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Friday, March 27, 2015

Links of the Day 03/27/15: Shale Oil to Run Out Soon?, Fracking Critics Downplaying EPA Groundwater Study, and More

Seeking Alpha:  Kinder Morgan: The Sharks Have Begun to Circle   -   "Kinder Morgan (NYSE: KMI) has stated it will increase the dividend by 16% this year and 10% each year until 2020. These projections sound good in theory. Yet, the company will need to grow EPS in order to make good on..."

Gas & Oil:  Barnesville Schools to Join Utica Shale Academy   -   "The Barnesville Exempted Village School Dstrict is joining forces with a charter school to offer high school students a unique opportunity to get hands-on training in the burgeoning gas and oil industry next school year."

Akron Beacon Journal:  Groups Discover Unlicensed Frack Fluid Facility in Jefferson County   -   "As the oil and gas industry lobbies lawmakers to further consolidate power in the hands of the Ohio Department of Natural Resources (ODNR), the agency has shown itself to be ill-equipped to have more oversight of..."

NGI:  Drilling Fluids Provider Ordered to Close Ohio Site   -   "The Ohio Department of Natural Resources (ODNR) has ordered an independent oilfield services company to cease operations and remove equipment at a site in Jefferson County after it learned from grassroots organizations that the company was operating illegally. About two weeks ago, Anchor Drilling Fluids USA Inc., which was acquired by Calumet Specialty Products Partners LP last year, was given 14 days to shut down after an ODNR inspector discovered that the company was recycling drill cuttings without a permit, said..."

Forbes:  Stop Propping Up Zombie Oil Companies   -   "“Everybody says it’s going to be different this time — the city’s more diversified than it used to be. But oil still supports everything here, whether they believe it or not.” Perhaps most stunning: the number of lifelines thrown to troubled oil companies in recent weeks. Investors seem to be worried that they’re going to miss the opportunity to..."

Associated Press:  Despite Low Oil Prices, Recent Mishaps, DOE Advisory Council Pushes for Arctic Drilling   -   "The U.S. should immediately begin a push to exploit its enormous trove of oil in the Arctic waters off of Alaska, or risk a renewed reliance on imported oil in the future, an Energy Department advisory council says in a study to be released Friday. The U.S. has drastically cut imports and transformed itself..."

The Detroit News:  States Are the Best Fracking Watchdogs   -   "The rules issued last week by the Obama administration regulating hydraulic fracturing on federal lands should serve as fair warning to those states like Michigan that have already enacted adequate standards to regulate..."

CNBC:  Why Oil Could Be Going Back to $70   -   "Oil has fallen too far too fast, and benchmark Brent crude could be back at $70 or $80 per barrel, the CEO of Signal Investment Research said Tuesday. Stephen Davis said on CNBC's "Squawk Box" he sees oil prices bouncing $10 In the next three to six months and believes prices could go much higher. "The price of [Brent] oil has..."

SNL:  Trailblazing Company's Demise Clouds Future of Waterless Fracking   -   "With more than 5 million gallons of water shot down a typical shale well and millions more gallons later recovered and requiring disposal, a method to fracture oil and natural gas bores without water seems like an energy company's dream. GASFRAC Energy Services Inc., a small company that developed a method to use propane gel instead of highly pressurized water to crack rocks, looked as though it might have hit..."

Heartlander Magazine:  Why I am a Climate Change Skeptic   -   "I am skeptical humans are the main cause of climate change and that it will be catastrophic in the near future. There is no scientific proof of this hypothesis, yet we are told “the debate is over” and “the science is settled.” My skepticism begins with..."

Energy in Depth:  Why Are Fracking Critics Downplaying EPA's Groundwater Study?   -   "Inside Climate News (ICN) recently produced an article alleging that industry has somehow bought off the U.S. Environmental Protection Agency (EPA), particularly with respect to its forthcoming study on groundwater and hydraulic fracturing. ICN, which has a history of taking sides when it comes to covering fracking, attempts to lend credibility to a dubious allegation from drilling critics, citing “the agency’s [EPA’s] weakness relative to..."

Reuters:  U.S. Refiners Turn to Tanker Trucks to Avoid "Dumbbell" Crudes   -   "In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going straight to the source. Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can..."


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Activist Group Not Deterred by Ballot and Court Defeats for Home Rule

Lois Gibbs
From The Business Journal:
The female activist from the Love Canal neighborhood of Niagara Falls, N.Y., stood before the Northstar 1 injection well Friday afternoon to warn residents of Youngstown about the dangers to their health open injection wells pose. 
Lois Gibbs, the activist who, in the 1970s, led the Love Canal community against the Hooker Chemical Co. (since acquired by Occidental Petroleum Corp.), and the New York state and federal governments, warned Youngstown residents of the dangers of open injection wells. 
What happened in her community nearly 40 years ago could happen here, she said. The board of education in Niagara Falls bought the abandoned Love Canal that Hooker Chemical had used as a dump to bury toxic waste, Hooker not knowing just how toxic it was. Nor did the school board when it paid Hooker $1 for the site to build a school.
Read more of that article by clicking here.

Industry site Energy in Depth had plenty to say in response to Gibbs' statements in Youngstown:
The group invited New York activist Lois Gibbs to speak in Youngstown in front of the Northstar 1 injection well. To her credit, Ms. Gibbs at least admitted her true intentions in coming to Youngstown. According to the Youngstown Business Journal, she said, “The area’s economy should not involve fracking in any capacity.” 
Yet, even with this clear acknowledgment, it’s worth taking a look at some of her claims at the event (as well as the claims of Frackfree Mahoning Valley) and providing the facts: 
Gibbs claim: “‘Let’s not take radioactive material and put it on this land. This all goes into the aquifer and into people’s water.’ With the well unplugged, she said, rain, melting snow and runoff can mix with the residue and contaminate the aquifer underground.” 
Fact: In suggesting that the Northstar 1 well is putting water at risk, Ms. Gibbs’ claim goes directly against what the Environmental Protection Agency (EPA) has determined. 
In a recent report, EPA found:
“There are approximately 30,000 Class II active disposal wells in the United States used to dispose of oil and gas related wastes, many of which have operated for decades. EPA is unaware of any USDW contamination resulting from seismic events related to injection-induced seismicity. (emphasis added)
As EID has noted on several occasions, the state of Ohio has some of the most stringent regulations on Class II injection wells, even surpassing those of the U.S. EPA. Further, the U. S. Government Accountability Office (GAO) released a report last year, which found that states “have safeguards in their programs that EPA has deemed protective of underground sources of drinking water.”
You can read more of that article by clicking here. 

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Thursday, March 26, 2015

Poll Finds Americans Split on Support of Fracking

From Gallup:
The practice of hydraulic fracturing, or "fracking," has emerged as a divisive issue across the U.S., reflected in Americans' opinions about it; 40% of Americans say they favor the procedure, while 40% oppose it, and a substantial 19% do not have an opinion. This is amid the Obama administration last week announcing the first nationwide safety rules for fracking.
Fracking is a process of drilling and injecting fluid into the ground at high pressures to fracture shale rocks and release natural gas inside. Developed in the 1940s, fracking became much more widespread in the late 1980s, when oil operators began drilling horizontally, using hydraulic fracturing. In the 1990s, fracking was introduced into shale formations, and it is this practice on a massive commercial scale that is employed throughout the U.S. today. Many credit fracking with contributing to the current "oil boom," which has helped dramatically ramp up the production of oil in the U.S., and the U.S. even passing Saudi Arabia as the world's largest oil producer. It is also being denounced by environmentalists as causing potential hazards, such as water table pollution and earthquakes. 
This Gallup survey was taken March 5-8, before the U.S. Interior Department unveiled new rules regarding fracking on federal lands and Indian territories, but as the debate rages in states such as New York, Pennsylvania and Oklahoma. 
The survey asked Americans whether they favor or oppose "hydraulic fracturing or 'fracking.'" The survey did not further define the process, list pros or cons or measure the degree to which the public has been following the issue. But eight in 10 Americans are willing to give an opinion, with the results split evenly, along with 19% who explicitly said they didn't have an opinion.
See more by clicking here.

Fracking in the United States

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Chesapeake Energy Reduces 2015 Budget; Carl Icahn Increases His Stake in Company

From a Chesapeake Energy press release:
Chesapeake Energy Corporation (NYSE:CHK) today announced it has reduced its 2015 capital budget (including capitalized interest of $500 million) to $3.5 – $4.0 billion for 2015, which is a $500 million reduction from its previous guidance of $4.0 – $4.5 billion. Chesapeake plans to operate 25 – 35 rigs in 2015, which represents a decrease of approximately 55% from an average of 64 rigs in 2014. The company intends to spud and connect to sales approximately 520 and 650 gross operated wells, respectively, in 2015 (a decrease from 1,175 and 1,150 wells in 2014). As a result, the company is lowering its targeted 2015 production to 231 – 236 million barrels of oil equivalent, or average daily production of 635 – 645 thousand barrels of oil equivalent, which represents 1 – 3% production growth over the prior year after adjusting for 2014 asset sales. 
Doug Lawler, Chesapeake’s Chief Executive Officer, said, “We entered 2015 with a strong liquidity position and we intend to manage it prudently. In response to continued weak commodity prices, we are further reducing capital expenditures and associated drilling activity. As a result, we now forecast ending 2015 with approximately $6 billion in combined cash and borrowing capacity under our credit facility. With this budget revision we anticipate being free cash flow neutral by the end of 2015.”
Chesapeake's previously announced capital budget was already a 34% reduction from 2014, and now it is being slashed even more.

From Seeking Alpha:
Investors in Chesapeake Energy (NYSE:CHK) have finally managed to catch a break after a few very difficult months. The natural gas and oil producer has further reduced the capital expenditure plans for 2015 in order to preserve liquidity and limit the increase in debt. 
This news and the fact that prominent investor Carl Icahn has increased his stake has been welcomed by investors. Shareholders have seen a few difficult weeks after shares lost a third of their value over the past month. Despite the pullback in the shares, the outlook remains dire amidst very low benchmark prices and the huge discount at which the company is selling its energy.
Read that article by clicking here. 

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Wednesday, March 25, 2015

Court Decisions in Home Rule Cases Still Leave Question Marks for Ohio Towns

From Midwest Energy News:
Almost three weeks after Ohio’s top court struck down a town’s restrictive drilling ordinances, lawyers and local officials are predicting another round of court cases to settle how much control local governments have over oil and gas development. 
The state Supreme Court ruled that the Akron-area town of Munroe Falls could not require Beck Energy Corp. to get separate drilling permits, finding that only the state can issue drilling permits. But it left open whether cities can use zoning to control where drilling happens, and whether the outright drilling bans in some towns can continue to stand. 
In the weeks following the highly anticipated decision, attorneys have rushed to interpret how and when that issue will be decided. Will Ohio follow in the footsteps of New York and Pennsylvania, which have preserved some local powers over drilling; follow Colorado and Texas, which have taken a harder line; or chart a new path? 
“We’ve reached the first fork in the road, and it appears that the Ohio Supreme Court has generally decided which path they’re going to take: Legitimate local zoning regulations are unlikely to be wholly pre-empted,” BakerHostetler attorney Ryan Babiuch said. “There will be a new wave of litigation that could flesh that out.”
Read more by clicking here.

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Saudis Not Anticipating the Return of $100 Oil

From Bloomberg Business:
Oil is unlikely to rebound to $100 any time soon because higher prices would spur more output and prolong a glut, said Mohammed al-Madi, Saudi Arabia’s OPEC governor. 
Oil prices at that level “will let the high-cost producers come back again,” al-Madi said at a conference in Riyadh on Sunday. Saudi Arabia, the world’s biggest oil exporter, is pumping at a near-record level of about 10 million barrels a day, Oil Minister Ali al-Naimi said at the conference. 
Brent, a global oil benchmark, fell almost 50 percent in the past year as Saudi Arabia and others in the Organization of Petroleum Exporting Countries chose to protect their market share over cutting output to boost prices. While U.S. producers have idled rigs for 15 consecutive weeks, output is still running at its highest level since at least 1983. 
“Shale-oil companies are one of the high-cost producers that benefited from high oil prices,” al-Madi said. “We’re not against shale oil. We welcomed shale oil, but it’s not fair for high-cost producers to push low-cost producers out of the market.” 
Saudi Arabia can meet demand from any customer, and while global consumption is improving, there isn’t enough need to raise the nation’s production capacity beyond its current level of 12.5 million barrels a day, al-Naimi said.
Read the rest of the article by clicking here.

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Gulfport Energy Sues Village of Barnesville Over Water Withdrawal Agreement

From The Intelligencer/Wheeling News-Register:
Citing a potential loss of "millions of dollars," Marcellus and Utica shale driller Gulfport Energy is suing the village of Barnesville for the right to draw water from the Slope Creek Reservoir for its nearby fracking operations. 
Filed earlier this month in U.S. District Court for the Southern District of Ohio, Gulfport's lawsuit claims the Oklahoma City-based firm should be allowed to take water from the reservoir, located about five miles south of the village, unless the "health and safety of area residents and businesses are impaired." 
"Barnesville has frustrated Gulfport's right to develop minerals under the mineral rights agreement by refusing to provide Gulfport with water in violation of Gulfport's water rights," company attorney O. Judson Scheaf states in his complaint. "Barnesville has wrongfully maintained that Gulfport's water rights are limited by the 2014 water use agreement between Barnesville and Antero" Resources. 
Court documents show that on Aug. 17, 2012, Barnesville officials signed an agreement permitting Gulfport to buy water from the Slope Creek Reservoir at a price of one cent per gallon. The contract shows the firm would be able to draw the water until a point when the village would determine such action would endanger public health.
Click here to read more on this story.

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Obama Cracks Down on Fracking on Federal Land, But GOP Plans to Fight Back

From The Hill:
The Obama administration is setting new standards for the controversial hydraulic fracturing process, the first major federal effort to crack down on the practice that has largely been behind the nation's oil and natural gas boom. 
The fracking standards only apply to drilling on leased federal land and land owned by American Indian tribes, which account for less than a quarter of the country’s oil production and 17 percent of its gas. The vast majority of fracking happens off federal land, regulators said. 
The long-awaited rules from the Interior Department’s Bureau of Land Management (BLM) are meant, in part, to ease public fears about a practice that involves pumping fluids miles underground to extract oil and gas from small pockets in rock. 
“This rule will move our nation forward as we ensure responsible development while protecting public land resources,” Interior Secretary Sally Jewell told reporters. “That’s good for the public; it’s good for industry; it’s good government.”
Another article from The Hill:
Republicans on Friday roundly rejected the Obama administration’s rules for hydraulic fracturing on federal land and pledged to fight them. 
The GOP warned that the regulations will hamper the nation’s economic recovery that has been bolstered by the boom in natural gas and oil production, much of which depends on fracking. 
“America’s energy boom is one of the best things going for our economy, and keeping it going should be one of the federal government’s top priorities,” Speaker John Boehner (R-Ohio) said in a statement. 
“Instead, the Obama administration is so eager to appease radical environmentalists that it is regulating a process that is already properly regulated.” 
Boehner promised to “do all we can” to stop attempts to impede the energy boom, including the fracking rules.

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