Opponents Outnumber Supporters at NYC Hydrofracking Meeting
The BMCC lecture hall was full to capacity for the City Council's town meeting on hydrofracking on Tuesday night. (image: Nicholas Whitaker for HeatingOil.com)
On Tuesday night, the New York City Council held a public “town meeting” to solicit citizens’ views on the subject of hydraulic fracturing, the controversial oil and gas drilling method known as hydrofracking. The meeting, held at the Borough of Manhattan Community College, allowed city residents two minutes each to express their views on hydrofracking and proposed regulations. City Council Speaker Christine Quinn and Councilman Jim Gennaro presided over the meeting, and a handful of other representatives from city government were in attendance as well. Also at the meeting were two representatives of the federal Environmental Protection Agency (EPA), which is currently undertaking a comprehensive nationwide study of the practice to gain a better understand of its effects on the environment surrounding drilling sites.
From the opening moments of the meeting, it was clear that the majority of city politicians and bureaucrats, as well as the approximately 200 citizens in attendance, were there to oppose the use of hydrofracking in New York City’s watershed. Speaker Quinn kicked off the meeting with kudos for her fellow council members and state lawmakers for their willingness to enact moratoriums on hydrofracking. Quinn stated that the purpose of the meeting was to collect testimony from New York City residents (who would be “directly affected” by hydrofracking) that would be submitted to the EPA, as the agency had not planned a hearing in the city as part of their nationwide hydrofracking study. Quinn included a mention of industry opposition to hydrofracking regulation, saying that the natural gas industry, “As [State Senator Liz Krueger] can tell you, has pumped a lot of money into Albany.” Councilman Jim Gennaro, who took over the meeting after Quinn’s introduction, also made clear his opposition to hydrofracking at the outset, declaring his intention to “bring some sanity” to the drilling method.
A one-page leaflet distributed by the City Council offered a basic explanation of hydrofracking.
Numerous speakers referred to hydrofracking as “the most important environmental issue in New York State,” and most focused on its threat to drinking water—rightly so, as no gas drilling would ever take place in New York City, but in the Catskill Watershed that supplies the city with its unfiltered drinking water. In addition to the health risks posed by chemical contamination of drinking water, many speakers touched on the financial burden of building and operating a filtration plant to ensure clean water in the event of contamination. Councilman Oliver Koppell, who worked on water issues as a state assemblyman, estimated the cost of building such a plant at $20 billion. Filmmaker Josh Fox, the director of the recently released hydrofracking documentary Gasland, expanded his opposition to hydrofracking beyond water concerns, demanding that regulators also look into effects of the process on air and soil quality. To raucous applause, Fox urged citizens to demand the closing of loopholes in key environmental regulations the Clean Water Act, the Clean Air Act, and the Superfund Law that specifically exempt hydrofracking from their provisions. Fox also called for federal regulators to be present full-time at sites with more than 100 gas wells to ensure drilling is carried out safely.
Filmmaker Josh Fox speaks to the Council as attendees look on. Fox called for tighter federal regulation of hydrofracking. (image: Nicholas Whitaker for HeaitngOil.com)
Despite a palpable anti-hydrofracking air in at the meeting, two proponents of expanded gas drilling and hydrofracking did speak. The first was Ray Olson, a representative of landowners from Windham, NY, a town located in the Catskill watershed that holds potential for gas extraction. Clearly sensing that he was in unfriendly territory, Olson took a combative tone, beginning with a correction of “misstatements” made by council members. “There are a million acres in the watershed,” he stated defiantly, “900,000 of those are privately owned. It is not your watershed, and it is certainly not your water. It is ours.” Olson went on to describe the financial compensation offered by gas companies to landowners such as himself, and said that he stood to win initial payments (through land leasing and gas royalties) that total $5 million. “We will get our money one way or another,” he said, arguing that the city would have to pay watershed landowners for the rights to the water beneath their land—though that premise is highly questionable, as upstate residents are not currently compensated for the water used by New York City. Olson also took on the financial argument, saying that the $20 billion cost of a water filtration system would be “a bargain,” as it would create jobs and commerce in the city and state. This proclamation brought boos and jeers from the meeting attendees that were cut off by Councilman Gennaro’s gavel. In conclusion, Olson offered a third argument in favor of expanded drilling, declaring, “The opportunity for New York to become the first energy-independent state in the world is irresistible.” Another fracking defender, Brianne Murphy, took a more muted approach. Representing landowners in Broome County, Murphy argued that the interests of landowners are often overlooked, as the debate over fracking is frequently framed as one between environmentalists and the natural gas industry. She acknowledged the risks that hydrofracking poses to local residents, but also asserted, “we cannot allow fear-mongering and other unfounded, grossly exaggerated concerns to dictate policy.” She emphasized that correctly executed hydraulic fracturing has not been proven to threaten the safety of drinking water.
The least partisan statements of the evening came from Jennifer Grossman of the Open Spaces Institute, who brought a message of unity to her testimony. She sympathized with upstate landowners in economic distress what have to “make [the choice] of giving up their land or signing [gas drilling] leases. Her message was one of unity that ended with a call for citizens, environmental groups, and industry to work together at finding solutions to the problems posed by hydrofracking.
Because meeting attendees were largely opponents of hydrofracking, much of the statements made amounted to, as one speaker noted, “preaching to the choir.” What was clear at the meeting was that there is a segment of New York City residents that are informed and passionate about the hydrofracking debate. What was also clear is that New York City politicians (however personally interested in the issue they may or may not be) are eager to tap into the passion of those citizens and use it to boost their own professional profile and win votes.
The EPA is only in the sixth month of a two-year review, and the state moratorium on hydrofracking will expire in May of 2011, before which time it will almost certainly be reconsidered by the legislature. This of course means that the debate over hydrofracking is far from over, and there are many more community meetings and other events to be had, both inside and outside New York State.
NY Senate Passes Hydrofracking Ban
The Capitol building in Albany--the site of a rally urging legislators to pass a moratorium on hydrofracking three weeks ago--saw the Senate pass just such a moratorium on Wednesday. (image: Nicholas Whitcker for HeatingOil.com)
In a whirlwind session on Wednesday night the New York State Senate approved a moratorium on the controversial gas drilling technique known as hydraulic fracturing or hydrofracking. Local public radio station WNYC reported on Thursday that the measure passed by a vote of 48 to 9, with 15 yes votes coming from Republicans. Speaking to WNYC, ProPublica reporter Abrahm Lustgarten noted that the bill acknowledges the state Department of Environmental Conservation’s (DEC) pending review of hydraulic fracturing and “takes pressure off” of the agency by giving it more time to perform a thorough review of the technique.
The bill, S8129B, would suspend all permits for hydraulic fracturing in New York State until May 15, 2011. By that time, the DEC’s review will most likely be completed, and the state government will have collected and considered more information on the practice. The moratorium on hydrofracking would expire on May 15 of next year, and would have to be replaced by new legislation if the DEC, the State Legislature, and/or the Governor finds sufficient evidence that calls for closer oversight or an outright ban. According to the bill’s author, upstate Senator Antoine Thomson (D), its bipartisan passage stemmed from “noticeable effects” of hydrofracking on drinking water in Pennsylvania and concerns over the safety of oil and natural gas drilling intensified by the oil spill in the Gulf of Mexico. Hydrofracking, which involves injecting chemical-laden water deep underground at high pressures, is the suspected cause of water contamination and health problems at drilling sites around the country. However, drilling companies have repeatedly asserted that hydrofracking is safe and that no definitive scientific links have been established between the practice and water contamination.
The Senate’s passage of the bill marks a victory for New York’s anti-fracking activists, who staged a rally at the then-empty capitol building on July 20. The bill still requires approval by the Assembly and Governor David Paterson before it becomes law.
Senate Bill that Responds to BP Spill Includes New Regulation of Hydrofracking
Senate party leaders Harry Reid (D-NV, left) and Mitch McConnell (R-KY, right) are at odds over hydrofracking oversight in the proposed energy bill that’s a response to the BP oil spill in the Gulf of Mexico. (image: politico.com)
The energy and oil spill protection bill currently being shepherded through the Senate by Majority Leader Harry Reid includes many tacked-on provisions, one of which is new disclosure requirements for hydraulic fracturing (hydrofracking), the Houston Chronicle reported on Wednesday. A similar bill is making its way through the House as well, and also includes many extra provisions on top of a focus on remedying problems brought to light by the Deepwater Horizon spill and its fallout.
Both bills have become sources of partisan bickering—Republicans accuse Democrats of exploiting the disaster to pass unrelated energy measures in the bills, while Democrats counter that seemingly unrelated provisions are tied to America’s oil addiction. “I think they view this as an opportunity to push an agenda absolutely unrelated to the oil spill,” said Republican Congressman Kevin Brady of Washington State. In defense of the Senate bill, Reid called high demand for oil in the US a direct cause of the Gulf of Mexico catastrophe: “The BP disaster is one of the most visible consequences of our dangerous addiction to oil.” he said.
The hydrofracking measure in the Senate bill brings the debate over the drilling method, currently being used to extract natural gas from massive deposits beneath the Marcellus Shale formation in the eastern US, to the national stage. Recently, the debate over hydrofracking and its effects on local water supplies and ecosystems has heated up in New York State, where a moratorium on the process is pending in the state legislature.
The provision in the Senate bill would require companies that employ hydrofracking to disclose the chemicals added to water that is shot underground at extremely high pressure to break up (“fracture”) rock formations that contain natural gas deposits. The disclosure requirement is an attempt to federally regulate hydrofracking, which was specifically exempted from the Clean Air Act, Clean Water Act, and other national environmental regulations by the Energy Policy Act of 2005, a bill authored by a group of energy industry representatives organized by then-Vice President Dick Cheney. The first attempt to regulate hydrofracking at the federal level came in June of 2009 with the introduction of the Fracturing Responsibility and Awareness of Chemicals Act to the House, but the bill has so far failed to advance out of committee.
The disclosure requirement has a better chance at eventual adoption because of its inclusion in the “spill bill” (the Clean Energy Jobs and Oil Company Accountability Act of 2010), but has quickly become one of the most controversial parts of the 409-page bill. Recent reporting on the debate over the Senate bill from the Huffington Post and Salon.com cite its removal of liability caps on oil companies as the provision that will eventually prove to be the bill’s deal breaker, as it will lead two Democrats to withdraw their support, thereby leaving their party two votes short of the 60 needed to pass the bill over Republicans’ inevitable filibuster.
If the disclosure requirement does somehow become law, it would mark a victory for environmentalists and other hydrofracking opponents (including outspoken actor and New York State resident Mark Ruffalo) who list disclosure of the chemicals used in the fracking process as one of their demands for natural gas drilling companies.
NYS Celebrities Stoke Fiery Debate Over Gas Drilling at Albany Rally in Support of Ban
Actor Mark Ruffalo proclaims his opposition to hydrofracking in New York State and urges legislators to enact a moratorium on the controversial practice at a rally in Albany on Tuesday. (image: timesunion.com)
Concerned citizens of New York State, including two celebrities, held a boisterous meeting at the State Capitol on Tuesday in support of a temporary ban on the natural gas drilling technique known as hydraulic fracturing or hydrofracking. The meeting brought new attention to the debate over the controversial drilling technique, which has opened up a huge area of the Northeast that sits atop an underground rock formation called the Marcellus Shale, which stretches from Tennessee to northern New York, to potentially lucrative natural gas extraction. The controversy over hydrofracking stems from the injection of water laced with hundreds of chemicals at high pressure deep into the ground to break up rock formations and access massive natural gas reserves. Opponents of the technique cite risks of groundwater contamination, the consumption of huge quantities of water, and creation of toxic waste.
A group of those opponents met in the hall outside the State Senate chamber (which was empty, as legislators are currently in summer recess) in Albany to advocate for their cause, the Albany Times-Union reported. The group featured 91-year-old folk legend Pete Seeger and actor Mark Ruffalo, who called for New York lawmakers to approve a proposed moratorium on hydrofracking until further testing is conducted and appropriate regulations are put in place. Seeger, banjo in hand, drew parallels between the dangers of hydrofracking and the environmental disaster in the Gulf of Mexico by singing, “when drill, baby, drill turns to spill, baby, spill/God’s counting on me.” Ruffalo, a resident of Sullivan County, made an impassioned speech (watch the video below) that focused on the need for safe drinking water, but also gave a sympathetic nod to struggling farmers and other landowners who support hydrofracking because of the income it could bring to them in the form of drilling royalties paid by energy companies.
Companies who perform hydrofracking insist that the method is safe, and point to a lack of conclusive evidence connecting it to contaminated drinking water and other maladies. The Times-Union quoted one industry representative’s strongly worded response to the event at the Capitol:
Brad Gill, executive director of the Independent Oil & Gas Association of New York, called the rally “another example of the reckless disregard for the facts that ill-informed and dishonest opponents continue to put forth as they attempt to block the safe exploration of natural gas and economic recovery in New York.”
While no indisputable scientific link has been made between hydrofracking and contaminated water or other pollution, scores of residents who live near fracking operations have reported problems with their drinking water, as well as other environmental issues whose appearance coincided with the onset of gas drilling nearby. Holding a jar of cloudy water he said he pulled from a family well in Dimock, Pennsylvania, 200 yards away from a hydrofracking site, Ruffalo asked, “Who in New York would take a sip of that?”
Pennsylvania resident and filmmaker Josh Fox was inspired to create a documentary about the effects of hydrofracking when a representative of a gas company offered to pay him for permission to drill for natural gas on his property. The film, titled Gasland, chronicles a litany of health, water, and environmental problems experienced by Americans living near hydrofracking sites—the most memorable of which may be a Colorado man lighting the well water from his kitchen tap on fire.
In addition to the rally in Albany this week, the debate over hydrofracking has seen several recent developments. In June, the interstate Delaware River Basin Commission (DRBC) blocked all gas drilling that employs hydrofracking, as well as exploratory drilling in the Basin, New York City’s WNYC reported on Monday. “This is something new that’s being introduced to the Delaware River Basin and we want to make sure that we get this right,” said DRBC spokesman Clarke Rupert.
Last week, the environmental news service Greenwire reported on efforts by one natural gas drilling company, Range Resources Corp., to appease hydrofracking opponents by disclosing the chemicals used in the process on a well-by-well basis. Chesapeake Energy Corp., a major driller in the Marcellus Shale area, is considering following Range’s example. The lack of disclosure of which chemicals are used in hydrofracking is another objection to the process raised by opponents, including Ruffalo. The Greenwire report noted that gas companies hoped that disclosure of fracking chemicals, in addition to allaying environmental concerns, would keep regulation at the state level, which the gas industry as a whole firmly supports. At the federal level, the Environmental Protection Agency is currently undertaking a two-year review of the hydrofracking process that could eventually lead to the agency regulating the practice.
Whatever the long-term fate of hydrofracking, the current battle over the practice is in New York State. If Ruffalo, Seeger, and other hydrofracking opponents succeed in their efforts, the New York Legislature will approve the proposed moratorium on hydrofracking in the state that would suspend fracking for at least a year and lead to new regulations of the process.
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Heating Oil Weekly Roundup: Oil Spill Terminology, Hydrofracking Critics, and the World Cup’s Carbon Footprint
(image: John Cole, the Scranton Times via cagle.com)
Is the oil spill a spill? Or is it a gusher, or a leak, or a catastrophe, or a blowout? Anita Lee of the Biloxi Sun Herald (via McClatchyDC.com) investigates the possibilities of what to call the…thing in the Gulf of Mexico.
It’s been a tough PR week for the natural gas industry, whose controversial practice of hydraulic fracturing (hydrofracking) has received sustained attention after Josh Fox’s muckraking documentary Gasland debuted on HBO on Monday, has been reviewed by nearly every national publication, and Fox himself has been everywhere (including The Daily Show). If that wasn’t enough, Christopher Bateman at Vanity Fair piled on with his own highly critical account of hydrofracking in Pennsylvania.
Fans and players from around the globe have converged on South Africa for the World Cup, and all of that travel used up a lot of fuel and emitted a lot of carbon, says the Center for American Progress. Even when international travel is left out of the equation, the carbon footprint of the 2010 World Cup is eight times bigger than that of the 2006 World Cup in Germany.
Solar power is a long way from being able to provide us with enough electricity to replace power plants, but there’s one thing we know it can do: power a car disguised as a shrub. Leslie Katz at CNET has the story on the “Terrestrial Shrub Rover,” which is pretty much what it sounds like and is powered entirely by the sun. Watch the video below to see a guy drive a shrub.
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CFTC Extends Regulation of Electronic Energy Markets
The CFTC ruled to regulate seven electronic natural gas contracts traded on the IntercontinentalExchange (ICE). (image: money.cnn.com)
The Commodity Futures Trading Commission (CFTC) ruled on Tuesday to extend its regulation to seven natural gas contracts that are traded electronically on the IntercontinentalExchange (ICE), reported Reuters. The CFTC concluded that the contracts played a significant role in setting the price of a commodity, which means they merit the CFTC’s oversight and could be subject to position limits.
The CFTC’s decision to increase regulation of these electronic contracts is separate from its proposal to establish position limits on energy commodities, including heating oil futures. However, the public comment period on that proposal concluded on Monday, and the CFTC’s move to extend its oversight into electronic markets like ICE could be a clue that the CFTC remains bent on tightening regulation of all trading of energy commodities.
Electronic markets are typically subject to lighter regulation than traditional futures exchanges (like the New York Mercantile Exchange, or NYMEX), says Dow Jones Newswires, but a 2008 law granted the CFTC the ability to regulate contracts traded on electronic energy markets if it determines that the contract plays a role in setting price.
On Tuesday the CFTC deliberated over 24 energy contracts, and decided that only seven met the criteria for increased oversight. The contracts that did not warrant oversight were other natural gas contracts on ICE and on the Natural Gas Exchange, and one carbon contract on the Chicago Climate Exchange.
This ruling by the CFTC to bring additional energy contracts under its purview adds momentum to the push for financial reform taking place now in the Senate and to the newfound regulatory zeal in the SEC and the CFTC itself. Most end users of commodities like heating oil desire curbs on speculation in commodity markets, which should lead to stable, and quite possibly lower, heating oil prices.
Energy Dept: Natural Gas Supply Data Overstated
Despite major errors in EIA’s reporting of natural gas supply and demand, inventories that have remained at or above the five-year average for the last nine months will likely keep short-term prices low. (image: thomsonreuters.com)
The US Department of Energy announced on Monday that it would implement sweeping changes to its data collection on natural gas supplies to address “overestimates” in production, according to the Wall Street Journal. The DOE’s Energy Information Administration (EIA) currently collects data from large natural gas producers and extrapolates that data across the industry, omitting data from hundreds of smaller producers. The EIA will begin using new data collection methods this month to correct the problem, which will likely lead to a substantial reduction in US supply estimates.
In addition to excluding data from smaller producers, or perhaps as a result of it, recent natural gas estimates have shown huge margins of error, leading many analysts to question the overall validity of the data. The Journal explained:
Analysts also point to the discrepancy between supply (how much gas is produced or imported) and demand (the amount that is stored or used). Those two figures should cancel each other. While there always is a margin of error, that margin has widened sharply in recent months. In December, the agency reported total new gas supply at 87.8 billion cubic feet a day and total demand of 80 billion, leaving 7.8 billion cubic feet unaccounted for—a margin of error of 10%.
The EIA’s announcement drove up the price of natural gas by 11 percent earlier this week, as traders anticipated a tightening of supplies as a result of the data collection changes. According to a Reuters report published on Tuesday, however, “analysts said that will not change the fuel’s weak near-term fundamentals.” Although recent data may be inaccurate, US supplies of natural gas still surpass demand, and that trend will likely continue over the next few months.
Last month, a report by Dow Jones Newswires found similar inaccuracies in the EIA’s reporting of oil inventory data that had major effects on crude (and, by extension, heating oil, diesel, and gasoline) prices in the last six months. The reception of that finding was more muted, as deficiencies in the oil supply reporting process—like reliance on storage firms’ self-reporting and human error—were fairly widely known.
EIA officials have pledged to address reporting issues, but have not offered any specifics on how they will do so. It appears that weekly oil inventory reports will likely remain unchanged and continue to influence oil prices, flawed though they may be. Changes to natural gas supply and demand data collection are forthcoming, and will certainly affect the long-term view of natural gas supplies and drive up prices in the long term.
EPA to Undertake Comprehensive Study of Hydrofracking
The EPA is taking on the controversy surrounding hydrofracking, and plans to deliver an answer in 2012. (image: asmalldoseof.org and sierraactivist.org)
Following years of controversy over a technique used for extracting hard-to-reach oil and natural gas called hydraulic fracturing (a.k.a. hydrofracking), the EPA announced on Thursday that it would invest two years and almost $2 million to study hydrofracking’s possible threats to human health and the environment. The Wall Street Journal reported on the agency’s announcement, as made by Paul Anastas, assistant administrator for EPA’s Office of Research and Development:
Our research will be designed to answer questions about the potential impact of hydraulic fracturing on human health and the environment. The study will be conducted through a transparent, peer-reviewed process, with significant stakeholder input.
At CERAWeek Conference, Oil and Gas Are the Future
Secretary of Energy Steven Chu speaking about the future of oil and gas at CERAWeek 2010. (image: chron.com)
Tuesday was “oil day” at the CERAWeek 2010 energy conference, sponsored by the energy research firm IHS CERA, and leading figures from the energy industry and from the Obama administration gathered to speak about the future of oil and gas. The dominant tone was one of confidence, as most speakers insisted that fossil fuels would remain the key energy sources far into the future, reported the Houston Chronicle.
While a positive assessment of the future of oil and gas might be expected from energy insiders, some of the oil and gas industry’s central claims about the continuing potential and relevance of fossil fuels were confirmed by Secretary of Energy Steven Chu. He talked about the promise of natural gas, which can be used for power generation and burns cleaner than coal, as a “bridge” fuel that can play a role in the “transition to other fuels” in the future. Oil, too, will retain its place in the energy mix, according to Chu: “Oil is an ideal transportation fuel, so it will be with us for decades.”
Report of $2.4 Trillion Worth of US Oil & Gas Reserves Deserves Closer Scrutiny
Reports of an unprecedented bounty of domestic oil and gas reserves are open to misinterpretation. (image: trcc.commnet.edu and i.ehow.com)
On Monday, a report released by a national contractor for state utilities claimed that the United States contains more than 2,000 trillion cubic feet (tcf) of natural gas and 229 billion barrels (bbl) of oil—as observed by The Energy Source blog at Forbes.com, that’s more than the average OPEC nation holds. Noting that a chunk of these reserves lie in areas barred from drilling, the report also found that leaving these reserves untouched would cost the US $2.36 trillion in lost GDP over the next twenty years.
It’s no secret that the US contains its own oil and gas reserves. According to Reuters, Previous estimates have placed those figures at 1750 tcf and 186 bbl for gas and oil, respectively.
The study, two years in the making, was sponsored by the National Association for Regulatory Commissioners in conjunction with the industry-funded Gas Technology Institute. The government-protected reserves amount to 43 billion barrels of oil and 286 tcf of gas and are located in the Arctic National Wildlife Refuge and in areas just off the coastline of the continental US. The US currently consumes an average of 20 million barrels of oil per day, and produces 6 million barrels per day.
The research was done according to standard methodology by SAIC Corp ie data collection and processing, and the report attributes the reserve increases to advances in drilling technology and gas extraction methods. The real thrust of the study comes from its economic figures. This appears to be the first time a hard dollar amount—and a whopping one at that—has been attached to the value of those reserves.
Natural Gas Explosion Kills 5 at CT Power Plant
Aerial view of the Kleen Energy Systems LLC power plant following the blast. (image: Bettina Hansen via Hartford Courant.com)
As reported by Reuters, a natural gas powered-electrical plant near Middletown, CT exploded yesterday, killing five people and injuring a dozen others. It was initially believed that some 50 construction workers were trapped in the building’s rubble, but those reports appear to be inaccurate, as the Hartford Courant has reported that all of them are now accounted for.
In early reports, officials suspected that a gas leak originating from pipes going in to the building was the cause of the combustion, because workers were purging these lines of air as the explosion occurred just before 11:30 in the morning.
The blast was so powerful that it blew out windows from neighboring houses and rocked the ground beneath cars and houses 20 miles away. An investigation is currently underway.
T. Boone Pickens Loses Interest in Wind Power
Pickens remains committed to energy independence, but is cutting back on wind power. (image: jurvetson via flickr.com)
T. Boone Pickens, recently an outspoken (and somewhat unexpected) proponent of wind power, has changed course again. Pickens announced earlier this week that he is reducing his investment in wind to focus more exclusively on natural gas. The Dallas Morning News reported that the former oilman’s company, Mesa Power, LP, will be taking a delivery of only 300 wind turbines, down from an order he announced in May of 687 turbines.
Those turbines were meant to become part of an ambitious wind farm in Texas; now, none of the turbines will be sent to the Lone Star state. Pickens told reporters that America has only one resource that can compete with oil “and it’s natural gas.” Pickens said that one reason wind energy has become less important is because of the drop in the price of natural gas.
The change in Pickens’ energy interest—wind energy was one of the lynchpins of his Pickens Plan—likely won’t earn the billionaire any points with environmentalists though, as the New York Times notes. The paper highlights that, once again, Pickens has “tweaked the Pickens Plan in a way that just happens to conform with his changing business interests.” The paper goes on to note that many of Pickens’s business investments will benefit if natural gas usage were to rise.
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US Became World’s Biggest Natural Gas Producer in 2009
A natural gas drilling rig. (image: danielfoster437 via flickr.com)
Signifying the rising importance of unconventional energy resources and the developed world’s slow movement away from crude oil, in 2009 the United States overtook Russia as the world’s largest producer of natural gas. On Tuesday, Upstreamonline.com reported that America’s overall production for 2009 rose approximately 3.7% for an estimated 624 billion cubic meters of natural gas. According to Department of Energy data, “minimal hurricane disruptions and significant growth in production from onshore shale basins have contributed to the increase in domestic supply.”
However, America’s increased production does not entirely explain why the U.S. became number one in natural gas for 2009. A significant reason for the shift resulted from tremendous Russian losses, especially from the country’s state-owned natural gas company (and subject of a rousing, if not frightening anthem), Gazprom. It is estimated that Russian output fell by nearly 12 percent last year, to 582 billion cubic meters. However, news that the United States has increased its domestic production of natural gas may put a stop to Gazprom’s crooning. Prior to hearing the news, Gazprom was reportedly hoping to obtain as much as 10% of America’s natural gas market by 2020; however it seems that a spiraling Russian economy and shrinking European demand for Russian natural gas have all but dashed those hopes.
Literally Singing the Praises of Gazprom
With the days of socialist marches and propaganda posters fading away, it seems that Russia has found a new way to whip up nationalist pride: an epic anthem extolling the virtues of the national gas company, Gazprom. In a YouTube video that can be described as inspiring, strange, comical, infectious and frightening (or all of the above), Gazprom presents its new theme song in music video form with English subtitles.
Sure, natural gas is an important commodity that’s “giving people warmth and light for office and for home,” but does it deserve three and a half minutes of exultation that borders on religious fanaticism? It’s clear that natural gas is one of the main (if not the most important) factors that maintain Russia’s political relevance in our global society, as then-president Putin showed when he cut off Russia’s gas supply to the Ukraine in the dead of winter last year.
Crucial domestic resource, chief export, invaluable revenue source, political weapon…you can see why the Russians love their gas. However, I doubt average Russians share the unconditional love and reverence for Gazprom that the anthem expresses, or if the song is even known in the country (or anywhere outside the snickering group of 67,950 YouTube viewers), but I do know that they’ll “never ever find a surer friend than Gazprom.”
So pour yourself vodka straight up so we can “drink to all the Russian gas, that it never comes to an end, though it’s so hard to obtain!”
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Chesapeake Energy Speaks Out Against Proposed NY Regulations
Chesapeake Energy logo. (image: wvchamber.com)
Unhappy with a new proposal by the New York state government to regulate shale-gas drilling, Chesapeake Energy, which holds numerous investments in the state’s untapped shale, has threatened to move its operations elsewhere.
According to an article published by Reuters on Tuesday, the energy company has decried the proposed regulations as unnecessarily onerous, complaining that they will likely force energy companies out of the state, thereby depriving New York of badly needed revenue.
Energy CFOs Say Legislation is More Important Than Demand
Energy business leaders await the coming blow to their industry that will follow from the now-officially noxious status of greenhouse gas emissions. (image: seanmcgrath via flickr.com)
In a telling statement about what’s to come politically this year, U.S. Energy CFOs have predicted that legislation, and not demand for their products, will have the most impact on their industry in 2010. Kirsten Korosec of BNet.com reported Wednesday that about 45 percent of CFOS surveyed for consultant firm BDO Seidman’s 2010 Energy Outlook Survey chose legislation as the top issue in the coming year. Just 28 percent of those surveyed pointed to demand as the most important factor, which topped out last year’s survey results.
Indeed, 2010 is a bit of a gauntlet year for big oil and impending legislation. First off, the EPA made a big move in early December, declaring greenhouse gases a public health hazard, and therefore opening them up to regulation by the agency. In the Senate, climate change legislation is currently in the works that would place a cap on greenhouse gas emissions. There is also legislation on the table attempting to regulate hydraulic fracturing, a controversial technique currently being debated in Upstate New York as a way to access natural gas in the Marcellus Shale formation.
Whatever the outcome, it’s pretty clear that the industry is in flux, and may have some adapting to do in the coming years. For heating oil and other energy consumers, this could mean higher prices in the short term as energy companies adjust, but would likely lead to lower long term prices.
NYC Study Warns of Dangers of Hydrofracking
Hydraulic fracturing and drilling can reach into water supplies as well as natural gas-laden shale formations. (image: journeyoftheforsaken.com)
“Introduction of hundreds of tons per day of fracturing chemicals into the watershed over a period of several decades will likely be accompanied by the gradual dispersion of low levels of toxic chemicals into the environment and potentially the [New York City] water supply via multiple transport pathways.”
That’s from the just-released “Final Impact Assessment Report” by the NYC Department of Environmental Protection on the risks posed by natural gas production in upstate New York. Normally, engineer- and scientist-speak tends to understate risks; they’re the kind of people who’d call what happens when you hit the pavement after falling off the observation deck of the Empire State Building “Sudden Deceleration Syndrome.” However, even couched in scientific-ese, the conclusion reported above is frightening—any time you put “toxic chemicals” and “water supply” into the same sentence, you have a problem.
Other conclusions from the DEP’s report include:
Natural Gas Price Rose the Most of All Commodities During 2000s
Marcellus Shale well in Northwestern PA. (image: LJSTEINCO via flickr.com)
Putting its own spin on the onslaught of end-of-decade roundups, the Wall Street Journal’s Environmental Capital Blog entered the fray with a look back at the most expensive commodities of the aughts. Referring to a report published on Wednesday by Barclays Capital that calculated the change in price on 17 commodities from the last decade to this one, blogger Russell Gold pointed out that the one commodity that saw the biggest price bump in the 00’s was natural gas. Natural gas cost on average $6.50 per million British thermal units in the 00’s, which is nearly a 142% increase over its average cost of $2.70 during the ‘90s. As Gold went on to note, all four of the top commodities—ranked by the biggest percentage price increase—in Barclay’s report were energy products, with heating oil and crude tied for second place, followed by gasoline. Here is the rundown of the four most valuable commodities of the last decade from the Barclay’s report, followed by the percentage increase in cost they saw from the previous decade:
Spending on Oil and Gas Exploration and Production to Rise in 2010
Oil companies will be spending more money on exploration in 2010. (image: yorku.ca)
A survey of 387 oil and gas producers found that global spending on oil and gas exploration will rise 11 percent to $439 billion in 2010 as energy prices increase, Reuters reported on Thursday. The increase in spending on exploration reverses the 15 percent decrease seen in 2009, when oil prices dropped after 2008’s record highs.
Exploration and development spending is strongly linked to oil and gas prices. If prices are too low, oil companies have no incentive to initiate exploration and drilling projects. Without the development and production of new fields, however, supplies will decrease; that could in turn raise prices, unless demand falls by an equal amount.
The survey projected spending on exploration and development in the US to rise by 12 percent to $79 billion, with drilling for shale gas responsible for much of the increase. Spending in Canada is expected to increase by 23 percent to $23 billion, buoyed in part by the strengthening of the Canadian dollar. Globally, national oil companies in Asia, Africa, the Middle East, and Russia are expected to increase their budgets and raise exploration and development spending outside of North America by 10 percent to reach $337 billion.
The findings of the survey, conducted by Barclay’s Capital, fit with Chevron’s recent decision to focus on exploration and development in favor of refining. The majority of Chevron’s $22 billion in planned spending for 2010—$17.6 billion—will be spent on upstream natural gas and crude oil exploration and production projects.
Earnings Fall for Oil and Gas Industry in 3rd Quarter
Chevron oil refinery in Salt Lake City. (image: arbyreed via flickr.com)
Both the oil and natural gas industries have taken major hits last financial quarter (Q309). On Wednesday, the U.S. Energy Information Administration (EIA) released a report noting that all segments of the oil and natural gas industries are reporting decreased earnings as compared to this time last year .
HeatingOil.com has been monitoring the recent turbulence in the oil industry, specifically in the refining sector. For example, Chevron, one of America’s largest oil companies, is cutting back on refining because of market constraints caused by high crude oil prices and comparatively low demand for refined products like heating oil.
According to the report, refiners of crude oil have taken heavy losses. The EIA notes that large integrated and large independent refiners’ “earnings dropped to $0.4 billion in Q309 from $9.7 billion in Q308.” To highlight how big of a hit this truly is, these losses emerged despite the fact that refiners were paying remarkably lower prices for crude this quarter ($66.37 per barrel) than last year’s third quarter ($113.52 per barrel). The natural gas sector was hit with the opposite dilemma–companies that were pulling in an average of $8.86 per thousand cubic feet last year are now only averaging $3.17 per thousand cubic feet.
Finally, the report notes that large integrated and large independent producers have also taken major hits, reporting “earnings of $15.8 billion in Q309 for the oil and gas production segment, down from $42.7 billion in Q308.”
Unfortunately, the oil and gas industries are likely to try and compensate for steep declines in revenue by raising wholesale prices, which would result in higher consumer costs for products like heating oil.
