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Wednesday, July 20, 2016

Depleted Workforce and Other Factors Slow Oil Industry Revival

From Reuters:
Two years ago, Reg MacDonald's 20-day drilling classes were packed to capacity, with nearly 40 students eager to land lucrative jobs in the booming oil and gas industry. Now he is lucky if he gets half a dozen to enroll. 
The latest rout in oil prices has been the last straw for many workers just getting back on their feet after the last downturn in 2008, said MacDonald, president of Maritime Drilling Schools Ltd in Nova Scotia, Canada, which trains both entry-level and experienced workers for oilfield jobs all over the world. 
"It's not stable. It's too cyclical. You get ahead and you lose," said MacDonald, who has been in the industry since the mid-1970s. 
Supply outages brought oil prices close to $50 a barrel that many U.S. shale producers say they need to lift output, and drilling has picked up in some of the best oil patches. 
Conversations with larger producers, contractors and suppliers suggest, however, that any recovery will look very different from the 2009-2014 shale boom that nearly doubled U.S. crude output and turned it into one of leading global producers 
The loss of thousands of workers during the two-year downturn and dearth of candidates to replace them is just one challenge.

Oil professionals also talk about equipment idled for so long that it has become unusable, rising service costs, and the threat of extra supply from the backlog of drilled-but-uncompleted wells.
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Ohio Seeing Power Plant Building Boom

From The Columbus Dispatch:
A power-plant building boom has hit Ohio, the first since shale natural gas changed just about everything in the state's energy landscape. 
Six plants are under construction or in the planning stages across the state, including one near Circleville. The projects show how shale gas is transforming the electricity market in a state long associated with coal and coal-fired electricity. 
"Don't be surprised if the future of power generation is natural gas, along with wind and solar," said Don Mason, a Zanesville lawyer who specializes in energy issues and a former member of the Public Utilities Commission of Ohio. "There is an abundance of natural gas that will provide the price to beat." 
It is no accident that he left coal off his list. Coal-fired power plants are closing because of a combination of old age and the high costs of complying with clean-air rules. Gas plants also emit pollutants, but at much lower levels than coal plants.
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Ohio Inches Closer to 2,200 Utica Shale Permits

The latest weekly update on permitting from the Ohio Department of Natural Resources shows that the slow crawl in the number of permits issued continued last week.  Six new permits show up on the latest report.  Three of those are for sites in Jefferson County, while one permit each went to Belmont, Monroe, and Noble counties.

There are now 2,197 permits issued for Utica shale horizontal drilling in the state, with 1,759 wells drilled and 1,347 wells producing.  The Utica rig count is 12.

View the report below or by clicking here.

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Tuesday, July 19, 2016

Corrected UC Fracking Study Shows Retracted Original Exaggerated Cancer Risk by 725,000 Percent

by Seth Whitehead, Energy in Depth

Prior to being retracted last month due to what researchers called “honest calculation errors,” a 2015 University of Cincinnati study on the effects of shale development in Carroll County, Ohio, suggested “natural gas extraction may be contributing significantly to PAH (polycyclic aromatic hydrocarbon emissions) in the air, at levels that are relevant to human health.”
That assessment led to alarmist headlines, such as Newsweek’s “Fracking Could Increase Risk of Cancer, New Study Finds,” But it turns out that the corrected version, posted this week, has reached the exact opposite conclusion:
“This work suggests that natural gas extraction is contributing PAHs to the air, at levels that would not be expected to increase cancer risk.”
In fact, the researchers’ “honest calculation errors” in the original study led to an exaggeration in the cancer risk from PAH emissions in Carroll County by an astounding 7,250 times what the corrected study shows they actually are. The following graphics from the original and corrected study pretty much tell the tale.

The first graphic illustrates the original study. The blue, green and yellow bars on the left of the graph indicate emissions at the well sites (close, middle distance and far away from natural gas wells) while the purple bars on the right are supposed to indicate emission levels detected in similar studies conducted in urban areas such as Chicago, as well as a refinery in Belgium and a pair of oil spill sites. The original study showed PAH levels in Carroll County at 330, 240, and 210 ng/m3, respectively, for each the three study groups, which were much higher than levels in urban areas and refineries.
But the second graphic, which is the corrected graphic, shows that PAH levels were actually 1.2, 0.94, and 0.97 ng/m3 in each of the study groups. These readings are far below all the comparable studies it cited and more than 20,000 percent lower than what the original study reported.
Most notably, the corrected study shows that PAH emission levels are well below the level the U.S. Environmental Protection Agency (EPA) says would increase risk of cancer — the complete opposite of what the original study claimed. Amazingly, the original study exaggerated the cancer risk 725,000 percent what it actually is, based on the researchers’ revised data.
Let’s take a look at the most notable data corrections from the retracted study to the corrected study, with the first three examples concerning cancer risk.
Original Study Claim: “Closest to active wells, the (cancer) risk estimated for maximum residential exposure was 2.9 in 10,000, which is above EPA’s acceptable risk level.”
Corrected Study: “At sites closest to active wells, the risk estimated for maximum residential exposure was 0.04 in a million, which is below the U.S. Environmental Protection Agency’ s acceptable risk level.”

Original Study Claim: “This suggests that the maximum exposure scenario would produce risk levels above the U.S. EPA’s acceptable range. Thus, PAH mixtures in areas heavily impacted by NGE may have higher than acceptable cancer risk increases as exposure moves closer to an active NGE well.”
Corrected Study: “None of the estimated ELCRs (excess lifetime cancer risk) were above one in a million, which is the conservative end of the range that the U.S. EPA considers acceptable. Thus, NGE in this study did not appear to emit PAH levels into air that would elevate carcinogenic risk associated with inhalation.”

Original Study Claim: “For the maximum residential exposure scenario of 24 h/day, estimated excess lifetime cancer risk (ELCR) decreases from 290 to 200 in a million when moving from the close to far group. For the minimal residential exposure scenario of 1 h/day, estimated ELCR decreases from 12 to 8.1 in a million when moving from the close to far group. The outdoor worker scenario was also calculated to approximate exposures working outside amidst NGE activity, such as farming or working on NGE wells. For this scenario, estimated ELCR decreases from 59 to 50 in a million when moving from the close to far group.”
Corrected Study: “For the maximum residential exposure scenario of 24 h/day, the estimated excess lifetime cancer risk (ELCR) decreases from 0.040 to 0.027 in a million when moving from the close to far group. For the minimal residential exposure scenario of 1 h/ day, the estimated ELCR decreases from 0.0017 to 0.0011 in a million when moving from the close to far group. The outdoor worker scenario was also calculated to approximate exposures working outside amidst NGE activity, such as farming or working on NGE wells. For this scenario, the estimated ELCR decreases from 0.0082 to 0.0055 in a million when moving from the close to far group…”
Essentially, the revised study completely contradicts a claim by study co-author Kim Anderson of Oregon State University, who was quoted in a press release accompanying the original study saying: “Air pollution from fracking operations may pose an under-recognized health hazard to people living near them.”
The original study also trumpets that two PAHs in particularly — benzopyrene and phenanthrene — are primary concerns for cancer. Interestingly, in the original study phenanthrene was identified as the most prominent PAH detected. However, the corrected study identifies naphthalene as the most prominent PAH detected, while benzopyrene wasn’t even mentioned as being prominently detected.
Here’s a look at the differences between the two studies in regard to phenanthrene and benzopyrene and all PAH detection in general:
Original Study Claim: “Average phenanthrene levels were 130, 96 and 88 ng/m3 for the close, middle and far groups.”
Corrected Study: “Average phenanthrene levels were 0.25, 0.18, and 0.17 ng/m3  for the close, middle, and far groups.

Original Study Claim: “Average benzo [a] pyrene levels were 2.8, 2.7 and 1.9 ng/m3 for the close, middle and far groups…. Average BaPeq (Benzo[a]pyrene equivalent) concentrations in all distance groups would be potentially concerning in chronic doses.”
Corrected Study: “Average benzo [a]- pyrene levels were 14 Å~  10−6 , 7.1 Å~  10−6 , and 2.9 Å~  10−6  ng/m3for the close, middle, and far groups. Average BaPeq concentrations in this study would likely not be concerning as chronic doses.”

Original Study Claim:
 “… PAH levels closest to natural gas activity were an order of magnitude higher than levels previously reported in rural areas.”
Corrected Study: “PAH levels closest to natural gas activity were comparable to levels previously reported in rural areas in winter.”
Though the authors’ acknowledgement of their errors and relatively prompt publication of the corrected study is commendable — especially when compared to how UC’s still yet-to-be-published study showing no groundwater contamination from fracking has been handled — it is still becoming more and more difficult to give UC the benefit of the doubt.
Combined with the many flaws of the study EID has already pointed out – the fact that the authors admit their sample size (25 samples) was too small, that fact that they conceded that the chief assumption used for their research model was “totally impractical,” the fact that study participants were recruited by an anti-fracking activist group, and the fact that worst case scenarios were assumed in their cancer hazard assessments, just to name a few — the sheer degree to which the research team botched the original data borders on shocking, especially considering scientists would seemingly be capable of catching such egregious mathematical errors.
But maybe it shouldn’t come as a big a surprise, considering lead author Erin Haynes not only presented the study’s original findings at a meeting of an anti-fracking group, and the researchers specifically thank that group’s leader in the corrected study.
“This work was funded by grants from the National Institute of Environmental Health Sciences to Oregon State University (P30-ES000210) and the University of Cincinnati (P30-ES06096). We thank Glenn Wilson, Ricky Scott, Jorge Padilla, Gary Points, and Melissa McCartney of the OSU FSES Program for help with analysis. Thank you to Dr. Diana Rohlman of the OSU Environmental Health Sciences Center Community Outreach and Engagement Core (COEC), Sarah Elam of the University of Cincinnati (UC) Environmental Health Sciences Center COEC, Jody Alden of UC, and Paul Feezel of Carroll Concerned Citizens, all for assistance with volunteer recruitment and communication. Thank you to Pierce Kuhnell of UC for mapping sample sites. Finally, thank you to the volunteer participants in Ohio for making this study possible.”
Considering the study was taxpayer funded, it seems more explanation may be in order as to why the original version was so off the mark.

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Monday, July 18, 2016

Injection Well Shut Down After Illegal Dumping May Soon Be Back in Action

From Business Journal Daily:
The new owner of a shuttered Class II injection well along McCartney Road in Coitsville Township could resume operations in the near future, confirms a spokesman for the Ohio Department of Natural Resources. 
Eric Heis, responding by email to a request from The Business Journal related to the status of the Collins #6 well, said that the well permit was transferred after the initial owner’s permit – in this case, D&L Energy – was revoked. 
“The well in question was transferred to a new owner after D&L Energy’s permits were revoked, and the new owner expressed interest in operating the well in the future,” Heis said in his email. 
The prospect of restarting the well drew protestors near the site Tuesday. They held signs denouncing the use of injection wells as dangerous to the environment and the public. 
The bulk of D&L’s assets that included the Collins injection well were purchased by Denver-based Resource Land Holdings LLC through U.S. Bankruptcy Court in November 2013. The Coitsville well is listed as operated by North Star Disposal Services VI LLC, ODNR records show.
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Seventy Seven Energy Emerges From Bankruptcy with New $100 Million Loan

From the Wall Street Journal:
Oil-field-services provider Seventy Seven Energy Inc. is preparing to get out of bankruptcy after a judge agreed to approve a reorganization plan that would give the Oklahoma company access to up to $100 million in a new borrowing deal. 
Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del., said in court Wednesday that she would give Seventy Seven Energy permission to put its reorganization plan into action. The plan would allow bondholders owed $1.1 billion to take over most of the ownership in the company, which provides drilling, hydraulic fracturing and oil-field-rental services to exploration and production companies. 
“By converting all of the funded bond debt to equity under the plan and structuring the exit facility on the [current terms and conditions], [Seventy Seven Energy and its affiliates] have the means to withstand the volatility endemic in the current commodity market,” Chief Financial Officer Cary Baetz said in earlier court documents. 
Under the company’s reorganization plan, its unsecured debt would be fully paid. Shareholders would receive warrants for 20% of new common stock.
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Thursday, July 14, 2016

Belmont County Cracker Plant Likely to Force Some Residents to Move

From The Intelligencer:
The skyline alongside the Ohio River will soon change, as contractors plan to demolish the stack of the R.E. Burger Plant by the end of the month to make room for a multi-billion-dollar ethane cracker.

Since officials with Royal Dutch Shell confirmed plans to build their giant petrochemical plant near Monaca, Pa., anticipation for the PTT Global America project in Belmont County has continued building. Although PTT executives had hoped to make a final investment determination this year, company spokesman Dan Williamson this week said the final decision will likely occur next year. 
“We are continuing the front-end engineering design process. The site remediation is also in progress. We will have enough information to announce a final investment decision in the first quarter of 2017,” Williamson said. 
As contractors working for FirstEnergy Corp. work to clear the former R.E. Burger Plant for about one-third of the land needed to construct the massive ethane cracker, many of those living to the west of Burger are learning they would need to move if Thailand-based PTT elects to proceed with the project. Company officials maintain it is too early to tell what properties they will need to build the plant, but some residents say officials have been in touch with them about acquiring their land.
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Speculation Mounting That Oil Prices Will Drop Again

Predicting what will happen to oil prices seems to be the ultimate example of an inexact science.  A lot of very intelligent people who get paid to speculate on what will happen next have been proven wrong over and over, especially in the past two years or so.

With that in mind, take the following for what it's worth.

After seeing prices rebound quickly and go north of $50 in recent weeks, the oil price has declined again of late, landing in the $45 range over the past couple of weeks.  A variety of factors have been implicated in that drop, including Brexit and the latest rhetoric from OPEC.  And now the talk among analysts seems to be concerned with if and how much further oil may drop before the price starts to rise again.

First, from Forbes contributor Michael Lynch:
The Brexit-induced turmoil in financial markets undoubtedly affected oil prices, despite the likelihood that fundamental effects will be minimal. British economic growth and oil demand might be somewhat smaller than expected pre-Brexit, but on a global level, insignificant. The sun has long set on the British oil empire.

On the other hand, the flight from the pound to the dollar no doubt has pushed the price of oil slightly lower, although there might also have been some ‘flight to safety’ in oil, but probably nothing compared to what has been seen at times over the last decade. Political risk in the oil market remains extremely high, partly because spare capacity in OPEC is minimal, making it difficult for the producers to respond to any further outages, but also due to the potential for surprise increases in supply. 
In particular, Libya appears to be close to achieving enough stability to reopen its primary oil ports and perhaps add close to 1 mb/d in high quality crude oil to the market, although that level is unlikely to be reached quickly. The situation on the ground appears much improved, but it is unlikely that restarting exports requires little more than flipping switches. In at least some places, the security situation (or insecurity situation) means that little or no maintenance has been done, and so at the least some weeks of work will be necessary to resume operations.
Next, from
Altogether, the IEA estimates that about 95 million barrels of oil are sitting in floating storage, the highest level since a wide contango opened up in the aftermath of the financial crisis in 2008-2009, which led to oil traders stashing oil at sea. 
But the IEA said that the current floating storage predicament is different from the situation in 2009 when oil traders were hoping to store a glut of oil for a profit at a later point in time. The IEA says that the market contango does not support floating storage today – the price differential between near-term contracts, while trading at a discount to futures one year out, is not wide enough to justify storing oil at sea. Instead, oil and refined products such as gasoline and diesel are being stored on tankers because of logistical problems. In addition to the North Sea, the IEA cited a recent backup of gasoline tankers at New York harbor because onshore storage facilities were mostly already in use. 
The rising use of floating storage proves that the market is far from balanced, even if it is moving in the right direction. The IEA warned in its report that a gasoline glut could forceanother oil price rout, and the presence of floating storage also demonstrates that there is still too much oil on the global market.

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