Recently in Unconventional Resources Category

May 23, 2014

Two New Technologies Could Change How We Use Energy

Here are two emerging technologies that could change how we might use natural gas to fuel our cars and electrify our homes and offices.

A company called Redox Power Systems is building a plant in Florida to produce The Cube, a dishwasher-sized system that generates electricity from natural gas using electro-chemical fuel cell technology. 

The-Cube.jpg

With almost no moving parts, The Cube can provide enough electricity to power a gas station or a small grocery store. It also generates heat that can be used to heat a home or business. It's technology was developed at the University of Maryland. The system also emits carbon dioxide, but according to a review by MIT, its emissions should be lower than those associated with power from the grid. Redox plans to complete a 25-kilowatt prototype and start selling complete systems by the end of this year.

A company named Siluria Technologies is making low-carbon gasoline from natural gas using a catalyst grown from a genetically modified virus. Siluria claims that its gasoline carries half the carbon footprint of gasoline refined from oil, and that it can produce gasoline for about $15 a barrel, not counting the price of the natural gas consumed.  According to Sliuria's website: "At commercial scale, Siluria's process will enable refiners and fuel manufacturers to produce transportation fuels that cost considerably less than today's petroleum-based fuels, while reducing overall emissions, NOx, sulfur and particulate matter. Fuels made with Siluria's processes are also compatible with existing vehicles, pipelines and other infrastructure and can be integrated into global supply chains."

February 4, 2014

Rig Technology Changes the Landscape

The New York Times reported recently that the number of mobile or "walking" drilling rigs in operation now exceeds the number of conventional rigs, by 650 to 500. "Pad drilling" -- the drilling of multiple wells from a single pad site -- has now become the norm in unconventional plays, and these walking rigs make drilling from a single pad site more economical and efficient. Moving a rig to a new location now takes a matter of hours instead of days. The new rigs cost up to $20 million. The increased effeciency of these rigs has actually reduced the rig count while increasing the number of wells drilled, and has caused the Energy Information Administration to develop a new rig-efficiency measure.  The combination of walking rigs and multi-well drillsites results in significant reductions in drilling costs. Continental Resources, the largest player in the Bakken, says it now can drill 14 wells from a single pad.

EIA's new Drilling Productivity Report shows how the new technology has affected production in the major shale plays. Here is its graph for the Eagle Ford:

EIA Eagle Ford Well Efficiency.JPG

Here is an annual comparison for several shale plays:

EIA Well Efficiency.JPG

 

Not necessarily good news for drilling companies, but good news for exploration companies and royalty owners.

 

January 23, 2014

A Good Video Explaining Horizontal Drilling and Hydraulic Fracturing

From Northern Oil and Gas:

http://www.northernoil.com/drilling-video

December 9, 2013

"Induced Seismicity" Caused By Wastewater Injection in Barnett Shale

StateImpact Texas has published a series of good articles about the growing evidence that the huge quantities of wastewater being injected in the Barnett Shale field are causing earthquakes -- some of sufficient intensity to cause significant damages. Lawsuits have been filed in Johnson County to recover for the damage.  StateImpact's most recent article can be found here. Links to all of StateImpact's articles on earthquakes caused by oil and gas activity are here.
October 30, 2013

End of the Shale Boom?

I have recently seen articles predicting the end of the shale boom, coming not only from those who have consistently predicted that shale production would never amount to anything, but also from respected sources whose predictions have previously proven accurate. A recent Houston Chronicle article quotes from a paper written by Amy Myers Jaffe, executive director for energy and sustainability at the University of California, Davis, and Mahmoud El-Gamal of Rice University, saying that "The most likely scenario - absent war - is for oil prices to decline significantly." A significant decline in oil prices would make many if not most wells shale wells now being drilled in the Eagle Ford and Permian areas of Texas uneconomical. Jaffe expects oil prices to decline in the next three to five years. "To hold up prices it would have to be a regime change in several countries that results in lasting civil wars with lots of infrastructure being blown up," she said.

An article in Business Week says that the break-even price for profitability in the Cline Shale play of the Permian Basin is $96 per barrell; in the Eagle Ford, it's $78/barrel, and in the Bakken, $84.  Here is one analyst's prediction of future oil prices:

Business Week graph.JPG

Falling fuel demand is a big part of the prediction.  Jaffe believes demand will fall even with continued growth in China and other emerging nations. The average fuel economy for new vehicles in the US is up 4.7 mpg since October 2007. And Americans are driving less.  Lower-priced natural gas will replace some of the oil demand.  From the Energy Information Administration:

US Crude Oil and Energy Consumption.JPG

And, as with natural gas in the latter part of the last decade, US crude oil production and resulting supply are increasing:

Crude Oil Production and Ending Stocks.JPG

EIA has begun publishing a new report, its "Drilling Productivity Report," focusing on production in the six major shale plays in the US.  The report appears to me to highlight two attributes of shale plays:  first, companies are lowering the cost of drilling and completing wells in these plays, increasing the efficiency of putting new production online; and second, the industry has to continue to drill wells to replace the rapid decline in production from these plays. Here are a couple of the EIA's charts from its recent analysis of Eagle Ford wells that illustrate these attributes:

Eagle Ford new well production per rig.JPG

This shows that fewer rigs are needed to continue the increase in production from the Eagle Ford.

On the other hand, it takes continuous drilling to replace the decline in existing production:

Eagle Ford change in oil production.JPG

The above chart tells me that, if and when oil prices decline, the growth in oil production from the Eagle Ford will quickly turn into a rapid decline, when rigs leave the play.

 

October 15, 2013

Motion for Rehearing filed in Klotzman v. EOG Allocation Well Permit Dispute

For those of you following the Klotzman proceeding at the Texas Railroad Commission, you can read the Klotzman Motion for rehearing here.  #02-0278952 Klotzman Motion for Rehearing.PDF
August 19, 2013

Good Buda Wells in Zavala County

Some big horizontal wells have begun producing in Zavala County from the Buda formation (below the Eagle Ford) that may open up Zavala County for additional wells comparable to the best Eagle Ford Wells. This Hughes well, now having a history of production for a year, shows no sign of letting up:

Hughes Heitz.JPG

Here's another Buda well, completed by Sage Energy:

Sage Mills.JPG

Here's a well recently completed by Texas American Resources, headquartered right here in Austin:

T.JPG

 Good news for those holding acreage in Zavala County.

 

July 8, 2013

News About Fracking and Groundwater

There has been a lot of discussion lately about the demand on groundwater from its use to hydraulically fracture wells, and possible contamination of wells by hydraulic fracturing and improper completion of wells.

Air Products and Chemicals is promoting the use of nitrogen foam instead of water in fracking in shallower formations. 

http://www.cryogas.com/pdf/Link_Nitrogen%20Fracs_Water_Air%20Products.pdf

A second study of wells in the Marcellus Shale led by Rob Jackson of Duke Universty, published in the Prodceedings of the National Academy of Sciences, found increased methane in water wells located close to recent shale wells. "Overall, our data suggest that some homeowners living <1 km from gas wells have drinking water contaminated with stray gases," Jackson's team concluded. The study does not directly link the methane to the Marcellus wells because of the lack of data on the quality of the groundwater before the wells were drilled.

http://www.scientificamerican.com/article.cfm?id=methane-in-pennsylvania-duke-study

The EPA has abandoned its investigation into possible contamination of groundwater by fracking in Pavillion, Wyoming, saying that it would instead support the state's investigation.  EPA released a draft report in 2011 that found frac fluids present in groundwater; its report was heavily criticized by the industry.

http://www.eenews.net/stories/1059983265

Scarcity of groundwater in the Permian Basin in West Texas has caused operators to turn to water recylcing and use of brackish (non-potable) groundwater. A recent study by UT Austin estimated that 20% of the frac water used in that area came from recycled or brackish water. The study found that in Dimmit, Webb and LaSalle Counties - all in the Eagle Ford Shale -- more than 50% of total water use comes from mining, which includes fracking.

http://stateimpact.npr.org/texas/2013/03/28/drilling-boom-spurs-a-rush-to-harness-brackish-water/ 

http://ecowatch.com/2013/fracking-industry-reacts-water-scarcity/

Barnhart, a small town in Irion County in West Texas, has run out of water. It's well has run dry. The Texas Commission on Environmental Quality has listed 30 communities statewide that could run out of water by the end of the year. 

http://www.texastribune.org/2013/06/06/west-texas-oilfield-town-runs-out-water/

http://www.tceq.texas.gov/drinkingwater/trot/droughtw.html

A report by the Texas Water Development Board showed groundwater levels dropped significantly in Texas aquifers. In South Texas' Carrizo-Wilcox aquifer, the principal source for frac water in the Eagle Ford, median groundwater levels dropped 4.4 feet in monitoring wells, and the average drop was 17.1 feet. One monitoring well in LaSalle County ropped some 136 feet.

http://www.texastribune.org/2013/05/07/texas-groundwater-dropped-sharply-amid-droughtstud/

http://www.twdb.state.tx.us/groundwater/data/waterlevel.asp

Here is a good article on the relation between water resources and hydraulic fracturing:

http://www.martenlaw.com/newsletter/20130422-hydraulic-fracturing-and-water?utm_source=Marten+Law+News&utm_campaign=319bfd5c5e-Marten_Law_News_May_6_2013&utm_medium=email&utm_term=0_ff00f67215-319bfd5c5e-222334753

Ceres, an environmental non-profit, has published a paper analyzing water use in fracking operations and efforts being made by industry to use alternatives to potable groundwater. It found that more than half of the wells drilled in Texas in 2011 were in areas with high or exremely high "water stress."

 

May 27, 2013

The Downside of Canadian Heavy Crude

A recent article in the New York Times highlights the difference between "oil," or "owal" as we say in Texas, and the heavy crude oil mined from Canadian tar sands. A major waste product of that mining is coke.  The tarry substance mined in Canada goes through an initial refining process to separate the crude from tarlike bitumen, caled "coking." The tarry solid left from the process is called coke. It can be burned, and is an essential ingredient in making steel. The coke created from Canadian tar sands has a high sulfur content. Some of the Canadian tar sands are now being coked in a refinery in Detroit owned by Marathon Petroleum, and the coke by-product is sold to Koch Carbon, owned by Charles and David Koch. (I'm not making this up.) The Koch brothers have recently been in the news for considering an offer to buy the Los Angeles Times and the Chicago Tribune. They are also famous for supporting conservative and libertarian political causes. 

Here is the picture from the NYT article showing the stockpile of coke along the Detroit River belonging to the Kochs:

PILE-articleLarge.jpg

The crude oil generated by the coking process is the oil that is supposed to go through the Keystone pipeline running from Canada to the Texas coast, if that pipeline ever gets regulatory approval. According to the NYT article, Canada has 79.8 million tons of coke stockpiled. Efforts are underway to export Canadian coke to China and Mexico as a fuel. California, which also produces heavy crude that has to be coked, exports about 128,000 barrels of coke per day, mostly to China. The EPA does not permit it to be burned in the US. The Oxbow Corporation, owned by William I. Koch (a brother of David and Charles), is one of the world's larges dealers in petroleum coke, selling about 11 million tons a year.

Here are some pictures of petroleum mines in Alberta, Canada:

Alberta oil sands 1.jpg

Alberta oil sands 2.jpg

Alberta oil sands 3.jpg

Alberta oil sands 4.jpg

This is what the raw petroleum sand looks like:

Alberta oil sands 5.jpg

May 13, 2013

Shale Reserves - Revolution or Ponzi Scheme?

A study written by J. David Hughes and published in February by the Post Carbon Institute claims that shale gas reserves are vastly overstated. "Drill Baby Drill - Can Unconventional Fuels Usher In a New Era of Energy Abundance?"  A companion article by Deborah Rogers claims that the shale "frenzy" is a Wall-Street-created bubble, that "U.S. shale gas and shale oil reserves have been overestimated by a minimum of 100% and by as much as 400-500% by operators according to actual well production data filed in various states," and that "shale oil wells are following the same steep decline rates and poor recovery efficiency observed in shale gas wells." "Shale and Wall Street: Was the Decline in Natural Gas Prices Orchestrated?" Both are published on a website called shalebubble.org.  These nay-sayers are continuing a tradition that has followed the oil and gas industry for decades - the debate between the peak-oil advocates and those who believe we will never run out of fossil fuels.

David Hughes' study is worth reading. He studied more than 60,000 shale wells in the US and their rates of decline, costs and reserves. Hughes concludes that more than 1,542 wells will have to be drilled each year in the Bakken and Eagle Ford plays just to maintain current production, at a cost of $14 billion per year. He estimates that it will take $42 billion and more than 7,000 wells per year to maintain current levels of production of shale gas, whereas the value of the gas produced in 2012 was only $32.5 billion. Some examples from Hughes' study:

On overly optimistic predictions by the Energy Information Administration:

Hughes Figure 25.JPG

Hughes' decline curve for Eagle Ford wells:

Hughes Figure 72.JPG

Hughes' prediction of future production from the Eagle Ford and Bakken plays:

Hughes Figure 80.JPG

And on the world's insatiable appetite for fossil fuels:

Hughes Figure 109.JPG

 Hughes' study is mentioned in "What If We Never Run Out of Oil," by Charles C. Mann, in the May edition of The Atlantic magazine. Mann gives a broad historical perspective to the debate over the ubiquity of fossil fuels. Mann begins by recounting his visit to the Kern River oil field in California many years ago.  One of the first and biggest oil fields discovered in the US, Kern River was discovered in 1899. In 1949, after 50 years of production, analysts estimated that 47 million barrels of recoverable reserves remained. In the next 40 years, the field produced 945 million barrels, and in 1989 analysts estimated the field's remaining reserves at 697 million barrels. By 2009, the field had produced more than 1.3 billion barrels and remaining reserves were estimated to be almost 600 million barrels.

Mann then tells the story of M. King Hubbert, a prominent geophysicist at Shell oil in the 1950's. In 1956, Hubbert predicted that crude oil production in the US would peak between 1965 and 1970. In 1964 Hubbert went to work for the US Geological Survey. The head of the USGS at the time, Vincent E. McKelvey, was an optimist about US oil and gas reserves, and his agency issued optimistic assessments of US oil industry's future.  McKelvey denigrated Hubbert's pessimistic projections and eventually forced Hubbert to resign from USGS.  Although McKelvey derided Hubbert's theories, they proved to be correct, and the decline in US production led to the oil embargo and gas lines of the 1970's. Jimmy Carter adopted Hubbert's views in declaring that the planet's proven oil reserves could be consumed by the end of the next decade. The Carter administration imposed energy-efficiency measures including gas-mileage regulation, home-appliance energy standards, conservation tax credits and subsidies for weatherization.

Mann says that the debate continues today between pessimists and optimists, Hubbertians and McKelveyans, "hammering at each other like Montagues and Capulets." The difference between the Hubbertians and the McKelveyans is in their conception of what is a "reserve." The Hubbertians think of reserves as a physical entity - oil in the ground. The McKelveyans think of reserves as an economic judgment: how much petroleum can be harvested from a given area at an affordable price. In fact, reserve estimates are a mixture of the two - at least if you are wanting to know "recoverable" reserves. What is "recoverable" depends on the price of the commodity and the cost of extracting it. As prices rise, recoverable reserves increase. As technology improves and costs drop, recoverable reserves increase. And vice versa.  Because there will always be some oil in the ground that is too expensive to recover at any point in time, McKeleyans say that the world's supply of oil will never be exhausted. Thus the idea behind Mann's article: "Will we ever run out of oil?"

And now the shale boom, and predictions that the US will soon be energy-independent. If the past is any judge, any prediction is sure to be wrong.

Mann's article goes well beyond the peak oil debate. He explores the possibility of commercial production of methane hydrate as the next breakthrough in unconventional hydrocarbon resources. Methane hydrate is gas trapped in frozen water crystals beneath the sea bed.

Methane Hydrate.JPG

Mann says that "Estimates of the global supply of methane hydrate range from the equivalent of 100 times more than  America's current annual energy consumption to 3 million times more." A core sample of methane hydrate was found to contain 99.4% methane. The ice crystals in which the methane is trapped can be lit afire - burning ice.

Ice on fire.JPG

Japan has spent $700 million on methane hydrate research over the past decade. Its ship, the Chikyu, is the world's most sophisticated research vessel. It recently tested a method of recovery of methane from methane hydrate that produced about 4 million cubic feet of gas.

Chikyu.JPG

Mann speculates on the global geopolitical consequences of a shift to unconventional hydrocarbon resources like shales and methane hydrate. Although it would be a relief not to rely on Middle East reserves for US energy supply, such a shift could have destabilizing results in the economies and politics of nations who even now are in the middle of unsettling developments. Mann quotes Daron Acemoglu, an MIT economist and co-author of Why Nations Fail: "Think of Saudi Arabia.  How will the royal family contain both the mullahs and the unemployed youth without a slush fund?"

The US is unique among the 62 petroleum-producing nations in allowing private entities to control most oil and gas resources. In most nations, these assets are owned or controlled by the government. Michael Ross, a UCLA political scientist and author of The Oil Curse: How Petroleum Wealth Shapes the Development of Nations (2012), says that this naturally leads to corruption. Such oil-based economies become unstable when shortfalls in oil revenues eliminate the sole, unsteady support of the ruling elite.

The world has become totally dependent on fossil fuels for its economy and well-being. As Mann says:

[E]conomic growth and energy use have marched in lockstep for generations. Between 1900 and 2000, global energy consumption rose roughly 17-fold, ... while economic output rose 16-fold - as close a link as one may find in the unruly realm of economic affairs.

We depend on hydrocarbons for everything from lighting our homes to providing energy to build our computers to running our cars. Modern life would be impossible without hydrocarbons. Humankind's appetite for energy is insatiable, and is sure to grow as developing countries continue to increase their standard of living. We need to understand and be aware of the consequences. Mann's article is a good place to start.

April 29, 2013

Decoupling Oil and Gas

A recent editorial in the Houston Chronicle makes a good point: we should no longer think of "oil and gas" together. Their paths have diverged, at least in the US.

The prices of oil and gas used to be roughly equivalent, based on their energy value - their Btu content. But since the shale revolution in the US, this is no longer the case. Today, gas is much cheaper than oil on an energy-equivalent basis. Today, most exploration companies have moved from gas shale plays to oil shale plays, chasing the higher oil price. But gas prices have recently risen, and wells are still being drilled profitably in the Marcellus. If gas returns to $5-6/mcf, shale gas plays will return, and gas will still be much cheaper than oil.

Second, gas is a clean-buring fuel, unlike oil or coal. US emissions of greenhouse gases have declined substantially since utilities have gradually switched from coal to gas. Vehicles powered by gas have much lower emissions than those fueled by gasoline. Gas is touted as a "bridge fuel" in the transition from hydrocarbon to renewable sources of energy, because of its lighter environmental footprint.

So why are we still using so much oil? Principally because of the transportation sector. It is expensive to convert vehicles to burn natural gas, and there is a dearth of refueling stations in the US for natural gas. If the price of natural gas remains cheap, more and more vehicles will burn it instead of gasoline.

As the public begins to better understand the differences between oil and natural gas, and as the market's confidence grows in the US supply of gas, the stability of its relatively low price, and its more benign environmental impact, gas should make inroads into the transportation industry.

April 22, 2013

Big Boom in the Cline Shale

Information below passed on to me by a client, from a friend of a friend:

 

Following are charts and photos of a tour of Cline Shale exploration and operations yesterday afternoon. I remember the boom in the 50s and the late 70s. Those are minimal compared to the massive and very expensive boom taking place right now. I never imagined anything like this.

For instance, there are no small operators involved. Everyone leasing, building, drilling and operating has to be a major with very deep pockets. The road you will see in the first photo cost over $1 million to build. The wells are hitting 9,000 feet in this area and much deeper in other places. Each hydraulic fracturing operation (fracking) uses more than 5 million gallons of water. In just this area, railroad sidings have been built in Miles, San Angelo and Barnhart to unload sand and load oil. The railroad trains in San Angelo used to consist of a few dozen cars a week and now consist of 500 cars a day. And, really, this is just getting started.

The Cline Shale is nearly 150 miles from north to south and nearly 60 miles from east to west. Reservoir engineers still think it will be the largest oil field ever discovered in the USA. The impact on cities and towns is profound. Colorado City has 4,200 residents and there are four hotels and two supermarkets under construction. At all times of the day and night, the traffic in Snyder seems like rush hour in Dallas. Motel rooms in many towns are being rented for 12 hour shifts. Nobody knows where people will live, how water will be available to drink or how to maintain roads that are being torn up by the heavy truck traffic. For now, everyone's attitude is to sack the money while you can and kick the can down the road to solve problems some day.

In San Angelo, one of the most important events is the rodeo. This year there were no hotel rooms for the rodeo cowboys and tourists because the rooms were full of oil field workers. That used to be the biggest tourist draw in town. I guess the cowboys slept in their horse trailers with their horses since some have very nice sleeping places. The Chamber of Commerce and the hotel owners never said a word of apology. There is a brand new apartment complex west of San Angelo with hundreds of apartments and the whole thing has been leased indefinitely to Halliburton. In Midland, restaurants are closing early because they do not have the workers to stay open and are running out of food. In Big Lake, convenience stores are closing early in the day because they are out of food and fuel. I stopped at the Dairy Queen in Big Lake and the typical order being called in was for 36 hamburger baskets to go. And there is order after order like that. Every day, people with food trailers leave San Angelo and drive to Barnhart and Big Lake to feed people. I talked to a banker in Big Lake who said the best food in town is now a food trailer. I have heard that there is such a demand for truck drivers that they are receiving $10,000 signing bonuses and making $80,000 a year.


Chart of Oil Bearing Formations and Approximate Depth in Irion and Reagan Counties. The depths will vary from one part of the Permian Basin to another.
 

 Cline.JPG

 

The Million Dollar Caliche Road - must be 10-15 miles long - the blue pipes are transporting water for miles from to and from holding ponds for the wells.
 

Cline 1.jpg

 

Entire hills of limestone are excavated, crushed and screened for rock to make roads and drilling pads. Look at the man standing beside the portable rock crusher. As soon as this hill is gone, then another will be crushed. The landscape is changing. On the other side of the crushed rock pile were several loaders and dump trucks which were hauling the material off almost as fast as it could be produced.
 

Cline 2.jpg


Long view, about 2 miles, showing 5 pads in a row. Each pad will contain 3-4 wells. Pads are huge (several acres) to accommodate the multiple wells and the fracking operations.
 

Cline 3.jpg


Three active drilling rigs. A few days ago there were five lined up. Notice the old pump jack on left. This ranch already had hundreds, if not thousands, of old wells. By old, I mean 30 years old. Notice red pumps and red pipes piping water to fracking operations. In some cases, the recovered frack fluids are being cleaned up and used for water flooding the old wells to stimulate secondary production.
 

Cline 4.jpg


A fracking operation in progress. The crane holds a manifold over the drilled well. There were several heavy-walled pipes connected to the manifold, through which pass the fracking fluids, gels and propants. Each operation requires about 5,000,000 gallons of water. That's a problem in a part of the world with very little water to start with. It's hard to imagine the value of all the trailers, trucks, storage facilities, pumps and other equipment at each site. The cheapest thing in the photo are the porta-potties.
 

Cline 5.jpg


Several wells are drilled on each pad. These are two wellheads only a few feet apart. Once the rig completes one hole, a couple of bulldozers are used to skid the rig over about 30' where it starts another well. We saw as many as four wells per pad. Each well probably has multiple horizontal legs 9,000 feet down in the Cline Shale. Most of the horizontal legs are 1.5 miles in horizontal length. In this particular location, all the horizontal legs are north-south because the production is better than any other orientation. This type of information is determined by drilling and testing "Science Wells" which usually cost over $2,000,000 each. These "science wells" are never meant to be produced. How can you kiss off $2 million? That's what I mean when I say that only the big boys are playing this game.
 

 Cline 6.jpg

 

Looking at a large storage tank. There are dozens of these tanks. They are so big that you can see them with Google Earth. At each tank, the water surface is roughly 5 acres and the depth is approximately 15 feet. Each tank  contains about 26,000,000 gallons or 624,000 barrels of water. The reason much much is stored is because the water must be readily available (guaranteed) to begin and maintain hydraulic fracturing operation.

Cline 7.jpg

 


 

 

 

March 18, 2013

Water Used for Fracing Exceeds Oil Produced in Texas

I recently read this astounding report from the Texas Tribune:

"In 2011, Texas used a greater number of barrels of water for oil and natural gas fracking (about 632 million) than the number of barrels of oil it produced (about 441 million), according to figures from the Texas Water Development Board and the Railroad Commission of Texas, the state's oil and gas regulator."

Of course wells use all of the water in the fracing process, at the beginning of the well's life, and continue to produce oil for many years, so oil production will eventually catch up with water use. But this is nevertheless a remarkable statistic.

The Tribune article reports that a study by the UT Bureau of Economic Geology published in January "found that the amount of water used statewide for fracking more than doubled between 2008 and 2011. The amount is expected to increase before leveling off in the 2020s. The study's lead author, Jean-Philippe Nicot of the University of Texas, has calculated that in 2011, nearly a quarter of the water used in Dimmit County went toward fracking. He projects that the figure will rise to about a third in a few years."

The Tribune has also published a good article on the uneven responses of Texas groundwater districts to operators' use of groundwater, that you can read here.

Fracing continues to make news elsewhere:

The California Department of OIl Gas and Geothermal Resources is considering regulations covering fracing that are being criticized by the industry and environmentalists:

http://www.conservation.ca.gov/Index/Pages/Index.aspx

http://www.huffingtonpost.com/2013/03/12/california-fracking_n_2864147.html

http://www.huffingtonpost.com/2012/12/19/california-fracking_n_2327165.html

r-CALIFORNIA-FRACKING-MAIN-large570.jpg

 

In New York, which has had a moratorium on fracing since 2008, the governor is still considering whether to lift the ban. The state's health commissioner is preparing to issue his recommendation, which the governor said will be key to his decision. The New York State Assembly recently voted to extend the moratorium through 2015.

http://newyork.cbslocal.com/2013/03/11/n-y-state-health-commissioner-wont-wait-for-studies-on-fracking/

A group of artists and actors led by Yoko Ono and Sean Lennon have started up their own campaign to ban fracing in New York, called Artists Against Fracking. Several of them have produced a music video of Sean Lennon's song "Don't Frack My Mother:"  "Don't frack my mother, cos I ain't got no other. You can do anything that you want to do, but please don't frack my mother." Yoko Ono then pitches in: "Don't frack me, don't frack me."

Only in America.

March 11, 2013

University of Texas Study of Barnett Shale

UT's Bureau of Economic Geology has issued a comprehensive report on the estimated reserves in the Barnett Shale Field. The study, funded by the Alfred P. Sloan Foundation, looked at 16,000 wells in the field. It has been submitted for peer review before publication, but a summary of the report can be found on the BEG website.

The BEG created a model with data from 15,000 wells drilled through 2010. Assuming a $4 constant gas price, the model predicts another 13,000 wells through 2030. It predicts total field production of 44 Tcf of gas through 2050. Here are two images showing results of the study:

BEG Barnett Shale 1.JPG

BEG Barnett Shale 2.JPG

 

The BEG plans to complete similar studies of the Marcellus, Haynesville and Fayetteville Shales by the end of 2013.

 

 

February 18, 2013

Continued Controversy About Frac Fluids

The E&P industry is continuing to face public criticism of its use of fresh groundwater in fracing wells and its failure to disclose the chemicals added to frac water.

On February 5, the Investor Environmental Health Network (IEHN) issued a press release announcing that shareholders have filed resolutions with Cabot O&G, Chevron, Exxon Mobil, EOG Resources, ONEOK, Pioneer Natural Resources, Spectra Energy, Range Resources and Ulta Petroleum challenging the companies "to quantifiably measure and reduce environmental and societal impacts" of their exploration activities. The resolutions focus on water issues, asking the companies to disclose the amount and sources of water used, how they track and measure naturally occurring radioactive materials (NORM) in frac water, whether and to what extent the companies use closed-loop systems in handling frac water, and what efforts are being made to reduce the amount of fresh water used. Shareholder proposals were filed by Calver Investments, Green Century Capital Management, the New York City Office of the Comptroller, the New York State Common Retirement Fund, the Sisters of St. Francis of Philadelphia, and Trillium Asset Management. IEHN and the Interfaith Center on Corporate Responsibility published a report in 2011, "Extracting the Facts: an investor guide to disclosing risks from hydraulic fracturing," intended to list and encourage best risk management practices by E&P companies, including reducing and disclosing all toxic chemicals, minimizing fresh water use by substituting non-potable sources, and using closed-loop systems to store waste waters.

Last week, New York Comptroller Thomas DiNapoly announced that the state's pension fund had reached an agreement with Cabot O&G to disclose its practices for minimizing the use of toxic chemicals in frac fluids. DiNapoli withdrew his shareholder proposal submitted for Cabot's upcoming proxy statement. DeNapoli has negotiated similar agreements with Hess, Range Resources and SM Energy.

Halliburton, which provides frac fluids for the industry, has developed a "green" frac fluid called CleanStim that uses only food-industry additives. Halliburton production manager Nicholas Gardiner said that Halliburton has developed a chemistry-scoring system for fracfluids, with lower scores being better. CleanStim has a zero score, he said, but is "relatively more expensive" than many traditional fracking fluids. Terry Engelder, a geologist at Penn State, said: "Eventually industry would like to end up with a mix of just water, sand, and food-grade additives. Companies are learning to deal with fewer and fewer additives."

The Texas House Energy Resources Committee held a hearing last week about fracing and water use. Industry spokesmen testified that they are using more brackish water and reusing flowback frac water; recycling water; and covering their retention ponds that store fresh water to limit evaporation. A spokesman for Fountain Quail Water Management said that 900 million gallons of flowback water have been recycled back to freswater in the Barnett Shale over the past nine years. He also announced formation of the Texas Water Recycling Association. A Devon Energy spokesman saidd that Devon had recycled about 700 million gallons of frac water since 2005. He said it costs 50 to 75% more than disposing of the water by injection. NBC News reported on a new water desalination technology that can clean up brackish water so that it can be used in fracing.

Meanwhile, Texas' law on disclosure of chemicals in frac fluds has come under criticism because of its trade-secret "loophole." A Bloomberg report said a sample of frac fluid disclosures from 370 wells reported in August 2012 showed that Baker Hughes averaged 9.1 non-disclosed ingredients per well, Halliburton averaged 9.3, and Superior Well Services averaged 32.5. Lon Burnam, the Democratic state legislator who co-authored the law, said that "this disclosure bill has a hole big enough to drive a truck through."

 

On another topic: a final good-bye to Aubrey McClendon, who has resigned from Chesapeake, the company he founded. He receives a nice parting gift of $45.2 million over the next four years and $33.5 million in restricted stock. He was previously removed as Chairman of the Board because of heavy criticism of alleged conflicts of interest and the company's poor market performance. It will be interesting to see how Chesapeake survives without him. While much of the criticism of his tenure is undoubtedly deserved, his huge contribution to the natural gas boom of the last ten years should not be forgotten.