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Friday, July 11, 2014

Goldman Sachs: strong enviro regs key to economic growth in the shale gas era

A new report from Goldman Sachs, a venerable global investment banking, securities and investment management firm, offers some insights into why the US and especially states like Pennsylvania have failed to drive economic growth beyond resource extraction during the current oil and gas boom.  

Although North America has access to some of the lowest energy prices in the world, reinvestment rates in energy-intensive manufacturing that create high-value jobs lag those of Asia and the Middle East, by…15-to-1. Further, the region has also fallen short in building the infrastructure to ensure the benefits of abundant energy supplies can be fully reaped…
If these trends continue, North America will not only fail to harness the benefits from the shale revolution it created, but it will also forego over the next decade more than 2 million new jobs, 1.0 % of additional GDP growth and at least a 5% incremental reduction in greenhouse-gas emissions. 
Ignore for the moment - as Goldman does - the distinct possibility (absent ubiquitous deployment of CCUS technologies for all fossil-fueled power) that we might have to leave the gas in the ground to avoid catastrophic climate disruption. “(W)hat”, Goldman asks, “can be done to turn resource wealth into real economic value?” Their answer is: 
...reducing uncertainty through stable and well-defined energy, environmental and transportation policies. 
That's because: 
…(w)hile the “shale revolution” has taken place without an energy policy…the demand-side investments that we need today are larger in scale, requiring decades to recoup the investment, and as such require a high level of confidence in future policies… 
I’ll focus here on the environmental policies. On the subject of regulation, Goldman says: 
In order to be predictable, regulation needs to be clear, uniform and effective. In our view, effective energy policy should be conducted in terms of both protecting the environment and in attracting longer-term responsible investment. These objectives are not mutually exclusive. 
They go on to highlight key issues that can “promote transparency and environmental
  • Disclosure of chemicals used in hydraulic fracturing. We believe it is key that there is public confidence the environmental risks associated with the use of frac fluids are acceptable…
  • Reducing surface and air disturbance. In both rural and urban communities that have seen increases in activity, there remain concerns regarding surface disturbance, contribution from drilling/fracture stimulation on pollution/air quality and traffic/noise that reduce quality of life for local residents.
  • Ensuring well integrity to prevent groundwater contamination. We see a continued need for industry to increase public confidence in well integrity to reduce concerns of groundwater contamination. We view the casing of wells as key, particularly when wells are being drilled through aquifers.
  • Measurement and recycling of water supply. Water disposal and water quality remain an ongoing concern across shale plays…there remains further opportunity to reduce freshwater withdrawal used for drilling and completion. Before and after drilling, testing of groundwater can help identify areas of non-compliance.
 On the critical subject of methane emissions, Goldman calls for:
  • Better measurement, increased focus and investments on measurement tools and analysis to understand the sources of methane emissions and means of capture.
  • Improve well completion techniques.. Importantly, the upstream industry should embrace these techniques, as they are potentially returns/profitability enhancing as they increase volumes/revenues, unlike midstream/downstream operators where the commodity is a pass-through to customers.
  • Accelerate/ improve pipeline integrity programs.
Goldman concludes:
To access the potential that North America has to exploit its cost advantage and increase market share, several current uncertainties need to be addressed to give business the confidence that the current competitive advantage is sustainable...
The business case for sustainability gains ever more adherents. Now, if only the energy industry would catch up.

Thursday, July 10, 2014

How to talk to the natives

The American Petroleum Institute has issued Community Engagement Guidelines - "recommendations designed to promote the safe and responsible development of the nation’s oil and natural gas resources by engaging and respecting the communities where these operations occur."

The need is national. In Pennsylvania, shale gas wells and related industrial infrastructure are being located closer to population centers than in several other oil and gas producing states, giving rise to perhaps more intense conflicts. But the industry as a whole has largely missed opportunities for constructive engagement here, and the hubris of Act 13 has added fuel to the fire.

At first glance, the guidelines look solid enough. While they could raise the bar for the industry, the fact that they needed to be issued in the first place speaks volumes.

Wednesday, July 9, 2014

Monitoring impacts of energy development on forests must be improved

I’ve blogged frequently on the topics of landscape-level and cumulative impacts of energy development.  Second and third only to climate disruption, they are defining environmental issues of our times.  Landscape-level planning is needed to minimize these impacts, and much more intensive monitoring of these impacts by governments and regulators is a must. One way to accomplish that is through development of remote-sensing tools, techniques, and programs. 

A new study by Canadian researchers that’s been published in Land discusses these issues in the context of forested ecosystems.

Earth-observation and characterization of anthropogenic disturbance regimes of forests will become requisites for understanding global patterns of forest use during the Anthropocene. The substantial increase in energy development and consumption over recent decades, and in particular fossil fuels, will likely undermine ecosystem-based management of forested ecosystems. Several ecological components have already been exacerbated by energy development including biodiversity and habitat loss. The current state of knowledge of energy development in forests is primarily limited to persistent linear corridors and surface mining. As the number of in situ projects rapidly increase in forested ecosystems, research programs should focus on the non-discrete impacts of energy development. Moreover, research into the monitoring of pipeline impacts to forested ecosystems will be critical during this decade of new expansions. 
To date, the majority of impacts of oil and gas activities have been characterized by research from outside the industry...The development of a planning framework that brings all stakeholders together will be a necessary first step towards mitigating the negative impacts on multiple use landscapes undergoing rapid energy development. 
“You can't manage what you don't measure” is an adage that applies here.  The embrace of remote sensing tools by regulators – and a commitment to their programmatic use, and translation into landscape-level planning requirements - is essential to conserving and protecting natural resources that are being placed at existential risk by a wave of resource extraction that, in Pennsylvania’s case, at least, will dwarf all previous resource extraction eras combined.  

Fortunately, the path to this essential work is well lit.  Superb change agents like and are demonstrating the power – and the necessity – of remote sensing to understand the impacts of our activity on our fragile globe.

Will this great work be heeded?

Tuesday, July 8, 2014

Accounting 102 for the oil and gas industry - midstream edition

SASB has also issued similar standards for the Oil and Gas Midstream Industry – the companies that gather, transport, store, and process and ship natural gas and natural gas liquids. 

SASB’s research brief on the Oil & Gas Midstream industry highlights cites these familiar sustainability issues as competitive drivers within the industry: 
Sustainability is a business imperative that smart companies will embrace - and profit from.

Monday, July 7, 2014

Accounting 101 for the oil and gas industry

The Sustainability Accounting Standards Board (SASB) has released their provisional Sustainability Accounting Standards for Non-Renewable Resources, which includes standards for oil and gas production. The standards provide guidance to companies on how to measure and disclose to investors environmental, social, and governance risks that impact a company’s financial performance. 

SASB’s oil and gas industry brief says that “performance on…sustainability issues will drive competitiveness within the Exploration & Production industry.” Among those issues are:
As I’ve argued, there’s a strong and growing business case for sustainable shale gas development that the industry ignores at its peril. SASB’s new standards reflect the financial community’s increasing acceptance of that fact - and its demand for performance by the oil and gas industry.