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Thursday, October 30, 2014

Increased LNG exports lead to increased natural gas prices

The US Energy Information Administration has released its study of the impact on liquified natural gas exports on domestic prices and found that - surprise (not) - exports will increase domestic natgas prices.

Effect of Increased Levels of Liquefied Natural Gas Exports on U.S. Energy Markets confirms what any Econ 101 student should know - that increased demand for a commodity will likely push up its price.  The study finds:
projected U.S. natural gas prices increase in each of the five baseline cases. The price paths depend on the assumptions made regarding the resource base and advances in production technology, economic growth, and natural gas demand. In the Reference case, the average Lower 48 state supply price more than doubles between 2013 and 2040, ultimately reaching $7.25/Million British thermal units (MMBtu) in 2040. In contrast, under the more optimistic resource assumptions of the [high oil and gas resource] case, prices increase by only 38% by 2040 and never rise above $4.34/MMBtu. Under the more pessimistic resource assumptions of the [low oil and gas resource] case, prices reach $10.08/MMBtu in 2040.
EIA notes understandable caveats:
projections of energy markets over a 25-year period are highly uncertain and subject to many events that cannot be foreseen, such as supply disruptions, policy changes, and technological breakthroughs. This uncertainty is particularly true in projecting the effects of exporting significant LNG volumes from the United States...
Natural gas exports will raise prices and impact domestic consumers, utilities, and manufacturers. That has been a concern raised by legislators and business leaders. How much of an impact there will be remains to be seen.  There have been thoughtful analyses of this issue, and some perhaps less thoughtful. But any way you slice it, you can't repeal the laws of economics.  EIA's basic result is not surprising.

Monday, October 27, 2014

Tracing the problem

While hydraulic fracturing itself has yet to be proven to have contaminated groundwater, faulty wellsleaking impoundments, and spills have. Better methods to detect contamination and its source are needed. A study published last week in the journal Environmental Science & Technology has identified new tracing tools that can fill that bill.

New Tracers Identify Hydraulic Fracturing Fluids and Accidental Releases from Oil and Gas Operations finds that hydraulic fracturing flowback fluids that have been spilled or released into the environment can be reliably identified by using certain chemically-stable tracers with distinctive chemical fingerprints.

According to this article on the study, the tracers - based on elements that occur naturally in shale formations - allow scientists to track the presence of frack fluids in the environment and tell them apart from naturally-occurring background water and wastewater that comes from other sources, including conventional oil and gas wells.

The tracers appear to be a valuable tool – for both regulators and the industry - to differentiate among sources of contamination and guide efforts to mitigate - and prevent - environmental impacts of unconventional oil and gas development.  Will these new tools be used?

Friday, October 24, 2014

Drillers use loophole to avoid permits for using dangerous chemicals in fracking - UPDATED

This story from The Columbus (OH) Dispatch is essential reading. It reports on a study from the Environmental Integrity Project that finds that, despite a federal ban on the use of diesel fuel in hydraulic fracturing without a permit, some oil and gas companies are exploiting a Safe Drinking Water Act loophole to frack with petroleum-based products containing even more dangerous toxic chemicals than diesel - without any permits.

Fracking's Toxic Loophole finds that thanks to what's commonly referred to as the “Halliburton Loophole,” oil and gas producing companies are routinely injecting chemicals more toxic than diesel during hydraulic fracturing operations in at least 11 states. The list does not include Pennsylvania.

While fracking itself has yet to be proven to have contaminated groundwater, faulty wellsleaking impoundments, and spills surely have. 

The industry should have enough sense to stop using diesel and petroleum-based chemicals in fracking.  But since they apparently don't, the only way to eliminate the risk inherent in using them - both environmental and financial - is to outlaw it.  Now. And, while we're at it - if we're really serious - industry practice and regulations must drive to waterless, chemical-free fracking

October 26, 2014 update: While Pennsylvania was not on EIP's list, it's worth noting that diesel-based drilling fluids are apparently in use - and being spilled - here.

Wednesday, October 22, 2014

Amid Marcellus boom, PA falls to dead last in job creation

According to an analysis of US Bureau of Labor Statistics data by the Keystone Research Center, Pennsylvania - the so-called "Saudi Arabia of natural gas" and home to the most productive natgas wells on earth - ranks dead last among US states in job creation since January, 2011.  When, not coincidentally, the current governor took office.  Before which it ranked 10th.

All-gas-all-the-time is not an economic development policy. At least, not a good one. Pennsylvania must start thinking ahead - and thinking differently - or it will repeat the mistakes of its past.

Like its anemic regulatory response to shale gas development, its laughable tax policy, and its less-than-impactful "impact fee", Pennsylvania's dismal economic development record amid the drilling boom is yet another cautionary tale to the world.

Tuesday, October 21, 2014

Argument from ignorance, part 3: the willful kind

An argument from ignorance is a conclusion that a proposition is false because it has not been proven to be true. When it comes to the impacts of unconventional natural gas development, Pennsylvania is suffering from an acute case of such arguments that grows in severity with each new revelation.

The first Pennsylvania instance of this faulty reasoning was a study that found no evidence of water contamination as a result of hydraulic fracturing in Pennsylvania's Marcellus region - because monitoring infrastructure and technology have not kept pace with drilling.

The second Pennsylvania instance was a revelation last year that the state does not track - or event count - the number of letters it issues as a result of investigations of water quality damage complaints. This was despite the fact that, as it later came to light, oil and gas development in the state contaminated water supplies at least 243 times since 2007.

The latest Pennsylvania instance comes in a story from the Pittsburgh Post-Gazette that's profoundly troubling. What the P-G reports is that this third instance is the most egregious of all - a case of willful ignorance:

Three widely cited state studies of air emissions at Marcellus Shale gas development sites in Pennsylvania omit measurements of key air toxics and calculate the health risks of just two of more than two dozen pollutants.
State regulators and the shale gas drilling industry over the past four years have repeatedly used the regional studies to support their positions that air emissions from drilling, fracking wastewater impoundments and compressor stations don’t pose a public health risk...
Not only did the DEP not calculate the vast majority of chemical hazards, but its determination that public health would not be harmed was not made by anyone with training in medicine, toxicology or environmental or occupational health...
This apparently willful ignorance is intolerable.  It places lives potentially at risk.  It must be corrected immediately - and investigated thoroughly.  Those responsible for such willful ignorance must be held to account.