Light sweet crude is flowing in Weld County, Colorado. (image: co.weld.co.us and lca-resources.com)

Yesterday, reports of a high quality crude oil well in discovered in northern Colorado contained two remarkable facts.

1. During its initial 24-hour test, the production well yielded 1,770 barrels of oil. According to denverpost.com, the average well in the region produces 100-150 barrels a day.

2. The oil is light sweet crude, the most useful and therefore most valuable crude grade in the world that is increasingly rare.

Light sweet crude is the highest crude grade due to its lightness (flow quality) and sweetness (purity). Defined as crude with little or no sulfur (under 0.5%), sweet crude is easiest to pump and requires significantly less processing than sour (sulfur-heavy) crude grades. Also, light crude yields more gasoline and other distillates per barrel because of its higher hydrocarbon content. The value of light sweet crude grows as global supply declines: according to OPEC via the Energy Bulletin, the global peak in light sweet oil production was reached in 2005.

The discovery of high quality liquid crude oil comes in an area known to contain great quantities of oil shale, a waxy substance trapped inside rock that must be heated before it can be extracted and processed into crude oil. In nature, formation of oil shale takes place through geologic processes over millions of years. As the global supply of conventional (liquid) oil depletes, unconventional oil from sources like oil shale becomes more attractive, but comes at twice the cost of conventional oil production, according to Department of the Interior.

The newly discovered field is located in northern Weld County underneath a sheet of shale rock called the Niobrara Formation. Oil companies have known the value of this region for years, but only recently acquired the legal rights and the necessary technology to reach the oil, which requires a drill maneuvered by a horizontal pipe thousands of feet long and 50 feet underground.

The well, named Jake 2-01H, is run by EOG Resources Inc, an independent oil and gas exploration company based in Houston that has been cagey about its projects in the area. According to the Houston Business Journal, company spokespersons Elizabeth Ivers and CEO Mark Papa have released just one shared statement: “EOG doesn’t discuss areas where we are still leasing acreage.”

Ed Holloway, CEO of Synergy Resource Corp, one of the oil companies trying to get a share of the region’s lease, called the well a “gusher” and said, “There’s some really significant things that are going to go on in Weld County. . . It’s just going to spark off one heck of a drilling activity.”

Weld County Commissioner Doug Rademacher agreed, stating that the field was “very high quality” and “high producing,” and that it could be “fairly large.”

Said energy analyst Ward Polzin of Tudor, Pickering Holt & Co.; “If I’d pick any recent activity in the state of Colorado that has people excited in the oil and gas industry, this is it.”

A large domestic oil find could ease crude oil prices downward due to supply increases. If this field’s early reports hold up then we are bound to see a corresponding heating oil price drop in the future.

New technology will help Exxon Mobil pump new oil from an aging oil field. (image: wikipedia.org)

Recent advances in technology are allowing oil companies to squeeze a few more drops out of their aging oil wells. On Wednesday, Rigzone reported that Exxon Mobil will attempt to breathe new life into its decrepit Hawkins Field in northeast Texas by injecting nitrogen and other gases into the wells which, in turn, should push hard to reach oil up toward the surface. Exxon officials believe that through such means they will be able to acquire an additional 40 million barrels of oil and extend the life of the field for an additional 25 years.

Exxon is not the only oil company attempting to reinvigorate old Texas oil fields. Recently, Denbury Resources announced that it intends to resuscitate Conroe Field by pumping chilled carbon dioxide into the ground. And in North Dakota, oil companies are looking to extract hard-to-reach oil by means of horizontal drilling.

If these and other unconventional extraction techniques prove successful, oil consumers around the world may not have to worry—as much—about dwindling reserves.

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.

American gains in domestic natural gas production could be a sign of the future. The above Department of Energy reference to increased shale basin production largely refers to the Marcellus Shale formation, an underground rock formation that spans from Kentucky and Ohio to upstate New York and is believed to contain up to 500 trillion cubic feet of natural gas. Much of this massive reservoir of natural gas was inaccessible until new advancements in extraction techniques such as hydrofracking allowed gas companies to drill deeper and reach farther.

However, extracting gas from the Marcellus Shale formation does not come without controversy. Hydrofracking, which consists of sending mixtures of dangerous chemicals underground to break up underground rock, is potentially dangerous to the environment and nearby communities. It has been reported that hydrofracking can result in chemically tainted, radioactive, and even flammable drinking water. This potential for harm has resulted in numerous debates over whether or not the resources obtained through such methods are worth the risk.

While many Americans believe that natural gas production is the future of American energy development, if the United States is going to continue its efforts to expand domestic natural gas production, it will have to do so by means of extracting from difficult areas such as the Marcellus Shale formation. However, before this can be done, numerous difficult issues are going to have to be sorted out between gas companies, extractors, environmentalists, and land owners.

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.

“The measures proposed…will be more burdensome than any of those placed on our industry throughout the United States,” Chesapeake said on Tuesday, warning that, encumbered by strict environmental codes, “some operators may elect to focus their risk capital in other states.” The company was quick to point out that if the legislation is passed, New York, which faces a $3.2 billion budget deficit, would lose potential tax revenue from gas production. According to a spokesman for Fortuna, another gas-drilling company with stakes in the state’s shale, “New York is facing the loss of at least hundreds of millions of dollars of direct economic impact stimulus and is forfeiting the opportunity to create thousands of new jobs at a time in our state’s history when they have never been needed more.”

Nevertheless, state legislators have good reason to be suspicious of unchecked shale-gas drilling within New York’s borders. While the development of the massive Marcellus Shale in several northeastern states holds the promise of providing the United States with a valuable domestic energy source, shale-gas drilling is not without its nasty side effects. Environmentalists have expressed grave concerns over the impact that shale-gas drilling—specifically a method known as hydraulic fracturing, or hydrofracking—has on the surrounding environment. For starters, neighbors of shale-drilling operations in other states have complained that their drinking water has become discolored or foul smelling, and that their pets and farm animals have died from drinking it; not to mention studies that have indicated a link between hydrofracking and incidents of cancer. While the Environmental Protection Agency has begun scrutinizing shale gas drilling, Congress is now considering a bill that would force companies to disclose the chemicals used in hydraulic fracturing.

Hydrofracking is a complex drilling process in which fluids under high pressure are used to force open seams in gas-rich rock. The process combines vast quantities of water—enough, as the New York City Department of Environmental Protection has noted—to exacerbate drought during dry spells with chemicals such as diesel fuel, methanol, hydrochloric acid, and formaldehyde. As hydrofracking forces open channels in rock to facilitate the upward movement of liquids and gases, it should come as no surprise that despite drillers’ best efforts, the grim mix of chemicals often escapes into the environment.

The threat of contamination by toxic chemicals has led New York City’s Acting EPA Commissioner Steven Lawitts to warn that “high volume hydrofracking and horizontal drilling pose unacceptable threats to the unfiltered fresh water supply of nine million New Yorkers.” To their credit, Chesapeake, which recently announced a joint venture with French oil company Total concerning its $2.5 billion stake in shale-gas operations in Texas, has already agreed to refrain from drilling anywhere near New York City’s watershed.

And while New York Governor David Paterson, all too aware of the state’s financial woes, has proposed opening the Marcellus Shale to gas drilling, the DEP may be harder to convince. For this reason, Chesapeake, along with other drilling companies like Fortuna, has begun shifting its sites to shale-gas reserves in Pennsylvania, where—at least for the moment—there is no threat of environmental legislation and, thus, no end to potential profits.

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:

• “Withdrawals [of water to support hydraulic fracturing] during dry periods could increase the duration of drought watch, warning, or emergency conditions.”

• “[C]hronic and persistent occurrence of small scale surface spills and contamination incidents will inevitably accompany . . . hydrofracking . . . [and will] reduce public and regulatory agency confidence in the quality and safety of the water supply.”

• “[H]yrodfracking . . . will produce an industrial-strength waste stream characterized by exceptionally high concentrations of a wide range of substances with the potential for adverse health and water quality effects which can be expected to exceed existing treatment and assimilative capacities. . .”

• “There is high level of uncertainty as to whether effective waste treatment processes and sufficient capacity will be available in the future.”

All of which led NYC’s acting Department of Environmental Protection Commissioner, Steven Lawitts, to say that “high volume hydrofracking and horizontal drilling pose unacceptable threats to the unfiltered fresh water supply of nine million New Yorkers.”

Hyrdrofracking, or hydraulic fracturing, is the use of high-pressure fluids to force open seams in natural gas-rich rock, to allow the gas to be extracted. While it is an old technique, hydrofracking has gained currency in the last few years as a way to extract gas from sizeable but hard-to-reach deposits, such as those in the Marcellus Shale of upstate New York and Pennsylvania.

Hydrofracking uses vast quantities of water—enough, as the DEP report noted, to exacerbate drought during dry spells. However, that’s a just a sideshow to the real hazard, which is the toxic brew used in the hydrofracking process. While it could technically be done using just water, that’s costly and inefficient; hyrdrofracking works much better—and is kinder to drilling companies’ bottom lines—when chemicals such as diesel fuel, methanol, hydrochloric acid, and formaldehyde are added to the mix. Since the whole purpose of hydrofracking is to force open channels in rock to facilitate the upward movement of liquids and gases, it should be no surprise that despite drillers’ best efforts, hydrofracking chemicals get out into the environment. That’s bad under any circumstances, but worse when it occurs in or near the water source for millions of people, such as the New York City watershed.

That’s why acting Commissioner Lawitts is asking for a ban on gas drilling in the watershed; when you’re talking about potentially introducing toxic chemicals into New York City’s water supply, “[t]he risks are simply not worth it.”
To their credit, a number of gas companies (such as Chesapeake Energy Corp.) have already voluntarily announced that they would not drill in the NY watershed. The question is whether corporate good citizenship and judgment can be trusted, or whether a formal ban is necessary.

The issue is going to keep coming up: much of the vast quantities of natural gas that have been discovered in the last few years are in reserves that require hydrofracking to exploit. Without hydrofracking, a large percentage of this gas can’t be reached—to a considerable extent, domestic natural gas supplies and hydraulic fracturing are inextricably intertwined.

Hydrofracking’s not all or always bad: there are locations where it can be done with little environmental or societal impact, and there are techniques that are relatively safer or cleaner. Very few people in government or otherwise are calling for broad, outright bans on hyrdrofracking, though momentum seems to be building for restricting where it can be done, as well as for requiring greater transparency from gas companies in terms of disclosing the chemicals they use. That’s the purpose, for example, of the so-called “Frack Act” that’s working through Congress—to mandate disclosure of hydrofracking chemicals.
On all sides, the stakes are high: in the Marcellus Shale alone, the water supply for 9 million people and the upstate environment is balanced against a 20-year supply of natural gas, several thousand jobs, and considerable tax revenue. Getting that balance right will not be easy, but it is vital.

North Dakota’s oil production has expanded thanks to advances in drilling technology. (image: audreymichel photo via flickr.com)

The AP reports that there may be another patch of oil accessible in North Dakota. According to the wire service there is a “crude-bearing cache” called Birdbear that, according to geologists, can be tapped with new technology. This oil formation is near the already-producing patches of Bakken and Three Forks-Sanish in the state.

To access the oil in Birdbear, oil companies will need to use the same technique they’ve developed for the Bakken and Three Forks-Sanish patches—horizontal drilling. Horizontal drilling has opened up new possibilities for oil and gas companies. The controversial drilling method known as “hydrofracking”—most widely used in drilling for natural gas—relies in part on horizontal drilling, though the threat hydrofracking poses comes from the fluids that are released into wells in order to break up the earth, which can release toxic chemicals that find their way into soil and drinking water.

The prospect of opening up new oil formations has generated opposition, including from those who question the amount of oil that could be tapped, but the Birdbear is just one example of a trend of notable oil discoveries that have recently happened. BP discovered a significant reserve in the Gulf of Mexico in September and another in November, as new drilling technology opens up many oil fields that were previously inaccessible.

(image: greencollarrap.files.wordpress.com)

Natural gas is a fossil fuel, like coal or oil. Like coal, the United States has significant domestic reserves of natural gas. Natural gas also emits less carbon than other fossil fuels, and is convenient to use in many ways—it can be blown through pipes as a gas, or liquefied for compact storage. These qualities have made natural gas the darling of the fossil fuel world—available domestically in larger quantities than oil and burning cleaner than our most abundant fuel, coal, has made it seem an energy silver bullet.

Of course, as the old saying goes, “there ain’t no free lunch.” Natural gas may not emit as much carbon as oil, let alone coal, but it has its own significant health and environmental risks: it is a powerful greenhouse gas (almost 60 times as powerful, pound for pound, as carbon dioxide), and its combustion creates nitrogen oxides, which cause smog and acid rain. There’s also the little fact that its extraction can release methane into water supplies, leading to flammable tap water—an admittedly rare, but scary (and very photogenic!) side effect of gas drilling.

Even with those issues, you’ve probably seen the commercials touting natural gas as the cure for our country’s energy woes. If you live in New York or Pennsylvania, natural gas is an even hotter topic with some important local connections. It’s been discovered that those states are sitting an enormous reservoir of natural gas—enough to meet the nation’s needs for 20 years, according to a November 1 article from Crain’s New York. The wealth and jobs that gas drilling could bring—not to mention the tax revenue—have created a “gas rush” in the Appalachians, an area that’s had too little economic good news for too long.

Technically, the gas was not recently discovered; we’ve long known that there’s natural gas in the Marcellus Shale formation that stretches from Ohio and West Virginia up through Pennsylvania and into New York. What’s new are two factors:

• Only recently has the full size of the gas-rich formation been appreciated

• New technology has made it practical to extract gas that we couldn’t have tapped previously

That new technology consists of horizontal drilling—being able to reach out further from a single well—and hydraulic fracturing, also called “hydrofracking.” Hydrofracking involves injecting fluids at high pressures down wells in order to fracture, or break up, the shale, allowing the gas within it to move more freely. Hydrofracking is used in a variety of contexts, ranging from reviving dried-up domestic water wells to extracting unconventional oil from shale and other rock formations.

(image: bossintl.com)

These new drilling and extraction technologies—coupled with the previously unrealized scope of the Marcellus reserves—have brought the fossil fuel industry to a corner of America far removed from the Texan, Alaskan, or Gulf oil fields it’s usually associated with. The industry has brought vast sums of money with it. With drilling rights going for more than $5,000 an acre—plus, in many cases, a continuing royalties on the gas taken from the land—natural gas can be seen as monetary mana from heaven, not just for landowners, but also for the state and city governments that stand to profit through taxes. Then, on top of that, you have the J-word: jobs.

But again, there ain’t no free lunch. Hydrofracking involves injecting a toxic brew of chemicals underground—but they don’t stay underground. They get into water supplies and come back to the surface. They’ve been implicated in livestock deaths, and since there’s nothing that will kill a cow or pig that won’t also kill humans, the health concern is obvious and inescapable. Out of those concerns, New York City fought a determined, and so far successful, action to keep natural gas drilling out of the upstate New York watershed, an area that provides drinking water for over 8 million people in NYC and surrounding counties.

Worse, not only do the hydrofracking chemicals come back up, but so do other trapped liquids—including a radioactive “brine.” This brine is water that’s been marinating in radioactive rock in the Marcellus formation for thousands of years or more. Much of the Earth is radioactive, at least at low levels—did you know that your granite kitchen countertop gives off radioactivity?—so the mere fact of radiation isn’t a concern. It’s the amount that’s worrisome: test samples from New York gas drilling show radium-226 (a derivative of uranium) at up to 267 times the limit for safe environmental discharge and thousands of times over the safe limit for drinking. While it’s much less radioactive than spent fuel from nuclear reactors, the potential volume of radioactive waste water is also vastly greater. At present, the NY/PA area has no facilities capable of dealing with it.

The Marcellus natural gas reserves have significant potential—both good and bad. It’s important to make sure that we fully appreciate, and can deal with, the latter as we attempt to harvest the former.