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I recently came across a study just published by a group of sociology professors testing our ability to make decisions based on facts. It takes a little explanation, but it is worth looking at. The question they asked:  Why does public conflict over societal risks persist in the face of compellng and widely accessible scientific evidence? To find out, the professors asked 1,111 participants a series of questions designed to gauge their political views, and then they were asked to solve a word math problem. Half of the participants were given the following problem:

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The correct answer?  Patients who used the skin cream were more likely to get worse than those who didn’t.  Roughly 1 in 3 patients who used the skin cream got worse, but roughly 1 in 5 of those who didn’t use the skin cream got worse. Solving the problem requires skill in “numeracy”, basically the ability to solve math problems. (For the study, the data were reversed for half of the participants and presented so that they suggested that the skin cream did work.)  59% of those in the study got the answer wrong. The more “numerate” the study participants were, the more likely they were to get the problem right. That was true whether the participants were liberal Democrats or conservative Republicans.

The other half of the participants were given a different problem:  they were asked to determine the effectivenes of laws “banning private citizens from carrying concealed handguns in public.” Participants were given data about cities that had or had not passed concealed carry bans, and where crime in these cities had or had not decreased. The numbers used in this problem were exactly the same as those in the skin-rash problem. The results are shown below:

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Texans for Public Justice, www.tpj.org, issued its report on 2012 Election Cycle Spending by Texas political action committees.  You can see it here. Some highlights:

Of the $70 million spent by Texas business PACs in 2011-12, $11.9 million, or 9%, was spent by PACs devoted to energy and natural resources issues/candidates. Here are the top spenders:

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The above figures represent spending by these PACs both in-state and out-of-state.

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Last week I attended the State Bar Annual Advanced Oil, Gas and Energy Law Conference in Houston. This year is the 75th anniversary of the Oil, Gas and Energy Section of the Texas Bar (older than the State Bar itself), and there was a special dinner to honor the occasion, at which Daniel Yergin spoke.  He is the author of the Pulitzer-prize-winning book The Prize, a history of the global prusuit of oil, money and power — a great read. More recently Yergin published his follow-up, The Quest: Energy, Security, and the Remaking of the Modern World, updating the history of global energy production and demand from the first Gulf War to the present.

Some tidbits from Yergin’s talk:  politically, the biggest risk to the industry is the opposition to hydraulic fracturing — not a big issue in Texas, but a huge issue in eastern states and California — and the pressure for increased federal regulation of drilling.  The biggest practical challenges to the industry in the US are dealing safely with wastewater from oil and gas operations, and, in some parts of the US, the industry demand for fresh water for fracing. Once again, peak-oil predictors have been proven wrong, by the triumph of technology.  Texas has long been a leader in the industry not only because of its abundance of natural resources but also because of private ownership of oil and gas and the development of the legal theories and framework for the industry by the Texas bar and courts in the 20th century. 

To see Yergin’s “world energy timeline, click here.

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A report recently released by the University of Texas’ Cockrell School of Engineering, “Measurements of methane emissions at natural gas production sites in the United States,” has re-energized the debate between industry and environmental groups over whether natural gas is good for the environment.

UT’s report is a peer-reviewed paper reporting on the results of measurements of methane emissions at 190 onshore natural gas sites in the US. It was sponsored by the Environmental Defense Fund, Anadarko Petroleum, BG Group, Chevron, Encana, Pioneer Natural Resources, Shell, Southwestern Energy, Talisman Energy USA, and Exxon. The study is part of a larger series of studies being sponsored by EDF to determine how much methane is emitted by natural gas exploration, production and transportion in the US. The issue is important because, on the one hand, burning of methane releases less carbon dioxide into the atmosphere than coal or oil, and on the other hand, methane is itself a powerful greenhouse gas that contributes to global warming. Over the first 20 years after it is released, methane is 72 times more potent than carbon dioxide as a greenhouse gas.

Those environmental groups who oppose further development of hydrocarbon resources argue that, because of methane emissions, natural gas is not a good alternative to other fossil fuels. They have argued, based in part on estimates of methane emissions from completion operations on wells using hydraulic fracturing, that the increased development of natural gas resources made possible by fracing is bad for the environment. The industry, and some environmental groups, see natural gas as a plus, a “bridge fuel” to development of renewable energy.

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I subscribe to the Economist, and it recently sent its subscribers a booklet, Pocket World in Figures, that contains rankings of 198 countries in categories ranging from longest river to biggest cities to number of refugees to living standards, etc.  Here are some interesting statistics related to energy from that booklet:

Top 10 Oil Producers 2012 (‘000 bbls/day)

Saudi Arabia           11,530

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The historic floods in Colorado have inundated hundreds of oil and gas wells, dislodging tanks and threatening significant pollution of the flood water.

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The disaster has raised questions across the country about regulation of drillsite locations in areas that could be subject to flooding.  The Colorado Oil and Gas Conservation Commission Wednesday released a statement that it “is aggressively assessing the impacts of the flood to oil and gas facilities,” including by mapping drilling sites within flooded areas, tracking reports from the ground, and sending out inspection teams. A similar disaster occurred in 2010-2011 in North Dakota, where floods from thawing snow along the Missouri River caused flooding of wells, resulting in contamination of flood waters by fracking fluids, drilling mud and saltwater. That flood prompted changes in North Dakota’s regulation of wasterwater storage.  The North Dakota Industrial Commission amended its rules to prohibit the use of open pits except in cases of emergencies. Companies can still store drilling waste in open pits for up to 72 hours after drilling a well or after securing approval from the commission.

Here are stories and additional photos of the impact of Colorado’s flooding on its oil and gas sites:

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Texas pumped 2.575 million barrels of oil per day in June, exceeding Iran’s production of 2.56 million barrels/day. Texas now ranks ahead of seven members of OPEC in oil production.

The U.S. is now the world’s largest exporter of refined fuels, including gasoline and diesel. The U.S. met 87 percent of its energy needs in the first five months of 2013. This is expected to be the highest annual rate since 1986. Net imports of oil and petroleum products will fall to 5.4 million barrels a day by 2014, down from 12.5 million in 2005, according to the Energy Information Administration.  It is expected that the U.S. will pump 7.75 million barrels/day by the end of the year.  West Texas Intermediate’s price is now above $107/bbl.

Meanwhile, the Houston Chronicle reported that a “growing number of experts” are now saying that the increased production of oil will result in a significant decline in prices.  Amy Myers Jaffe, executive director for energy and sustainability at the University of California at Davis, recently wrote that “The most likely scenario – absent war – is for oil prices to decline significantly.”  She sees a repeat of the decline in oil prices from the 1980s. If you superimpose a curve of oil prices from the 1980s over today’s price curve, “we’re already on the other side of the hump,” said Jaffe.  The decline will be a result of rising supplies and falling fuel demand, exacerbated by higher fuel prices, less driving, less demand from emerging nations like China, the rising dollar, replacement of oil with cheaper natural gas, and OPEC’s inability to cut production enough to prop up prices.  “Don’t lose sight of the fact that [oil prices are] a cycle.  We get in this mania that whatever the price is it’s going to be that forever.”

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The Texas Railroad Commissioners voted unanimously today to reject the recommendation of its examiners denying EOG’s allocation well permit and instructed the examiners to prepare an order and findings granting EOG’s permit.  For my prior posts about this case, see here, here and here.

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Julia Trigg Crawford has waged a well-publicized fight to prevent condemnation of an easement across her farm for the XL Keystone Pipeline.  On August 27, the 6th Court of Appeals in Texarkana denied her appeal of TransCanada Keystone Pipeline’s award of an easement over her property.  Crawford has vowed to appeal to the Texas Supreme Court.

The Court of Appeals’ opinion says that Ms. Crawford had two arguments: first, that the Texas statutes granting pipelines condemnation authority do not apply to interstate pipelines; and second, that Keystone had failed to meet the showing required by the Texas Supreme Court in Texas Riceland Partners v. Denbury Green Pipeline-Texas, 363 S.W.3d 192, 202 (Tex. 2012) that the pipeline must show “a reasonable probability … that the pipeline will at some point after construction serve the public by transporting gas for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier.” The Texarkana court held that Keystone had met that burden. The court also held that the relevant Texas statutes do grant condemnation authority to interstate common carrier pipelines.

The portion of the XL Keystone pipeline from Cushing, Oklahoma to Port Arthur, Texas is nearing completion.  That segment of the pipeline has been able to proceed even though the Obama administration has not yet approved the segment of the system that would carry heavy crude from Canada across the northern segment of the XL Pipeline system.

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John McFarland
 Graves, Dougherty, Hearon & Moody, P.C.
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