Oil and Gas Lawyer Blog

NASA has prepared a report on the rise of global temperatures that contains a great time-lapse view of global temperatures over time. You can view it here:

http://www.giss.nasa.gov/research/news/20120119/

 

 

A study group sponsored by the Massachusetts Institute of Technology has issued a report, The Future of Natural Gas, the fourth in a series of MIT multidisciplinary reports examinging the role of various energy sources and the effects of carbon dioxide emissions restraints.  The full 170-page report can be found here. The report analyzes the relative carbon footprint of natural gas compared to other fuels and the environmental impact of the development of shale gas reserves, among other topics. Here are some excerpts:

Major conclusions of the report:

• "There are abundant supplies of natural gas in the world, and many of these supplies can be developed and produced at relatively low cost."
• "The role of natural gas in the world is likely to continue to expand under almost all circumstances, as a result of its availability, its utility and its comparatively low cost."
• Natural gas is "one of the most cost-effective means by which to maintain energy supplies while reducing CO2 emissions."

Regarding gas's carbon footprint, the report concludes that "Among the fossil fuels, it has the lowest carbon intensity, emitting less CO2 per unit of energy generated than other fossil fuels. It burns cleanly and efficiently, with very few non-carbon emissions. Unlike oil, natural gas generally requires limited processing to prepare it for end use."

Regarding potential natural gas supply:

• "The mean projection of [worldwide] remaining recoverable resource [of natural gas] in this report is 16,200 Tcf, 150 times current annual global natural gas consumption .... Of the mean projection, approximately 9,000 Tcf could be developed economically with a natural gas price at or below $4/Million British Thermal units (MMBtu) at the export point."
• "The mean projection of recoverable shale gas resource in this report is approximately 640 Tcf, with low and high projections of 420 Tcf and 870 Tcf, respectively. Of the mean projection, approximately 400 Tcf could be economically developed with a natural gas price at or below $6/MMBtu at the wellhead."

Continue reading "New MIT Study, "The Future of Natural Gas," Touts the Future of Natural Gas Shale Development" »

Darell T. Brownlow, Ph.D, has published an article giving his analysis and opinion of the ability of the Carrizo Aquifer to supply water demands caused by fracing of wells in the Eagle Ford play.  The article was published in the newsletter of the Texas Ground Water Association, Fountainhead, and can be found here: Brownlow Article.pdf

Dr. Brownlow, a hydrologist, concludes that there is plenty of water in the Carrizo, in most places, to meet the demands for frac water. His estimates:

• There are about 6 million acres in the Eagle Ford play, and a possible 20,000 oil and gas wells (one well per 300 acres).
• An average frac job uses 15 acre-feet of water (4,887,765 gallons, or 115,375.5 42-gallon barrels).
• So, the frac jobs on those 20,000 wells would use about 300,000 acre-feet of water over the life of the play.
• Current withdrawals from the Carrizo Aquifer are about 275,000 acre-feet per year; so the entire demand for frac water from Eagle Ford wells would equal about one year's withdrawal of water from the aquifer.  At a rate of withdrawal of 275,000 acre-feet per year, groundwater management studies estimate that the Carrizo water table will drop an average of 30 to 35 feet by 2060.

Dr. Brownlow says that, if a successful Eagle Ford well makes 300,000 to 400,000 barrels of oil at $80/bbl, the return to the landowner would be $520,000 per acre-foot ($1.60 per gallon). In contrast, the return to a farmer using  the same acre-foot of water to irrigate corn, peanuts or coastal hay would be $500 to $1,000 per acre, or about $250 per acre-foot of irrigation water. "The point here is that using groundwater from the Carrizo for hydraulic fracturing in the Eagle Ford Shale has enormous economic potential for landowners, oil production companies and the entire region. Moreover, from a geologic and water planning perspective, additional impact on the aquifer appears minimal."

Dr. Brownlow is a resident of Wilson County, a cattle rancher in LaSalle County, serves on the South Central Texas Regional Water Planning Group (Region L), and was the governor's appointee to the Evergreen Underground Water Conservation District from 2000-2010.

James Fallows is a national correspondent for Atlantic Monthly. ( jamesfallows.theatlantic.com )  In the last few years he has lived in and written about China. He has written the cover article for Atlantic's December issue, "Dirty Coal, Clean Future." I am a big fan of James Fallows; he writes clearly about big-picture issues, is a deep thinker, and does not talk down to his readers. Mr. Fallows' article is about the future of coal as a source of energy in the world, and how China is developing "clean coal" technology.

Much has been made recently of new discoveries of natural gas in the U.S.; it has been touted as a solution to our dependence on foreign oil and as a way to reduce emission of greenhouse gases, by replacing coal-powered electric generating plants. Mr. Fallows does not write about new gas discoveries, but his discussion of the future of coal puts our domestic natural gas discoveries in perspective. Below are some excerpts from and summaries of Mr. Fallows' discussion. I recommend that you read his article in full.

Continue reading "James Fallows on the Future of Coal" »

A study group at the Massachusetts Institute of Technology has concluded that natural gas will play a leading role in the U.S. over the next several decades, both in providing fuel for the nation's energy needs and in reducing greenhous gas emissions. The study was conducted over two years by a group of thirty MIT faculty members, researchers and graduate students, assisted by an advisory committee of industry leaders and consultants. The study group has released an interim 80-page report summarizing its findings. A full report with additional analysis will follow later this year.

Among the study's findings:

Continue reading "MIT Releases Study on Future of Natural Gas" »

A new report on the risks and advantages of hydraulic fracturing by Ann Davis Vaughan and David Pursell, "Frac Attack: Risks, Hype, and Financial Reality of Hydraulic Fracturing in the Shale Plays," provides a much-needed objective summary and analysis of the recent debate over the safety of hydraulic fracturing. Ann Davis Vaughan founded Reservoir Research Partners and is a former investigative journalist for the Wall Street Journal. David Pursell is an analyst with Tudor Pickering Holt & Co., an investment banking firm in Houston specializing in the energy industry.

Continue reading "New Report Provides Objective View of Debate Over Hydraulic Fracturing" »

Gasland is a film documentary about the dangers caused by hydraulic fracturing of gas wells being drilled in shale plays across the U.S. It won a Special Jury Prize at the Sundance Film Festival this year. It was filmed by Josh Fox, whose family owns land in Pennsylvania that is in the Marcellus Shale Play. Gasland is now being screened across the country.

Josh Fox was recently interviewed about his film on the PBS program NOW. The film asserts that frac'ing of wells has caused underground aquifers to be charged with methane in Pennsylvania and Colorado and poses severe risks of contamination to the water supply. Josh Fox notes that hydraulic fracturing is exempt from federal regulation, and he advocates for passage of the FRAC Act now before Congress that would give the EPA jurisdiction over hydraulic fracturing.

The comments about the NOW story posted on its website evidence the growing controversy over frac'ing.

 

Continue reading "Movie 'Gasland' Stirs More Controversy About Hydraulic Fracturing" »

The Bureau of Land Management has signed a settlement agreement in which it agreed to "suspend" oil and gas leases covering BLM lands in Montana until it has completed a review of the effect of oil and gas development on greenhouse gas emissions.

The settlement was entered in Montana Environmental Information Center, et al. v. United States Bureau of Land Management, Case No. 08-178-M-DWM, in the U.S. District Court for the District of Montana, Missoula Division, on March 11, 2010. The case was brought by citizens groups who contended that federal law required the BLM to consider the cumulative impacts of oil and gas development on the environment, and specifically the greenhouse gas emissions caused by oil and gas well drilling and production, before granting oil and gas leases on lands in Montana.

The plaintiffs' petition contains some interesting facts:

The State of Montana published a Greenhouse Gas Emissions Inventory and Reference Case Projections 1990-2020G, in 2007; it estimated that oil and gas operations in Montana released 4.7 million metric tons of CO2 or its equivalent in 2005, more than 12% of the state's total GHG emissions.

According to the Inventory of U.S. GHG Gases and Sink: 1990-2006, by the Environmental Protection Agency, oil and gas systems are the largest human-made source of methane emissions and account for 24% of methane emissions in the U.S. - 2% of the U.S.'s total GHG emissions. (Methane - natural gas - has 21 times the global warming impact of carbon dioxide.)

The EPA has a program called the Natural Gas STAR Program, designed to encourage oil and gas companies to voluntarily reduce their GHG emissions by following GHG reduction technologies and practices. EPA reported that industry partners in its STAR Program achieved GHG emission reductions totaling 92.3 billion cubic feet. This is equivalent to the annual greenhouse gas emissions from approximately 6.8 million passenger vehicles.

Companies producing oil and gas have reported success in utilizing a number of methane reduction measures, including replacement of high-bleed pneumatic controllers with low-bleed pneumatics, installing plunger lifts, using "green" completions (not venting gas produced during completion operations), replacing gas-actuated pumps with solar electric pumps, and utilizing vapor recovery units (devices that capture vapor emitted from storage tanks and recycle it back into the production stream), and conducting regular inspections of facilities to identify and reduce fugitive leaks from valves, flanges and other connectors.

We may expect that federal agencies like the BLM and the Minerals Management Service, who are responsible for leasing of federal lands, will move toward imposing requirements on oil and gas operators to reduce their GHG emissions by using best available technologies like those enumerated in the plaintiffs' petition in this case. Those same technologies could be used to reduce emissions in and around the Barnett Shale, where residents are increasingly complaining about emissions from oil and gas compressors and other facilities.

The debate over the safety of hydraulic fracturing continues. The Environmental Working Group, a Washington-based non-profit environmental advocacy organization, has issued a white paper, "Drilling Around the Law," calling for fracking to be regulated under the Safe Drinking Water Act and to require public disclosure of chemicals used in frac fluid. The EWG claims that "companies that drill for natural gas and oil are skirting federal law and injecting toxic petroleum distillates into thousands of wells, threatening drinking water supplies from Pennsylvania to Wyoming." EWG claims that fracking has been linked to drinking water contamination and proeprty damage in Colorado, Ohio, Pennsylvania, Wyoming and other states, citing articles written by Abrahm Lustgarten in ProPublica, another non-profit organization.

Meanwhile, Chesapeake has published on its website a "Fact Sheet" listing the chemicals used in its frac fluids in the Barnett Shale. The list includes "petroleum distillate," which Chesapeake describes as a "friction reducer," describing it as a product "used in cosmetics including hair, make-up, nail and skin products." The website shows that 99.5% of frac fluid is made up of water and sand, and only .5% is made up of additives, including "petroleum distillate." But the site does not show what percentage or volume of "petroleum distillate" or other additives are used in the frac fluid, or what kind of petroleum distillate is being used.

Another energy organization, Energy In Depth, has published a response to the EWG's white paper on fracking, "When Gummy Bears Attack." its author, Chris Tucker, cites data from the U.S. Department of Energy to show that "petroleum distillate" represents .088% of the volume of frack fluid. He says that petroleum distillates are used in lip gloss, sunscreen and gummy bears.

So what is "petroleum distillate"? Purdue University describes "petroleum distillates" as including all products derived from the distillation of petroleum, from diesel fuel to petroleum jelly to waxes and asphalts:

"Petroleum distillates are found in a wide variety of consumer-products including lip gloss, liquid gas, fertilizer, furniture polish, pesticides, plastics, paint thinners, solvents, motor oil, fuels and hundreds of other products. Petroleum distillates listed commonly on labels of general household products are those that distill off around naphthas. Petroleum jelly, a petroleum distillate product, is generally regarded as nontoxic.

"Petroleum distillates contain both aromatic hydrocarbons (carbon rings) and aliphatic hydrocarbons (straight carbon chains). The chemical structure of the hydrocarbon largely defines the nature and behavior of these compounds. Aromatic hydrocarbons are the most toxic compounds found in petroleum products. Most aromatic hydrocarbons are long-term toxins and known cancer causing agents. These aromatic compounds are found in all crude oils and most petroleum products. Many aromatic hydrocarbons have a pleasant odor and include such substances as naphthalene, xylene, toluene, and benzene. Aliphatic hydrocarbons are flammable and may be explosively flammable. Aliphatic hydrocarbons include methane, propane, and kerosene.

"Aliphatics and aromatics pose a special health risk if ingested and vomited. When swallowed, the lighter, more volatile distillate products can be sucked into the lungs interfering with the lung's functions and chemical pneumonia may result. Aspiration of fluid into the lungs can occur both during swallowing and vomiting of the product. Upon skin contact, petroleum distillates can produce local skin irritation and sensitivity to light in some individuals. Environmentally, many of the petroleum distillate products add to smog and water pollution due to improper disposal or during their manufacture and use."

The controversy over frac fluids has made the Wall Street Journal.

The industry claims that hydraulic fracturing is safe and is necessary to tap oil and gas reserves in the U.S. to reduce our dependency on foreign resources. Environmental groups claim that frac fluid can cause contamination of drinking water and should be closely regulated. Much of the debate appears to suffer from a lack of reasonableness and objectivity.

 

 

The information below is from the Energy Information Administration.  Note the wide variation in City Gate and Wellhead Prices among different states:

 

Below is the same information in graph form.  Why would average residential gas prices in Texas be $12.88 per mcf, while residential prices in California and Minnesota -- far from natural gas production -- be less than $10 per mcf? Why such variations in Residential prices?

 

Exxon Mobil announced that it would acquire XTO Energy in an all-stock deal worth $41 billion. The acquisition is viewed as Exxon's decision to enter the domestic onshore gas shale play, which to date has been developed almost exclusively by independent producers. But the deal includes an exit clause in the event Congress passes legislation that would make hydraulic fracturing illegal or "commercially impracticable." Shale gas development would be impossible without hydraulic fracturing technology. Bills are pending in Congress (known as the FRAC Act) to subject fracturing to federal regulation under the Safe Drinking Water Act. The bills would require companies to publicly disclose the chemicals used in frac fluids. And U.S. Rep. Ed Markey, Dem. Massachusetts, said he would hold hearings in the House Energy and Commerce Committee to review the Exxon-XTO deal and to address environmental concerns about hydraulic fracturing.

State Representative Lon Burnam, Dem. Fort Worth, asked nine questions of the Texas Commission on Environmental Quality concerning its investigations of emissions of methane and volatile organic compounds from oil and gas operations in the Barnett Shale area and in Texas in general. Recent air quality tests by private companies for local towns in the Fort Worth area have created a stir and caused some to call for increased monitoring and additional testing of emissions from oil and gas operations. Rep. Burnam has also called for the City of Fort Worth to place a moratorium on issuing permits for drilling until additional testing has been done. A group of concerned citizens has formed the North Central Texas Communities Alliance, to press for a moratorium in the DFW area until environnmental and other concerns are addressed.

The TCEQ's response to Rep. Burnam's questions provides some interesting data.

Continue reading "TCEQ Answers Rep. Lon Burnam's Questions on Investigations of Air Quality" »

Twenty-two U.S. House Democrats from Texas, Louisiana, Oklahoma, New Mexico, Arkansas, Utah and Idaho delivered a letter to Environmental Protection Agency Director Lisa P. Jackson, cautioning the EPA to do a "reasonable and transparent study" of whether hydraulic fracturing of wells creates risks to drinking water. EPA is required to study whether hydraulic fracturing creates risks to underground sources of drinking water under the 2010 Appropriations Act for the Department of the Interior. The producing-states Congressmen want to be sure that the EPA's study is scientific, systematic, transparent, accurate and valid.

The EPA conducted a similar study of fracing in 2004. That study was done to investigate whether hydraulic fracturing of wells completed in coalbed methane seams posed a risk to groundwater drinking supplies. The study was in response to alleged incidents of groundwater contamination and to a judgment of a U.S. Court that, because hydraulic fracturing of coalbeds to produce methane is a form of underground injection, the EPA is required to regulate it under Part C of the Safe Drinking Water Act. That Act requires states to regulate underground injection of fluids and to develop an Underground Injection Control Program approved by the EPA. The EPA's 2004 study of fracturing of coalbed methane wells found no evidence that any water had been contaminated by fracing of wells or that fracing posed any risk to drinking water. That study was criticized by some, including scientists in the EPA. In 2005, Congress exempted hydraulic fracturing from coverage under the Safe Drinking Water Act, in part at least based on EPA's 2004 study.

The requirement for a new EPA study of fracing in 2010 has been driven, in my opinion, by the development of the Marcellus Shale play in Pennsylvania and New York. New York has placed a moratorium on permits for wells and has published its own draft study of risks to surface and underground water supplies caused by drilling in the area of upstate New York that provides drinking water to New York City. That study is still subject to comment and revision and has caused much controversy in New York. The New York draft study likewise concludes that hydraulic fracturing poses no risk to drinking water if properly regulated. In a related development, a bill in Congress, the FRAC Act, proposes to require companies to disclose the chemical content of frac fluids.

 

The International Energy Agency (IEA) issued a forecast of world energy consumption and use, and for the first time included a scenario projecting the impacts of taking steps to stabilize greenhouse gases in the atmosphere at about 450 parts per million by 2030. This "450 Secnario" would limit overall temperature increases to 2 degrees C., versus a rise in global temperature of as much as 6 degrees if no efforts to curb carbon dioxide are made. The report compares this 450 Scenario to its "reference scenario," its projections of energy production, prices and consumption assuming no policy changes are enacted.

Its conclusions:

Under the reference scenario, oil prices would increase to $87/bbl in 2015, $100/bbl by 2020, and $115/bbl by 2030 (in 2008 dollars). Under the 450 Scenario, the oil price would level off at $90/bbl by 2020.

Natural gas prices would grow 17% by 3020 under the 450 Scenario, or an average of 0.7%/year.  In 2030, gas prices would be 17% lower than under the reference scenario.

Although significant additional investment would be necessary to meet the 450 Scenario, this investment would be more than offset by fuel cost savings. Oil and gas import costs for OECD countries would be much less. Oil and gas import costs for China and India would be 30% lower in China and India in 2030 than in the reference scenario.

The Energy Information Administration has issued rankings of states in production of oil, gas, coal, electricity generation, and energy consumption. Texas ranks prominently in most categories.

-- Texas is first in total energy production, producing 10,997 trillion Btus of energy in 2006 (the most recent information available). Wyoming is second (mainly from coal production) with 10,062 trillion Btus. Texas produced 15.5% of all the energy produced in the nation.

-- Texas is first in crude oil production, producing 32.77 million barrels in May 2009 (20% of the nation's production), ahead of Alaska with 21 million barrels; and (by far) first in natural gas production, producing 6 trillion mcf in May 2009 (30% of the nation's production), ahead of second-place Wyoming with 1.9 trillion mcf.

-- Texas produced 41.6 million megawatt hours of electricity in July 2009, ranking first ahead of California, which produced 21.5 million megawatt hours.

-- Texas also ranked first in carbon dioxide emissions (2007 data), emitting 255,092,183 metric tons of CO2. The nearest competitor was Ohio, which emitted 130,407,085 metric tons.

-- Texas ranked fifth in total energy consumption per capita (2007 data), behind Alaska, Wyoming, Lousiana, and North Dakota. Texans consumed 496 million Btu per capita; Alaskans consumed 1,062 million Btu per capita. It's cold in Alaska, Wyoming and North Dakota. Louisianans consumed 861 million Btu per capita -- maybe they had a cold winter in 2007?