Op-Ed: Fracking Needs A Shakeout, Not A Bailout.
According to an op-ed by Liam Denning in Bloomberg, “Calls for the Trump administration to provide financial aid for frackers have drawn
denunciations of socialism. If anything, with oil trading around just $31 a barrel, the critics don’t go far enough. Because directing state resources into producing yet more of a thing manifestly not in demand isn’t just socialism; it’s the Soviet-grade,
tractor-quota good stuff. There is nothing wrong per se with government stepping in as a last resort when crisis threatens a vital segment of the economy. But you need a clear understanding of what the crisis is, what’s vital and what the objectives are. In
the case of the U.S. exploration and production business, to say the current predicament is the fault of Saudi Arabia or a virus is to cite catalysts rather than the underlying pathology. Consider Continental Resources Inc.: Founder and majority shareholder
Harold Hamm told Bloomberg TV on Wednesday he had ‘reached out’ to the Trump administration and wants it to take action to prevent cheap Russian and Saudi Arabian barrels flooding the U.S. to the detriment of the domestic industry. Yet Continental should look
to itself. Its guidance — which envisages growing production in a market that was oversupplied even before coronavirus struck — implies free cash flow going to zero this year if oil averages about $48. As of now, 2020 swaps trade around $34. Only last summer,
the company was buying back shares at an average price of about $34 apiece. They are now below $9. The shale oil boom of the past decade (and natural gas before that) has come with a hefty dose of moral hazard built on various assumed market puts. One was
OPEC’s willingness to keep its own barrels offline to prop up prices.” [Bloomberg,
3/12/20
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Crossing State Lines? Oil Firms Flare Texas Gas As Investors Vent On Climate.
According to Reuters, “Across the Permian Basin’s high desert landscape, natural gas is going up in smoke even as oil majors including Exxon Mobil and BP pledge cuts in greenhouse
gas emissions. Flaring, the deliberate burning of unwanted polluting gas, is rife during oil production in the biggest U.S. shale field, and an acute problem in Texas, home to most of the Permian reservoir, which sprawls 86,000 square miles (220,000 km2) across
two states. Loose regulation in Texas means that companies including Exxon, Matador Resources and privately-held BTA Oil Producers last year burned off gas at more than twice the rate as in neighboring New Mexico, a Reuters analysis of data compiled by Rystad
Energy from more than 50 of the largest producers shows. Some drillers burned natural gas at up to six times the rate in Texas as they did over the state line, the data shows. Exxon flared more gas in Texas last year than any other producer, data released
in February by a state regulator shows. This is despite Exxon and other large oil producers, which have spent billions drilling and building pipelines in the region, promising emissions cuts to curb global warming. Although companies have to apply for permits
to burn unwanted gas, Texas allows producers to burn unwanted gas for six months and routinely issues waivers after the six months expires. New Mexico allows new wells to flare for 60 days and is moving toward 30-day extensions thereafter.” [Reuters,
3/12/20 (=)]
The Arctic Might Be A Methane Time Bomb—Or Not.
According to Popular Science, “We already have a narrow window of time to ward off the worst impacts of climate change. That could shrink even more if a previously-stable store of
carbon is suddenly unleashed into the atmosphere. And a big store that many climate scientists are worried about is permafrost, the frozen soil that covers about a quarter of the northern hemisphere. In a 2018 Special Report, the Intergovernmental Panel on
Climate Change warned that permafrost presents a huge uncertainty for our carbon footprint in the future. What underlies that uncertainty is the fate of the old carbon stored in permafrost. Much like burning fossil fuels, releasing carbon from frozen soil
that has been stored in the earth for thousands of years can warm our planet rapidly. But scientists aren’t sure whether that carbon will be released mostly as carbon dioxide, or as methane—a more powerful greenhouse gas. Permafrost is soil that’s frozen year-round.
It can include sand, rocks, or dark earth that’s rich in organic matter. It’s this organic-rich soil that’s most important from a climate perspective. Over thousands of years—tens of thousands, in some places—plants and animals died, decomposed, and became
part of the soil as organic matter. Then, when that compost-like soil froze, all the carbon it contained became locked away from the atmosphere. That makes permafrost an extensive store of carbon. It stretches across roughly seven million square miles at high
latitudes, and contains about 1.5 trillion metric tons of carbon—around double the amount of carbon in the entire atmosphere.” [Popular Science,
3/12/20 (=)]
Arch Coal Contracts For Flaring Of Methane At West Elk Mine.
According to the Grand Junction Daily Sentinel, “Arch Coal has contracted for flaring of methane at its West Elk Mine, which would reduce the greenhouse gas emissions associated with
the state’s largest single industrial source of methane. The company has reached an agreement with Environmental Commodities Corp., or ECC, for the project. According to its website, ECC works with companies to generate and supply emission offsets to entities
capped by California’s greenhouse gas program. John Poulos, engineering manager for the underground mine, said he couldn’t elaborate further about the project. But Gunnison County Commissioner John Messner said it should be completed around June or July, once
conditions allow after spring snowmelt, according to what Poulos has told a North Fork Valley coal methane working group. Messner called the agreement a pretty big advancement. ‘This is what we asked West Elk to do when we supported their expansion, is that
we could support the expansion only if they actively explore methane capture and mitigation and/or economic utilization,’ he said. Methane, which is produced during mining and vented to the surface to prevent mine explosions, is a far more potent greenhouse
gas than carbon dioxide. But its climate impacts can be much reduced by flaring, and as the primary component in natural gas it also potentially can be collected and piped for use as a fuel or burned on site to create electricity. West Elk Mine is seeking
to expand beneath 1,700 acres of the Sunset Roadless Area in the Gunnison National Forest.” [Grand Junction Daily Sentinel,
3/12/20 (=)]
Shale Tycoon Seeks U.S. Probe Into Saudi Oil Flood.
According to E&E News, “Shale billionaire Harold Hamm intends to file a complaint with the U.S. Department of Commerce against Saudi Arabia for ‘illegal’ dumping of crude that sent
oil prices into a tailspin earlier this week. The Continental Resources Inc. founder will begin an investigation with an industry trade group, the Domestic Energy Producers Alliance, he said in an interview with Bloomberg TV. The Department of Commerce would
have 20 days to accept it and could rule on it within 60 days, he said. Saudi Arabia ‘has moved to essentially flood the market with crude oil’ with ‘express intent to grab more market share,’ Hamm said. ‘It’s illegal to do that.’ Hamm, who has acted as an
informal sounding board to President Trump on energy policy, said he hasn’t spoken to the president and the industry group is acting alone. Representatives of the Commerce Department, headed up by Secretary Wilbur Ross, didn’t immediately respond to emailed
requests for comment. ‘If they’re found guilty of dumping as we believe now they obviously are, if they’re found guilty of that, there could be countervailing duty to place upon all their imports to this country,’ Hamm said. ‘That would be a drastic good measure
that should be done.’ The U.S. shale oil industry is reeling from Saudi Arabia and Russia’s decision to ramp up production in a price war that sent crude plunging to the $30-a-barrel range, a level not seen in four years. With heavy debts, many explorers are
operating at a loss at current prices and are being forced to cut rigs and production.” [E&E News,
3/13/20 (=)]
Solar CEO Backs Aid For Battered Oil Drillers, With A Catch.
According to E&E News, “One of America’s biggest rooftop-solar companies supports a potential relief package for an unlikely group: oil producers clobbered this week by collapsing
prices. The head of Houston-based Sunnova Energy International Inc. said he would back the oil industry’s bid for federal aid amid the worst price rout in a generation, as long as it’s part of a package that restores the U.S. solar industry’s federal tax credit
to last year’s level. ‘These are unusual times and unusual times call for fairly dramatic and fairly effective enforceable measures,’ John Berger, Sunnova’s chief executive officer, said in a phone interview Wednesday. The rapid spread of the coronavirus has
rattled economies around the world, slowing growth and weakening energy demand. That escalated after Saudi Arabia and Russia entered into an all-out oil price war, causing crude prices to plunge as much as 34% on Monday and stock markets to plummet around
the world.” [E&E News,
3/13/20 (=)]
Colo. Announces Record Fine Over Deadly 2017 Gas Explosion.
According to E&E News, “Colorado regulators have proposed a record $18.25 million penalty against the oil company responsible for an explosion that killed two people and destroyed
a home in a Denver suburb nearly three years ago. The fine for the blast in Firestone, Colo., would be imposed on a subsidiary of Anadarko Petroleum Corp., which is now owned by Houston-based Occidental Petroleum Corp. (Energywire, May 3, 2017). The April
17, 2017, gas explosion killed Mark Martinez and his brother-in-law, Joey Irwin, and seriously injured Martinez’s wife, Erin. ‘Today’s action sends a message that Colorado won’t tolerate risky, negligent behavior that endangers our families’ ability to live
safely in our own homes,’ Erin Martinez said in a prepared statement. ‘The prevention of a future tragedy is a great way to honor both Mark and Joey.’ The proposed penalty is more than 11 times larger than the previous record for an oil field violation, the
Colorado Oil and Gas Conservation Commission (COGCC) said. The commission is asking for fines of $10,000 to $15,000 a day, for 365 days, on each of four rule violations. It’s also asking for an enhancement to one of the penalties because of the deaths. If
the commission approves the penalty at a meeting next month, the funds will be used for air monitoring and projects to fight pollution from oil and gas production. A spokeswoman for Occidental said the company won’t fight the penalty. The explosion galvanized
opposition to drilling in some parts of eastern Colorado and led the state Legislature to overhaul the oil and gas commission.” [E&E News,
3/13/20 (=)]
Chad Ellwood
Senior Research Associate
Climate Action Campaign
202.448.2877 ext. 119