Natural Gas the Talk of the Town

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 Today, Ernest Moniz appeared before the Senate Energy & Natural Resources Committee hearing in order for Senators to ask him questions before they vote on a confirmation. Barring any last minute shocks, Moniz will be the next Secretary of Energy in the Obama administration’s second term.

When questioned about liquefied natural gas (LNG) exports, Moniz neither confirmed nor denied the administration’s plan to export natural gas. He did vow to “make a transparent, analytical evaluation application by application” and include a public interest criterion for each application. In response to Sen. Wyden’s criticism of DOE’s LNG study released in December, Moniz responded with a general, hearing-appropriate comment: “We certainly want to make sure that we’re using data that’s relevant to the decision at hand.” It’s thought by most in Washington that DOE will go ahead and approve at least a certain amount of natural gas export permits, but time will tell for sure. Check out IPAA’s comments on this issue.

Hopefully, the administration will indeed approve these permits, because we have more great natural gas news released today. According to the nonprofit advisory group, the Potential Gas Committee, shale fields increased the amount of U.S. natural gas that can be recovered under current technology to its highest level ever in 2012. The new assessment finds that the United States possesses a technically recoverable natural gas resource potential of 2,384 trillion cubic feet (Tcf). This is the highest resource evaluation in the PGC’s 48 year history and more than a 25 percent jump, thanks to shale gas resources in the Atlantic, Rocky Mountain West, and Gulf Coast regions. Clearly, the U.S. is awash in natural gas, and we should develop it, use it, and export it to friendly countries as the market dictates.  

Moniz also touted the benefits of hydraulic fracturing in developing natural gas and oil from shale. He also noted that “very important to have public confidence in environmental stewardship as we produce this resource.” The industry couldn’t agree more. That’s why IPAA and Energy in Depth have spent so much time educating not only lawmakers, but the American public on the process of hydraulic fracturing.

Of course, despite the broad bipartisan support, there those typical naysayers who are accusing Moniz as being “in the industry’s pocket” because he actually believes that oil and natural gas have a place in an “all of the above” energy strategy. Imagine that. More than 100 progressive and anti-fracking groups urged Senate Energy and Natural Resources Committee members to vote against Ernest Moniz’s nomination. Not least among these are the group, Americans Against Fracking, members of 350.org, the Progressive Democrats of America and Democracy for America.

Although the Department of Energy is not involved in the regulation of hydraulic fracturing, it is encouraging to hear that a possible future Secretary of Energy understands the complexities present at the state level. Citing geologic differences, Moniz noted that “the physical realities call for states to be heavily engaged” in regulating hydraulic fracturing. It will be interesting to see how much its neighboring agency – the Department of Interior – understands the differing geologies in the diverse shale plays across the country. The Bureau of Land Management is set to release its hydraulic fracturing rule on federal lands rule that it has revised in response to the comment period.

IPAA has filed comments explaining how a federal standard placed on top of existing state regulations would create great confusion and massive new red tape for an industry that is already struggling on federal lands. A federal rule administered from Washington would be especially burdensome for independent producers, who employ 12 people on average. They don’t have the cash flow to hire a team of lawyers and regulatory specialists to dissect and navigate the red tape that such a rule would create. But, we’ll keep you posted on how Interior releases this rule.

 

Good News for Offshore Development, So Why Block Access?

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Today, the Department of Interior held a lease sale for the Central Gulf of Mexico. The sale garnered a great deal of enthusiasm from the industry, attracting 407 bids from 52 companies. The total bids for today’s sale exceeded $1.2 billion dollars—one of the highest sales since leasing began in 1983.

This huge amount of federal revenue begs the question: Why are legislators in Congress and the administration calling to raise taxes on the oil and natural gas industry when the industry is garnering a huge deal of revenue for the country? Repealing critical tax deductions would undoubtedly curtail this enthusiasm in the Gulf and onshore. It’s vital that Washington doesn’t mess with tax deductions and an investment plan that are clearly working.

The revenues are so great that states want in on more of the bounty. Today, Senators Mary Landrieu (D-LA) and Lisa Murkowski (R-AK) introduced legislation that enables states currently open for offshore production (Gulf states and Alaska) to keep more of the revenue generated by offshore energy development. The Fixing America’s Inequality with Revenues (FAIR) Act provides up to 37.5 percent of all revenues from offshore development to coastal states. Of this percentage, states would automatically receive 27.5 percent of these revenues, 25 percent of which would go to the coastal communities most impacted by offshore development. They’d also be eligible for additional 10 percent if they establish funds to support projects relating to clean energy or conservation.

 

Although the IPAA supports efforts to increase American offshore oil and natural gas production, we believe the real solution to increasing offshore production would be to increase access to areas in the Eastern Gulf of Mexico and the Atlantic.  Rather than limiting offshore exploration to a few areas across the nation, the federal government should allow the states along the eastern seaboard and elsewhere to begin the process of exploring for additional energy resources off their coasts. 

What independent producers – and states – really struggle with is access. We need to open up the eastern Gulf of Mexico – to explore for the resources that are undoubtedly lying beneath the waters there. When the federal government refuses to allow producers to explore for American energy, it not only hurts the industry, but it does the American people a disservice. More American energy means more American jobs, more revenue for depleting government budgets, and more growth for our economy.

The oil and natural gas industry supports efforts to remove these federal roadblocks to American development. So do many legislators in Congress. Today, more than 40 legislators sent a letter to President Obama, urging his administration to complete the long-delayed Environmental Impact Statement (EIS) for the conduct of a safe, environmentally protective seismic assessment of the oil and natural gas resources offshore the Atlantic outer continental shelf (OCS). As the letter expressed, it’s been more than two generations since the last seismic testing was done on the eastern seaboard. Clearly, the technology has advanced greatly since then. We didn’t even have 3-D seismic testing at that point. The letter expressed that this testing “represents a critical step toward making science-based decisions with regard to any future commercial or recreational activities in the federal waters off our Atlantic coastline that could provide the nation much needed energy, economic, and environmental benefits.”

 It’s time to let states that have been barred from offshore development explore this opportunity for jobs, economic growth, and energy security. It’s time to let industry get excited about developing the eastern seaboard and the Western Gulf of Mexico. The economic potential of this energy opportunity is so large that the industry, states, federal government, and the American people can all share in the bounty.

IPAA Winter Magazine Released

wintermag The first 2013 issue of IPAA’s magazine was released this week. I encourage you check out the features, particularly the articles on the tax battles that IPAA fought in the 112th Congress and the update on IPAA’s Education Center, and IPAA’s work against the manipulated Endangered Species Act.

Check out the table of contents below:

President’s Message……………………………………………………8
Barry Russell

Petroleum Delivers on American Jobs…………………………10
Examining Development & the U.S. Workforce

Lining up for Change……………………………………………………18
U.S. Technology Revolutionizing Development

IPAA Education Center Update………………………………………26
A 2012 Recap

Over the Cliff…………………………………………………………………32
Tax Issues Remain in Play

Standing Tall…………………………………………………………………28
IPAA Pushes Back Against Abusive Use of the ESA

Also make sure you check out what IPAA members and staff have been up to, from Summer NAPE in Houston to OGIS in San Francisco to IPAA’s 83rd Annual Meeting in New Orleans. We’ve been quite a busy bunch!

 Peruse the online version of the magazine here.

 

Don’t Hold Oil & Gas Hostage for Political Points

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Washington is buzzing about the upcoming deadline for sequestration on March 1, which is just a little over one week away. Sequestration refers to a number of automatic spending cuts that will be made across the board unless they are renewed by the House, the Senate, and the White House.

The effects of sequestration are no joke. They would mean real cuts to programs and budgets that would translate into a loss of jobs for thousands of workers employed by the federal government. However, this deadline is being used inside the Beltway as a political contest – a game of chicken, if you will – whose ultimate end is to deflect blame onto the other political party. The White House and Democratic leaders in the Senate and House want to paint the Republicans as obstructionist and have called for a plan to raise taxes, again. Speaker John Boehner and House Republicans, by contrast, are trying to demonstrate to the American public that the Democrats are crying wolf – bemoaning a budget crisis that their spending policies got the U.S. into in the first place.

Yesterday, Rep. Markey, a liberal Democrat from Massachusetts known as an unceasing assailant against oil and natural gas development, used sequestration as a political flamethrower. He called Republicans “hypocritical” for not adhering to the White House’s proposal to avert the sequestration, because, he argued the effect of looming budget cuts would hamper the Department of Interior’s ability to issue permits for drilling. The White House affirmed this argument and has pushed to increase taxes on the industry.

edward-markey

“Republicans say they want to ‘drill baby drill’. Yet by letting the sequester go forward, Republicans in Congress will put the brakes on oil and gas development on public lands in America and reduce our ability to protect against another offshore drilling disaster.”

First of all, when has Markey been concerned about the Interior Department’s faulty record on issuing permits to drill? Markey is probably the most vocal opponent of natural gas and oil development in Congress.

Second of all, let’s address the as of now fully-funded Department of Interior’s record under President Obama. (Thanks to the House Natural Resources Committee on this one). Mind you, this is all according to government data from the Energy Information Administration.

  • Oil and natural gas production on federal lands is down by more than 40 percent compared to 10 years ago. The real increase in oil and gas production has occurred on private land, from the Eagle Ford in Texas to the Marcellus in Pennsylvania to the Bakken in North Dakota.
  • Under the Obama administration’s watch of the Department of Interior, 2010 had the lowest number of onshore leases issued since 1984.

The Democrats’ logic (ahem, politics) has a third fatal flaw. Markey, President Obama, and other Democrats in Congress have ignored the fundamental link between oil and natural gas development and government revenues. Just last week, Louisiana State University economist Joseph Mason published a study commissioned by the Institute for Energy Research that found that opening up restricted drilling areas on federal lands and offshore waters would add $35.8 billion dollars in the short run, and $99 billion dollars in the long run to the federal government. This is thanks to the millions of dollars paid by America’s oil and natural gas companies each day in taxes and royalties to the federal government from exploration and production of U.S. oil and natural gas. Republican leaders touted the study as a reason to utilize energy development to help raise revenue for the federal government.

To put the icing on the cake, President Obama announced today that he will speed up the permitting for renewable energy projects despite the looming sequestration and budget cuts. You decide where the hypocrisy stands in this round of politics.

Holding our nation’s energy supply in hostage to score a political point is a dangerous policy move. Instead of demonizing the oil and natural gas industry and blaming policymakers who want to avoid raising taxes on the American people and small businesses, President Obama should expand access to America’s vast oil and natural gas reserves. This would raise much-needed federal revenue to help avoid the sequester. Not to mention, it would create millions of jobs and add billions to the U.S. economy in the process. Any real solution our nation’s budget crisis includes a hefty policy pillar that encourages U.S. oil and natural gas development.

God Made a Roughneck

Every year, Americans tune into the most watched television event of the year – the Super Bowl. Every year, companies spend millions on advertisements that will evoke praise and elicit emotion from the millions of people watching. Every year, people look forward to these commercials that stand above the rest – that cleverly twist a conventional idea or tap into something deep inside each one of us. This year, that commercial was Chrysler’s “So God Made a Farmer” for Dodge Ram pickup trucks.

farmerThe advertisement resurrects the speech that radio broadcaster Paul Harvey delivered to the Future Farmers of America convention in 1978. It picks up the Genesis creation story on the 8th day and props up farmers as the caretakers of the Earth.

The advertisement plays this speech over gorgeous pictures of tilled land and close shots of real, human faces – faces that have been wrinkled through toil and weathered through seasons.  It makes you realize the work, passion, and unrelenting work that goes into farming. The upkeep of a family farm is perpetual and enormously expensive. Due to tough economic times, many family farms have gone under as people no longer can make ends meet, let alone turn over a profit. It breaks people’s hearts when they are forced to sell their land that has been in the family for generations.

However, in recent years, there has been a silent savior of family farms. It’s called natural gas. Across the country, from Pennsylvania to Colorado, people’s farms are being turned around – due to abundant natural gas reserves lying untapped on the land. There are countless stories of farmers, whose livelihoods have been saved, because a natural gas company has turned up on their door, offering them a way out and developed the energy on their land. They receive thousands of dollars in a signing bonus and a share in the production from the well. This money enables farmers to update their farming equipment, weather tough crop seasons, and pass on their farms to their children.

The opposition claims that natural gas is somehow an enemy of landowners. In fact, the very opposite is true. Natural gas is often the one thing saving their farms and the life the American farmers have built around them. Natural gas doesn’t destroy the farming legacy – it preserves it.

roughneck

There’s another American worker that deserves an ode. Here’s an unworthy homage for the worthy workers of America’s oil and natural gas industry:

On the 9th day, God Made a Roughneck.

And on the 9th day, God looked down at his planned paradise and said “I need energy to make this world run.” So God Made a Roughneck.

God said, “I need somebody to develop the home-made energy that powers our homes, fuels our cars, and heats our homes. I need somebody to work outside, in all kinds of weather – snow, sleet, scorching hot weather for 12 hour shifts. I need someone with fortitude – someone who isn’t afraid of the unknown, who can take on challenges and fix problems.” So God made a roughneck.

God said, “I need somebody who will sacrifice. I need someone who will separate himself from the comforts of his own home, not to abandon his responsibilities but to fulfill and exceed them – to provide his family with a future that is bigger and brighter than his own.” So God made a roughneck.

“I need somebody with arms strong enough to lift steel and power machinery, but eyes watchful enough to prevent accidents and protect the safety of his crew. I need somebody who doesn’t quit – who doesn’t cut corners and puts safety ahead of everything. Someone to pump mud, trip pipes, and come back – not to his warm home and home-cooked meal, but to man camps, just to wake up the next day and do it all over again for two weeks at a time.

“I need somebody who will trade glamour for danger. I need somebody to travel thousands of miles from home – onto dusty, frigid plains and deep waters out on the open sea. Somebody who can tough it out in cramped, uncomfortable beds and fix problems when they arise. I need somebody who can do the hard, dirty, perilous work that comes with unleashing the energy buried deep in the earth.” So God made a roughneck.

“I need somebody who loves nature. Somebody to cherish the land they work on every day with careful preservation of the environment around them. I need someone to be surrounded day after day in the forests, the plains, and the mountains. Who can bring up energy from the bottom of the earth and then look up at the stars in quiet awe, realizing with solemn gratitude the great blessings we’ve been given in our land.

“Somebody who, after two straight weeks away from home, doing intense work that stretched him to his physical and mental limit, can be as patient, kind, and loving with his wife and family as if he’d spent two weeks on vacation. I need somebody to pick up his son at school and encourage him to do his math and science homework before baseball practice. Someone who will nod and tell his daughter, “Yes, you too can work in this industry. You can be an engineer or a geologist and can explore, find and develop the natural gas and oil that America runs on.” So God made a roughneck.

God said, “I need somebody who understands the dignity of work—work that isn’t pleasant or easy, but is rewarding, who takes pride in what they do, for they know that the work they do will save family farms, send children to college, and make our country safer. I need somebody to keep our economy growing, keep our country safe, and give people the power to run their own lives—to deliver the American energy that gives people the lifestyle they may even take for granted.”

I need somebody with strength and fortitude. So God made a roughneck.

New Year Brings Opportunities and Obstacles for Industry

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IPAA President & CEO Barry Russell’s reflects on the opportunities and challenges of the year ahead:

“As 2013 begins, IPAA is optimistic that the great benefits of natural gas and oil development are gaining traction with leaders in Washington. Despite political gridlock that Washington seems to be characterized by these days, leaders on both sides of the aisle are recognizing that energy development environmental protection can and do work together to the benefit of the American people. IPAA has had several productive meetings with Congressional leadership and the White House on how development of oil and natural gas resources, particularly from shale, is boosting jobs, government revenue, and economic growth all across the nation. Below are some of the issues that IPAA will be working with Congress and the administration on.

TAXES.         

“Although major bills will likely be stymied in Congress, IPAA’s major area of legislative concern is taxes. Although comprehensive tax reform may not be undertaken immediately, tax policy will inevitably be in the spotlight. The call to end industry’s provisions of intangible drilling costs and percentage depletion and the passive loss exclusion will inevitably resurface. This is a dangerous political rallying cry that ignores the enormous risk that independent producers face in exploring for energy and threatens the continued investment in America’s vibrant and growing energy sector. IPAA continues to educate lawmakers and their staff on why these provisions are in the tax code. We will continue to warn against the unintended consequences that eliminating these provisions would have on future oil and natural gas production.

REGULATION.

“Due to the standstill in Congress, environmental issues will be addressed by regulations.  In fact, the legislative gridlock could embolden the Obama administration’s agencies to take major steps to federalize oil and natural gas regulation, with particular focus on hydraulic fracturing. Traditionally, the states have had jurisdiction of energy regulation and, time and time again, have proved themselves more than capable of doing so. From the EPA’s proposed national source performance standards to BLM’s drilling regulations to EPA’s regulatory guidance and studies on hydraulic fracturing rules, IPAA will be keeping a close watch on the administration’s actions in regard to oil and natural gas development.

ESA.

“In particular, the Endangered Species Act, which the anti-development activists use to try to shut down development of all kinds, is a top priority for IPAA in 2013. Specifically, IPAA will be pushing back against the listing of the Lesser Prairie Chicken. A listing could threaten oil and natural gas production in resource-rich states, states which have already made special conservation coalitions to protect this species.”

 

Shale Bringing Joyful Tidings

This tool in oil and natural gas extraction, known as “Christmas tree” for its resemblance, comes with a major present: New jobs

 

It’s the holiday season which means a lot of things. Holiday parties, holiday shopping, holiday food. All of this involves a great deal of money, which is why this time of year can be just as stressful as it is festive. The added financial pressure of the holidays is especially rough for those folks who are out of work – struggling to put food on the table and give their kids the best Christmas possible.

The good news is that many are finding well-paying work that enables them to provide for their family in the oil and natural gas industry. Because of the shale boom that is sweeping the United States, jobs are being created from Pennsylvania to California, from Louisiana up to Michigan.

Yesterday, the U.S. Chamber of Commerce’s Institute for 21st Century Energy released a new study, done by IHS Cera, that detailed the economic benefits of shale development by state. And these benefits are enormous.

You wouldn’t think that snowy Michigan would be counted among the major energy producing states. But shale development, which hinges on the critical hydraulic fracturing process, accounted for 38,000 direct or spinoff jobs in Michigan in 2012 and is set to create 79,000 jobs and contribute more than $8 billion to the economy.

In Ohio, whose economy has struggled for decades with the departure of manufacturing companies, is experiencing oil and natural gas development due to the Utica shale play. The abundance of affordable natural gas is causing a huge comeback in manufacturing. Towns like Youngstown which has been stagnant for decades is breathing new life again. About 39,000 jobs in Ohio are linked to oil and natural gas production. This good news is just the beginning — that number is projected to triple by the end of the decade!

Now, Texas has had a long and rich history in energy development. In popular culture, cowboy hats and boots pretty much go hand in hand with the idea of oil companies. But the shale plays are energizing the state in a way that is unprecedented. The Barnett and Haynesville shale plays are a flurry of industry activity. Jobs are being created by the thousands as people rush to take advantage of golden opportunities.

But nothing beats the massive Eagle Ford shale that spans the southwestern region of Texas. This week’s Declaration of Independents did a major profile of the Eagle Ford play, which could now be more prolific than the outstanding Bakken in North Dakota that is revolutionizing that snowy state. It detailed the history of the play, the technologies being utilized there, and the targeting trends of natural gas and, increasingly, oil.

IPAA economists also highlighted the economic contributions of the Eagle Ford in the analysis, whose job creation matches those of entire states.

“Direct employment has been boosted by increased demand for workers to drill and complete wells, to provide the geophysical and engineering analysis to guide projects, and to build pipelines and processing facilities. This in turn, has increased diverse jobs for workers who provide housing, transportation, and consumer goods and services of all kinds for the larger regional workforce. This also means a workforce with rising wages with more money to re-inject into the local economy. According to analysis by the Dallas Federal Reserve Bank, the average weekly pay in the entire region rose 14.6 percent annually from the first quarter of 2010 to the third quarter of 2011, more than double the 6.3 percent rate for the U.S. as a whole. According to a study by the Institute for Economic Development at the University of Texas at San Antonio (UTSA), Eagle Ford activity supported 38,000 jobs in 2011. That figure was forecast to grow to over 82,000 jobs by 2021. In that year, it is estimated that the boost in economic activity will add more than $1.5 billion to state revenues and $888 million to local government revenues.”

And as the IHS study detailed, Texas accounts for almost half the nearly 1.3 million industry jobs associated with shale oil and natural gas production. Some 576,000 Texans were in jobs connected to shale oil and gas in 2012. By the end of the decade, the analysis projected that 930,000 people in Texas will have oil and natural gas industry jobs. Seriously, everything is bigger in Texas.

It’s not an exaggeration to say that the oil and natural gas industry, because of the amazing well-paying jobs it is creating, is giving hope to hundreds of thousands of people across the nation. These jobs give dignity to those employed, as the jobs empower them to provide for their families and give them a kind of security that is especially felt around the holiday season.

Click here to read the full Declaration of Independents article: The Eagle Ford – Texas Shale Star

Click here to read the Chamber’s IHS Cera study: The Unconventional Oil and Gas Revolution and the U.S. Economy

Regulatory Actions are a Dime a Dozen

There are three major regulatory actions by the Obama administration that should be developing in the coming weeks.

President Obama visiting TransCanada Stillwater Pipe Yard in Cushing, Oklahoma

1. Keystone XL. The Obama administration made the infamous decision last January to reject TransCanada’s application to build the Keystone XL pipeline. The pipeline would start in Canada’s Alberta Oil Sands and go down to the refineries in Texas. This pipeline would create thousands of new blue-collar jobs, relieve the bottleneck from Bakken crude oil in Cushing, Oklahoma, and provide energy supply from our closest ally, Canada. To approve the pipeline should have been a no-brainer and the initial rejection revealed an anti-development bias in the Obama administration – which he got a lot of flak for. TransCanada has re-submitted its application with an alternative route, and the administration is set to make a decision in the coming weeks. This decision will give us an inkling of how anti-industry that administration’s second term may look like.

2. BLM Hydraulic Fracturing Rule. In May, the Obama administration released a proposed rule on hydraulic fracturing and well construction on federal lands. This sets a new precedent as the states historically handled the regulation of oil and natural gas development. This is due to the diverse geology and environmental issues that state regulators have better capacity to manage (both budget-wise and experience-wise). IPAA submitted comments expressing our concern about the federal scope of the rule that threatens to drive even more producers from federal land. More than 59,000 comments were submitted to the Bureau of Land Management on this proposed rule, from both sides of the issue. The administration will likely make a decision on BLM HF (as it’s been coined) before Christmas. Due to the controversy surrounding the implications of this broad rule, the rumors are right now that the administration will take into consideration the comment recommendations and propose a revised rule. We shall see what ends up happening (after all, rumors are only rumors) but this federal lands issue is of paramount importance for IPAA.

3. EPA Hydraulic Fracturing Study. The EPA has undergone a study of the impact of hydraulic fracturing on drinking water supplies. Industry has long had problems with this study. For one, it is retroactive in nature – which means it is looking at sites with history of hydraulic fracturing. It is hard to make causal assumptions when the study is putting together pieces of history. Second, the EPA’s methodologies in the past have been extremely flawed, undoubtedly political in nature and quest, and have contained serious faulty science. (Think Pavillion). The study was requested in 2010 and isn’t supposed to be released until 2014, but EPA plans to give a preliminary progress report by the week’s end. Also, at the end of the day, the EPA, Interior, and other top officials of the administration have said repeatedly that there has never been one case of groundwater contamination in the over 1 million wells that have been fracked since 1947. It looks like the EPA is trying to find a ghost that doesn’t exist yet won’t rest until it comes up with some sketchy, hastily-drawn conclusions. The report will give us some indication of the motives of EPA and will give us a preview about how political the full report will be.

Again, just this week, industry is dealing with three different federal agencies with three different high-profile examples of attempts to regulate oil and natural gas development. This is a good microcosm of the fact that in total, there are 14 different federal agencies trying to regulate the industry. These are just the high-profile regulatory cases that are on the top of IPAA’s agenda this week.

Technology in the Age of Shale

When people unfamiliar with the oil industry think of an oil well, they tend to think of a black and white image of Drake’s well in Pennsylvania (1859) or the famous Spindletop gusher (1901). While these are important parts of the history of the U.S. oil industry, they are far from the images that are true today. This is due to the amazing improvements in technology that have, decade by decade, changed the face of the oil industry.

The famous image of Texas’ Spindletop is what people not familiar with today’s oil industry might picture.

This showcases the industry's amazing technological advancements in the offshore.

In the past few years, there have been remarkable advancements in technologies that have enabled U.S. oil producers to access oil and natural gas trapped in shale. The most extraordinary development is the combination of hydraulic fracturing and horizontal drilling. Although hydraulic fracturing has been used since 1947 and over a million wells have been fractured (with no case of groundwater contamination, I might add) it is the combination with the newer method of horizontal drilling that has enabled producers to unlock enormous reserves that were previously known about but inaccessible. 

 

This has changed the name of the game. This famous development has received widespread media attention, due both to its transformative role and its often-hyped and distorted controversy.  Just today, the International Energy Agency (IEA) reported that U.S. oil production is the highest it’s been in 15 years, thanks largely to hydraulic fracturing. Just from last year, daily production has increased 16 percent, or about 900,000 barrels! Additionally, the IEA projected that by 2020, the United States would top Saudi Arabia and Russia to become the number one oil producer in the world.

Hydraulic fracturing is changing the energy business.

The progress and innovation does not end there, however. This week’s Declaration of Independents piece took a closer look at some of the amazing technological advancements in recent years. It outlined the different ways to frack a well, from “zipper fracs” to plugging to a “plug and perforate” method. IPAA also outlined the differen types of sand and proppants used in the hydraulic fracturing solution and pointed out that 99.5 percent of the mixture is sand and water. Most of the proppants are ones found in typical household products.

The oil and natural gas industry has always been on the forefront of technological improvements. Our industry employs the best engineers that are constantly developing new ways – faster, more efficient, more stable ways – to retrieve oil from the ground. And these recent technological improvements are topping the industry’s “personal bests.” The article outlines many kinds of “above ground” and “below ground” technologies that are occurring across the industry.

The industry has a special interest in developing technologies regarding water usage. From the article:

“New processes that greatly reduce water and proppant use are being thoroughly explored and implemented. Further, recycling flowback water for additional fracturing jobs is reducing water use and the need for treatment and disposal. Tapping non-drinkable aquifers or use of brackish water, when possible, have also been steps toward balancing the mix of water resources with the many users in the community. Advanced methods for optimizing spacing and targeting of fracturing zones have resulted not just in greater operational efficiency, but more efficient use of water and proppants. In some cases, smaller, more conductive fractures have been shown to result in more productive wells than treatments using much larger volumes of water and proppants. Improvements in water usage and management, pad drilling, and other advances reduce community impacts with fewer trucks on the roads and other byproducts of development activity.”

Microseismic monitoring is increasingly utilized.

When I was in Pennsylvania last winter, I saw a “walking rig,” which works like this: The rig walks “by means of hydraulic lifts, which alternately raise the rig, move it, and let it down a short distance away…Reportedly, walking rigs have saved half a million dollars per well in some cases. Improved rig efficiencies mean that operators are completing wells more quickly and using fewer rigs to accomplish the same amount of development.” The fact that engineers can make a rig  “walk it out” when it weighs hundreds of tons is absolutely mind-boggling, and demonstrates the industry’s incredible ingenuity.  Click here to read the article.

Thanksgiving for American Energy Renaissance

With Thanksgiving tomorrow, it’s important to reflect upon – and be thankful for – the incredible American oil and natural gas renaissance.

The cornucopia is a symbol of abundance.

1. The U.S. is energy abundant.

The United States is one of the most resource-rich countries in the world. This is an incredible blessing and we are lucky to be accustomed to the lifestyle that energy abundance gives us. Overall, we have relatively low-cost energy for consumers in this country. Even gasoline, which does become a burden to families paying the bills, is much lower than it is in other countries. Just look at Europe. The shale revolution of recent years have further increased our access to our rich resources, with the advanced technologies of hydraulic fracturing and horizontal drilling unlocking vast reserves of oil and natural gas. As Ken Hersh, CEO of NGP Energy Capital Management said, the shale oil and gas boom will be “the redefining global phenomenon, from a finite world to a surplus world.” Each year, production levels in North Dakota, Ohio, and Pennsylvania shale plays are topping themselves and setting new records.

2. Our industry is creating jobs and strengthening the economy.

In a struggling economy, the oil and natural gas sector is providing much-needed, well-paying jobs to people across the United States. These are well-paying jobs. On average a worker in the oil and gas industry makes more than $35 per hour. The average wages in the general economy are about $23 per hour. Petroleum engineers make over $100,000 on average starting out. Oil and natural gas development also supplies amazing blue-collar jobs. Roughnecks, roustabouts, and land men do not need advanced education. These jobs pulls people out of poverty, gives hope to families, and strengthen the middle class. It’s also bringing manufacturing back to America’s shores. America’s oil and natural gas sector is also bringing enormous amounts of revenue into state, local, and federal treasuries.

3. America’s energy security is strengthened every day.

The United States is becoming the global leader in energy production. The Paris-based International Energy Agency reported last week that the U.S. will be the number one producer of oil by 2020 and the number one producer of natural gas by 2016. This would put us ahead of Saudi Arabia as the world’s top producer of oil. IHS Vice Chairman Dan Yergin, renowned energy historian, recently said “The growth of unconventional oil and gas production is creating a new energy reality for the United States.”  Our increased self-sufficiency will insulate us from shocks abroad and protect us from relying on foreign countries for our oil. After all, oil imports are down from 57% in 2008 to just 45% today. Within a decade, the IEA forecasts that U.S. oil imports will drop by more than half to just four million barrels a day, from 10 million barrels a day currently.

America’s energy boom, made possible by the oil and natural gas industry and the great men and women who are employed by our companies, is surely something to be thankful for.