October 2009 Archives

October 29, 2009

EIA Says U.S. Natural Gas Reserves Highest Ever


EIA issued the following press release today:

U.S. Energy Information Administration Washington, DC 20585


OCTOBER 29, 2009

Natural Gas Reserves at Record High - Oil Reserves Fall with Lower Price

At the end of 2008, domestic natural gas proved reserves reached their highest level since the U.S. Energy Information Administration (EIA) began reporting them in 1977, according to "Summary: U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, 2008", released today by EIA. Discoveries of 29.5 trillion cubic feet (Tcf) of gas during 2008, an increase of 3 percent, represent the sixth consecutive yearly increase.

Reserves from shale reservoirs grew dramatically, up 51 percent over 2007 and now accounting for 13 percent of total proved reserves of dry natural gas. "This year's report underscores for a second year the technological shift in domestic exploration and production from conventional reserves to unconventional shales" said EIA Administrator Richard Newell. "Given the drop in the price of natural gas during 2008, growth in proved reserves is remarkable."

"Remarkable" is an understatement.

Here's EIA's graph:

Gas Proved Reserves.gif

October 23, 2009

America's Natural Gas Alliance Supports Kerry-Boxer Energy Bill

America's Natural Gas Alliance, a recently formed energy lobbying group formed by natural gas producers, has issued a press release praising the Senate's version of a climate bill.  Without actually endorsing the bill, the Alliance commended the bill's authors for "including provisions in their bill that will enable us to continue to engage in the process of developing language that will effectively promote natural gas as part of the climate solution."

The Alliance was formed in March 2009, and according to its website it represents 28 of North America's largest independent natural gas producing companies, whose members produce more than 40 percent of total U.S. natural gas supplies, about nine trillion cubic feet per year. Its members include Anadarko, Apache, Chesapeake, Devon, El Paso, Encana, Petrohawk, Pioneer, Plains, and XTO. The Alliance's position on the Kerry-Boxer energy bill is markedly different from that of the American Petroleum Institute and the Texas Alliance of Energy Producers, long-time lobbyists for the energy industry which have come out strongly against cap-and-trade legislation. Alex Mills, President of Texas Alliance of Energy Producers, is in particular an opponent of cap-and-trade, saying that it will wreak havoc on the energy industry. Chesapeake, Devon, Encana, and XTO are also members of the Texas Alliance. Politics makes strange bedfellows.

But companies relying mainly on gas production -- more than 90 percent of Chesapeake's total production is natural gas -- believe that natural gas producers can benefit from climate legislation, since natural gas is a clean-burning fuel with much lower carbon emissions per unit of energy than oil or coal. Tom Price, Senior V.P. of Chesapeake for corporate development and government relations, said that "We think Texas, Oklahoma, Louisiana, Arkansas and the states that are primarily natural gas producers will come out very favoarable to a legislation that differentiates among the low-carbon fuels."

October 14, 2009

Accepting Drafts in Payment for Lease Bonus - A Ticking Time Bomb?

The recent volatility in prices for oil and gas leases has raised issues with the time-honored custom in the industry of paying lease bonuses with drafts. Problems have arisin because companies have refused to honor the drafts or because lessors have sought to cancel the transaction after signing and delivery the lease and lessor's deposit of the draft. When someone wants to back out of "the deal" after a lease has been exchanged for a draft, the lessor and lessee run to their lawyers to find out what legal rights and obligations have been created by the exchange. No one is happy.

As I have written previously, it is generally my advice to avoid using drafts for payment of lease bonuses. My practice is to hold my client's original signed lease until I receive a check for the bonus from the company, then send the check to my client and the lease to the company. I find that most companies are willing to close the deal in this manner.

But most lease transactions are consummated using a draft. So, herein is an additional discussion of problems arising from use of drafts..

Continue reading "Accepting Drafts in Payment for Lease Bonus - A Ticking Time Bomb?" »

October 7, 2009

Great New Website from Energy Information Administration Explains Energy in Layman's Terms

The U.S. Energy Information Administration has launched a new website that contains wonderful information about energy described in terms laypersons can understand. It can be found at http://tonto/eia.doe.gov/energyexplained/ .  Here are some examples of information you can find there:

-- A British Thermal Unit (Btu) is the quantity of heat required to raise the temperature of one pount of liquid water by 1 degree Farenheit at the temperature that water has its greatest density (approximately 39 degrees F.).

-- One Btu is about the amount of energy burned by a common kitchen match. One million Btu equals about 8 gallons of gasoline. One billion Btu eqals all the electricity that 300 households consume in one month.

-- Renewable Energy supplies 7% of U.S. total energy needs. Of that 7%, solar energy supplies 1%, geothermal energy supplies 5%, wind energy supplies 7%, hydropower supplies 34%, and biomass (wood, ethanol from corn, biodiesel from vegetable oil) supplies 53%.

-- 22.5% of U.S. energy consumption is from coal; 23.8% from natural gas; 37.1% from petroleum; and 8.5% from nuclear power.

-- 30% of U.S. natural gas production is from Texas. 14% comes from the Gulf of Mexico.

-- EIA estimates that proved reserves of natural gas in the U.S. were 237.7 trillion cubic feet as of 12/31/07. The U.S. consumed 23.2 trillion cubic feet in 2007.

-- "In 1821, William Hart dug the first well specifically to produce natural gas in the United States in the Village of Fredonia on the banks of Canadaway Creek in Chautauqua County, New York. It was 27 feet deep, excavated with shovels by hand, and its gas pipeline was hollowed-out logs sealed with tar and rags."

-- 41% of energy used in homes is for heating, 8% for air conditioning (average U.S. -- not in Texas!). 25% is used for lighting and appliances, and 20% for water heating. 5% of home energy use is by our refrigerators!

-- Crude oil is called "sweet" when it contains only a small amount of sulfur and "sour" if it contains a lot of sulfur. Crude oil is also classified by the weight of its molecules. "Light" crude oil flows freely like water, while "heavy" crude oil is thick like tar.

Surf around on this website. Improve your energy I.Q.