landfills and water treatment plants.

NOTE: EPA previously said petroleum and natural gas systems “are the largest                    source of CH4 [methane] emissions from industry in the United States.” That obviously has changed.

  • Total GHG emissions from petroleum and natural gas systems are roughly ten times smaller than the largest source: power plants.
  • Emissions from power plants declined from 2010 to 2011, due in large part to the increased use of natural gas.
  • Overall GHG emissions in the United States declined by about three percent from 2010 to 2011.

It is worth noting, however, that it’s difficult to make an exact apples-to-apples comparison between EPA’s previous estimates of total methane emissions from oil and gas and the data released this week. The agency’s latest data represent “85-90 percent of total U.S. GHG emissions,” according to the EPA, as they exclude smaller sources in the existing categories. The data also exclude agriculture, which can be a significant source of methane: EPA’s prior inventory of GHGs, released in 2012, showed enteric fermentation from livestock and manure management were two of the top five sources of methane in the United States.

Nevertheless, the bigger picture is certainly good news: greenhouse gas emissions are falling in the United States, led in part by an affordable and abundant fuel like natural gas. And given all of the attention on methane emissions, it’s great to see that the current data suggest a significant decline from the agency’s previous estimate.

Of course, you’d probably never know many of these facts if you accepted the media’s take on EPA’s data.

E&E News said the report revealed “massive methane emissions” from the oil, natural gas, and coal sectors, identifying only the methane-as-CO2-equivalent number for petroleum and natural gas systems – 82.6 million metric tons. As mentioned above, 82.6 million metric tons is two-thirds less than EPA’s prior estimate, some helpful context that was unfortunately ignored. Scientific American re-posted the E&E story, adding that methane emissions are “on the rise” in the United States, apparently unaware of the actual data related to oil and natural gas.

A separate piece for E&E led with the statement that petroleum and natural gas systems “accounted for 40 percent of the methane emissions reported to the U.S. EPA in 2011.” Again, no mention of the drop in EPA’s estimates, nor the acknowledgment that landfills, treatment plants, and other waste facilities had overtaken oil and gas with higher methane emissions.

But the worst offender was Bloomberg, which ran with the headline, “Fracking Seen by EPA as No. 2 Emitter of Greenhouse Gases” – a demonstrably false characterization. (That’s disappointing, too; the story that followed the bogus headline was actually decently written and captured a lot of the critical details from EPA’s report.)

Petroleum and natural gas systems were listed by EPA as the second largest GHG emitter, although the difference in emissions between number one (power plants) and number two was enormous: 2.2 billion tons versus 225 million tons. Petroleum and natural gas systems also include things like LNG import facilities, offshore oil and gas wells, pipelines and compressor stations – none of which could ever accurately be described as “fracking.”

In fact, several facilities studied were in places like the North Slope of Alaska and even Hawaii, where no hydraulic fracturing is even occurring. Additionally, some of the midstream infrastructure analyzed throughout the country has been in operation for decades and was constructed long before the “shale boom” ever began.

Even worse for Bloomberg is that EPA’s page explaining all of the components of its “petroleum and natural gas systems” category never once mentions the words “hydraulic fracturing” or “fracking.” That means the EPA said nothing about emissions specifically from hydraulic fracturing, rendering absurd Bloomberg’s suggestion that the process was somehow “seen by EPA” as the number two emitter.

But don’t just take our word for it. John Quigley, the former Secretary of the Pennsylvania Department of Conservation and Natural Resources, said of Bloomberg’s headline: “Imprecise language misinforms and clouds the discussions we should be having and the actions we should be taking.” A reporter for SNL Energy tweeted: “Bloomberg appears to be labeling ALL oil and gas activity as #fracking. Kind of a stretch, dontcha think?”

Interestingly, (a blog for the Houston Chronicle) ran Bloomberg’s story and even used the same headline. A few hours later, however, the blog changed the headline to “Houston companies among top polluters on federal list” – not exactly a sparkling gem, but certainly a far cry from the previous misappropriation of emissions to hydraulic fracturing. It’s also telling that even a news outlet running a Bloomberg wire story was not comfortable using Bloomberg’s designated headline on its website.

Despite the media’s penchant for alarmist headlines and what often appears to be an insatiable need to link every aspect of oil and gas development to hydraulic fracturing, the facts are clear: EPA’s latest report on greenhouse gas emissions made several reassuring observations, including declines not only in greenhouse gases across the entire country, but also in methane emissions from oil and gas systems specifically.

Links for further reading:

This article posted  by: Steve Everley, Energy In Depth

Examining the Facts in Portage County, Ohio Methane Case

Monday, January 14th, 2013

This week, a local NBC affiliate out of Cleveland did a story on a Portage County family (the Klines) concerned about the levels of methane in their water well, and pretty convinced that a natural gas well drilled more than 1,800 feet away from their property is the sole reason why it’s there.

To their credit, the producers in Cleveland did a pretty good job of laying out the situation in a pretty balanced way, noting several important facts (we’ll get to those in just a bit) that, taken together, render the notion of oil and gas development having anything to do with this event a virtual impossibility. Unfortunately, producers with the Today show in New York didn’t quite apply the same standard of accuracy in running with the story on its broadcast this morning, airing a piece that carefully avoids mention of the facts, even in the face of a mountain of evidence that directly contradicts its thesis.

Since the focus of NBC’s “investigative” report was on the presence of two substances (methane and chloride) in the Kline water well, let’s examine each of those with the kind of attention to detail to which we hope news outlets – and, separately, the Today show — will adhere in the future.


It’s important to note right up top that the operator of the nearby natural gas well in question conducted extensive baseline water testing before any development activities ever proceeded – sampling the Kline well even though it technically resides outside the “presumptive liability” zone of 1,500-feet from the well. A copy of those test results can be found  here.

As you’ll see, methane was found in the Klines’ water well before the natural gas well was even drilled. Other baseline water tests focused on the area in question confirm that methane is commonly found in water wells throughout the region. Again, these findings come from samples taken before drilling began, meaning the methane detected is naturally occurring, and sometimes present in fairly high concentrations.

But perhaps the most important detail concerning the Klines’ water well is this: According to the Ohio Department of Natural Resources (ODNR), the Kline water well was actually drilled through the existing water aquifer and into a rock formation below called the “hard blue shale.” According to the statement that ODNR submitted to Today: “The water well in question was found to be drilled into shale, which is known to contain methane and is naturally occurring.”

In other words: natural gas was found in a water well that was drilled into a shale formation that contains natural gas.

Here’s why that’s relevant: According to the U.S. Geological Survey (USGS), the relatively shallow shale rocks that underlie Portage Co. have long been known to house some pretty low-quality drinking water.   In a report filed  by USGS in 1966 – 56 years ago, mind you – the agency found that:

“the shale units in Portage County generally have not been used as a source of water because of either the poor quality of the water or its insufficient quantity.”

The fact that the Klines’ water well was drilled into one of those shales explains a lot about the composition and quality of their water.

One of the other points the reporter made sure to highlight in the Today show piece was that methane levels discovered in water sampling tests from December 2012 (based on tests conducted by ODNR) were higher than what was detected in the baseline samples collected in August 2012. So even if there were methane in the water beforehand – and lots of it – what could explain the increase in concentration?

Here, a 2008 report that appeared in a prominent scientific journal examining how and why levels of methane can change in groundwater might prove useful. That report, entitled Spike-Like Concentration Change of Methane,” observed that it’s common for methane levels in groundwater to increase or decrease over time, as methane concentrations are “controlled by the hydrostatic pressure gradient in the aquifer.” According to the study, the pressure gradient can change for a number of reasons — not only due to withdrawals from the well, but also from atmospheric conditions, such as changes in barometric pressure. Because of this, changes in temperature can cause methane concentrations in groundwater to fluctuate.

The baseline tests were taken in the summer, whereas ODNR’s tests were taken in the late fall/winter.


Another substance that came up in samples of the Kline water well was chloride. Once again, baseline water tests provide much-needed information in this case, including before and after measurements of chloride itself.

In those baseline tests, chloride was detected in the Klines’ water at a concentration of 414.8 mg/L. The U.S. EPA’s standard, however, is 250 mg/L, meaning the chloride concentration significantly exceeded the acceptable limit set by the EPA before drilling even began.

With all of these facts spread out on the table, NBC News chose only to say that, according to ODNR’s investigation, “the well water’s chloride levels were nearly twice the safe limit.” No mention of the baseline data, and certainly no mention of the fact that chloride levels far exceeded safe limits before the company ever drilled its natural gas well.

But chloride levels were slightly higher in ODNR’s tests (taken in December) than the baseline samples from August. How to explain that?

For one, a 2004 report on Ohio groundwater from USGS found elevated levels of chloride in Portage Co., specifically in the winter months. The reason, according to USGS, was the “direct application of deicing chemicals” to roadways. USGS added that “downgradient dissolved chloride concentrations (mean 124-345 mg/L) rarely returned to background concentrations (mean 7-37 mg/L) throughout the study period.” In Portage Co. specifically, two of the three wells sampled registered average chloride concentrations of between 406 mg/L and 534 mg/L, with some readings over 1,900 mg/L.

In other words, during the winter months, water aquifers in Portage Co. often experience spikes in chloride levels, and significant ones at that – a phenomenon that was observed, recorded and lamented in the area long before any shale development came to town.

There’s another element that may have contributed to the rise in chlorides, as detailed in a Nov. 2011 story in the Columbus Dispatch. The headline of that piece?    “Stored road salt might have tainted well water.”  Elsewhere, the New Hampshire  Department of Environmental Services  has recognized road salts and other de-icers as significant hazards to groundwater quality, identifying the threat of chloride leaking into water supplies as a key reason. The Washington Post  put it more   bluntly: “Road salt melts snow, but it contaminates groundwater and damages habitats.”

Notably, Portage Co. experienced a large snowstorm last month – the same month as ODNR’s tests.

Also worth noting: Another report  from ODNR, this one issued in 1990, identified Portage County specifically as having a high risk for naturally induced water contamination: “The diversity of hydrogeologic conditions in Portage County,” ODNR observed, “produces settings with a wide range of vulnerability to ground water contamination.”


With all of these facts available, the Today show nonetheless chose to ignore each and every one of them, opting instead to focus on sensationalism and “expert analysis” from well-known anti-shale activist groups – even shoehorning in a quick interview with a Washington, D.C.-based staffer from the NRDC. The segment then officially jumped the shark by trying its level best to compare the Klines’ situation with the infamous “flaming faucet” scene in Josh Fox’s thoroughly discredited movie Gasland.

But actually, linking the Portage Co. case with Gasland’s flaming faucet may be entirely fitting. As we remember, the initial reaction to that scene was to connect it to shale development, specifically the process of hydraulic fracturing. But according to an investigation by Colorado’s oil and gas regulators – whom Fox refused to allow in his documentary to explain the facts – the flaming faucet was  “not related to oil and gas activity.”

Sounds familiar, huh?



Wednesday, January 2nd, 2013

SOUTH MONTROSE, PA - JANUARY 18: Men with Cabo...

Cabot Oil and Gas employees work on a natural gas valve at a hydraulic fracturing site in South Montrose, Pennsylvania. The Marcellus Shale Gas Feld extends through parts of New York State, Pennsylvania, Ohio and West Virginia and could hold up to 500 trillion cubic feet of natural gas. (Image credit: Getty Images via @daylife)

It’s an exciting time to be in the energy industry in America. The impact of unconventional oil   and gas development on the U.S. economy is considerable, with potentially hundreds of billions of dollars in investments, millions of new jobs, and a renaissance of American ingenuity and innovation.

In thinking about what is to come, looking back five years helps set the stage. January 2008: The energy sector was facing the great recession, high current and future expected natural gas prices, and job losses to China.  There was a generally poor outlook for the energy industry and the economy.

Few could have predicted the changes that were to come.  Unforeseen happenings include the North Dakota oil rush, liquefied natural gas facilities being used as export facilities (instead of as import facilities as originally planned), railroads hauling crude oil, and jobs coming back from China. And, this is just the beginning. The commencement of the crude oil and natural gas revolution can be boiled down to one simple equation:

Abundant resources + cost effective extraction = high production levels of unconventional oil and gas.

The net effect is a reshaping of the U.S. energy industry and our economy. Additionally, the country’s increased reliance on natural gas (displacing coal) has already benefited the environment, and will continue to do so in the future.  Carbon emissions hit a 20-year low (in the first quarter 2012 according to EIA)  and some industry observers believe that the U.S. could meet the Kyoto agreement standards by 2020 (even though the U.S. did not sign it).

The emergence of unconventional oil and gas will have tremendous impacts on both the energy industry and the economy. The outlook for unconventional gas is exceptionally bright—with expectations for relatively low future natural gas prices, enough supply to meet domestic needs, and surplus enough to export to other countries. While the unconventional oil story continues to unfold and evolve, an abundance of domestic crude oil is expected. And, thus, an opportunity to not only significantly reduce the country’s dependence on oil imports, but to also increase energy security.  Currently, crude oil prices are out of balance as new supply regions are isolated, making it difficult to get crude oil to market. That is expected to change once the necessary infrastructure is built to handle the new-found supply. As a result of these infrastructure needs, and the tremendous opportunities associated with unconventional oil and gas, U.S. economic activity is rising.

Rising levels of economic activity can be divided into three distinct but overlapping waves of capital investment. The first wave of capital investment targets new and expanding oil and gas production areas. Sustained investment in the upstream sector – including wellheads, drilling and production – will be required to keep pace with increases in demand for the foreseeable future.

The second wave of investment will focus on infrastructure to address new supply locations, delivering the product to market, and capitalizing on the near term opportunities arising from lower energy costs.  Billions  of dollars of investments specifically targeting capital projects in this wave are being announced weekly. Substantial investment in crude oil, natural gas and natural gas liquids pipelines will be required in order to build, expand, and reverse pipelines to address the new supply source locations.  Natural gas processing plants that separate natural gas liquids (NGL) from natural gas will be required to address the growing production levels and new supply regions. In addition, LNG facilities will begin to export natural gas, and there is a potential opportunity for natural gas-to-diesel plants.

In addition to these traditional areas of investment, creative market solutions are also emerging, such as rail transportation of crude oil. While railroads may serve primarily as a near to mid-term solution in the wake of long-lead time pipeline solutions, they are nimble competitors with small capital requirements that can be quickly deployed to utilize the country’s far-reaching rail networks. With only a few years needed to recover capital costs on investment, the competitive landscape changes and rail transportation rates could be reduced after pipelines enter the market to keep railroads competitive and still profitable. These factors suggest that railroads could be in the crude oil transportation business for the long haul.

During this second wave, there will be a manufacturing resurgence, in part because of lower expected energy costs. Other macroeconomic factors will also be at work—including relative improvement in U.S. labor rates as labor markets tighten in China and other countries. Petrochemical plants will become cost effective competitors in the worldwide market and will be a significant component of the manufacturing investment story. Manufacturing facilities will be built to manufacture pipes, drill bits, valves and other required infrastructure materials. In addition, other manufacturing plants will likely be built solely as a play on the expectation of relatively low energy costs into the future. Such suspects could include those whose energy costs are large portion of production costs: semiconductors, plastics, and LCD televisions. The trend includes linking production and energy resources in an efficient manner, and moving production closer to market demand in order to minimize transportation related costs.

The last wave of investment – which won’t begin to heat up for a few years – focuses on the consumers segment. In this wave, additional natural gas-fired power plants will be built to replace retiring coal plants and meet future increases in demand. Of course, new gas fired power plants will initially be built in regions with less excess capacity (post coal plant retirement). Another impact of U.S. unconventional oil and gas development will be increased in electricity demand (occurring more dramatically in various localized pockets), directly resulting from investment in waves one and two. New production areas and locations for processing and manufacturing plants will observe higher load growth. For example, localized areas within the Bakken region expect energy demand to double in the next five years. As a result of very specific changes to the economic activity and corresponding energy consumption levels, a more granular analyses will be required than is previously provided by traditional load forecasting methods.

This third wave will also see a significant number of new heavy-duty natural gas vehicles, including bus and truck fleets. Greater reliance on natural gas-fueled light duty vehicles is possible but will require more time due to greater infrastructure requirements and technological innovation. Other creative opportunities being explored include natural gas pumps (hooked up to the home) to fuel natural gas vehicles, and light duty vehicles relying on fuel cells (which manufacturers hope to begin building by 2015). While it’s not currently clear who the winners will be, it’s safe to say that positive market forces and ample opportunity will lead to innovative solutions.

The near-term outlook for total capital investment (from primarily first and second wave projects) is immense. The table below provides a snapshot analysis of the short term outlook (through 2020) for domestic (lower 48 state) based capital investment. These estimates are conservative and based largely on publicly reported company business plans. For example, Table 1 includes only a portion of expected U.S. LNG projects going forward, as compared to the full list of DOE applications. The estimate also excludes the massive $65 billion proposed Alaska pipeline/export facility project and third wave investments targeting natural gas fired power plants and natural gas vehicles. Even with just a portion of total investment included, the conservative estimate of short term investment reaches more than $300 billion.

Estimate of U.S. Unconventional Oil and Gas Capital Expenditures and Job Creation

(Through 2020)



Jobs Created

Exploration and Production

$60 – $70

440 – 480


$50 – $65

800 – 920

NG Processing Plants

$35 – $45

450 – 550


$20 – $30

260 – 370


$70 – $80

920 – 985

Rail and Other Infrastructure

$10 – $20

125 – 200


$245 – $305

3,000 – 3,505

These investments have a huge economic impact on the U.S. economy—impacting jobs, economic growth and energy security. Some studies indicate that the U.S. has avoided retreating into an economic recession as a result of activity in the unconventional oil and gas sector. Production areas for unconventional oil and gas have observed very low unemployment and stronger GDP and tax revenues as compared to the rest of the U.S. As a result of the significant near term investments associated with unconventional oil and gas, it’s possible that up to 3.5 million jobs will be created from the infrastructure build out and related opportunities (including both direct and indirect jobs).

What could impede U.S. progress? Political gridlock. Politicians will need to check their partisan baggage at the door and resolve the fiscal cliff issue well before the deadline. If there is no timely resolution, an economic contraction and an uptick in unemployment is possible. Another potential impediment includes possible additional taxes on the oil and gas industry. If the country wants to invest its way out of the sluggish economy, it may want to avoid additional taxing of the oil and gas industry as it will only serve to impede investment and dampen growth.  A wise move would be to enhance growth in key strategic areas, enabling the economy to maximize the benefit. While the Federal government should address the fiscal cliff and avoid consideration of additional taxes to the oil and gas sector, state and local governments (particularly those located near unconventional oil and gas regions) should be forward thinking and incentivize manufacturing and the oil and gas industry to set up shop. Following such a path will likely facilitate economic prosperity more significantly than not.

The bottom line is that the country has a unique opportunity before it. Transformational change, driven by American entrepreneurialism and ingenuity, is underway. Innovative solutions will address complex problems and hundreds of billions of dollars of investments and millions of new jobs are within reach.

Article written by:   Julie M. Carey, an energy economist with Navigant Economics who provides consulting and testifying services. Navigant’s unconventional oil and gas offerings include advisory services for strategic business decision analysis, construction risk management, economic and antitrust analyses, investment banking and restructuring advisory services, and expert services for disputes and investigations.



Wednesday, December 5th, 2012

The massive shift toward horizontal oil and natural gas drilling is evidence of its key role in the oil production revolution, made possible by the combination of this technique with enhancements to existing hydraulic fracturing methods and improved understanding of complex reservoirs.

It has long been known that tremendous volumes of oil and natural gas are trapped in low-permeability source rocks. These volumes were effectively inaccessible until the development of technology efficient enough to economically expose enough of the rock through horizontal drilling, and then to enable these resources to flow through man-made fractures. Horizontal drilling now accounts for more than 60 percent of all rig activity, as illustrated in the accompanying chart of Baker-Hughes directional data. According to some industry participants, 90 percent or more of wells currently drilled in the U.S. require some form of hydraulic fracturing to be economic.

Just as with other technological revolutions, there is not just one blockbuster breakthrough, but a myriad of subsequent innovations and refinements, some small and some large, continuing to move the industry ahead. We already know that today’s upstream is not your father’s (or mother’s) upstream. Tomorrow’s upstream will surely advance beyond today’s. Here’s a look at a few of the current technologies and areas where industry members are innovating.

Below ground

The basic process, the evolution of drilling and fracturing techniques that have been refined and innovated over the decades, follows: The first step is to drill horizontally through an oil or gas bearing layer, and the second is to pump in a mixture that consists largely of water and proppant (such as sand), with hydraulic pressure fracturing the rock and proppant keeping the fractures propped open.  The process is normally done in stages, by isolating a specific portion of the well for fracturing, then moving on to the next section or ”stage.” The objective is to achieve high “conductivity” — creating durable, open pathways to flow of the oil or natural gas within the formation toward the wellbore. This is not just a matter of sufficient fracturing, but also of employing the best proppant to keep the fractures propped open without clogging the openings or restricting flow.

The selection of proppants involves many factors, and many options have been explored.  The ideal proppant, besides being strong enough to resist crushing under the pressure of the rock, would also be readily available in sufficient quantities at reasonable cost, safe for the environment, resistant to “flow back” (becoming dislodged during production), chemically inert, durable, light-weight, and spherical. While sand is a common proppant, even then there are choices – for example, sand that is more prone to breaking apart and disintegrating can significantly hinder production. Size distribution and shape of grains affect performance (sand is sorted to mesh size, utilized for different applications). While larger grains can potentially maintain the openings of larger fractures, smaller grains can prop open the smaller fractures further away from the wellbore and resist crushing better than larger grains. Grains that are more rounded better resist crushing compared with irregular or oblong grains, thus contributing to superior well productivity.

Some better known varieties of sand are Brady sand (Texas) and Ottawa sand (named for Ottawa, Illinois and found over a broad region of the midcontinent). Ottawa sand, stronger than Brady sand but historically more costly, consists of naturally occurring grains of silica less irregular than their Brady counterpart. Resin-coated sand provides additional useful properties. Under the pressure and temperature conditions in the well, a resin cures and consolidates the proppant grains together, thereby locking the conductivity in place by avoiding particle flowback and clogging. Man-made ceramic proppants, compared with sand, can provide greater strength, durability, uniformity, and desirable shape, but may be more costly. Some varieties of ceramic proppants are also advantageously lighter weight.  While water and proppants typically make up 99.5 percent of the fracturing solution, operators also continue to seek optimal combinations of additives to fight corrosion, minimize bacteria, alter the viscosity of the fluid, and otherwise increase the efficiency and effectiveness of the operation. Many of these compounds are found around the house as food additives, household cleaners, etc.

Fracturing is normally done segment by segment within the well, or in “stages.” As industry members have continued to increase the lengths of horizontal wellbores through productive zones, this multi-stage fracturing has come to involve dozens of such segments. In order to isolate a segment of the well for fracturing, various technologies are used.

One traditional method is to block one end of the segment with a plug in order to focus fracturing at a specific location. The well’s casing or liner at that point will then need to be perforated with a perforating gun so that fracturing pressure can be applied to the formation at the intended location. This process is repeated many times, using plugs to segment the fracture stages, for the multiple targets that extend from the toe of the well (the far end) to the heel of the well (the near end). The plugs are drilled out or otherwise removed to enable production.

As an alternative to this “plug and perforate” method, a system of sleeves, for which opening and closing are controlled remotely (often by a ball dropped into the fluid and pumped down the string), can be used to stage the fracturing process. In this method, swellable packers are used to first isolate segments of the wellbore for each stage, typically in an “open hole” or unlined portion of the horizontal wellbore. The sleeve systems can enhance the flexibility of multi-stage fracturing and reduce treatment time by half or more. Sliding sleeves reportedly have reduced fracturing jobs from a week to a day, with correspondingly large cost savings. As a rapidly evolving technology, continual refinements are being made to increase the effectiveness of fracturing at each stage.

A further enhancement to the fracturing process, extending beyond a single well focus, is known as a “zipper frac.” This process involves alternating fracturing stages between neighboring wells. While stages in the first well are still under pressure, fractures of the second well will be redirected away from those of the first, increasing overall surface area exposed. Importantly, this also allows operators to more fully utilize crew time and equipment on site, increasing efficiency and reducing costs. Another practice, nicknamed “shake and bake,” consists of holding a well for days or weeks after fracturing and before production is begun. This “soak time” allows fluid to continue to permeate and dissipate within the formation. This process is being tried in many shale reservoirs today, and early results show very positive results to production. Due to diverse geology, not all shale reservoirs respond identically to this methodology.

Innovations and refinements in monitoring and downhole data acquisition are further enhancing the understanding of what’s happening thousands of feet below the surface. Without this information, directional drilling would have difficulty tracking a highly complex formation, and fracturing decisions would have more uncertain results. Advances in surface seismic interpretation used in conjunction with microseismic monitoring, for example, are providing improved understanding of the fracture propagation pattern and complexity of the fracture system generated from each stage and each well. Improvements in well logging (running sensors of many types down the well), logging while drilling, and wellbore imaging are also adding to the quality of downhole information. More accurate information from point to point along the wellbore—porosity, rock type, reservoir stress characteristics, and so on — allow for tailoring of the location and design of fracturing stages to specific characteristics of each region within the formation. This information, combined with analysis of fracturing results provide more and better data for reservoir simulation studies, enabling the creation of more efficient and productive development plans.

While a bit technical, the accompanying chart (derived from a paper in the Journal of the Society of Petroleum Engineers, “The Next Opportunity To Improve Hydraulic-Fracture Stimulation,” M. C. Vincent, Journal of Petroleum Technology, Volume 64, Number 3, March 2012) indicates the enormous magnitude of the impact of horizontal drilling combined with hydraulic fracturing. Simply put, the blue column on the far left represents a traditional, vertical well, while the far right column represents a horizontal, hydraulically fractured well. The dramatically rising vertical dimension, “reservoir contact,” is simply an indicator of how much more productive the latter is than the former. This is the fundamental result of this technology – low permeability oil and natural gas becoming both accessible and economic.

Above ground

Moving rigs has traditionally been complex and time-intensive, involving the disassembling and moving of the components to a new well site where everything is reassembled. By contrast, pad drilling has enabled greater efficiencies by allowing the spudding of multiple wells from a single drill site without the need to disassemble, transport, and reassemble the rig, cutting time and costs. The rig may be moved on specially-made rails, or a “walking rig” may be employed. Walking rigs literally “walk” by means of hydraulic lifts, which alternately raise the rig, move it, and let it down a short distance away. While the gait may seem deceptively slow to the casual observer, it enables a rig (which may weigh hundreds of tons) to be moved to a new location on the site in a few hours rather than in five or six days, over uneven terrain.  Reportedly, walking rigs have saved half a million dollars per well in some cases.  Improved rig efficiencies mean that operators are completing wells more quickly and using fewer rigs to accomplish the same amount of development.

New processes that greatly reduce water and proppant use are being thoroughly explored and implemented. Further, recycling flowback water for additional fracturing jobs is reducing water use and the need for treatment and disposal. Tapping non-drinkable aquifers or use of brackish water, when possible, have also been steps toward balancing the mix of water resources with the many users in the community.  Advanced methods for optimizing spacing and targeting of fracturing zones have resulted not just in greater operational efficiency, but more efficient use of water and proppants. In some cases, smaller, more conductive fractures have been shown to result in more productive wells than treatments using much larger volumes of water and proppants. Improvements in water usage and management, pad drilling, and other advances reduce community impacts with fewer trucks on the roads and other byproducts of development activity.

New management approaches & creative corporate structures

Some companies are finding that vertical integration is paying off.  In seeking significant long term savings, a number of companies have acquired their own rigs, fracturing, well service, and pressure pumping equipment, water disposal wells, midstream processing capability, and even sand mines. In addition, having their own crews to operate these resources gives more control over scheduling and staffing.  However, for this vertical integration to be successful over different economic and commodity price environments, many factors must be aligned.

In running a business in a rapidly changing environment, companies have found that they must ensure that financial and management tools that were adequate for a more stable environment are also flexible enough to adapt to novel challenges. Attention must be given to selecting and optimizing technologies and procedures for asset management, cost control, regulatory compliance, and risk management that can adapt, allowing management to maintain a current, transparent view of operational performance and to make adjustments in a timely and effective manner.

There are many more technical innovations and operational refinements being implemented, whether in small steps,  big steps, or an occasional leap, and they are springing from both operational experience and from pioneering research. These advances are enabled by a competitive market driven by the motivation to provide products that have benefits valued by consumers.

Many believe that the industry is in an early stage of the learning curve on how best to develop these new oil and natural gas resource plays. Current recovery factors for these plays are very low, and reserve estimates based on existing technology could potentially see a tremendous expansion as the recovery factors improve with dramatically evolving technology for drilling, completing, and understanding fluid flow through these low permeable source rocks.

The end results are still unfolding, and it is not easy to find another industry where technology has transformed a country’s economy so dramatically by enlarging its resource base, increasing its energy security through greater domestic production and lower imports, stimulating manufacturing through increased feedstock availability, and generating the growth of economically productive jobs. Some of these technologies have existed in one form or another for decades, but the synergistic evolution, innovation, and managerial creativity to deliver better results have ultimately brought about a sea change in an industry that is making the “unconventional” conventional.

To review our past analyses, please visit the Resources section of

Article provided by:  Declaration of Independents/America’s Oil & Gas Producers  (Julia Bell 202.857.4722)

We wish to thank our reviewers/contributors from Halliburton, Schlumberger, Carbo, Baker Hughes, and Richard Mason from Hart Energy for their comments and suggestions.

Splitting the state of Michigan

Thursday, November 15th, 2012

Hydraulic fracturing frees gas and oil; opponents say environmental cost too high

So can oil and gas mix with water in Michigan?
In any discussion about “fracking” natural gas and oil wells from layers of shale deep beneath the surface, the talk quickly steers to the balancing act between those natural resources — how much water is used and its source, where to put fracking fluid after it more resembles turpentine than water, and how much gas and oil can be captured in the tradeoff.

Those are the pivot points between opponents of hydraulic fracturing, who want tougher regulations or an outright ban of the practice in Michigan, and industry proponents, who see a need to tap into the state’s huge reservoirs of energy resources cheaply.

The protest against fracking made its way to Lansing last month at an auction of state-owned oil and gas lease rights. This year, hundreds of people in small communities across Michigan have packed everything from a nature center to county commission chambers to learn how companies intend to tap what is described as one of the most promising new sources of natural gas and oil in the United States.

Opponents say that oil and gas companies consume on average the equivalent of a small lake of water — about 3 acres by 5 feet deep — to use hydraulic fracturing to open a horizontally drilled well in deep shale. The dark sedimentary rock splits easily into plates to release oil and gas.

Proponents say a fracked well may produce enough natural gas to meet the needs of 30,000 to 50,000 homes for a year.

While the industry is developing ways to recycle the “flow-back” from newly fracked wells to cut down on water use, producers generally truck millions of gallons of used fracking fluid — laden with salt, hydrocarbons and chemicals — to any of the state’s 650 regulated injection wells for disposal.
“We’re really trading water for gas,” said LuAnne Kozma, co-founder of the Committee to Ban Fracking In Michigan, a nonprofit group founded in December last year that has begun a petition drive to ban horizontal hydraulic fracturing in the state. “We will be a waste capital here if we don’t stop fracking and generating frack wastes.”
Hydraulic fracturing in deep shale is “vital for Michigan if we want to maintain a standard of living similar to what we have grown accustomed to,” said Erik Bauss, field director in Michigan for Energy In Depth, a Washington, D.C.-based organization that rebuts the assertions of anti-fracking groups nationwide. “Particularly as a manufacturing state, these raw inputs are key to our competitiveness.”
Michigan’s liquid assets
About half of the state’s residents depend on groundwater for their drinking water supply, and more households get their drinking water from private wells here than in any other state. Further, Michigan is surrounded by the largest surface freshwater system on Earth, driving a tourism industry estimated at more than $17 billion annually.

At the same time, the Lower Peninsula produces from its own wells the equivalent of nearly 22 percent of the natural gas that the state’s residents and businesses consume annually. With no energy production in the Upper Peninsula, the mitten is a virtual pincushion of more than 50,000 holes drilled for energy since William Howard Taft was president — among them nearly 15,000 oil wells, more than 13,000 natural gas wells and more than 20,000 dry holes.

Proceeds from state-owned mineral lease rights are deposited into the Michigan Natural Resources Trust Fund and used to buy public land, maintain and improve state and local parks and preserve wildlife habitat, said Mary Uptigrove, acting manager for the minerals management
section of the Michigan Department of Natural Resources.

Over the past century, wells throughout Michigan have pumped more than 1.2 billion barrels of oil and about 6.6 trillion cubic feet of natural gas — a process largely unseen by the average person except for the rhythmic swinging of “nodding donkey” pump jacks in fields here and there. Some of that energy production comes from shale.

“More than 11,000 wells have been drilled in the Antrim Shale since the 1940s, and virtually every one of those wells has been hydraulically fractured,” said Hal Fitch, chief of the Michigan Department of Environmental Quality’s Office of Oil, Gas, and Minerals and a geologist. “There are a few of them that have been drilled horizontally, so horizontal drilling and hydraulic fracturing aren’t anything new.

“The only thing new that we’re seeing is the matter of scale.”

That scale has made Michigan a battleground state over the use of “slick water” hydraulic fracturing and horizontal drilling at greater depths into the Collingwood and A-1 Carbonite formations in northern Michigan.

The combination of technologies has sparked protests from those who worry that the state’s current rules, written to regulate relatively shallow vertical wells, are inadequate.

Uncharted waters

Michigan is on a learning curve — and for good reason. Even the oil and gas industry is still getting a handle on best practices for the technique.

Devon Energy Co., which is reported to lease more than 240,000 acres in Michigan, used a combination of horizontal drilling and hydraulic fracturing in Pennsylvania in 2003 with spectacular results, prompting experts to strongly increase their estimates of the nation’s gas and oil reserves.

But industry experts say practices used in Pennsylvania may not suit a state like Michigan because of differences in geology — one reason that each state is responsible for its own regulations on drilling instead of relying on a federal standard, Bauss said.

Michigan has only two producing deep shale wells now, but energy companies plan to sink more, state permits indicate. A successful completion in February 2010 of a pilot well in Missaukee County east of Cadillac — drilled by Encana Oil and Gas USA Inc., a subsidiary of Canada’s largest natural gas company — launched a land rush by large oil and gas companies to lock up leases in Michigan.

Encana, Chesapeake Energy Corp. and other energy producers engaged in a slugfest in May 2010 at the state’s biannual auction of oil and gas leases on state-owned property.

The result: Michigan collected $178 million in bonus payments in one day — nearly as much as it got in the previous 81 years of such auctions, state officials said.

In the aftermath, Encana and Chesapeake, the second-largest producer of natural gas in the U.S., have been accused of colluding to bring down the cost of leasing land. The Antitrust Division of U.S. Department of Justice and the Michigan attorney general are investigating whether executives of both companies in the summer of 2010 conspired to coordinate bidding to prevent a repeat of the spring auction.

In September, Encana’s board of directors said it did not find evidence that the company colluded with Chesapeake.

Legal wrangling aside, the expanding use of horizontal drilling and fracking caused the U.S. Energy Information Administration to revise the nation’s estimate of proven natural gas reserves upward by more than 30 percent — and Michigan is a key state in the mix.

Drilling down

The two deep shale wells — State Excelsior 1-25 HD-1 and State Excelsior 1-13 HD-1 in Kalkaska County — have a combined average production of about 1.2 million cubic feet of natural gas a day — about 35 times the average of a vertical well tapping the Antrim Shale formation in northern Michigan, Fitch and state records said.

Oil and gas companies have about 40 active permits and have filed about 15 active applications for high-volume hydraulic fracturing in Michigan, but some of the active permitted wells are pilots or vertical-only wells.

Part of Michigan’s learning curve is determining how much water will be diverted to deep shale fracking and how to dispose of the fracking fluid after it has done its work.

It takes 100 times more water to hydro-fracture the new breed of wells than the shallower wells in the Antrim Shale — more than 5 million gallons per well, Fitch said. In response, the state now requires oil and gas producers filing for high-volume hydraulic fracturing in Michigan to follow the same Water Withdrawal Assessment Tool as any major industrial user.

“If the tool shows the potential adverse impact,” Fitch said, “the operator most likely is going to have to find another source of water.”

Energy production companies generally drill shallow water wells near the sites of deep shale wells, then pump groundwater into holding ponds as staging reservoirs for fracking.  Proprietary chemical concentrates provided by companies such as Halliburton Co. are mixed with water in steel tanks, and the resulting fracking fluid is injected by huge hydraulic pumps into wells at pressures that can exceed 10,000 pounds per square inch.

The enormous pressures fracture the shale so it can release natural gas and oil.

Fitch said the water used to frack a well would equate to the amount of water a farmer would use to irrigate 6 to 8 acres of corn in a growing season.

What’s in the soup

But no one asserts that fracking fluid can be released into the waterways like cooling water from an electric power station. On the contrary, Fitch, Bauss and others agree that fracking fluid must be handled with the utmost care.

One sticking point between the pro- and anti-fracking groups is the identity of the fracking fluid to begin with. Oil service companies are exempted under federal law from having to disclose the chemicals in the proprietary fracking concentrates they sell, Kozma said. Bauss said fracking fluid consists of more than 99.5 percent water and sand, with the remainder being chemicals meant to reduce friction in the water and inhibit bacterial growth, mineral deposits building up in the pipe and corrosion.

“All of the ingredients aren’t released to the public because of the competitive issue — it is simply a trade secret,” Bauss said.

But Fitch, Kozma and others think there should be more transparency.

“Frankly, we as an agency would prefer that we knew the exact chemical makeup of the fluids, and the producers would prefer to see that,” Fitch said. “It’s the service companies providing the chemicals to the producers that are protecting their proprietary interests.” But he added that he thinks his agency has enough information to accurately track sources of contamination that may come from fracking.

“I have been a proponent of the industry publishing the chemicals that they used, because many are found beneath your kitchen sink,” said Sid Jansma Jr., president and CEO of Wolverine Gas and Oil Corp. in Grand Rapids

Production companies may be able to pump 30 percent to 60 percent of the fluid injected into a well back out after fracking, Bauss said. The remainder may remain in the formation and travel with the flow of natural gas over a period of years.

Federal lawmakers are looking at closing the loophole in the Safe Drinking Water Act that exempts fracking fluids from disclosure, and oil and gas companies are testing more benign formulas.

The chemical soup resulting from natural gas fracking is often saltier than ocean water and loaded with aromatic hydrocarbons such as benzene and other compounds, Kozma said. The only permitted way to dispose of the used fluid in Michigan is storage in steel tanks after it is pumped from the well, or injection in U.S. Environmental Protection Agency - registered Class 2 disposal wells. Other states such as Pennsylvania are recycling fluid.

Kozma said she is concerned about the possibilities that hazardous mixtures can contaminate water supplies at every step of the industrial operation.

Fitch, Bauss, Jansma and others in the industry said they think Michigan is a national leader, with comprehensive regulations that address safe oil and gas production. But they concede mistakes can occur, just as they can in any industrial operation.

“Businesses that are reckless or incompetent won’t be in business very long, not only due to state regulations but also due to the concerns of the landowners,” Jansma said. “My company has fracked hundreds of wells in the state of Michigan, and I’ve never had any problems.”

It’s possible for an operator to turn a valve the wrong way during a process, but good procedures generally prevent that, he said.

Well, well

Another point of contention is whether gas and oil wells hold up over time without failure. Fitch said the history of oil and gas production in Michigan shows that more than 12,000 wells have been drilled and fractured during the past 50 years with no consequence to public health.

Kozma said reports and studies from Pennsylvania and other areas of the country where horizontal drilling and deep shale fracking have occurred show that well casings fail with regularity, contaminating the groundwater with methane and other compounds. Research by Anthony Ingraffea, a professor of engineering at Cornell University, interpreted data from the Pennsylvania Department of Environmental Protection that he said shows wells tapping the Marcellus Shale in that state failed at a rate of 6.2 percent in 2011.

Fitch said companies pressure-test casings and “occasionally they will find a leak in a casing and will have to remediate that before they can proceed with drilling. But I cannot recall a casing failure after the initial production of the well.”

With a staff of about 25, Fitch’s department did not find any violations involving drilling or well construction last year. There were 470 violations related to production operations, ranging from housekeeping issues to oil-contaminated soil around the wells and tanks.

Michigan has established a fund to plug abandoned or improperly closed wells of oil, gas or brine disposal in cases where the owner is unknown or insolvent. The Orphan Well Program has targeted for plugging three wells leaking oil. But the problems have not been casing failures, Fitch said.

A cooling-off period

Ironically, hydraulic fracturing appears to have become a victim of its success. Last year, the United States surpassed Russia as the largest producer of natural gas, thanks in good measure to the new technique. But tapping newfound domestic reserves has driven down the price.

With oil selling for more than $80 a barrel, the energy-equivalent amount of natural gas should sell for more than $16 per thousand cubic feet, Jansma said. But natural gas is selling for closer to $3 to $4 per thousand cubic feet, “so people are highly motivated today to use natural gas because it is such a cheap energy source,” he said.

Falling natural gas prices seem to have restrained the frenzy to lease state land. In October, oil and gas companies paid an average of about $17 an acre for leases on state-owned properties, compared with an average of about $1,500 an acre in the May 2010 auction.

As energy exploration companies in Michigan react to the changing costs of oil and gas, Kozma and others have begun a petition drive to amend the state constitution in 2014 to ban horizontal hydraulic fracturing altogether. Other groups in Michigan want tougher regulations and oversight.

“I don’t think that the regulations in the state of Michigan can be fixed to the extent that they would need to be in order to make horizontal hydraulic fracturing acceptable,” Kozma said.

She stressed that her group does not advocate shutting down the oil and gas industry in Michigan, including the fracking of vertical wells in the Antrim Shale.

Bauss said his experience with anti-fracking groups in Michigan leads him to think they are more interested in greatly reducing consumption of hydrocarbon fuels, with fracking serving primarily as “a hook issue.”

“It’s really a straw man or a red herring of sorts that criticizes an industry that has an excellent track record.”

Article written by:  Matthew Gryczan: (616) 916-8158, Twitter: @mattgryczan; Crain’s Michigan Business 

Parking lots, restrooms get Natural Resources dollars

Wednesday, November 14th, 2012
The Natural Resources Trust Fund has played a major role in making Michigan a national leader in outdoor recreation, but the program also has provided millions of dollars for such less than natural things as parking lots, restrooms and playgrounds.

State records show the Trust Fund, over the past 36 years, has provided funding for 265 parking lot projects, 157 restrooms, 97 ball fields, 73 playgrounds and eight swimming pools. All of the parking lots were associated with a recreational facility.

According to state records, the most recent round of Trust Fund grants included:

* $300,000 to build a 325-space parking area in a Cass County park.

* $91,300 to pave parking lots at three Alma city parks.

* $300,000 to build an in-ground, concrete skate park in Ann Arbor.

* $300,000 to renovate a public pool in Ypsilanti.

State officials said all of those projects fit with the Trust Fund’s mission, which is to “buy property and develop projects that have recreational or natural resources value to Michigan citizens.”

“The Trust Fund has stayed true to its mission,” said Bob Garner, who leads the fund’s board of directors. “Originally the trust would only buy land for hunting and fishing … but our whole concept of the outdoors is changing as a society.”

Erin McDonough, executive director of Michigan United Conservation Clubs, agreed that fishing and hunting aren’t the only kinds of outdoor recreation that are deserving of Trust Fund grants.

“We have to be very careful not to judge — outdoor recreation means different things to different people,” McDonough said. “Providing outdoor recreation for all people is part of the vision of the Trust Fund.”

The Trust Fund has two distinct programs: One provides money to acquire land; the other funds development of recreational facilities. The development side of the Trust Fund is what funds bathrooms, parking lots, ball fields and myriad other outdoor recreation facilities.

Each year, at least 25 percent of the Trust Fund’s grants go toward buying land. Not more than 25 percent of the fund’s total expenditures may be used for development of public recreation facilities.

“You’re buying toilets with development funds, as opposed to buying land,” Garner said.

Jeff Cook, president of Greenville-based Southwestern Oil and head of the Michigan Oil and Gas Producers Education Foundation, said the Trust Fund has stayed true to its mission. Royalties on oil and gas extracted on state land provide the revenue for the Natural Resources Trust Fund.

“The Trust Fund’s primary purpose was the protection of natural resources, but these secondary goals —public access to waterways and outdoor recreation in urban areas — were also at its core,” Cook said. “While the fund is called the Natural Resources Trust Fund, the definition of natural resources is broad.”

Steve DeBrabander, a Michigan Department of Natural Resources grants manager who oversees the Trust Fund, said a reduction in yearly Trust Fund grants could soon halt funding for some types of recreation projects.

The Trust Fund reached its funding cap of $500 million in 2011. From now on, the state can only give grants from the interest earned on the Trust Fund’s principal. The $500 million nest egg is off-limits — unless voters amend the state Constitution.

Reaching the cap means the Trust Fund will reduce the amount of grants awarded annually from roughly $35 million to about $25 million, DeBrabander said. With less money for grants, he said the Trust Fund board would soon re-assess what types of recreation projects are worthy of funding.

“One thing that may happen is a more focused approach in the future, instead of all types of outdoor recreation being eligible for grants,” DeBrabander said.


Article written by:  Jeff Alexander is owner of J. Alexander Communications LLC and the author of “Pandora’s Locks: The Opening of the Great Lakes – St. Lawrence Seaway.” He’s a former staff writer for the Muskegon Chronicle.

Michigan cities may soon receive windfall from Michigan Natural Resources Trust Fund to operate parks and recreational facilities

Wednesday, November 14th, 2012

Southern Michigan cities struggling to operate parks and recreational facilities may soon receive a windfall from an unlikely source: the Michigan Natural Resources Trust Fund.

The fund was established in 1976 to buy land for natural resource protection and public outdoor recreation. Funding comes from royalties paid by companies that drill for oil and gas on state land.

The widely heralded fund has provided $959 million in grants over the past 36 years. Those grants have been used to: acquire miles of waterfront property along rivers and lakes; purchase huge tracts of forestland; increase public access to lakes, rivers and forests; and build scores of boat launches, parks, ball fields and other outdoor recreation facilities. But a confluence of recent events has trust fund managers shifting their focus away from buying property in Northern Michigan — where the state owns a disproportionate amount of land — to acquiring land and funding more recreation projects in the southern Lower Peninsula, particularly in urban areas.

Less money for Trust Fund grants, the state’s new cap on how much land the Department of Natural Resources can own and the lack of green space in cities are driving the changes.

Fund leaders eye southward shift

“I think it’s possible we could see new state parks in cities,” said Bill Rustem, a senior adviser to Gov. Rick Snyder. Rustem, who worked for Gov. William Milliken in the 1970s, helped create the Natural Resources Trust Fund.

“If you look at the availability of public land, most of it is in Northern Michigan,” Rustem said. “We have not done a good enough job of creating public spaces and access to natural resources in our cities, and it’s our cities that will determine the future of Michigan.”

Erin McDonough, executive director of Michigan United Conservation Clubs, said state officials intent on shifting the Trust Fund’s focus to Southern Michigan should tread cautiously.

“Putting an emphasis on grants to urban centers is a good idea as long as you don’t shut the door to the rest of the state,” McDonough said.

McDonough and other conservation leaders said there are still areas of northern Michigan and the Upper Peninsula that need more public land and better outdoor recreation facilities. Republican lawmakers want the state to stop buying land in the U.P.

Bob Garner, who heads the Trust Fund Board of Directors, said the fund could help bring nature to city dwellers who might never travel to Northern Michigan.

“I think we’ll make it easier for cities to buy land, but that doesn’t mean we shouldn’t buy more land up north,” Garner said.

Oil and gas propel natural fund

The Natural Resources Trust Fund was the nation’s first program to use oil and gas royalties to purchase land and develop new outdoor recreation facilities. It remains the largest program of its kind in the United States.

The predecessor to the Natural Resources Trust Fund was established in response to a 1970s controversy over the oil industry’s bid to drill for oil and gas under the Pigeon River State Forest, northeast of Gaylord. It was originally established to acquire land for hunting and fishing, but has since been expanded to support numerous outdoor activities.

Voters in 1984 made the Trust Fund part of the Michigan Constitution, a move that removed the temptation to divert its funds to other state activities.

Map of grants issued by county

Several other states — including Minnesota, Missouri, Arkansas and Tennessee — have recently established trust funds. But none of those programs come close to Michigan in terms of funding or achievements.

Among its 1,957 grants, the Michigan Natural Resources Trust Fund has acquired: 70 miles of river frontage and more than 25,000 acres along the Au Sable and Manistee rivers; several miles of frontage along Lake Michigan and Lake Superior; 10,000 acres of undeveloped land in Mackinac County; an easement that ensured public access to 248,000 acres of forestland in the Upper Peninsula; and thousands of miles of recreational trails.

For much of its history, the Trust Fund was focused on buying land in Northern Michigan and the U.P. But three recent developments have shifted the focus to urban areas in southern Michigan. Consider:

* After years of criticism that too many Trust Fund grants were awarded to communities in Northern Michigan, the fund’s board of directors in 2009 prioritized grants in urban areas, near population centers.

* The Trust Fund last year reached its revenue cap of $500 million. So, all new oil and gas royalties go into the Michigan State Parks Endowment Fund. From now on, Trust Fund managers can only spend interest earned on the fund’s $500 million corpus. That will reduce the amount available annually for grants from roughly $35 million to about $25 million, said Steve DeBrabander, a state Department of Natural Resources worker who oversees the Natural Resources Trust Fund.

* Earlier this year, the Legislature and Gov. Rick Snyder passed a law that capped the amount of land the DNR may own at 4.626 million acres. That law, which effectively prohibits the DNR from buying large chunks of land north of Clare unless it sells other parcels, could force the department to use Trust Fund grants to only buy land in Southern Michigan, according to several state officials.

“Historically the Trust Fund supported projects in the northern Lower Peninsula and the U.P.,” DeBrabander said. “The Trust Fund board made urban projects a priority (in 2009); it’s an attempt to make sure public outdoor recreation opportunities are being provided in urban areas.”

This year, the three largest Trust Fund grants went to communities in Southern Michigan: $3.7 million for recreational trails in Oakland County; $3 million to acquire 400 acres of land on Harsens Island, in the St. Clair River; and $3 million to purchase 2,000 acres of land in Jackson and Washtenaw counties for a new recreation area, the River Raisin Recreation Area.

Only one project in Northern Michigan received more than $1 million from the Trust Fund this year: Leelanau County’s Leland Township received a $2.9 million grant to buy 104 acres of waterfront property along Lake Michigan. The site will become the Clay Cliffs Natural Area.

Fund coveted for other purposes

Some state lawmakers believe the Natural Resources Trust Fund should evolve further, by helping to finance roads, airports and other purposes.

State Rep. Dave Agema, R-Grandville, introduced legislation last year to use 80 percent of Trust Fund revenue to fix roads and upgrade airports. His bill died in committee.

Rustem, the governor’s adviser, said the Trust Fund is protected by the constitution, so any attempts to raid the fund would prompt a legal challenge.

State Sen. Tom Casperson, R-Escanaba, said the DNR should use the Trust Fund to maintain crumbling marinas and build more roads that provide public access to state lands. Casperson, who authored the state’s new land cap, said it’s senseless for the Trust Fund or the DNR to buy more land when the state is struggling to properly maintain its current land holdings.

And Sen. Bruce Caswell, R-Hillsdale, introduced legislation in September that would divert Trust Fund revenue into the state transportation fund, where it could be used to fix roads.

Conservation leaders fear the state’s new land cap could fuel attempts to raid the Trust Fund.

“If the Trust Fund can’t purchase land, then it becomes susceptible to being diverted to other uses,” said Drew YoungeDyke, policy and communications specialist for the Michigan League of Conservation Voters. “It would take a lot to do it, but that doesn’t mean the Legislature wouldn’t try – that’s why we had to put (the Trust Fund) in the Constitution in the first place.”

There is also a battle over control of Trust Fund expenditures.

Last summer, state lawmakers took the unprecedented step of removing large land acquisition grants from the list of Trust Fund grants. Lawmakers objected to the DNR receiving millions of dollars for land acquisitions when DNR officials didn’t specify which parcels they wanted to acquire.

That spat prompted state Sen. Darwin Booher, R-Cadillac, to introduce legislation that would give the Legislature more control over Trust Fund grants.

Garner, the Trust Fund chairman who wrote the legislation that created the first Trust Fund in the 1970s, said he doesn’t understand why lawmakers want to change a program that has bolstered Michigan’s recreational economy and earned widespread praise in the process.

“This has been a darned good program,” he said.

Garner said limiting Trust Fund board members to eight years of service would hurt the grant program and the communities it serves.

“Terms limits didn’t serve us well with the Legislature,” Garner said. “I can’t see how they would serve us well with the Trust Fund.”


Article written by:  Jeff Alexander, owner of J. Alexander Communications LLC and the author of “Pandora’s Locks: The Opening of the Great Lakes – St. Lawrence Seaway.” He’s a former staff writer for the Muskegon Chronicle.

DEQ on fracking—‘Not a single incident in 60 years’ and 12,000 wells’

Tuesday, October 16th, 2012

Brad Wurfel, Communications Director for the Department of Environmental Quality (DEQ), said the controversy over hydraulic fracturing for gas and oil is a political conversation masking a policy issue. He believes organizations exaggerating the dangers associated with the practice are, “folks who don’t want to see America rely on natural gas.”

In a conversation with the Squire, Wurfel explained that the claims—which he said change frequently—have more to do with the use of renewable versus non-renewable energy sources rather than any facts about environmental damage by fracking.

On October 24 the State of Michigan is selling mineral rights on state-owned parcels of land in the Rockford area, including the White Pine Trail, the Cannonsburg State Game Area and the Rogue River Recreation Area. The news has some area residents worried about whether the practice of hydraulic fracturing to release oil and natural gas trapped in the earth will adversely affect the environment now or in the future.

“America sits on an abundance of natural gas,” Wurfel stated. He said natural gas is cleaner than coal and more reliable than wind or solar energy sources at the present time. At the core of environmental groups complaints, he stated, is that continued use of natural gas will set back investment in renewable energy by 15 years.

“I’ve seen Gasland and it’s a fun movie, but it isn’t real,” he stated, referring to a film that starkly shows devastating impact claimed to be the result of hydraulic fracturing, known as fracking. “In Michigan in 60 years and 12,000 wells there has never been a single incident associated with fracking,” he said.

Wurfel said the DEQ tightly controls mining in the state, whether hydraulic fracturing is used or not. “People get really excited about this. We are the Department of Environmental Quality, we protect the land, air and water. If something was going to damage those resources we would shut it down or outlaw it.”

Wurfel said the DEQ does not judge energy sources, whether they are windmills, gas or coal, but is simply a watchdog to make sure the means to harvest energy sources do not damage the state’s natural resources. “We don’t have a dog in the policy fight.” He said the facts of fracking have been “misrepresented consistently.” He also stated that responding to claims has been a moving target and different allegations have been thrown out nearly weekly. “Last month it was about earthquakes, last week it was about deep horizontal testing, it has been about water use. We’ve got really strict rules in Michigan.”

Wurfel said anyone with concerns is welcome to see the DEQ’s information about fracking on the internet at One avenue of anxiety has been the chemical mix that is included in the large amount of water injected into the ground to break up shale deposits holding pockets of trapped natural gas. Wurfel said the oil industry has not released the chemicals used claiming the release would give competitors an advantage. “We would like to know what those chemicals are and we are working on that,” he stated. But he said the amount of chemicals is very small. “It is one half of one percent,” of the mixture injected into the wells. He further stated that in some cases, the water solution being pumped into the ground would pass drinking water standards.

The water returned back from the wells is another matter. Wurful said the flowback is something you definitely wouldn’t want to see released to the surface. He stated that Michigan was once under the surface of an ocean, and the mines drill down to a level that contains briny ocean remains. The mining fluid that comes back to surface contains some of this substance, which Wurful said “Isn’t nice stuff. You wouldn’t want to put it on your Cheerios.”

Instead, the flowback is housed in steel containers until it is released in deep injection wells. Wurful further said aquifers which supply communities are carefully protected and usually exist at about 200 feet, compared with the much deeper deposits of natural gas. “Like any scientist, I can’t say it could never happen,” referring to possible contamination of aquifers. “All I can say is that in 60 years it hasn’t happened and it is really an outside chance.”

He also said claims that oil companies are not required to perform clean-up of the site after drilling is complete is not true. “We monitor the process from beginning to end. The oil and gas companies are held to rigorous standards and we inspect the facilities regularly. When the operation is done there is a whole huge protocol “ for shutting down.

He said the proposed sale of mineral rights is something that has been going on for a hundred years without the fanfare being seen today.

Wurfel volunteered to describe the process that takes place prior to the sale of mineral rights of state lands. He said the sales of mineral rights often come with no surface rights, so gas and oil companies contact nearby property owners and make arrangements for the placement of a well. They then petition the Department of Natural Resources for the sale of particular parcels, such as the ones on the state-owned land here. At that point the companies work through the DEQ for approval of the mines.

DEQ geologists inspect the oil company’s plans for wells and their water withdrawal studies. If gas is found to be underground the oil company considers the best way to extract it, and fracking may or may not occur. For the state’s part, oil companies pay throughout the process with funds earmarked for parks and recreation.

“I don’t want to seem to be dismissing people’s concerns,” Wurful said. “But this is a regularly used process that has been in place for 150 years.”

Wurful said scare tactics such as the movie Gasland are misleading. A much-promoted graphic of homeowners who are able to light their drinking water on fire has nothing to do with mining or fracking. “I just found a public service flier where the lead graphic was someone lighting their tap water on fire.” He said it happens less often now that more people are hooked to municipal water systems, but homeowners who have well water do have the possibility to have naturally-occurring methane gas contaminate their wells, allowing the alarming possibility of tap water that can burn.

“As these claims come up they are being debunked. It wasn’t happening in Demick Pennsylvania and it doesn’t have anything to do with fracking.”

Natural gas is an abundant, low-cost and plentiful fuel source, Wurfel stated. He said it burns much cleaner than gas or oil but is less clean than wind and solor. Nationwide more conservation groups are supporting the use of natural gas, including the Sierra Club, although not the Michigan Sierra Club. Wurfel reiterated that he believes the real conflict is not the danger of fracking to natural resources, but the difference of opinion regarding renewable versus non-renewable resources.

State Representative Pete MacGregor has arranged a public meeting with a representative from the state to answer questions about the sale of mining rights, the safety of hydraulic fracturing and other questions. The meeting is scheduled for Thursday, October 18 at 6 p.m. at Cannon Township Hall, 6878 Belding Road.


Article written by:   BETH ALTENA, The Rockford Squire, 10/11/12 

IPAA President, Barry Russell Encourages YOU to Vote

Friday, October 12th, 2012

Our system of government has served as a model for democracies around the world. Even so, only about half of those eligible in the United States regularly use their most powerful tool: the right to vote. Translation? Only about half of us decide who will represent all of us.

Many Americans fail to understand how critical each vote can be and the difference they can make in an election. Consider this: in the 2000 elections, fewer than 10,000 votes determined control of the entire U.S. government (President, House, and Senate). That’s only about 2 votes per elected state or federal official!

Because the cornerstone of our system is a government of the people, increased voter participation can and will improve how that system performs for each of us.

Our industry has much at stake in this election. On Nov. 6, 2012, voters will elect thousands of state and local leaders, 435 Members of Congress, 33 Senators, 11 Governors and a President. Each and every one of these elected officials has the ability to positively or negatively shape legislation affecting each of us, our company, and our communities.

We encourage you to visit IPAA’s website by clicking here for general information that will help you prepare for the upcoming elections. This website is designed to encourage employees, regardless of political affiliations, to learn about political issues and to vote on Election Day. This website does not endorse any specific political candidates, parties or causes.


Make sure that you and your family members are registered to vote for the general election.

For information on voter registration, including deadlines, instructions and forms, click here to go to the IPAA website. Here you will find the EZ Vote tool where you can simply enter your home zip code, and you will be provided with all of the election information you need to register to vote. Registering is easy and takes only a few moments.


If you won’t be able to go to the polls on Election Day, you may be able to vote early in person. To find out if you’re eligible to vote early, and get more information, click here, enter your home zip code, and select the “early voting” option to get more information.


If you won’t be able to go to the polls on Nov. 6, and haven’t already voted early in person, now is the time to request an absentee ballot. To find out more on your state’s election process please click here to visit IPAA’s State Voter Information page. Here you can click on your home state, and you will be taken to that state’s website for further voting information.

To find out if you’re eligible to vote early by mail, and get instructions and forms, please click here and enter your zip code to get further information for your state and voting precinct.

Please contact IPAA’s Ryan Ullman at 202-857-4722 if you have any questions.

Barry Russell is President and CEO of the Independent Petroleum Association of America (IPAA)


Romney, Obama debate natural gas, coal

Thursday, October 4th, 2012

President Obama and GOP presidential candidate Mitt Romney briefly touched on their positions on natural gas and coal during the first of three debates Wednesday night leading up to the Nov. 6 election.

Neither the Marcellus or Utica shales, which are so important to southwestern Pennsylvania’s energy industry, were mentioned specifically. But both Obama and Romney — who have talked up the shale gas boom in the past — discussed how important it was to increase oil and gas production.

Obama said he and Romney agreed that domestic energy production must continue to increase.

“But I also believe that we’ve got to look at the energy sources of the future, like wind and solar and biofuels, and make those investments,” Obama said according to a transcript of the debate.

Obama noted that domestic production of oil and gas was at a level higher than it had been in recent years, but Romney said it wasn’t due to Obama but instead in spite of his policies.

“Mr. President, all of the increase in natural gas and oil has happened on private land, not on government land,” Romney countered. “On government land, your administration has cut the number of permits and licenses in half. If I’m president, I’ll double them.”

Romney said he’d approve the Keystone XL oil pipeline.  Romney also said he favored coal.

“I’m going to make sure we can continue to burn clean coal,” Romney said. “People in the coal industry feel like it’s getting crushed by your policies. I want to get America and North America energy independent so we can create those jobs.”


Article provided by the Pittsburgh Business Times 


Proposed Hydraulic Fracturing Rules Obstruct Independents from Developing American Oil and Natural Gas

Wednesday, September 12th, 2012

Independent Petroleum Association of America (IPAA) President and CEO Barry Russell and Western Energy Alliance President Tim Wigley sent a letter to Interior Secretary Salazar, requesting  a meeting to discuss the impending rule for well stimulation, including hydraulic fracturing, on federal and Indian lands.

The two trade associations representing thousands of independent, mainly small oil and natural gas producers, pointed to a recent economic analysis of the proposed rule that shows a cost to society of about $1.5 billion annually.  These added costs will undoubtedly divert productive resources away from American energy development, job creation, and economic growth, and further disadvantage states with federal and Indian lands.

IPAA and Western Energy Alliance filed joint comments today which detailed how the implementation of these rules would negatively affect America’s oil and natural gas producers.

From the letter:

“The Bureau of Land Management’s (BLM) proposed rule will have enormous implications for America’s oil and natural gas producers.  The proposed rule is unnecessary, excessive and requires actions that no state currently regulating oil and natural gas production deems necessary based on their decades of regulatory experience.  The effort will also place undue economic burdens and time delays on independent producers that will inevitably drive many smaller companies away from exploring for oil and natural gas on federal lands.

“Onshore federal lands hold an opportunity for increased production of American energy.  This benefits our nation with greater energy security, increased employment opportunities and higher royalty revenues to the federal government.  The proposed rule with its one-size-fits-all federal approach to regulating well construction, disclosure and water management, overrides the states which have been successfully regulating oil and natural gas activities for decades with an exemplary safety record. 

“The BLM should look for opportunities to work with the individual states and allow them to do their job, not enact another set of burdensome regulations that will only further drive small oil and natural gas producers from operating on federal lands.”

Click here to read the letter in its entirety.

Click here to view IPAA and Western Energy Alliance’s full comments.

About Western Energy Alliance

Western Energy Alliance, founded in 1974 as the Independent Petroleum Association of Mountain States, is a non-profit trade association representing 400 companies engaged in all aspects of environmentally responsible exploration and production of oil and natural gas in the West.  More information on Western Energy Alliance and its members is available at

About IPAA

IPAA is the leading, national upstream trade association representing oil and natural gas producers that drill 95 percent of the nation’s oil and natural gas wells. These companies account for 54 percent of America’s oil production and 85 percent of its natural gas production. For more information, visit

IPAA NEWS MEDIA CONTACT:  Julia Bell/202-857-4722

Pipeline proposal would create jobs in Michigan

Wednesday, September 5th, 2012

A new natural gas pipeline would run through Michigan and create an unspecified number of jobs in the state, according to a proposal released Tuesday.

Detroit-based DTE Energy Co., Canada-based Enbridge Inc. and Houston-based Spectra Energy Corp. plan to spend as much as $1.5 billion to jointly develop a pipeline that will move natural gas from Ohio’s Utica Shale through Michigan to markets in the Midwest and eastern Canada.

The proposed Nexus Gas Transmission system would include 250 miles of pipe that starting in November 2015 would transport 1 billion cubic feet of gas a day to Michigan and Ontario, according to a joint statement.

Though not finalized, the pipeline route would start outside of Cleveland, run through northern Ohio, swing north in or around Detroit and cross into Ontario between Marine City and St. Clair, according to a general map provided by Spectra.

The pipeline would serve power plants and industrial customers, the companies said. DTE Energy’s MichCon has 90,000 commercial and industrial clients.

“This is going to be the new frontier in energy,” said Phil Flynn, energy analyst with PRICE Futures Group in Chicago. “This is going to be the start of a new boom.”

In 2010, Michigan ranked 10th nationwide with 28,000 direct and spinoff jobs from hydraulic fracturing to extract natural gas from shale formations, according to an IHS Global Insight study commissioned by America’s Natural Gas Alliance. Another 10,000 jobs will be created in Michigan by 2015, mostly in spinoff employment, the study estimates.

Environmental critics who have blasted the chemical process used to extract shale gas — nicknamed “fracking” — said the proposed pipeline would be a detriment to the state.

“We see fracking as a distraction of where Michigan and the rest of the country need to go, and that’s a clean-energy future,” said Nic Clark, spokesman for Ann Arbor-based Clean Water Action. “It doesn’t make a whole lot of sense to be running even more pipelines when we have the opportunity for energy independence.”

The companies should think twice about investing in the project, he said.

“It’s the status quo versus the future,” Clark said. “Their business model is profits from the status quo and continued investment in fossil fuels, which have damaging effects.”

The billion-dollar project is expected to create short-term construction jobs as well as long-term positions in Ohio, Michigan and Ontario, said Wendy Olson, spokesperson for Spectra Energy, but it’s too early to project how many. Energy companies and analysts argue that shale natural gas will make America energy independent and turn the country into an energy exporter.

Once completed, the pipeline might curb the cost of natural gas, which has risen since hitting a decades-low price earlier this year.

It will give manufacturers a reason to stay in or return to America by supplying lower-cost energy, Flynn said.

“Not knowing what the crystal ball has that far down the road, it should be a benefit from a financial standpoint,” including lower prices, DTE Energy spokesman Len Singer said.

Chesapeake Energy Corp., Devon Energy Corp. and Exxon Mobil Corp. have begun tapping into the Utica formation, which stretches from Kentucky to Ontario. The Ohio portion may produce as much as 5.5 billion barrels of oil and 15.7 trillion cubic feet of gas, according to Ohio Department of Natural Resources.

Spectra is developing, designing and building the pipeline, a company spokesman said. The pipeline must be approved by the Federal Energy Regulatory Commission, Singer said.

Spectra Energy plans to specify the pipeline’s economic benefits after it completes in the next few months what is known as an “open season” — a period when it lays out its plans, takes bid commitments from customers and gets public comments through the federal regulatory process.

A Video From the Miller Energy Criterium

Friday, August 24th, 2012

Check out this video from the Miller Energy Criterium! Many thanks to the organizers, who put on an excellent event, and to all the participants who came out to join us. We were delighted to support the cycling community in West Michigan!