New Jersey and Hydraulic Fracturing: Politics Trumping Policy?

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About two months ago, the state legislature of New Jersey voted to ban hydraulic fracturing there altogether and sent this bill up to Governor Chris Christie to be signed into law. As I blogged, Energy in Depth sent a letter to Governor Christie of New Jersey, asking him to veto the bill. The industry, environmental groups, and the general public waited to see what Governor Christie would do.

Late last week, Governor Christie vetoed the bill—but recommended to instate a one-year moratorium on hydraulic fracturing in order for New Jersey’s Department of Environmental Protection could study the matter. While this one year moratorium is obviously preferable to an outright ban of hydraulic fracturing, it is still not an industry victory.

Instating a ban of any time frame suggests that hydraulic fracturing is a threat to the environment. Of over one million wells drilled in the past 60 years using the technologies of hydraulic fracturing, there has been not one proven case where fractured well has been the cause of groundwater contamination.

Lee Fuller of Energy in Depth released this statement:

“It’s unfortunate and ill-advised that Gov. Christie would seek to ban the regulated use of hydraulic fracturing for any period of time, a technology that has been used safely for generations not only in the context of oil and natural gas, but to stimulate water wells and gain access to geothermal energy.

As the Garden State’s natural gas demands continue to tick upward, and with the governor touting the clear benefits of this abundant homegrown resource, banning this time-tested technology in the state – where no operators are actively seeking to explore for natural gas – flies directly in the face of common sense.”

Additionally, New Jersey has no natural gas production, so the ban is clearly a political move. Instead of political positioning, Governor Christie and the state legislatures should model themselves after New York, which has plentiful reserves of natural gas, and where Governor Cuomo just lifted the ban on hydraulic fracturing.

Politics should never trump policy. It is dangerous to create a precedent which suggests something other than the facts: Hydraulic fracturing is a proven, safe method; the utilization of which can unlock an abundance of energy which would create jobs, grow our economy, and increase our energy security.

Don’t cry for me, Tripoli—the truth is our independents have us covered

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With rebels finally closing in on Tripoli, people have revamped their speculations about Libya’s troubled oil production. The six month conflict has reduced Libyan oil production from about 1.6 million barrels per day before the start to 50,000 barrels per day now. Although analysts are hopeful that the fall of the Gaddafi regime will enable production to increase to about 300,000 barrels per day in a few months, most are doubtful that it will return to pre-conflict levels until after 2013.

IPAA released an analysis this week which pitted the decreasing Libyan oil production against the increasing American oil production. When juxtaposed against one another, it’s the outstanding gains of U.S. production stand crystal clear. Click here to view the full analysis.

Our economists noted:

“Although all Middle Eastern conflicts make us question the future stability of the oil market, the real answer lies within our own borders. The United States, due to shale and tight oil discoveries cropping up throughout the lower 48 states, is more than making up for Libya’s decreased oil production.”

Shocks in the oil supply are no small matter. However, our oil producers in America—lead by independent producers opening up established and emerging shale plays—have our energy needs covered. These numbers reflect the industry excitement demonstrated at the Summer NAPE® conference, which I blogged on earlier this week.

Clearly, the United States is at a crossroads: we can further restrict our own energy development and leave ourselves susceptible to oil supply disruptions from turbulent conflicts overseas, or we can increase our energy security by enacting energy policy that promotes oil production of our vast resources here at home—which will also provide jobs and give our economy a much-needed boost.

Please visit www.oilindependents.org for more information on how America’s independent oil producers are influencing the global energy market.

President Obama, Governor Rick Perry Knows Good Energy Policy

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The Obama camp has come out on the attack against Texas Governor Rick Perry, the newest presidential contender. Responding to claims that Perry has been instrumental in the vast job creation in Texas, David Axelrod, Obama’s top campaign adviser commented:

“There’s a specific reason that Texas has done so well, and that’s because the oil industry has done so well in the last few years, and the military has grown because of the challenges that we have had overseas. He’s been the beneficiary of things that he had very little to do with.”

What’s that you say? The Obama team is crediting the oil and gas industry as a job creator? Of course, that’s exactly what the industry is, so it shouldn’t be a strange phenomenon that it gets this credit. Unfortunately, as I have highlighted in this blog, the Obama administration has been far from friendly to the industry, demonizing it countless times over the past few months.

On the one hand, Axelrod is correct. The oil and gas industry IS an incredible job creator. At least the administration isn’t denying that (although I don’t know if they’ve ever said admitted this before). A few weeks ago, our economists highlighted this correlation: Out of the top ten petroleum producing states, nine of them have unemployment rates below the national average. The industry creates a huge amount of jobs each year—multiple studies released this year reflect the enormous job creating role of the industry.

On the other hand, the Obama camp is not being fair to Governor Perry. He deserves a great deal of credit because he is enacting good energy policy. After all, what does the administration think energy policy is? Energy policy comes from policymakers—and it enables the industry to do what it does best: tap into our own energy supply and thereby provide jobs, increase economic security, and grow our economy.

Credit should be given where credit is due. Governor Perry, unlike the Obama administration, understands the enormous potential for economic growth that the industry offers, and has promoted drilling in the Eagle Ford shale play in south Texas. This week on the campaign trail he discussed the impact of natural gas on the economy and jobs: 

“There may be copious amounts of natural gas down there. Because the Eagle Ford in south Texas — no one knew it was there until four or five years ago…There are new technologies finding new ways to bring this energy source. And we need to be … talking about ways to make America as independent energy-wise as we can.” 

Good energy policy opens up our federal lands, making it easier for the industry to unlock this supply of energy. Good energy policy minimizes the bureaucratic red tape while allowing state regulatory regimes and best industry practices to work effectively. Good energy policy increases our energy security by allowing us to rely less on supply from hostile countries through tapping our own vast reserves. 

What good energy policy is NOT is a federally imposed moratorium on offshore drilling and delaying over a whole year to sell new leases for the Gulf of Mexico. Good energy policy is not EPA’s continued attempts encroach on state regulatory regimes of hydraulic fracturing. These policies inhibit economic growth, stunt job creation, and increase our dependence on foreign sources of energy. Governor Rick Perry knows that politics doesn’t create jobs, but he knows that good energy policy enables the industry to be outstanding job creators.

NAPE Expo: The Only Thing Hotter than Houston Itself

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Last week, the bi-annual NAPE expo was held at the George R. Brown Convention Center in Houston, Texas. Many members of the IPAA staff traveled to Houston to attend NAPE, the world’s largest prospect and property expo, which IPAA has been a proud partner of since 1995. With over 6000 attendees, NAPE proved once again to be an expo which drew the industry, despite temperatures in Houston reaching 100 degrees.

As part of the conference on Wednesday, Lee Fuller, vice president of government relations at IPAA, was featured on an expert panel entitled, “The Golden Goose – Spotlight on Economic Significance of the U.S. O&G Industry.” Fuller focused on the disastrous economic impacts of changing the current tax structure that has encouraged industry investment for decades and fielded multiple questions from members of the industry about the political climate in Washington.

The special guest speaker at the NAPE Industry Luncheon on Thursday was Lieutenant General Russel Honoré, who commanded the Joint Task Force for Hurricane Katrina. Lt. General Honoré stressed the need cultivating a culture of preparedness, especially in states that are susceptible to natural disasters. The Lt. General is pictured above with Therese McCafferty, IPAA’s vice president of administration and member services.

During the luncheon, the industry gave over $200,000 dollars to charities. One of the recipient charities was Canine Companions for Independence, a non-profit which gives wounded veterans highly-trained assistance dogs that help them regain their mobility and independence. Former Special Forces soldier, Jason Morgan said that his dog, Nepal, helps him everyday, not only physically, but emotionally as well. Jason and Nepal are pictured above holding the IPAA dog toy that members of our staff gave away at our booth. IPAA is proud to support Canine Companions for Independence and encourages all to give back to our troops who make enormous sacrifices for our country’s freedom.

All in all, NAPE was a huge success. At the IPAA booth, we were able to talk with our members, whom we always look forward to connecting with and we also signed up some new members. The next NAPE will take place in Houston (as always) in the winter—we’ll keep you updated with details in the months ahead.

Energy Victory: Morgantown Drilling Ban Overturned

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In late June, I wrote about the recent Morgantown city council ban on hydraulic fracturing within a mile of the city limits. This was in reaction to Northeast Natural Energy’s drilling above the Monongahela River about a mile from a city drinking water intake. The company, which had already complied with state’s regulations and recommendations from the Morgantown Utility Board, was slated to lose over $7 million dollars that it had already invested in the drilling site.

However, Northeast Natural Energy did not take this blow lying down. The company called it an illegal power grab by the city and took the city to court. On Friday, the Associated Press reported that Monongalia County Circuit Court Judge Susan Tucker sided with the company, and declared that the city pre-empted the state’s authority in regulatory matters. The state alone has sole regulatory authority over oil and gas operations, the judge ruled. Judge Tucker wrote that the high court has ruled that has also said that when the state and a municipality enact legislation on the same subject, “the municipal ordinance must yield.”

This ruling reflects an important precedent: city councils are not allowed to circumvent the regulatory authority of the states in order to ban drilling around the perimeters of cities. This ruling will hopefully quell the efforts of anti-development groups from targeting specific cities to raise unfounded fear about the process of hydraulic fracturing, which, out of over one million wells drilled, has never been the proven cause of water contamination.

This is a huge victory for both the industry and the people of West Virginia. Drilling in West Virginia has the potential to create thousands of jobs for the people, increase our nation’s energy security, and jumpstart our stagnant economy.

Hydraulic Fracturing Report is Practical, not Emotional (take a hint NYT!)

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Earlier this summer, President Obama commissioned Secretary of Energy Steven Chu to produce a report giving recommendations on government regulation and industry practices of hydraulic fracturing. After 90 days of speculation within the industry and Washington, the advisory board released the much-anticipated report. IPAA President and CEO Barry Russell released a press release detailing industry reaction:

“The release of the SEAB Shale Gas Production Subcommittee Ninety-Day Report marks another instance where evaluation of shale gas development using hydraulic fracturing concludes – on balance – that the current state and federal regulatory processes are effectively protecting the public while allowing the development of America’s abundant natural gas. While the Report makes a number of recommendations, these recommendations are largely directed at improving public knowledge about development and enhancing the effectiveness of the current management of shale gas development environmental risks.”

 All in all the report was a mixed bag. The report stressed the need for industry transparency of hydraulic fracturing chemicals, which IPAA supports, but didn’t go as far as to insist on federal regulation of chemicals. Unfortunately, the report hesitated to acknowledge the success of effective programs in place to regulate hydraulic fracturing. IPAA suggests the industry mechanisms in place, like Fracfocus.org—a chemical registry website—adequately addresses the education of the public on the chemicals used in the process. IPAA also believes that the Department of Energy needs to give more credence to the successful state regulatory regimes already in place, like STRONGER—the State Review of Oil and Natural Gas Environmental Regulations. After all, these regulations have enabled the industry to safely and effectively practice hydraulic fracturing. Horizontal drilling and hydraulic fracturing are not a “one size fits all” technique. Different geologic formations require different methods and techniques. Therefore, the blanket policy of a federal regulatory regime is not the proper response.

All in all, the report may have been the best that could be expected, given the false fear that the New York Times has been stirring up on the proven safe practice of hydraulic fracturing.  At the very least the report is a practical, not emotional response which “stands in stark contrast to the strident, hysterical demands for moratoria on hydraulic fracturing.”

The Utica Shale Play: Ohio’s Hidden Treasure

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If you haven’t heard of Ohio’s hidden treasure, you haven’t heard of the Utica shale play.

Investors, companies, and geologists are eagerly talking about the Utica shale play, an organic-rich shale rock formation that was formed thousands of years ago and lies thousands of feet below than the Marcellus shale play and is thought to be  “the next big boom in American oil and natural gas reservoirs.” IPAA through its Declaration of Independents initiative, analyzed the different projections of the Utica. In particular, IPAA zeroed in on the Point Pleasant formation of the play, located in eastern Ohio. Point Pleasant is particularly significant because it is thought to be rich in not only natural gas, but  liquids as well.

IPAA discussed the economic ripple effect that development of the Utica, sparked by independents, would bring to Ohio and the U.S.:

“Technological advancements in drilling have now made these once-elusive resources accessible to oil and natural gas companies. With a new supply of energy, come new jobs, government revenues, and economic growth. Thought impossible a few years ago, as Ohio’s private manufacturing jobs have fallen more than 35 percent from 2001, the Wall Street Journal recently reported that a steel plant has been erected in Youngstown, Ohio to meet the demands of the oil and natural gas industry. This is indicative of what jobs the future holds for Ohio. As in most unconventional shale plays, independent oil and natural gas producers are leading the way as pioneers of the Utica shale play. Larger companies are now following suit because of the investor excitement and the huge gains expected there.”

However, IPAA pointed out there are political dangers that threaten development. Environmentalists and other anti-industry groups are working to ban horizontal drilling and hydraulic fracturing, which are how companies drill in shale. They claim that these methods cause groundwater contamination, although there has not been one proven case of this occurring of over one million wells drilled in the industry’s history. Just this Monday, anti-industry groups sent a letter to President Obama full of misinformation and flat out lies, demanding he ban hydraulic fracturing “by any legal means necessary.” The IPAA-managed Energy in Depth industry coalition, published a point by point rebuttal that same day. Energy in Depth is setting up a grassroots campaign in Ohio to promote the job creation, economic growth, and increased energy security that will development of the Utica means for Ohio and the United States.

Governor John Kasich is welcoming the oil and gas industry to Ohio with open arms as experts predict the industry could provide thousands of jobs to the state. He called the Utica a “revolution” and told people “Folks, this is huge” for the economy and people of Ohio. You can’t blame him. He has discovered a jobs-laden, economy boosting treasure that has been quietly hidden for thousands of years underneath the very feet of the people of Ohio.

For more information on what industry experts are saying about the Utica, please read IPAA’s full Utica analysis.

To read more about the role of independents in the American oil industry, please visit www.oilindependents.org.

New York Times Continues its Unmerited Attack on Natural Gas

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Once again, the New York Times’ most celebrated shale skeptic Ian Urbina, has attacked the natural gas industry. And once again, the shoddy reporting which NYT’s own public editor criticized Urbina for is in full force. The released story is an effort to discredit regulatory and industry officials, including Lisa Jackson of the EPA, who have stated over and over again that there is not “any proven case where the fracking process itself has affected water.” Urbina used borrowed research from the publicly anti-shale Environmental Working Group (EWG) to write the story. EWG actually showed Urbina’s cards when they went ahead and broke the story two hours before the NYT did.

What was the NYT “breaking story?” Turns out it is not so “breaking” as it actually happened nearly thirty years ago. Urbina describes the controversy around a well drilled in Jackson County, West Virginia in 1982. The claim, backed up by old reproductions of completion reports, is that hydraulic fracturing caused the contamination a well 600 feet away on the property of James Parsons.  

Three hours later, Energy in Depth published a rebuttal to the piece. For one thing, EWG’s lawyer, Dusty Horwitt’s own statements actually betrayed a much more “measured tone” in regard to his certainty on whether or not hydraulic fracturing actually caused the water contamination:

In one section (page 8) [Dusty Horwitt admits] that “it is unclear” how fluids could have accessed the well. In another section (page 13), EWG concedes that the West Virginia-based laboratory commissioned to investigate WV-17 “did not conclude that hydraulic fracturing caused the contamination …” And in its press release, EWG admits that “it is possible that another stage of the drilling process [and not hydraulic fracturing] caused the problem.”

Also, Energy in Depth notes, Urbina relies on testimony from “well-known oil and gas opponent” Carla Greathouse, who wrote the 1987 EPA report  in question that characterized the 1982 contamination as resulting from hydraulic fracturing.  Although one of Greathouse’s openly stated goals of the report was actually to cause more EPA regulation of drilling, Energy in Depth discovered that the EPA arrived at “precisely the opposite conclusion” in its 1988 report to Congress. Please click here to read the full Energy in Depth rebuttal.

Lee Fuller of IPAA and Energy in Depth, who wrote his own rebuttal in the Washington Examiner, stated:

“We’re talking about a technology that’s been deployed more than 1.2 million times in more than 25 states over the course of more than 60 years. I think it says an awful lot about fracturing’s record of safety that the best these guys could come up with after studying the issue for an entire year is a single, disputed case from 30 years ago that state regulators at the time believe had nothing to do with fracturing. Three decades later, the technology today is better than it’s ever been, the regulations are broader and more stringent, and the imperative of getting this right, so that we can take full advantage of the historic opportunities made possible by shale, has never been more apparent. Despite the Times’ best efforts, this story does not prove that hydraulic fracturing had anything to do with the contamination of a water well 30 years ago.”

So is this really even a story? It seems to be based (as usual) on speculation and wishful thinking on the part of EWG and the NYT.  Once again, Energy in Depth’s reporting proves to be more substantial than the New York Times. Energy in Depth relies on facts, figures, and testimony of leading industry and government officials which state that there is no found causation between hydraulic fracturing and well contamination. New York Times relies on outspoken, radical opponents of shale, rumors, and speculation—and sure, an outdated 1987 report rife with rumors and a clear agenda thrown in there.

States Are What They Eat — Hopefully it’s Oil

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This week, IPAA through Declaration of Independents, analyzed how United States consumption of petroleum correlates with economic growth. To do this, our economists broke up petroleum consumption by state and broke up the gross domestic product (GDP) which measures economic growth by state. They juxtaposed the results on two color-coded maps of the United States.

Clearly, the maps bear a striking resemblance to each other which identifies the positive correlation that petroleum consumption has on the growth of a state’s economy. In other words, a greater level of petroleum consumption is an integral part of a productive economy. An industrial manufacturing sector cannot exist without the fuel of petroleum to power the process. Plastic, lubricants, asphalt, rubber and many other finished products are also not possible without the value-adding substance of petroleum. To understand more about the consumption-economic growth correlation, please read the entire analysis.

Our economists highlighted this telling fact: Out of the top ten petroleum producing states, nine of them have unemployment rates below the national average.

Where do independents fit into this picture? Independent oil and natural gas producers are the “leaders in the exploration and production of domestic petroleum, which makes this economic development possible in the United States.” Without independents, the supply of American petroleum would be crippled. Without abundant petroleum, economic growth is stunted. When economic growth is stunted, American jobs are lost.

Petroleum powers the economy of this nation overall, evidenced by this strong correlation between states that have high petroleum use and high output. Petroleum is integral in our daily lives, not just as a fuel, but because it is present in common objects that are crucial to living a high-quality life.

Washington Avoids Default, and Tax Hikes on Industry—for now

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After months of contested debate that pushed the United States economy to the brink of default, President Obama signed the bill to raise the debt ceiling into law. The bill, crafted by House Speaker John Boehner, was passed by the House on Monday night with a bipartisan vote of 269-161 and passed by the Senate today with a bipartisan vote of 74-26.

Absent in the bill were any provisions which increased taxes on the oil and gas industry which would have resulted in a loss of industry investment—which inevitably means a loss of jobs, decreased government revenues, and diminished energy security.

IPAA President and CEO Barry Russell sent a letter to Congressional leadership asking them to oppose any provisions with tax increases on the industry. In it, he highlighted the role of independent producers as job creators and explained the adverse consequences of the tax increases:

“Two key issues that affect independent producers relate to drilling costs and percentage depletion. These are neither loopholes nor subsidies. They are mechanism—like depreciation that provide for capital recovery. Independent producers historically have reinvested as much as 150 percent of their American cash flow back into new American projects. Changes that limit this capital will affect the 4 million jobs associated with just America’s independent onshore investments.”

The resistance against any tax provisions on the industry was picked up by legislators like Democratic Rep. Gene Green (TX-9) and his colleagues, who sent a letter urging House leadership to oppose any bill which, through eliminating the “capital necessary to continue drilling new wells” would  “put thousands of these jobs in jeopardy, deepen our nation’s dependence on unstable regions of the world, and hamper our economic recovery.” Read IPAA’s economic analysis to learn how repeal of the historic tax structure would adversely affect the industry and devastate the economy.

Although the battle has been won, the administration’s war on oil continues. Part of the debt compromise includes the creation of a bipartisan commission, appointed by Congressional leadership. This commission will have to work together to make greater deficit reductions by late November. In his initial comments upon signing the debt compromise, President Obama spoke of a “balanced approach” in which “everything is on the table.” What the President meant by “everything,” was made very clear the next moment when he specified that the balanced approach must include “getting rid of taxpayer subsidies to oil and gas companies.” President Obama is still unabashedly intent on singling out of the oil and gas industry for tax hikes would continue—and he hopes the commission will be the perfect means to do so.

Jay Carney, the president’s press secretary, also made similar remarks in his press conference commenting that when finding 1.2 trillion more in deficit cuts as legislated through the deal, we must ask “oil and gas companies…[to] share in the sacrifice.”

The American economy scored a victory when tax increases on the industry were left out of the deficit bill. However, the administration’s rhetoric shows that the industry is not in the clear. Undoubtedly, Democratic legislators on the commission will seek to raise taxes on oil and gas companies as part of a larger assault on the industry. What America needs right now are jobs, energy supply, and energy security. What America doesn’t need is a tax hike on the industry—which would absolutely result in an increase on the debt through decreased revenues to government coffers.