By Joe Carroll
Jan. 29 (Bloomberg) -- Exxon Mobil Corp. and TransCanada Corp. said a proposed pipeline to carry Alaskan natural gas to U.S. markets will cost 23 percent to 58 percent more than originally expected.
The 1,700-mile (2,700-kilometer) conduit from Alaska’s North Slope to a network of pipelines that connect Alberta, Canada, to the Midwest will cost $32 billion to $41 billion, the companies said today in a statement. In June, they pegged the price tag at $26 billion.
Calgary-based TransCanada won state government support for its pipeline proposal and a promise of a $500 million subsidy in 2008. Exxon Mobil of Irving, Texas, agreed to help finance and build the pipeline in exchange for a minority stake in June.
The companies provided the new cost estimate in a request to the U.S. Federal Energy Regulatory Commission for permission to gauge interest among energy companies that would pump gas into the pipe.
In addition to the Alberta-bound conduit, Exxon and TransCanada today said they will consider an alternative route that would haul North Slope gas to the Alaskan port of Valdez. The 800-mile pipeline to Valdez would cost $20 billion to $26 billion, according to the statement.
At Valdez, Exxon and TransCanada said the gas could be chilled to liquid form for transfer to U.S. or international markets on tanker ships.
Both scenarios involve start-up dates of 2020, according to the statement.
To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net
Last Updated: January 29, 2010 13:54 EST
Sunday, January 31, 2010
Saturday, January 30, 2010
Alaska Pipeline Natural Gas Competing Against 48 States
The discovery of huge new natural-gas fields across the contiguous U.S. is threatening Alaska's plans for a pipeline to export gas to the lower 48 states.
Two rival consortiums, each backed by major energy companies, are competing to build the pipeline, designed to carry gas from Alaska's North Slope to continental markets.
Alaskans hope that gas will help offset falling oil production, as transported here from the North Slope.
But even as the project is poised to get off the ground after decades of discussion, its viability is being called into question as energy companies have found huge new supplies of natural gas locked in dense rocks known as shale in places such as Texas, Louisiana and Pennsylvania.
Those supplies are glutting the market and driving down prices, leading many experts to question whether a pipeline from Alaska is needed or could turn a profit for its backers.
Still, on Friday, one of the two contenders, backed by energy giant Exxon Mobil Corp. and pipeline company TransCanada, formally asked federal regulators for permission to begin accepting bids from gas producers for space on the pipeline, which would carry as much as 4.5 billion cubic feet of gas a day.
"This filing is an important milestone for the project and Alaska," said Tony Palmer, TransCanada's vice president in charge of the project. Mr. Palmer said he believed there is "no lack of demand" for the gas in the contiguous U.S.
The rival project, a joint venture of oil and gas producers BP PLC and ConocoPhillips, plans this spring to announce details of its own plans and begin its own bidding process. The project would stretch as much as 2,000 miles from Alaska and would cost an estimated $30 billion.
Mr. Palmer said TransCanada is considering two versions of the project, one of which would pipe gas through Canada and cost up to $41 billion, and another that would pipe the gas a shorter distance to Alaska's southern coast, where it could be transported by ship. That option would cost up to $26 billion. Either would be complete in 2020.
Supporters argue the pipeline, first proposed in the 1970s, would help stabilize U.S. natural-gas prices, reduce dependence on foreign sources of energy and provide revenue and jobs for Alaska.
Former Gov. Sarah Palin, who in 2008 signed a bill providing state support for the project, touted the pipeline during her vice presidential campaign as a potential solution to the nation's energy needs.
But that was before the success of shale drilling was widely recognized. The industry and many outside experts now believe the U.S. has a century's supply of gas.
"I just don't think that people appreciate even still the magnitude of gas volumes that are possible in the lower 48," said Porter Bennett, CEO of Bentek Energy, a consulting firm.
The bidding process, in which gas producers can make offers to secure space on the pipeline, could help determine whether there is enough demand for the pipeline to move forward. Backers of both projects are playing down expectations. They say they are worried that producers won't make the firm offers necessary to secure financing for the project.
"We are concerned that the bids may be heavily conditioned to address risks that are outside of our control," said David MacDowell, a spokesman for the Conoco-BP project.
The surge in lower-48 production isn't the only factor calling the project into question. Producers also are concerned about cost overruns, possible increases in Alaska's energy tax and other variables.
Most of those challenges have been known for years. The impact of shale drilling, however, became clear only recently. It has been so rapid that a planned natural-gas import terminal in British Columbia last year announced plans to export gas to Asia instead.
Not everyone thinks the U.S. gas glut has put the project in jeopardy. Alaska's vast gas resources are relatively cheap to produce. Ed Kelly, a gas analyst for the energy consulting firm Wood Mackenzie, said the U.S. gas market could shift significantly in the time needed to build the pipeline. "It's not competing with shale gas now. It's competing with shale gas 10 to 15 years from now," he said.
The uncertainty is making many Alaskans nervous. The state depends on revenue from the oil industry to fund nearly 90% of its budget, but oil production has been declining steadily for 20 years as giant fields such as Prudhoe Bay begin to dry up. State officials hope natural gas could help fill that void, but only if a pipeline gives producers a way to get that gas to market.
But Kurt Gibson, deputy director of the Alaska Division of Oil and Gas, said he is still confident the project will happen. "It's an important component to our state's economic future."
Others are less certain. State Rep. Craig Johnson, a Republican who co-chairs the House of Representatives' Resources Committee, said repeated delays had put the whole project in jeopardy.
"I think we've probably cost ourselves a few years, which allowed the shale plays to come in," Rep. Johnson said. "We should've built this pipeline four years ago."
Two rival consortiums, each backed by major energy companies, are competing to build the pipeline, designed to carry gas from Alaska's North Slope to continental markets.
Alaskans hope that gas will help offset falling oil production, as transported here from the North Slope.
But even as the project is poised to get off the ground after decades of discussion, its viability is being called into question as energy companies have found huge new supplies of natural gas locked in dense rocks known as shale in places such as Texas, Louisiana and Pennsylvania.
Those supplies are glutting the market and driving down prices, leading many experts to question whether a pipeline from Alaska is needed or could turn a profit for its backers.
Still, on Friday, one of the two contenders, backed by energy giant Exxon Mobil Corp. and pipeline company TransCanada, formally asked federal regulators for permission to begin accepting bids from gas producers for space on the pipeline, which would carry as much as 4.5 billion cubic feet of gas a day.
"This filing is an important milestone for the project and Alaska," said Tony Palmer, TransCanada's vice president in charge of the project. Mr. Palmer said he believed there is "no lack of demand" for the gas in the contiguous U.S.
The rival project, a joint venture of oil and gas producers BP PLC and ConocoPhillips, plans this spring to announce details of its own plans and begin its own bidding process. The project would stretch as much as 2,000 miles from Alaska and would cost an estimated $30 billion.
Mr. Palmer said TransCanada is considering two versions of the project, one of which would pipe gas through Canada and cost up to $41 billion, and another that would pipe the gas a shorter distance to Alaska's southern coast, where it could be transported by ship. That option would cost up to $26 billion. Either would be complete in 2020.
Supporters argue the pipeline, first proposed in the 1970s, would help stabilize U.S. natural-gas prices, reduce dependence on foreign sources of energy and provide revenue and jobs for Alaska.
Former Gov. Sarah Palin, who in 2008 signed a bill providing state support for the project, touted the pipeline during her vice presidential campaign as a potential solution to the nation's energy needs.
But that was before the success of shale drilling was widely recognized. The industry and many outside experts now believe the U.S. has a century's supply of gas.
"I just don't think that people appreciate even still the magnitude of gas volumes that are possible in the lower 48," said Porter Bennett, CEO of Bentek Energy, a consulting firm.
The bidding process, in which gas producers can make offers to secure space on the pipeline, could help determine whether there is enough demand for the pipeline to move forward. Backers of both projects are playing down expectations. They say they are worried that producers won't make the firm offers necessary to secure financing for the project.
"We are concerned that the bids may be heavily conditioned to address risks that are outside of our control," said David MacDowell, a spokesman for the Conoco-BP project.
The surge in lower-48 production isn't the only factor calling the project into question. Producers also are concerned about cost overruns, possible increases in Alaska's energy tax and other variables.
Most of those challenges have been known for years. The impact of shale drilling, however, became clear only recently. It has been so rapid that a planned natural-gas import terminal in British Columbia last year announced plans to export gas to Asia instead.
Not everyone thinks the U.S. gas glut has put the project in jeopardy. Alaska's vast gas resources are relatively cheap to produce. Ed Kelly, a gas analyst for the energy consulting firm Wood Mackenzie, said the U.S. gas market could shift significantly in the time needed to build the pipeline. "It's not competing with shale gas now. It's competing with shale gas 10 to 15 years from now," he said.
The uncertainty is making many Alaskans nervous. The state depends on revenue from the oil industry to fund nearly 90% of its budget, but oil production has been declining steadily for 20 years as giant fields such as Prudhoe Bay begin to dry up. State officials hope natural gas could help fill that void, but only if a pipeline gives producers a way to get that gas to market.
But Kurt Gibson, deputy director of the Alaska Division of Oil and Gas, said he is still confident the project will happen. "It's an important component to our state's economic future."
Others are less certain. State Rep. Craig Johnson, a Republican who co-chairs the House of Representatives' Resources Committee, said repeated delays had put the whole project in jeopardy.
"I think we've probably cost ourselves a few years, which allowed the shale plays to come in," Rep. Johnson said. "We should've built this pipeline four years ago."
Friday, January 29, 2010
More Pennyslvania Regs for Natural Gas
By Jon Hurdle
Regulatory News
Bonds
PHILADELPHIA, Jan 28 (Reuters) - Pennsylvania Gov. Ed Rendell on Thursday proposed new rules to strengthen state regulation of natural gas drilling to protect drinking water supplies and announced the hiring of 68 new inspectors.
The measures reflect the Democratic governor's environmental concerns while still aiming to promote development of the massive Marcellus Shale formation.
Marcellus is one of four major shale formations that could provide the United States with an abundant energy supply but whose exploitation could be inhibited by regulators.
The regulations are designed to prevent the escape of drilling chemicals into domestic water supplies, following numerous local reports of contamination from a process called hydraulic fracturing.
They would require energy companies to restore or replace water supplies affected by drilling; require operators to notify regulators of any leakage of gas into water wells; and direct drillers to construct well casings from oilfield-grade cement designed to prevent leakage of drilling fluid into underground water supplies.
To bolster enforcement, the state's Department of Environmental Protection was hiring 68 new inspectors in addition to the 120 already on staff.
Pennsylvania officials say energy companies have applied for 5,200 permits in the Marcellus Shale this year, almost triple the number in 2009, as drillers scramble to develop the huge gas field underlying about two-thirds of Pennsylvania and parts of surrounding states.
The field is estimated to contain enough high-grade natural gas to satisfy total U.S. demand for at least a decade.
"We want to encourage development of this resource because it's a tremendous opportunity for the state, but we will not allow that to happen at the expense of our environment," said Rendell, who wants to launch a tax on gas drilling in this year's budget.
Critics of gas drilling say toxic chemicals in drilling fluid cause water to turn cloudy, foul-smelling or in some cases flammable because of the escape of methane into private water wells. Some of the chemicals can cause serious illnesses including cancer, researchers say.
U.S. lawmakers are debating a bill that would require energy companies to disclose drilling chemicals and allow federal regulators oversight of the natural gas industry. The bill is opposed by some Pennsylvania Republicans who argue that regulation should remain with the states.
Ken Komoroski, a spokesman for Cabot Oil & Gas (COG.N), which operates Marcellus gas wells in northeastern Pennsylvania, said it was too early to comment on the proposals. (Reporting by Jon Hurdle; Editing by Daniel Trotta; Editing by David Gregorio)
Regulatory News
Bonds
PHILADELPHIA, Jan 28 (Reuters) - Pennsylvania Gov. Ed Rendell on Thursday proposed new rules to strengthen state regulation of natural gas drilling to protect drinking water supplies and announced the hiring of 68 new inspectors.
The measures reflect the Democratic governor's environmental concerns while still aiming to promote development of the massive Marcellus Shale formation.
Marcellus is one of four major shale formations that could provide the United States with an abundant energy supply but whose exploitation could be inhibited by regulators.
The regulations are designed to prevent the escape of drilling chemicals into domestic water supplies, following numerous local reports of contamination from a process called hydraulic fracturing.
They would require energy companies to restore or replace water supplies affected by drilling; require operators to notify regulators of any leakage of gas into water wells; and direct drillers to construct well casings from oilfield-grade cement designed to prevent leakage of drilling fluid into underground water supplies.
To bolster enforcement, the state's Department of Environmental Protection was hiring 68 new inspectors in addition to the 120 already on staff.
Pennsylvania officials say energy companies have applied for 5,200 permits in the Marcellus Shale this year, almost triple the number in 2009, as drillers scramble to develop the huge gas field underlying about two-thirds of Pennsylvania and parts of surrounding states.
The field is estimated to contain enough high-grade natural gas to satisfy total U.S. demand for at least a decade.
"We want to encourage development of this resource because it's a tremendous opportunity for the state, but we will not allow that to happen at the expense of our environment," said Rendell, who wants to launch a tax on gas drilling in this year's budget.
Critics of gas drilling say toxic chemicals in drilling fluid cause water to turn cloudy, foul-smelling or in some cases flammable because of the escape of methane into private water wells. Some of the chemicals can cause serious illnesses including cancer, researchers say.
U.S. lawmakers are debating a bill that would require energy companies to disclose drilling chemicals and allow federal regulators oversight of the natural gas industry. The bill is opposed by some Pennsylvania Republicans who argue that regulation should remain with the states.
Ken Komoroski, a spokesman for Cabot Oil & Gas (COG.N), which operates Marcellus gas wells in northeastern Pennsylvania, said it was too early to comment on the proposals. (Reporting by Jon Hurdle; Editing by Daniel Trotta; Editing by David Gregorio)
Thursday, January 28, 2010
Natural Gas to Power Equipment in North Dakota
By DALE WETZEL
BISMARCK, N.D.
Money from a North Dakota research fund will be used to explore whether wasted natural gas may be used to provide electricity for oil producers and rural electric cooperatives.
Rapid expansion of North Dakota's oil production has also boosted the state's output of natural gas, which is a byproduct of oil production.
State Department of Mineral Resources statistics show a 63 percent increase in natural gas production in the last five years. Oil output has more than doubled during the same period, to more than 245,000 barrels a day.
Construction of a network of pipelines to gather and ship the natural gas have not kept up with that growth. As a result, natural gas is often flared, or burned off, at the well site.
In 2008, more than 30 percent of North Dakota's natural gas production was flared. North Dakota energy industry officials say the percentage has dropped to just over 10 percent. The U.S. Energy Department says the national average is less than 1 percent.
"There's still a lot of gas out there that the gathering systems haven't gotten to yet, or wells where it could be years before it's (profitable) to bring a gathering system in," said Lynn Helms, director of the Department of Mineral Resources.
North Dakota's Industrial Commission, which regulates the state's oil and gas industry, has approved a $375,000 grant to study whether raw gas produced at an oil well site can be used to fuel an electrical generator to provide power for the well operator.
Any surplus power could be sold to the rural electric cooperative that serves the area, the proposal says.
The grant, which is split into increments of $250,000 and $125,000, is intended to finance tests at two well sites, application documents say.
The money will not be distributed until agreements are struck with oil operators, grant documents say.
Helms said the tests would be conducted at sites where a reduction in gas flaring was necessary to increase oil production or prevent production restrictions.
"This process will design a portable generator unit that can be set on the (oil well) location," Helms said. "It will burn the flare gas, generate electricity and put it directly into the rural electric grid."
Should it work, the project will help rural electric cooperatives satisfy the power demands of oil companies in rural western North Dakota, and allow increased production of both oil and natural gas, Helms said.
The research fund is financed by a share of North Dakota's tax collections on the oil industry. The fund's income is capped at $4 million every two years.
http://www.businessweek.com/ap/financialnews/D9DG3HD82.htm
BISMARCK, N.D.
Money from a North Dakota research fund will be used to explore whether wasted natural gas may be used to provide electricity for oil producers and rural electric cooperatives.
Rapid expansion of North Dakota's oil production has also boosted the state's output of natural gas, which is a byproduct of oil production.
State Department of Mineral Resources statistics show a 63 percent increase in natural gas production in the last five years. Oil output has more than doubled during the same period, to more than 245,000 barrels a day.
Construction of a network of pipelines to gather and ship the natural gas have not kept up with that growth. As a result, natural gas is often flared, or burned off, at the well site.
In 2008, more than 30 percent of North Dakota's natural gas production was flared. North Dakota energy industry officials say the percentage has dropped to just over 10 percent. The U.S. Energy Department says the national average is less than 1 percent.
"There's still a lot of gas out there that the gathering systems haven't gotten to yet, or wells where it could be years before it's (profitable) to bring a gathering system in," said Lynn Helms, director of the Department of Mineral Resources.
North Dakota's Industrial Commission, which regulates the state's oil and gas industry, has approved a $375,000 grant to study whether raw gas produced at an oil well site can be used to fuel an electrical generator to provide power for the well operator.
Any surplus power could be sold to the rural electric cooperative that serves the area, the proposal says.
The grant, which is split into increments of $250,000 and $125,000, is intended to finance tests at two well sites, application documents say.
The money will not be distributed until agreements are struck with oil operators, grant documents say.
Helms said the tests would be conducted at sites where a reduction in gas flaring was necessary to increase oil production or prevent production restrictions.
"This process will design a portable generator unit that can be set on the (oil well) location," Helms said. "It will burn the flare gas, generate electricity and put it directly into the rural electric grid."
Should it work, the project will help rural electric cooperatives satisfy the power demands of oil companies in rural western North Dakota, and allow increased production of both oil and natural gas, Helms said.
The research fund is financed by a share of North Dakota's tax collections on the oil industry. The fund's income is capped at $4 million every two years.
http://www.businessweek.com/ap/financialnews/D9DG3HD82.htm
Wednesday, January 27, 2010
Chevron Find More Natural Gas in Australia Field
SAN RAMON, Calif. (AP) - Chevron Corp., the second-largest U.S. oil company, said Tuesday it made a new gas find off the coast of Western Australia.
The company is pursuing a "robust" exploration program in the region, said Jim Blackwell, president of Chevron Asia Pacific Exploration and Production Co. added.
The waters off of Australia have lured major energy companies to the region in recent years for two reasons: massive natural gas fields and proximity to China.
China is hungry for energy sources to feed its booming industrial sector.
Last year, Exxon Mobil Corp. announced a $41 billion contract to provide liquefied natural gas to PetroChina Co., Asia's largest oil and gas company, from the yet-to-be developed Gorgon gas field off Australia's far northwest coast.
At the Yellowglen-1 discovery well in the Carnarvon Basin, Chevron has drilled to about 9,050 feet, the company said Tuesday.
The company is pursuing a "robust" exploration program in the region, said Jim Blackwell, president of Chevron Asia Pacific Exploration and Production Co. added.
The waters off of Australia have lured major energy companies to the region in recent years for two reasons: massive natural gas fields and proximity to China.
China is hungry for energy sources to feed its booming industrial sector.
Last year, Exxon Mobil Corp. announced a $41 billion contract to provide liquefied natural gas to PetroChina Co., Asia's largest oil and gas company, from the yet-to-be developed Gorgon gas field off Australia's far northwest coast.
At the Yellowglen-1 discovery well in the Carnarvon Basin, Chevron has drilled to about 9,050 feet, the company said Tuesday.
Tuesday, January 26, 2010
Natural Gas Opponents & Proponents Gather in Albany
WNYC
Natural Gas Rallies in Albany
by Ilya Marritz
NEW YORK, NY January 25, 2010 —A geological formation that was virtually unknown a few years ago is the cause of two opposing demonstrations in Albany this morning.
Environmental groups are rallying against a state plan to allow natural gas drilling in the Marcellus Shale, which extends across of much of upstate New York. They say the plan places water supplies, including New York City's reservoirs, in danger. Mayor Bloomberg is opposed.
Meanwhile, land owners who've signed gas leases will gather for their own counter-demonstration. They say a state environmental review that began in 2008 has gone on long enough, and it's time to start drilling.
The final word on drilling in New York rests with the Department of Environmental Conservation, which hasn't set a date for its final plan.
Natural Gas Rallies in Albany
by Ilya Marritz
NEW YORK, NY January 25, 2010 —A geological formation that was virtually unknown a few years ago is the cause of two opposing demonstrations in Albany this morning.
Environmental groups are rallying against a state plan to allow natural gas drilling in the Marcellus Shale, which extends across of much of upstate New York. They say the plan places water supplies, including New York City's reservoirs, in danger. Mayor Bloomberg is opposed.
Meanwhile, land owners who've signed gas leases will gather for their own counter-demonstration. They say a state environmental review that began in 2008 has gone on long enough, and it's time to start drilling.
The final word on drilling in New York rests with the Department of Environmental Conservation, which hasn't set a date for its final plan.
Monday, January 25, 2010
Pipeline Company Interested in Transporting Macellus Shale Natural Gas
NEW YORK, Jan 22 (Reuters) - Millennium Pipeline Co said Friday it would begin a binding open season on Jan. 25 in order to gauge interest in natural gas transportation on its system, linking production areas in the Marcellus Shale to New York's City's island of Manhattan.
Stocks | Bonds
The Marcellus Shale, located in parts of Pennsylvania, New York and West Virginia, is reported to contain enough natural gas trapped in rock to meet domestic needs for a decade or more.
The open season for firm transportation will run through Feb. 12, for service beginning Nov. 1, 2013, the company said in a statement.
"Our initiative improves the state's energy infrastructure and encourages development of the state's gas production and storage resources consistent with the New York State energy plan resulting in economic stimulus and job creation for New Yorkers," said Millennium's president Dick Leehr.
Millennium Pipeline, a New York-based interstate natural gas pipeline, serves the U.S. Northeast. The line is anchored by its customers National Grid, Consolidated Edison of New York, Central Hudson Gas and Electric Corp and Columbia Gas Transmission LLC and is jointly owned by affiliates of NiSource Inc (NI.N), National Grid (NGG.N) and DTE Energy (DTE.N). (Reporting by Eileen Moustakis; Editing by Marguerita Choy)
Stocks | Bonds
The Marcellus Shale, located in parts of Pennsylvania, New York and West Virginia, is reported to contain enough natural gas trapped in rock to meet domestic needs for a decade or more.
The open season for firm transportation will run through Feb. 12, for service beginning Nov. 1, 2013, the company said in a statement.
"Our initiative improves the state's energy infrastructure and encourages development of the state's gas production and storage resources consistent with the New York State energy plan resulting in economic stimulus and job creation for New Yorkers," said Millennium's president Dick Leehr.
Millennium Pipeline, a New York-based interstate natural gas pipeline, serves the U.S. Northeast. The line is anchored by its customers National Grid, Consolidated Edison of New York, Central Hudson Gas and Electric Corp and Columbia Gas Transmission LLC and is jointly owned by affiliates of NiSource Inc (NI.N), National Grid (NGG.N) and DTE Energy (DTE.N). (Reporting by Eileen Moustakis; Editing by Marguerita Choy)
Sunday, January 24, 2010
Water is the Debate for Marcellus Shale Natural Gas
By Betsey Piette
Philadelphia
Published Jan 23, 2010 8:50 AM
Plans by Pennsylvania to expand leasing of public land for shale gas drilling are fueling a growing public concern over potential hazards to the environment and drinking water supplies.
As the state seeks sources of immediate revenue to cover budget gaps, it is offering over one-third of its forest land for gas exploration of a mile-deep underground rock formation known as the Marcellus Shale. Similar gas drilling on private lands using hydraulic fracturing or “fracking,” a practice that forces millions of gallons of water laden with sand and toxic chemicals into underground shale layers, has already resulted in significant contamination of waterways and private water wells.
Yet on Jan. 12 natural gas drillers bid $128.5 million to develop 32,000 acres of Pennsylvania state forests, twice the revenue the state had budgeted. Under pressure from the state Legislature to generate $60 million from new leases, the state Department of Conservation and Natural Resources conducted bidding under duress, setting a minimum bid of $2,000 an acre. However, the profits to be made from this drilling are so lucrative that drillers offered an average of $4,020 per acre, almost double what such leasing generated two years ago.
The new lease agreements mean that about 692,000 acres of the 2.1 million acres of state forest will be under lease. Currently 750 wells are in production on conservation department lands, but state officials anticipate that more than 1,000 new Marcellus wells could be developed in the next 10 years.
The expansion of Marcellus drilling activity has been staggering. Eight years ago Pennsylvania offered 218,000 acres at $30 an acre but drillers protested the rate was too high and refused to bid on three-quarters of the tracts. In 2008 a single conservation department auction of 74,000 acres with an average lease of $2,243 per acre generated $166 million, surpassing the total income from the previous 53 years.
Last fall, after heavy lobbying by the gas industry, Gov. Ed Rendell opposed a planned severance tax on natural gas drilling that would have generated $90 million. Despite calls for state officials to evaluate the environmental impact of gas drilling before leasing more land, one day after the massive bidding Senate Republicans in Harrisburg announced they already had an agreement in place for additional leasing in 2011, and Rendell said he did not rule out leasing high-value parcels to generate more income.
The question is at what cost.
John Quigley, acting secretary of the state Department of Conservation and Natural Resources, expressed concern that the rush to lease state forests could threaten tracts that have taken over a century of state intervention to slowly recover after being denuded by lumber companies.
Across New York, Ohio and Pennsylvania, families living near gas drilling sites are finding their drinking water polluted by methane gas and the chemicals used in hydraulic fracturing. PennEnvironment.org director David Masur noted, “The drilling companies have shown their disregard for protecting our drinking water — seven Pennsylvania counties’ well water has been contaminated by methane, and companies are dumping toxic pollutants into nearby waterways across the state.”
In Candor, N.Y., Vietnam veteran Fred Mayer found that explosive vapors now issue from his tap along with the water. Mayer demonstrated by using a charcoal grill lighter to ignite water running from his kitchen faucet. (nydailynews.com, Jan. 2) In a number of similar cases, families have had their personal water wells and even houses explode from methane build-up.
On Jan. 4 protesters gathered outside New York City Hall to speak out against Gov. David Paterson’s plan for additional gas drilling across New York state. Of particular concern was the potential for drilling in the city’s upstate watershed, which provides unfiltered drinking water to 9 million New Yorkers.
While Paterson’s plan claims the state Department of Environmental Conservation can safely monitor the toxic chemicals and heavy environmental impact of hydraulic fracturing, there is little evidence that this is happening.
Chesapeake Energy, one of the major players in the expanding natural-gas-drilling industry, estimates that it could drill 13,500 to 17,000 Marcellus Shale wells over the next 20 years. Each well requires 2 to 9 million gallons of water for hydraulic fracturing. Already several Marcellus operators have taken water from rivers and streams without authorization.
Philadelphia
Published Jan 23, 2010 8:50 AM
Plans by Pennsylvania to expand leasing of public land for shale gas drilling are fueling a growing public concern over potential hazards to the environment and drinking water supplies.
As the state seeks sources of immediate revenue to cover budget gaps, it is offering over one-third of its forest land for gas exploration of a mile-deep underground rock formation known as the Marcellus Shale. Similar gas drilling on private lands using hydraulic fracturing or “fracking,” a practice that forces millions of gallons of water laden with sand and toxic chemicals into underground shale layers, has already resulted in significant contamination of waterways and private water wells.
Yet on Jan. 12 natural gas drillers bid $128.5 million to develop 32,000 acres of Pennsylvania state forests, twice the revenue the state had budgeted. Under pressure from the state Legislature to generate $60 million from new leases, the state Department of Conservation and Natural Resources conducted bidding under duress, setting a minimum bid of $2,000 an acre. However, the profits to be made from this drilling are so lucrative that drillers offered an average of $4,020 per acre, almost double what such leasing generated two years ago.
The new lease agreements mean that about 692,000 acres of the 2.1 million acres of state forest will be under lease. Currently 750 wells are in production on conservation department lands, but state officials anticipate that more than 1,000 new Marcellus wells could be developed in the next 10 years.
The expansion of Marcellus drilling activity has been staggering. Eight years ago Pennsylvania offered 218,000 acres at $30 an acre but drillers protested the rate was too high and refused to bid on three-quarters of the tracts. In 2008 a single conservation department auction of 74,000 acres with an average lease of $2,243 per acre generated $166 million, surpassing the total income from the previous 53 years.
Last fall, after heavy lobbying by the gas industry, Gov. Ed Rendell opposed a planned severance tax on natural gas drilling that would have generated $90 million. Despite calls for state officials to evaluate the environmental impact of gas drilling before leasing more land, one day after the massive bidding Senate Republicans in Harrisburg announced they already had an agreement in place for additional leasing in 2011, and Rendell said he did not rule out leasing high-value parcels to generate more income.
The question is at what cost.
John Quigley, acting secretary of the state Department of Conservation and Natural Resources, expressed concern that the rush to lease state forests could threaten tracts that have taken over a century of state intervention to slowly recover after being denuded by lumber companies.
Across New York, Ohio and Pennsylvania, families living near gas drilling sites are finding their drinking water polluted by methane gas and the chemicals used in hydraulic fracturing. PennEnvironment.org director David Masur noted, “The drilling companies have shown their disregard for protecting our drinking water — seven Pennsylvania counties’ well water has been contaminated by methane, and companies are dumping toxic pollutants into nearby waterways across the state.”
In Candor, N.Y., Vietnam veteran Fred Mayer found that explosive vapors now issue from his tap along with the water. Mayer demonstrated by using a charcoal grill lighter to ignite water running from his kitchen faucet. (nydailynews.com, Jan. 2) In a number of similar cases, families have had their personal water wells and even houses explode from methane build-up.
On Jan. 4 protesters gathered outside New York City Hall to speak out against Gov. David Paterson’s plan for additional gas drilling across New York state. Of particular concern was the potential for drilling in the city’s upstate watershed, which provides unfiltered drinking water to 9 million New Yorkers.
While Paterson’s plan claims the state Department of Environmental Conservation can safely monitor the toxic chemicals and heavy environmental impact of hydraulic fracturing, there is little evidence that this is happening.
Chesapeake Energy, one of the major players in the expanding natural-gas-drilling industry, estimates that it could drill 13,500 to 17,000 Marcellus Shale wells over the next 20 years. Each well requires 2 to 9 million gallons of water for hydraulic fracturing. Already several Marcellus operators have taken water from rivers and streams without authorization.
Saturday, January 23, 2010
Natural Gas Rig Count 1828
NEW YORK (Dow Jones)--The number of rigs drilling for oil and gas in the U.S. rose this week as producers ramped up drilling activity in response to higher prices.
The number of oil and gas rigs climbed to 1,282, up 34 from the previous week, according to data from oil-field services company Baker Hughes Inc. (BHI). The number of gas rigs was 833, an increase of 22 rigs from last week, while the oil rig count was 437, an increase of 12 rigs. The number of miscellaneous rigs was unchanged at 12 rigs.
The number of gas rigs in use peaked at 1,606 in September 2008. Producers cut natural-gas drilling sharply last year in response to falling prices, but the rig count has begun to recover in recent weeks as producers bet on colder winter weather and an economic recovery that would spark demand for the fuel.
Cold weather in the major gas-consuming regions in recent weeks has supported prices and put a substantial dent in inventories. Total gas in U.S. storage for the week ended Jan. 15 was 2.607 trillion cubic feet, in line with the five-year average and just above last year's level.
Natural gas for February delivery on the New York Mercantile Exchange was recently up 21.1 cents, or 3.76%, at $5.826 a million British thermal units.
-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com
The number of oil and gas rigs climbed to 1,282, up 34 from the previous week, according to data from oil-field services company Baker Hughes Inc. (BHI). The number of gas rigs was 833, an increase of 22 rigs from last week, while the oil rig count was 437, an increase of 12 rigs. The number of miscellaneous rigs was unchanged at 12 rigs.
The number of gas rigs in use peaked at 1,606 in September 2008. Producers cut natural-gas drilling sharply last year in response to falling prices, but the rig count has begun to recover in recent weeks as producers bet on colder winter weather and an economic recovery that would spark demand for the fuel.
Cold weather in the major gas-consuming regions in recent weeks has supported prices and put a substantial dent in inventories. Total gas in U.S. storage for the week ended Jan. 15 was 2.607 trillion cubic feet, in line with the five-year average and just above last year's level.
Natural gas for February delivery on the New York Mercantile Exchange was recently up 21.1 cents, or 3.76%, at $5.826 a million British thermal units.
-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com
Friday, January 22, 2010
More Natural Gas Fracking Water Blah Blah Blah
By BEN CASSELMAN And RUSSELL GOLD
SHREVEPORT, La.—A mounting backlash against a technique used in natural-gas drilling is threatening to slow development of the huge gas fields that some hope will reduce U.S. dependence on foreign oil and polluting coal.
The U.S. energy industry says there is enough untapped domestic natural gas to last a century—but getting to that gas requires injecting millions of gallons of water into the ground to crack open the dense rocks holding the deposits. The process, known as hydraulic fracturing, has turned gas deposits in shale formations into an energy bonanza.
The industry's success has triggered increasing debate over whether the drilling process could pollute freshwater supplies. Federal and state authorities are considering action that could regulate hydraulic fracturing, potentially making drilling less profitable and giving companies less reason to tap into this ample supply of natural gas.
Exxon Mobil Corp. placed itself squarely in the middle of the wrangling when it agreed last month to acquire gas producer XTO Energy Inc., a fracturing pioneer, in a deal now valued at $29 billion. Wary of the rising outcry, Exxon negotiated the right to back out of its deal if Congress passes a law to make hydraulic fracturing illegal or "commercially impracticable."
On Wednesday, Exxon Chairman and Chief Executive Rex Tillerson faced questions about the environmental impact of hydraulic fracturing at a Capitol Hill hearing on the merger.
"We can now find and produce unconventional natural-gas supplies miles below the surface in a safe, efficient and environmentally responsible manner," Mr. Tillerson told members of the House Energy and Commerce Committee.
Criticism of hydraulic fracturing was muted at the hearing, with most representatives focusing on the potential benefits of increased gas use. But the merger has given drilling opponents a new target.
"It puts Exxon at front and center of this whole issue," said Michael Passoff, associate director of As You Sow, an environmental-minded investment group.
Even before the Exxon-XTO deal, the controversy over hydraulic fracturing, also known as "fracking" or "fracing," was growing.
Oilmen were injecting water into wells to free up valuable oil and gas as far back as the 1940s. But in the past decade the technique has really taken off. First in East Texas and in the outskirts of Fort Worth, companies began pumping water under enormous pressure to see if they could break open dense shale-rock formations to release gas.
These initial efforts were largely welcomed by communities, with homeowners and landlords often receiving lucrative checks for the mineral rights that allowed companies to drill on their land.
When early efforts succeeded, the companies began running bigger fracturing jobs, using more water and higher pressure—and in turn searching for even more gas-bearing shale deposits.
This took the gas industry into places where drilling was less common in modern times, including downtown Fort Worth, northeastern Pennsylvania and within the city limits of Shreveport, La.
Hydraulic fracturing and some other technology improvements have created a way to tap a domestic fuel source that has proved abundant. U.S. natural-gas production has risen about 20% since 2005 in large part because of these developments, making gas a much bigger player in energy-policy planning.
Natural gas heats more than half of U.S. homes and generates a fifth of America's electricity, far less than coal, which provides the U.S. with nearly half its power. The industry and its allies are promoting natural gas a bridge fuel to help wean the U.S. off coal, which emits more global-warming gases, and imported oil until renewable fuels are able to meet the demand.
What most worries environmentalists isn't the water in the fracturing process—it's the chemicals mixed in the water to reduce friction, kill bacteria and prevent mineral buildup. The chemicals make up less than 1% of the overall solution, but some are hazardous in low concentrations.
Today, the industry estimates that 90% of all new gas wells are fractured. Shale—a dense, nonporous gas-bearing rock—won't release its gas unless it is cracked open, and other types of formations also produce more gas when fractured. Easier, more porous formations, which don't require fracturing, were tapped in earlier decades and have largely dried up.
As the industry has honed its techniques, hydraulic-fracturing operations have become more complex, requiring far more water and chemicals—millions of gallons per well, rather than tens or hundreds of thousands of gallons in the past.
Environmentalists and some community activists fear hydraulic fracturing could contaminate drinking-water supplies. They point to recent incidents that they say are linked to fracturing, including a water-well explosion in Dimock, Pa., and a chemical spill here in Shreveport.
The industry says fracturing is safe and argues that there have been only a handful of incidents among the large number of wells that have been fractured over the past 50 years. "Hydraulic fracturing has been used since the 1940s in more than one million wells in the United States. It's safe and effective," says Exxon spokeswoman Cynthia Bergman.
Even if the industry can make its case, it still must deal with the public-relations and political fallout from some of the questionable incidents.
On a recent Friday morning, a crew from Cudd Energy Services worked to fracture a Chesapeake Energy Corp. well in Caddo Parish, La., the heart of the Haynesville Shale gas field. While cattle chewed grass in a field across the street, a team of Chesapeake and Cudd employees monitored computer readouts as 21 diesel-powered pumps forced nearly 3,800 gallons of water a minute down a well that reached two miles into the earth.
It is a process Chesapeake says it has learned how to do both efficiently and safely. "We've done it 10,000 times in the company's history without incident," said Aubrey McClendon, Chesapeake's chairman and chief executive officer, in a separate interview.
But in a coffee shop in nearby Shreveport, Caddo Parish Commissioner Matthew Linn said he had concerns after more than a dozen cows died during a Chesapeake Energy fracturing operation last year. A preliminary investigation linked the deaths to chemicals that spilled off the well site into a nearby pasture. A Chesapeake spokesman says the company compensated the cattle's owner and has taken steps to prevent a similar incident in the future.
"I'm all for drilling, and I want to get the gas out from underneath us," Mr. Linn said. "But at the same time, how do you balance human life and quality of life and clean water against that?"
Natural-gas companies say what's at work is fear of the new. "When you introduce something like hydraulic fracturing in a part of the country that hasn't had any experience with it, I think it's natural for there to be questions about the procedure," says Mr. McClendon.
Regardless, the industry faces a real prospect of tightened rules that could make it harder, or impractical, to use hydraulic fracturing. In June, congressional Democrats introduced legislation that would regulate fracturing at the federal level for the first time. The bills remain in committee. In October, the house formally asked the Environmental Protection Agency to study the risks posed by fracturing.
Several states, including Colorado, Pennsylvania and New York, have either passed or are considering tightening regulations on fracturing and related activities. Members of the House of Representatives pushing for new legislation argue that federal oversight is needed to protect water supplies because state regulations vary widely.
The industry worries that new regulations would hurt the thin margins on many gas wells and cut the financial incentive to tap the U.S.'s vast supply of gas. "There is an anticipation that more federal oversight would add enough costs to make it uneconomical, even it wasn't outright prohibited," said Gary Adams, vice chairman of Deloitte LLP's oil and gas consulting division.
Already, the growing concerns about the practice are causing some companies to rethink where they drill. Chesapeake last fall publicly abandoned plans to drill in the watershed that provides New York City with its drinking water after opposition from city officials and others who feared a spill could contaminate the water. Talisman Energy Inc. says it is shifting its drilling effort away from New York because of regulatory challenges there.
There have been attempts to regulate fracturing before. The 1974 Safe Water Drinking Act regulated wells that injected liquids underground. The federal courts ruled the law covered fracturing in a 1990s lawsuit from Alabama. But the technique was exempted from federal oversight in the 2005 Energy Bill.
Some argue there is little really known about whether fracturing poses a genuine risk to water supplies. Hannah Wiseman, a visiting law professor at the University of Texas, Austin, says tighter regulation may be warranted. "There just isn't enough information out there right now about the effects," she said.
Some of the potential threats are clearer than others, however. Gas-bearing shale formations typically lie a mile or more below the surface, with thousands of feet of nonporous rock separating them from even the deepest freshwater aquifers.
Most people agree that means that if a fracturing job is done correctly, it would be virtually impossible for water or chemicals to seep upward into drinking water supplies.
The industry argues that there has never been a proven case of water contamination caused by fracturing. But regulators have tied multiple incidents to oil and gas drilling more generally. Environmental groups point out that wells aren't always constructed properly. Moreover, they say, storage ponds that hold chemical-laced water after fracturing is complete can overflow, and trucks carrying chemicals can crash.
A poorly sealed well is the alleged cause of gas escaping into an underground aquifer in Dimock, Pa. Gas also built up in one resident's water well, causing an explosion in January 2009.
The company that drilled the wells, Cabot Oil & Gas, paid a $120,000 fine to settle the matter with the state, but has denied responsibility for the contamination and says fracturing couldn't have been the cause.
"I could never sell this house now," said Dimock resident Craig Sautner, who now has drinking water shipped to him by Cabot. "Our pristine water that we used to have? It's done."
Whether it is the act of fracturing itself or the risk of contamination from related activities is somewhat beside the point, says Amy Mall, a senior policy analyst for the Natural Resources Defense Council, an environmental group that has raised concerns about fracturing. "Ultimately it's semantics. Somebody's water got contaminated," she says.
Still, for Exxon, the hearings this week presented an opportunity to highlight its investment in developing U.S. energy supplies and creating jobs. Most of its investments in recent years have been overseas. And Exxon executives usually face congressional grilling only when oil and gasoline prices skyrocket.
"This should probably be a very pleasant change of pace for Exxon Mobil because it's not going to be an argument about high oil and gasoline prices," says William Hederman, an energy analyst with Washington research firm Concept Capital.
—Siobhan Hughes contributed to this article.
http://online.wsj.com/article/SB20001424052748703837004575012952816154746.html
SHREVEPORT, La.—A mounting backlash against a technique used in natural-gas drilling is threatening to slow development of the huge gas fields that some hope will reduce U.S. dependence on foreign oil and polluting coal.
The U.S. energy industry says there is enough untapped domestic natural gas to last a century—but getting to that gas requires injecting millions of gallons of water into the ground to crack open the dense rocks holding the deposits. The process, known as hydraulic fracturing, has turned gas deposits in shale formations into an energy bonanza.
The industry's success has triggered increasing debate over whether the drilling process could pollute freshwater supplies. Federal and state authorities are considering action that could regulate hydraulic fracturing, potentially making drilling less profitable and giving companies less reason to tap into this ample supply of natural gas.
Exxon Mobil Corp. placed itself squarely in the middle of the wrangling when it agreed last month to acquire gas producer XTO Energy Inc., a fracturing pioneer, in a deal now valued at $29 billion. Wary of the rising outcry, Exxon negotiated the right to back out of its deal if Congress passes a law to make hydraulic fracturing illegal or "commercially impracticable."
On Wednesday, Exxon Chairman and Chief Executive Rex Tillerson faced questions about the environmental impact of hydraulic fracturing at a Capitol Hill hearing on the merger.
"We can now find and produce unconventional natural-gas supplies miles below the surface in a safe, efficient and environmentally responsible manner," Mr. Tillerson told members of the House Energy and Commerce Committee.
Criticism of hydraulic fracturing was muted at the hearing, with most representatives focusing on the potential benefits of increased gas use. But the merger has given drilling opponents a new target.
"It puts Exxon at front and center of this whole issue," said Michael Passoff, associate director of As You Sow, an environmental-minded investment group.
Even before the Exxon-XTO deal, the controversy over hydraulic fracturing, also known as "fracking" or "fracing," was growing.
Oilmen were injecting water into wells to free up valuable oil and gas as far back as the 1940s. But in the past decade the technique has really taken off. First in East Texas and in the outskirts of Fort Worth, companies began pumping water under enormous pressure to see if they could break open dense shale-rock formations to release gas.
These initial efforts were largely welcomed by communities, with homeowners and landlords often receiving lucrative checks for the mineral rights that allowed companies to drill on their land.
When early efforts succeeded, the companies began running bigger fracturing jobs, using more water and higher pressure—and in turn searching for even more gas-bearing shale deposits.
This took the gas industry into places where drilling was less common in modern times, including downtown Fort Worth, northeastern Pennsylvania and within the city limits of Shreveport, La.
Hydraulic fracturing and some other technology improvements have created a way to tap a domestic fuel source that has proved abundant. U.S. natural-gas production has risen about 20% since 2005 in large part because of these developments, making gas a much bigger player in energy-policy planning.
Natural gas heats more than half of U.S. homes and generates a fifth of America's electricity, far less than coal, which provides the U.S. with nearly half its power. The industry and its allies are promoting natural gas a bridge fuel to help wean the U.S. off coal, which emits more global-warming gases, and imported oil until renewable fuels are able to meet the demand.
What most worries environmentalists isn't the water in the fracturing process—it's the chemicals mixed in the water to reduce friction, kill bacteria and prevent mineral buildup. The chemicals make up less than 1% of the overall solution, but some are hazardous in low concentrations.
Today, the industry estimates that 90% of all new gas wells are fractured. Shale—a dense, nonporous gas-bearing rock—won't release its gas unless it is cracked open, and other types of formations also produce more gas when fractured. Easier, more porous formations, which don't require fracturing, were tapped in earlier decades and have largely dried up.
As the industry has honed its techniques, hydraulic-fracturing operations have become more complex, requiring far more water and chemicals—millions of gallons per well, rather than tens or hundreds of thousands of gallons in the past.
Environmentalists and some community activists fear hydraulic fracturing could contaminate drinking-water supplies. They point to recent incidents that they say are linked to fracturing, including a water-well explosion in Dimock, Pa., and a chemical spill here in Shreveport.
The industry says fracturing is safe and argues that there have been only a handful of incidents among the large number of wells that have been fractured over the past 50 years. "Hydraulic fracturing has been used since the 1940s in more than one million wells in the United States. It's safe and effective," says Exxon spokeswoman Cynthia Bergman.
Even if the industry can make its case, it still must deal with the public-relations and political fallout from some of the questionable incidents.
On a recent Friday morning, a crew from Cudd Energy Services worked to fracture a Chesapeake Energy Corp. well in Caddo Parish, La., the heart of the Haynesville Shale gas field. While cattle chewed grass in a field across the street, a team of Chesapeake and Cudd employees monitored computer readouts as 21 diesel-powered pumps forced nearly 3,800 gallons of water a minute down a well that reached two miles into the earth.
It is a process Chesapeake says it has learned how to do both efficiently and safely. "We've done it 10,000 times in the company's history without incident," said Aubrey McClendon, Chesapeake's chairman and chief executive officer, in a separate interview.
But in a coffee shop in nearby Shreveport, Caddo Parish Commissioner Matthew Linn said he had concerns after more than a dozen cows died during a Chesapeake Energy fracturing operation last year. A preliminary investigation linked the deaths to chemicals that spilled off the well site into a nearby pasture. A Chesapeake spokesman says the company compensated the cattle's owner and has taken steps to prevent a similar incident in the future.
"I'm all for drilling, and I want to get the gas out from underneath us," Mr. Linn said. "But at the same time, how do you balance human life and quality of life and clean water against that?"
Natural-gas companies say what's at work is fear of the new. "When you introduce something like hydraulic fracturing in a part of the country that hasn't had any experience with it, I think it's natural for there to be questions about the procedure," says Mr. McClendon.
Regardless, the industry faces a real prospect of tightened rules that could make it harder, or impractical, to use hydraulic fracturing. In June, congressional Democrats introduced legislation that would regulate fracturing at the federal level for the first time. The bills remain in committee. In October, the house formally asked the Environmental Protection Agency to study the risks posed by fracturing.
Several states, including Colorado, Pennsylvania and New York, have either passed or are considering tightening regulations on fracturing and related activities. Members of the House of Representatives pushing for new legislation argue that federal oversight is needed to protect water supplies because state regulations vary widely.
The industry worries that new regulations would hurt the thin margins on many gas wells and cut the financial incentive to tap the U.S.'s vast supply of gas. "There is an anticipation that more federal oversight would add enough costs to make it uneconomical, even it wasn't outright prohibited," said Gary Adams, vice chairman of Deloitte LLP's oil and gas consulting division.
Already, the growing concerns about the practice are causing some companies to rethink where they drill. Chesapeake last fall publicly abandoned plans to drill in the watershed that provides New York City with its drinking water after opposition from city officials and others who feared a spill could contaminate the water. Talisman Energy Inc. says it is shifting its drilling effort away from New York because of regulatory challenges there.
There have been attempts to regulate fracturing before. The 1974 Safe Water Drinking Act regulated wells that injected liquids underground. The federal courts ruled the law covered fracturing in a 1990s lawsuit from Alabama. But the technique was exempted from federal oversight in the 2005 Energy Bill.
Some argue there is little really known about whether fracturing poses a genuine risk to water supplies. Hannah Wiseman, a visiting law professor at the University of Texas, Austin, says tighter regulation may be warranted. "There just isn't enough information out there right now about the effects," she said.
Some of the potential threats are clearer than others, however. Gas-bearing shale formations typically lie a mile or more below the surface, with thousands of feet of nonporous rock separating them from even the deepest freshwater aquifers.
Most people agree that means that if a fracturing job is done correctly, it would be virtually impossible for water or chemicals to seep upward into drinking water supplies.
The industry argues that there has never been a proven case of water contamination caused by fracturing. But regulators have tied multiple incidents to oil and gas drilling more generally. Environmental groups point out that wells aren't always constructed properly. Moreover, they say, storage ponds that hold chemical-laced water after fracturing is complete can overflow, and trucks carrying chemicals can crash.
A poorly sealed well is the alleged cause of gas escaping into an underground aquifer in Dimock, Pa. Gas also built up in one resident's water well, causing an explosion in January 2009.
The company that drilled the wells, Cabot Oil & Gas, paid a $120,000 fine to settle the matter with the state, but has denied responsibility for the contamination and says fracturing couldn't have been the cause.
"I could never sell this house now," said Dimock resident Craig Sautner, who now has drinking water shipped to him by Cabot. "Our pristine water that we used to have? It's done."
Whether it is the act of fracturing itself or the risk of contamination from related activities is somewhat beside the point, says Amy Mall, a senior policy analyst for the Natural Resources Defense Council, an environmental group that has raised concerns about fracturing. "Ultimately it's semantics. Somebody's water got contaminated," she says.
Still, for Exxon, the hearings this week presented an opportunity to highlight its investment in developing U.S. energy supplies and creating jobs. Most of its investments in recent years have been overseas. And Exxon executives usually face congressional grilling only when oil and gasoline prices skyrocket.
"This should probably be a very pleasant change of pace for Exxon Mobil because it's not going to be an argument about high oil and gasoline prices," says William Hederman, an energy analyst with Washington research firm Concept Capital.
—Siobhan Hughes contributed to this article.
http://online.wsj.com/article/SB20001424052748703837004575012952816154746.html
Thursday, January 21, 2010
Feds Like Exxon XTO Natural Gas Merger
By MARIA RECIO
McClatchy Newspapers
WASHINGTON -- Exxon Mobil's proposed $41 billion merger with based XTO Energy Inc. was met Wednesday with a largely favorable reaction on Capitol Hill - with one notable exception.
At a hearing to review the merger's competitive and environmental impacts, Rep. Ed Markey, D-Mass., chairman of the House Energy and Commerce Committee's energy and environment subcommittee, said the deal, which would expand Exxon Mobil's presence in unconventional natural gas markets, amounted to "a $41 billion bet on what America's energy future will be."
"I think that's a smart bet," he said.
Texas Reps. Joe Barton, Michael Burgess, Ralph Hall and Gene Green were all supportive of the merger during the hearing. But Rep. Diana DeGette, D-Colo., vice-chair of the House Energy and Commerce Committee, sharply questioned XTO founder Bob Simpson and Exxon Mobil CEO Rex Tillerson about the environmental impact of the deal.
At issue for DeGette is a provision in the merger document nullifying the deal if Congress put limits on hydraulic fracturing, the drilling technique which forces water and a combination of chemicals and sand or plastic beads into dense rock to release hydrocarbons.
"As I have introduced legislation on hydraulic fracturing, this piqued my interest," said DeGette, whose bill would require the disclosure of chemical ingredients to comply with the Safe Drinking Water Act.
"Good news," said DeGette. "I support hydraulic fracturing. Let me say that again: I support hydraulic fracturing. My bill would not make hydraulic fracturing illegal, nor would it make it 'commercially impracticable.' I simply worry about the effects on drinking water if hydraulic fracturing is not done in an environmentally responsible manner."
In terse exchanges with Tillerson in particular, DeGette demanded to know how much regulatory disclosure now costs, with only four states with regulations on hydraulic fracturing, and the problem with disclosing the non-proprietary components in the blast.
"I've dealt with EPA," said Tillerson, saying the "devil is in the details."
"I don't know how the regulation is going to be written - nor do you," he told DeGette.
Asked if the proposed regulation amounted to being a deal-killer, or "commercially impracticable" as the merger document says, both Tillerson and Simpson said, "I do not know."
Markey tried to be a peacemaker at the conclusion of the hearing, saying, "There's no secret plot to ban hydraulic fracturing." Markey said that lawmakers, led by DeGette, have asked the EPA to study the impact of hydraulic fracturing on drinking water.
Tillerson testified that there are "over 1 million wells drilled with hydraulic fracturing and there is not one reported case of a freshwater aquifer being contaminated."
Simpson, who created the company with a handful of employees in 1986, testified about the benefits of the merger - which would create a new Exxon Mobil unit in Fort Worth, Texas - as taking advantage of XTO's experience in natural gas exploration and Exxon's financial capability.
"I believe it's a great American success story," Simpson said of his company. He recalled how when he built a home in Fort Worth 30 years ago, he couldn't get natural gas to heat it "even though I was in Texas." Now, the city is known to sit on the natural-gas-rich Barnett Shale.
But the folksy Simpson didn't exactly emerge unscathed from the hearing. Rep. John Shadegg, R-Ariz., took Simpson to task for saying that he "couldn't imagine" Congress would intervene in hydraulic fracturing.
"I find that statement to be stunningly politically naive," said Shadegg, a 16 year member who just announced his retirement from Congress. Later, his spokewoman, Nicole Philbin, said that the congressman meant it in a "light-hearted, teasing manner."
DeGette spokesman Kristofer Eisenla said the lawmaker would seek a committee hearing on her bill, HR 2766, the FRAC Act - or Fracturing Responsibility and Awareness of Chemicals Act.
McClatchy Newspapers
WASHINGTON -- Exxon Mobil's proposed $41 billion merger with based XTO Energy Inc. was met Wednesday with a largely favorable reaction on Capitol Hill - with one notable exception.
At a hearing to review the merger's competitive and environmental impacts, Rep. Ed Markey, D-Mass., chairman of the House Energy and Commerce Committee's energy and environment subcommittee, said the deal, which would expand Exxon Mobil's presence in unconventional natural gas markets, amounted to "a $41 billion bet on what America's energy future will be."
"I think that's a smart bet," he said.
Texas Reps. Joe Barton, Michael Burgess, Ralph Hall and Gene Green were all supportive of the merger during the hearing. But Rep. Diana DeGette, D-Colo., vice-chair of the House Energy and Commerce Committee, sharply questioned XTO founder Bob Simpson and Exxon Mobil CEO Rex Tillerson about the environmental impact of the deal.
At issue for DeGette is a provision in the merger document nullifying the deal if Congress put limits on hydraulic fracturing, the drilling technique which forces water and a combination of chemicals and sand or plastic beads into dense rock to release hydrocarbons.
"As I have introduced legislation on hydraulic fracturing, this piqued my interest," said DeGette, whose bill would require the disclosure of chemical ingredients to comply with the Safe Drinking Water Act.
"Good news," said DeGette. "I support hydraulic fracturing. Let me say that again: I support hydraulic fracturing. My bill would not make hydraulic fracturing illegal, nor would it make it 'commercially impracticable.' I simply worry about the effects on drinking water if hydraulic fracturing is not done in an environmentally responsible manner."
In terse exchanges with Tillerson in particular, DeGette demanded to know how much regulatory disclosure now costs, with only four states with regulations on hydraulic fracturing, and the problem with disclosing the non-proprietary components in the blast.
"I've dealt with EPA," said Tillerson, saying the "devil is in the details."
"I don't know how the regulation is going to be written - nor do you," he told DeGette.
Asked if the proposed regulation amounted to being a deal-killer, or "commercially impracticable" as the merger document says, both Tillerson and Simpson said, "I do not know."
Markey tried to be a peacemaker at the conclusion of the hearing, saying, "There's no secret plot to ban hydraulic fracturing." Markey said that lawmakers, led by DeGette, have asked the EPA to study the impact of hydraulic fracturing on drinking water.
Tillerson testified that there are "over 1 million wells drilled with hydraulic fracturing and there is not one reported case of a freshwater aquifer being contaminated."
Simpson, who created the company with a handful of employees in 1986, testified about the benefits of the merger - which would create a new Exxon Mobil unit in Fort Worth, Texas - as taking advantage of XTO's experience in natural gas exploration and Exxon's financial capability.
"I believe it's a great American success story," Simpson said of his company. He recalled how when he built a home in Fort Worth 30 years ago, he couldn't get natural gas to heat it "even though I was in Texas." Now, the city is known to sit on the natural-gas-rich Barnett Shale.
But the folksy Simpson didn't exactly emerge unscathed from the hearing. Rep. John Shadegg, R-Ariz., took Simpson to task for saying that he "couldn't imagine" Congress would intervene in hydraulic fracturing.
"I find that statement to be stunningly politically naive," said Shadegg, a 16 year member who just announced his retirement from Congress. Later, his spokewoman, Nicole Philbin, said that the congressman meant it in a "light-hearted, teasing manner."
DeGette spokesman Kristofer Eisenla said the lawmaker would seek a committee hearing on her bill, HR 2766, the FRAC Act - or Fracturing Responsibility and Awareness of Chemicals Act.
Wednesday, January 20, 2010
Williams is the Natural Gas Player of the Day
TULSA, Okla. (AP) — Williams Cos. said Tuesday it will create one of the largest natural gas partnerships in the nation by combining its pipeline and processing units.
The deal provides Williams with more money to explore for natural gas. Many energy companies are manuevering to get a bigger portion of the huge natural gas reserves in the U.S. that have been discovered due to advances in drilling technology.
The deal is worth about $10 billion plus $2 billion in debt. Williams, based in Tulsa, Okla., will get about $3.5 billion in cash from Williams Partners, its natural gas processing company. It will also receive 203 million units of the partnership and its stake from 24 percent to 80 percent.
The restucturing will also allow the company to borrow money more easily.
Williams is one of the biggest natural gas operations in the U.S., producing enough gas for more than 4 million homes per day and transporting about 12 percent of the nation's daily supply of natural gas. One its most important assets is the Texas Transcontinental Gas pipeline, which carries gas from the Gulf Coast to New Jersey and New York City as well as the Northwest.
Shares of Williams rose $1.73, or 8.1 percent, to close at $23.10. Earlier, shares reached a 52-week high of $23.76. Williams Partners shares shot up $5.60, or 18.2 percent, to $36.39, and hit a 52-week high of $36.40. Williams Pipeline Partners shares gained $3.84, or 16.5 percent, at $27.19. The shares hit $27.25 during the session, their highest price over the past year.
http://www.latimes.com/business/nationworld/wire/sns-ap-us-williams-restructuring,0,5234240.story
The deal provides Williams with more money to explore for natural gas. Many energy companies are manuevering to get a bigger portion of the huge natural gas reserves in the U.S. that have been discovered due to advances in drilling technology.
The deal is worth about $10 billion plus $2 billion in debt. Williams, based in Tulsa, Okla., will get about $3.5 billion in cash from Williams Partners, its natural gas processing company. It will also receive 203 million units of the partnership and its stake from 24 percent to 80 percent.
The restucturing will also allow the company to borrow money more easily.
Williams is one of the biggest natural gas operations in the U.S., producing enough gas for more than 4 million homes per day and transporting about 12 percent of the nation's daily supply of natural gas. One its most important assets is the Texas Transcontinental Gas pipeline, which carries gas from the Gulf Coast to New Jersey and New York City as well as the Northwest.
Shares of Williams rose $1.73, or 8.1 percent, to close at $23.10. Earlier, shares reached a 52-week high of $23.76. Williams Partners shares shot up $5.60, or 18.2 percent, to $36.39, and hit a 52-week high of $36.40. Williams Pipeline Partners shares gained $3.84, or 16.5 percent, at $27.19. The shares hit $27.25 during the session, their highest price over the past year.
http://www.latimes.com/business/nationworld/wire/sns-ap-us-williams-restructuring,0,5234240.story
Tuesday, January 19, 2010
More Money for Pennsylvania Natural Gas
HARRISBURG - Renewing a call for a state severance tax, Gov. Ed Rendell said Thursday that higher-than-anticipated bids for natural gas drilling on state forest land will come in handy to plug revenue shortfalls in the state budget.
Pennsylvania will realize $128 million in revenue from leasing drilling rights on 32,000 acres of forest land in northcentral Pennsylvania based on high bids submitted earlier this week by five companies.
The winning bids will generate more than twice the revenue anticipated when state officials prepared the leases in order to generate revenue to balance the 2009-10 budget, said Rendell at a press conference.
"Now we can walk into next year with $68 million in unanticipated oil and gas revenues," he said.
The successful bidding at an average per-acre bid of $4,100 is one of several signs the natural gas industry is healthy enough to pursue exploration of the deep gas pockets in the Marcellus Shale formation and pay a severance tax on the gas produced starting July 1, said Rendell.
Estimates that state permit applications for Marcellus Shale wells will quadruple this year and Exxon Corp.'s acquisition of XTO Energy, a natural gas firm, are two more signs the industry is rebounding, Rendell said.
Rendell said this represents a turnaround from conditions in the industry last August when he decided to stop pushing for a 5 percent severance tax that he had proposed when the budget debate started. Natural gas prices reached a seven-year low last summer, but energy prices have rebounded this winter.
The governor plans to meet with natural gas industry leaders next week to discuss a "fair and appropriate" severance tax as well as environmental issues relating to water contamination from drilling and disposal of water used in hydrofracking to break up shale formations to reach the gas pockets. He is looking for an agreement on "best practices" to limit the amount of state forest land impacted by drilling.
The successful bidding rekindled a debate about how Pennsylvania should deal with its emerging Marcellus Shale bonanza.
"It just shows increasing taxes are not needed," said Stephen Miskin, spokesman for House Minority Leader Sam Smith, R-66, Jefferson County. "It calls for smartly using the resources we have."
A group of House GOP lawmakers has called for leasing nearly 400,000 acres of state forest land over a three-year period for drilling.
The state should put a moratorium on leasing additional public land until it does a study of the impact of drilling on the forest environment and other public uses of the state forests, said Jan Jarrett, president of PennFuture, a statewide environmental group.
Pennsylvanians want to go slow on leasing state land for drilling, said Rendell.
rswift@timesshamrock.com
Pennsylvania will realize $128 million in revenue from leasing drilling rights on 32,000 acres of forest land in northcentral Pennsylvania based on high bids submitted earlier this week by five companies.
The winning bids will generate more than twice the revenue anticipated when state officials prepared the leases in order to generate revenue to balance the 2009-10 budget, said Rendell at a press conference.
"Now we can walk into next year with $68 million in unanticipated oil and gas revenues," he said.
The successful bidding at an average per-acre bid of $4,100 is one of several signs the natural gas industry is healthy enough to pursue exploration of the deep gas pockets in the Marcellus Shale formation and pay a severance tax on the gas produced starting July 1, said Rendell.
Estimates that state permit applications for Marcellus Shale wells will quadruple this year and Exxon Corp.'s acquisition of XTO Energy, a natural gas firm, are two more signs the industry is rebounding, Rendell said.
Rendell said this represents a turnaround from conditions in the industry last August when he decided to stop pushing for a 5 percent severance tax that he had proposed when the budget debate started. Natural gas prices reached a seven-year low last summer, but energy prices have rebounded this winter.
The governor plans to meet with natural gas industry leaders next week to discuss a "fair and appropriate" severance tax as well as environmental issues relating to water contamination from drilling and disposal of water used in hydrofracking to break up shale formations to reach the gas pockets. He is looking for an agreement on "best practices" to limit the amount of state forest land impacted by drilling.
The successful bidding rekindled a debate about how Pennsylvania should deal with its emerging Marcellus Shale bonanza.
"It just shows increasing taxes are not needed," said Stephen Miskin, spokesman for House Minority Leader Sam Smith, R-66, Jefferson County. "It calls for smartly using the resources we have."
A group of House GOP lawmakers has called for leasing nearly 400,000 acres of state forest land over a three-year period for drilling.
The state should put a moratorium on leasing additional public land until it does a study of the impact of drilling on the forest environment and other public uses of the state forests, said Jan Jarrett, president of PennFuture, a statewide environmental group.
Pennsylvanians want to go slow on leasing state land for drilling, said Rendell.
rswift@timesshamrock.com
Monday, January 18, 2010
Natural Gas Lobbying Congress in Washinton D.C.
By ANNE C. MULKERN of Greenwire
Published: January 14, 2010
Help for coal and renewable power in climate legislation could hurt natural gas, an industry official said yesterday as the fuel continued its quest to gain political standing.
Natural gas will be caught in a "squeeze play" if there are subsidies for coal, solar, wind and other green sources and natural gas is ignored, Skip Horvath, president and CEO of the Natural Gas Supply Association, said at the U.S. Energy Association's annual State of the Energy Industry Forum.
"There's a false perception that natural gas will come out a winner in any climate change scenario because of its low emissions and reliable performance record," Horvath said. "The environmental benefits of natural gas will allow it to hold its own on a level playing field, but not if the field is dramatically tilted by subsidies for coal and overly rigid mandates for renewable sources.
"Our worry is the balance will become too heavily in favor of coal and renewables, which will squeeze us out of the mix."
Comments by Horvath marked the latest move by natural gas to win concessions in Senate climate legislation after it was largely ignored in the House climate bill.
The natural gas industry last summer said that it had failed to adequately lobby for help in the bill from Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) that passed the House in June. That bill created a cap-and-trade program where businesses would buy and sell permits for carbon emissions. It also gave away the bulk of those allowances in the early years, with a large portion going to utilities and coal-fired plants receiving help.
A new lobbying group called America's Natural Gas Alliance, an alliance of 27 independent natural gas companies, formed in March. Natural gas executives at a Denver meeting in July formed a strategy to influence rewrites in the Senate.
"Coal has done a better job in the past in lobbying Congress than we did," Horvath said. "That's stopped now. I don't think we're too late. The Senate hasn't voted yet."
In talking about subsidies for coal, Horvath meant the free allowances in the bill, a Natural Gas Supply Association spokesman said today.
Natural gas emits about half the carbon dioxide that coal does for the same amount of energy produced. In addition to pushing the message that natural gas is cleaner than coal, natural gas groups have run advertisements promoting new supplies of natural gas. Discoveries of the fuel in shale formations will mean supplies for years to come, the industry has said.
Since the summer, natural gas has surged in political popularity, with many lawmakers now mentioning it in speeches as a means of producing domestic energy that has lower carbon emissions.
At the event yesterday, natural gas officials noted those achievements.
"It's very clear that the natural gas abundance message really took hold last year," said Donald Santa, president of the Interstate Natural Gas Association, who noted that the Center for American Progress examined how to make natural gas part of the solution to energy needs in the face of climate change.
What is needed, Santa said, is natural gas playing a bigger role in the "policy prescriptions."
A coal industry spokesman, however, criticized Horvath's comments.
"They're trying to use the climate debate to increase their market share," said Luke Popovich, spokesman for the National Mining Association.
With China and India building coal-fired power plants at a rapid pace, Popovich said, there needs to be more overall research into ways to capture and sequester carbon emissions.
"This whole fight" that natural gas "wants to start between coal and gas doesn't take us down the road toward effective technology development" that is needed to address worldwide carbon emissions, Popovich said.
Natural gas proposals
Natural gas is looking for "equality" in any climate bill, Horvath said. He said that subsidies for "clean coal" have gone heavily to coal, even though four of the five carbon capture and sequestration plants operating in the world run on natural gas.
Published: January 14, 2010
Help for coal and renewable power in climate legislation could hurt natural gas, an industry official said yesterday as the fuel continued its quest to gain political standing.
Natural gas will be caught in a "squeeze play" if there are subsidies for coal, solar, wind and other green sources and natural gas is ignored, Skip Horvath, president and CEO of the Natural Gas Supply Association, said at the U.S. Energy Association's annual State of the Energy Industry Forum.
"There's a false perception that natural gas will come out a winner in any climate change scenario because of its low emissions and reliable performance record," Horvath said. "The environmental benefits of natural gas will allow it to hold its own on a level playing field, but not if the field is dramatically tilted by subsidies for coal and overly rigid mandates for renewable sources.
"Our worry is the balance will become too heavily in favor of coal and renewables, which will squeeze us out of the mix."
Comments by Horvath marked the latest move by natural gas to win concessions in Senate climate legislation after it was largely ignored in the House climate bill.
The natural gas industry last summer said that it had failed to adequately lobby for help in the bill from Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) that passed the House in June. That bill created a cap-and-trade program where businesses would buy and sell permits for carbon emissions. It also gave away the bulk of those allowances in the early years, with a large portion going to utilities and coal-fired plants receiving help.
A new lobbying group called America's Natural Gas Alliance, an alliance of 27 independent natural gas companies, formed in March. Natural gas executives at a Denver meeting in July formed a strategy to influence rewrites in the Senate.
"Coal has done a better job in the past in lobbying Congress than we did," Horvath said. "That's stopped now. I don't think we're too late. The Senate hasn't voted yet."
In talking about subsidies for coal, Horvath meant the free allowances in the bill, a Natural Gas Supply Association spokesman said today.
Natural gas emits about half the carbon dioxide that coal does for the same amount of energy produced. In addition to pushing the message that natural gas is cleaner than coal, natural gas groups have run advertisements promoting new supplies of natural gas. Discoveries of the fuel in shale formations will mean supplies for years to come, the industry has said.
Since the summer, natural gas has surged in political popularity, with many lawmakers now mentioning it in speeches as a means of producing domestic energy that has lower carbon emissions.
At the event yesterday, natural gas officials noted those achievements.
"It's very clear that the natural gas abundance message really took hold last year," said Donald Santa, president of the Interstate Natural Gas Association, who noted that the Center for American Progress examined how to make natural gas part of the solution to energy needs in the face of climate change.
What is needed, Santa said, is natural gas playing a bigger role in the "policy prescriptions."
A coal industry spokesman, however, criticized Horvath's comments.
"They're trying to use the climate debate to increase their market share," said Luke Popovich, spokesman for the National Mining Association.
With China and India building coal-fired power plants at a rapid pace, Popovich said, there needs to be more overall research into ways to capture and sequester carbon emissions.
"This whole fight" that natural gas "wants to start between coal and gas doesn't take us down the road toward effective technology development" that is needed to address worldwide carbon emissions, Popovich said.
Natural gas proposals
Natural gas is looking for "equality" in any climate bill, Horvath said. He said that subsidies for "clean coal" have gone heavily to coal, even though four of the five carbon capture and sequestration plants operating in the world run on natural gas.
Sunday, January 17, 2010
Governor Rendell Wants Natural Gas Wellhead Tax for Pennsylvania
By Jon Hurdle
PHILADELPHIA, Jan 14 (Reuters) - Pennsylvania Gov. Ed Rendell said on Thursday he will press for a wellhead tax on natural gas drilling in the state's Marcellus Shale formation to take effect July 1 this year.
Rendell said the industry can afford to pay the "severance" tax, given the higher-than-expected prices that companies agreed to pay this week at an auction to lease state forest lands for gas drilling. [ID:nnN13139717]
He also cited Exxon Mobil's (XOM.N) recent $31 billion bid for gas producer XTO as evidence of the industry's ability to pay for the development of the massive Marcellus field.
"The private sector believes this is going to be extremely profitable," he told a news conference. "There is no reason to think that the industry needs to be nurtured any more."
Rendell scrapped an earlier proposal for a severance tax because he said he wanted to encourage development of the industry at a time when natural gas prices were falling. Details of the proposed tax will be included in state's fiscal 2010-2011 budget on Feb. 9.
He said the industry expects to seek 5,200 Marcellus well permits this year, up from the 1,984 issued in 2009. A total of 958 wells were drilled in the Pennsylvania portion of the Marcellus formation in the past two years, of which 763 were in 2009.
Development of the Marcellus Shale -- which geologists estimate contains enough gas to meet total U.S. demand for at least a decade -- could generate 100,000 jobs in Pennsylvania by the end of the decade, and help reduce U.S. dependence on petroleum from other countries, Rendell said.
"That is something that the state cannot turn its back on and should not turn its back on," Rendell said.
But he said the state also needs to protect its natural environment, particularly drinking water sources, which critics say have been contaminated by chemicals used in the hydraulic fracturing technique used to extract gas from shale.
The Democratic governor said he will hold the first of a series of monthly meetings with industry and state regulators next week to try to reach agreement on the tax proposal and environmental measures, such as the disposal of drilling waste water.
Industry representatives were not immediately available to comment. (Reporting by Jon Hurdle; Editing by Anna Driver and John Picinich)
PHILADELPHIA, Jan 14 (Reuters) - Pennsylvania Gov. Ed Rendell said on Thursday he will press for a wellhead tax on natural gas drilling in the state's Marcellus Shale formation to take effect July 1 this year.
Rendell said the industry can afford to pay the "severance" tax, given the higher-than-expected prices that companies agreed to pay this week at an auction to lease state forest lands for gas drilling. [ID:nnN13139717]
He also cited Exxon Mobil's (XOM.N) recent $31 billion bid for gas producer XTO as evidence of the industry's ability to pay for the development of the massive Marcellus field.
"The private sector believes this is going to be extremely profitable," he told a news conference. "There is no reason to think that the industry needs to be nurtured any more."
Rendell scrapped an earlier proposal for a severance tax because he said he wanted to encourage development of the industry at a time when natural gas prices were falling. Details of the proposed tax will be included in state's fiscal 2010-2011 budget on Feb. 9.
He said the industry expects to seek 5,200 Marcellus well permits this year, up from the 1,984 issued in 2009. A total of 958 wells were drilled in the Pennsylvania portion of the Marcellus formation in the past two years, of which 763 were in 2009.
Development of the Marcellus Shale -- which geologists estimate contains enough gas to meet total U.S. demand for at least a decade -- could generate 100,000 jobs in Pennsylvania by the end of the decade, and help reduce U.S. dependence on petroleum from other countries, Rendell said.
"That is something that the state cannot turn its back on and should not turn its back on," Rendell said.
But he said the state also needs to protect its natural environment, particularly drinking water sources, which critics say have been contaminated by chemicals used in the hydraulic fracturing technique used to extract gas from shale.
The Democratic governor said he will hold the first of a series of monthly meetings with industry and state regulators next week to try to reach agreement on the tax proposal and environmental measures, such as the disposal of drilling waste water.
Industry representatives were not immediately available to comment. (Reporting by Jon Hurdle; Editing by Anna Driver and John Picinich)
Saturday, January 16, 2010
Natural Gas Rig Count Up to 1,248
NEW YORK (Dow Jones)--The number of rigs drilling for natural gas in the U.S. climbed this week as producers brought rigs back to work in response to higher prices.
The number of oil and gas rigs climbed to 1,248, up 28 from the previous week, according to data released Friday by oil-field services company Baker Hughes Inc. (BHI). The number of gas rigs was 811, an increase of 30 from last week, while the oil-rig count was 425, a decrease of two. The number of miscellaneous rigs was unchanged at 12.
The number of gas rigs in use peaked at 1,606 in September 2008. Producers scaled back natural-gas drilling sharply over the past year in response to falling prices, but the rig count has stabilized in recent weeks as producers bet on colder winter weather and an economic recovery that would spark demand for the fuel.
Natural-gas prices have fallen by more than 60% from their summer 2008 highs above $13 a million British thermal units, but have recovered somewhat in recent weeks because of winter heating demand. But gas supplies remain ample despite cold temperatures. Total gas in U.S. storage for the week ended Jan. 8 was 2.852 trillion cubic feet--about 3.7% above last year's level and 4.4% above the five-year average.
Natural gas for February delivery on the New York Mercantile Exchange was recently up 10.8 cents, or 1.93%, at $5.696 a million British thermal units.
-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com
The number of oil and gas rigs climbed to 1,248, up 28 from the previous week, according to data released Friday by oil-field services company Baker Hughes Inc. (BHI). The number of gas rigs was 811, an increase of 30 from last week, while the oil-rig count was 425, a decrease of two. The number of miscellaneous rigs was unchanged at 12.
The number of gas rigs in use peaked at 1,606 in September 2008. Producers scaled back natural-gas drilling sharply over the past year in response to falling prices, but the rig count has stabilized in recent weeks as producers bet on colder winter weather and an economic recovery that would spark demand for the fuel.
Natural-gas prices have fallen by more than 60% from their summer 2008 highs above $13 a million British thermal units, but have recovered somewhat in recent weeks because of winter heating demand. But gas supplies remain ample despite cold temperatures. Total gas in U.S. storage for the week ended Jan. 8 was 2.852 trillion cubic feet--about 3.7% above last year's level and 4.4% above the five-year average.
Natural gas for February delivery on the New York Mercantile Exchange was recently up 10.8 cents, or 1.93%, at $5.696 a million British thermal units.
-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com
Friday, January 15, 2010
T Boone Pushing Natural Gas in January 2010
By KEITH JOHNSON
T. Boone Pickens, the oilman and clean-energy booster, shelved his massive wind-power project in Texas even as he stepped up his push to increase the use of natural gas for transportation.
Cheap natural gas, the lack of electricity-transmission lines and the lingering credit crunch have combined to take the shine off large-scale renewable-energy projects, and those factors led Mr. Pickens to halve his $2 billion wind-turbine order with General Electric Co., said a spokesman for Mr. Pickens's Mesa Power LP.Mr. Pickens in May 2008 announced plans for the biggest wind farm in the U.S., by amount of installed megawatts, to be located in the Texas panhandle. But Tuesday he said he would cut his order with GE to 333 turbines from 667 machines and use them for wind farms in Canada and Minnesota.
That means the Pampa Wind Farm slated for north Texas—and postponed last summer until at least 2013—won't happen under current conditions.
"It's off the table," Mr. Pickens said Wednesday in a conference call. If Texas makes more investments in transmission lines to carry power from the remote wind farm to towns and cities, he said, "we'll be back."
A GE spokesman said the two parties mutually renegotiated the terms of the 2008 deal.
Natural-gas prices have fallen sharply since the summer of 2008, when Mr. Pickens announced the big wind farm and the "Pickens Plan," which calls for using natural gas to power big rigs, buses and other large vehicles to lessen U.S. dependence on foreign oil.
Cheaper natural gas hurts wind farms, because cheaper gas makes gas-fired power plants a more attractive option for electricity generation. "You can't finance wind farms very well when natural gas is under $6" per million British thermal units, Mr. Pickens said. Natural-gas futures settled at $5.733 Wednesday afternoon on the New York Mercantile Exchange.
The effects of the credit crunch and the economic slowdown also slowed growth in the wider U.S. wind-power industry in 2009, after a record year for wind-power installations in 2008.
But less expensive natural gas, due to a boom in U.S. production over the last two years, has given new impetus to Mr. Pickens's transport plans. Mr. Pickens announced Wednesday a new national television ad calling on America to "wake up" to the cost of importing oil. He also called on Congress to pass pending legislation that would offer new incentives for greater use of natural gas in the heavy-duty transport fleet.
Write to Keith Johnson at keith.johnson@wsj.com
T. Boone Pickens, the oilman and clean-energy booster, shelved his massive wind-power project in Texas even as he stepped up his push to increase the use of natural gas for transportation.
Cheap natural gas, the lack of electricity-transmission lines and the lingering credit crunch have combined to take the shine off large-scale renewable-energy projects, and those factors led Mr. Pickens to halve his $2 billion wind-turbine order with General Electric Co., said a spokesman for Mr. Pickens's Mesa Power LP.Mr. Pickens in May 2008 announced plans for the biggest wind farm in the U.S., by amount of installed megawatts, to be located in the Texas panhandle. But Tuesday he said he would cut his order with GE to 333 turbines from 667 machines and use them for wind farms in Canada and Minnesota.
That means the Pampa Wind Farm slated for north Texas—and postponed last summer until at least 2013—won't happen under current conditions.
"It's off the table," Mr. Pickens said Wednesday in a conference call. If Texas makes more investments in transmission lines to carry power from the remote wind farm to towns and cities, he said, "we'll be back."
A GE spokesman said the two parties mutually renegotiated the terms of the 2008 deal.
Natural-gas prices have fallen sharply since the summer of 2008, when Mr. Pickens announced the big wind farm and the "Pickens Plan," which calls for using natural gas to power big rigs, buses and other large vehicles to lessen U.S. dependence on foreign oil.
Cheaper natural gas hurts wind farms, because cheaper gas makes gas-fired power plants a more attractive option for electricity generation. "You can't finance wind farms very well when natural gas is under $6" per million British thermal units, Mr. Pickens said. Natural-gas futures settled at $5.733 Wednesday afternoon on the New York Mercantile Exchange.
The effects of the credit crunch and the economic slowdown also slowed growth in the wider U.S. wind-power industry in 2009, after a record year for wind-power installations in 2008.
But less expensive natural gas, due to a boom in U.S. production over the last two years, has given new impetus to Mr. Pickens's transport plans. Mr. Pickens announced Wednesday a new national television ad calling on America to "wake up" to the cost of importing oil. He also called on Congress to pass pending legislation that would offer new incentives for greater use of natural gas in the heavy-duty transport fleet.
Write to Keith Johnson at keith.johnson@wsj.com
Thursday, January 14, 2010
Pennsylvania Natural Gas Shale Acres at $4000/Acre
32,000 acres of Pennsylvania
natural gas land was just leased for $4,020 an acre. That's almost twice what the land went for a year ago.
The land in question was part of the massive Marcellus shale formation that stretches from New York to West Virginia. For natural gas bulls, it's comforting to see bidding wars heat up over shale assets. Big money is beginning to realize that shale will be a very competitive source of U.S. energy, including Exxon as shown by its recent XTO acquistion, and France's Total, as shown by their recent Chesapeake tie-up.
Philly.com: With the new agreements, about 692,000 acres of the 2.1 million acres of state forest will be under lease - that includes about 290,000 acres on which the state does not own the mineral rights. About 750 wells are in production on conservation department lands, but only three of them tap into the Marcellus. State officials expect more than a thousand Marcellus wells could be developed in the next decade.
Five companies yesterday were the apparent high bidders for the new leases located in the Elk, Moshannon, Sproul, Susquehannock, and Tioga State Forests in Cameron, Clearfield, Clinton, Potter and Tioga Counties.
Seneca Resources was the winning bidder on two tracts. The other successful bidders are EXCO Resources Inc.; Anadarko Exploration & Production; Chesapeake Appalachia L.L.C.; and Penn Virginia Oil & Gas Co., based in Radnor.
...
In 2008, in a single auction of new leases, the conservation department generated $166 million from 74,000 acres, surpassing the total generated in the previous 53 years. Those leases went for an average of $2,243 an acre.
HARRISBURG - Natural-gas drillers yesterday bid $128.5 million to develop 32,000 acres of Pennsylvania state forests, twice the revenue the state had budgeted, prompting fears of a headlong rush to overrun public lands to tap into the rich Marcellus Shale.
Gas drillers offered an average of $4,020 per acre - almost twice the amount that such leases generated less than two years ago - for the right to extract natural gas from six tracts of state forest in north-central Pennsylvania.
The robust bidding was further proof of the intense industry interest in the Marcellus Shale, a vast underground formation stretching from New York to West Virginia, and whose sweetest spots underlie much of Pennsylvania.
But John Quigley, acting secretary of the Department of Conservation and Natural Resources, regarded the successful auction as a mixed blessing, saying the windfall could further whet the appetite of policymakers to lease public land to derive immediate revenue without fully understanding the long-term environmental implications of gas development.
"As we sit here this afternoon, fully one third of the state forest is now leased for gas exploration," Quigley said in an interview yesterday. "I think that raises some important questions. How much is too much?"
Jan Jarrett, president of the advocacy group Citizens for Pennsylvania's Future, also called for a suspension of new leases until the impact of drilling could be measured.
"We believe that's enough," she said. "We believe there ought to be a moratorium on further leases on state land until a study can be done to determine what the impact is on the forests and the other uses of the forest."
Rather than leasing more public land, Quigley encouraged policymakers to enact a statewide severance tax on natural gas as a more sustainable revenue source. Gov. Rendell, who last year delayed imposition of a severance tax after the gas industry told him the tax would stymie new development, has called on the legislature to enact the tax by July 1.
An industry trade representative declined to comment on the calls for a severance tax, but lauded the lease sale.
"This shows the industry's ability to generate wealth for Pennsylvanians," said Kathryn Klaber, president of the Marcellus Shale Coalition.
The state conservation department conducted the bidding under duress after the legislature ordered it to generate $60 million for the general fund with new gas leases. The department selected six tracts totaling 31,967 acres and set a minimum bid of $2,000 an acre.
The drillers have a month to send their checks to the state treasury for the new leases, and the $68.5 million that exceeded the legislature's target will flow into the state's Oil and Gas Lease Fund, which under state law must be used for conservation purposes.
Jarrett suggested the state use some of the funds to buy the mineral rights that it does not now own under about 85 percent of the state's parks. Without the rights, the commonwealth has little control over drilling activity on those lands.
"The state cannot prohibit drilling where they don't own mineral rights," she said. "That puts the best areas for public recreation at risk."
But the legislature can order that money in the Oil and Gas Lease Fund be spent for other purposes, and the windfall is likely to trigger a scramble in Harrisburg to redeploy that revenue in the state's cash-strapped budget.
With the new agreements, about 692,000 acres of the 2.1 million acres of state forest will be under lease - that includes about 290,000 acres on which the state does not own the mineral rights. About 750 wells are in production on conservation department lands, but only three of them tap into the Marcellus. State officials expect more than a thousand Marcellus wells could be developed in the next decade.
Five companies yesterday were the apparent high bidders for the new leases located in the Elk, Moshannon, Sproul, Susquehannock, and Tioga State Forests in Cameron, Clearfield, Clinton, Potter and Tioga Counties.
Seneca Resources was the winning bidder on two tracts. The other successful bidders are EXCO Resources Inc.; Anadarko Exploration & Production; Chesapeake Appalachia L.L.C.; and Penn Virginia Oil & Gas Co., based in Radnor.
The new state leases, which are much more environmentally restrictive than the private-sector agreements, limit the drillers to building 123 well pads totaling no more than 645 acres on the six leases - about 2 percent of the land. Marcellus gas developers typically install multiple wells on each site, and tap into the mile-deep formation with a horizontal drilling technique that allows them to reach laterally for thousands of feet.
The new leases also call for the drillers to pay royalties of 18 percent for gas sold from the wells, much higher than the 12.5 percent state minimum. State officials say the revenue generated from royalties from successful wells can far exceed the up-front lease fee.
The growth of Marcellus activity, and its economic potential from public lands, has been staggering.
Until 2007, the state's Oil and Gas Lease Fund had generated $153 million over five decades.
In 2008, in a single auction of new leases, the conservation department generated $166 million from 74,000 acres, surpassing the total generated in the previous 53 years. Those leases went for an average of $2,243 an acre.
Just eight years ago, the state offered 218,000 acres of gas leases in northern Pennsylvania. The gas industry protested the rate of $30 an acre was too high and declined to bid for most of the tracts. Only a quarter of the acreage was leased.
Contact staff writer Andrew Maykuth at 215-854-2947 or amaykuth@phillynews.com.
natural gas land was just leased for $4,020 an acre. That's almost twice what the land went for a year ago.
The land in question was part of the massive Marcellus shale formation that stretches from New York to West Virginia. For natural gas bulls, it's comforting to see bidding wars heat up over shale assets. Big money is beginning to realize that shale will be a very competitive source of U.S. energy, including Exxon as shown by its recent XTO acquistion, and France's Total, as shown by their recent Chesapeake tie-up.
Philly.com: With the new agreements, about 692,000 acres of the 2.1 million acres of state forest will be under lease - that includes about 290,000 acres on which the state does not own the mineral rights. About 750 wells are in production on conservation department lands, but only three of them tap into the Marcellus. State officials expect more than a thousand Marcellus wells could be developed in the next decade.
Five companies yesterday were the apparent high bidders for the new leases located in the Elk, Moshannon, Sproul, Susquehannock, and Tioga State Forests in Cameron, Clearfield, Clinton, Potter and Tioga Counties.
Seneca Resources was the winning bidder on two tracts. The other successful bidders are EXCO Resources Inc.; Anadarko Exploration & Production; Chesapeake Appalachia L.L.C.; and Penn Virginia Oil & Gas Co., based in Radnor.
...
In 2008, in a single auction of new leases, the conservation department generated $166 million from 74,000 acres, surpassing the total generated in the previous 53 years. Those leases went for an average of $2,243 an acre.
HARRISBURG - Natural-gas drillers yesterday bid $128.5 million to develop 32,000 acres of Pennsylvania state forests, twice the revenue the state had budgeted, prompting fears of a headlong rush to overrun public lands to tap into the rich Marcellus Shale.
Gas drillers offered an average of $4,020 per acre - almost twice the amount that such leases generated less than two years ago - for the right to extract natural gas from six tracts of state forest in north-central Pennsylvania.
The robust bidding was further proof of the intense industry interest in the Marcellus Shale, a vast underground formation stretching from New York to West Virginia, and whose sweetest spots underlie much of Pennsylvania.
But John Quigley, acting secretary of the Department of Conservation and Natural Resources, regarded the successful auction as a mixed blessing, saying the windfall could further whet the appetite of policymakers to lease public land to derive immediate revenue without fully understanding the long-term environmental implications of gas development.
"As we sit here this afternoon, fully one third of the state forest is now leased for gas exploration," Quigley said in an interview yesterday. "I think that raises some important questions. How much is too much?"
Jan Jarrett, president of the advocacy group Citizens for Pennsylvania's Future, also called for a suspension of new leases until the impact of drilling could be measured.
"We believe that's enough," she said. "We believe there ought to be a moratorium on further leases on state land until a study can be done to determine what the impact is on the forests and the other uses of the forest."
Rather than leasing more public land, Quigley encouraged policymakers to enact a statewide severance tax on natural gas as a more sustainable revenue source. Gov. Rendell, who last year delayed imposition of a severance tax after the gas industry told him the tax would stymie new development, has called on the legislature to enact the tax by July 1.
An industry trade representative declined to comment on the calls for a severance tax, but lauded the lease sale.
"This shows the industry's ability to generate wealth for Pennsylvanians," said Kathryn Klaber, president of the Marcellus Shale Coalition.
The state conservation department conducted the bidding under duress after the legislature ordered it to generate $60 million for the general fund with new gas leases. The department selected six tracts totaling 31,967 acres and set a minimum bid of $2,000 an acre.
The drillers have a month to send their checks to the state treasury for the new leases, and the $68.5 million that exceeded the legislature's target will flow into the state's Oil and Gas Lease Fund, which under state law must be used for conservation purposes.
Jarrett suggested the state use some of the funds to buy the mineral rights that it does not now own under about 85 percent of the state's parks. Without the rights, the commonwealth has little control over drilling activity on those lands.
"The state cannot prohibit drilling where they don't own mineral rights," she said. "That puts the best areas for public recreation at risk."
But the legislature can order that money in the Oil and Gas Lease Fund be spent for other purposes, and the windfall is likely to trigger a scramble in Harrisburg to redeploy that revenue in the state's cash-strapped budget.
With the new agreements, about 692,000 acres of the 2.1 million acres of state forest will be under lease - that includes about 290,000 acres on which the state does not own the mineral rights. About 750 wells are in production on conservation department lands, but only three of them tap into the Marcellus. State officials expect more than a thousand Marcellus wells could be developed in the next decade.
Five companies yesterday were the apparent high bidders for the new leases located in the Elk, Moshannon, Sproul, Susquehannock, and Tioga State Forests in Cameron, Clearfield, Clinton, Potter and Tioga Counties.
Seneca Resources was the winning bidder on two tracts. The other successful bidders are EXCO Resources Inc.; Anadarko Exploration & Production; Chesapeake Appalachia L.L.C.; and Penn Virginia Oil & Gas Co., based in Radnor.
The new state leases, which are much more environmentally restrictive than the private-sector agreements, limit the drillers to building 123 well pads totaling no more than 645 acres on the six leases - about 2 percent of the land. Marcellus gas developers typically install multiple wells on each site, and tap into the mile-deep formation with a horizontal drilling technique that allows them to reach laterally for thousands of feet.
The new leases also call for the drillers to pay royalties of 18 percent for gas sold from the wells, much higher than the 12.5 percent state minimum. State officials say the revenue generated from royalties from successful wells can far exceed the up-front lease fee.
The growth of Marcellus activity, and its economic potential from public lands, has been staggering.
Until 2007, the state's Oil and Gas Lease Fund had generated $153 million over five decades.
In 2008, in a single auction of new leases, the conservation department generated $166 million from 74,000 acres, surpassing the total generated in the previous 53 years. Those leases went for an average of $2,243 an acre.
Just eight years ago, the state offered 218,000 acres of gas leases in northern Pennsylvania. The gas industry protested the rate of $30 an acre was too high and declined to bid for most of the tracts. Only a quarter of the acreage was leased.
Contact staff writer Andrew Maykuth at 215-854-2947 or amaykuth@phillynews.com.
Tuesday, January 12, 2010
El Paso Pipeline Recommended by U.S. Federal Regulators
By MATTHEW BROWN Associated Press Writer
BILLINGS, Mont. January 11, 2010 (AP)
Federal regulators are recommending approval of two natural gas pipelines that could sharply increase fuel shipments from the Rockies to population centers in the Midwest and on the West Coast.
The Rockies hold an estimated 375 trillion cubic feet of natural gas, or almost as much as the Gulf of Mexico.
The fuel has been promoted as a less-polluting alternative to coal because it emits less greenhouse gas. Yet moves to crank open the spigot in the Rockies are getting pushback from environmentalists worried about the growing number of pipelines crisscrossing the West.
Combined, the two latest proposals would move almost 2 billion cubic feet of natural gas a day — enough to fuel about 9 million homes. That would amount to a roughly 25 percent increase over current gas exports from Colorado, Wyoming and Utah.
The Federal Energy Regulatory Commission is expected to make final decisions on the Bison and Ruby pipelines in the next two to three months, said agency spokeswoman Tamara Young-Allen. Construction could begin by spring.
http://abcnews.go.com/Business/wireStory?id=9531884
BILLINGS, Mont. January 11, 2010 (AP)
Federal regulators are recommending approval of two natural gas pipelines that could sharply increase fuel shipments from the Rockies to population centers in the Midwest and on the West Coast.
The Rockies hold an estimated 375 trillion cubic feet of natural gas, or almost as much as the Gulf of Mexico.
The fuel has been promoted as a less-polluting alternative to coal because it emits less greenhouse gas. Yet moves to crank open the spigot in the Rockies are getting pushback from environmentalists worried about the growing number of pipelines crisscrossing the West.
Combined, the two latest proposals would move almost 2 billion cubic feet of natural gas a day — enough to fuel about 9 million homes. That would amount to a roughly 25 percent increase over current gas exports from Colorado, Wyoming and Utah.
The Federal Energy Regulatory Commission is expected to make final decisions on the Bison and Ruby pipelines in the next two to three months, said agency spokeswoman Tamara Young-Allen. Construction could begin by spring.
http://abcnews.go.com/Business/wireStory?id=9531884
Monday, January 11, 2010
PA Natural Gas Looking for Taxing Leadership
By Kevin Ferris
Inquirer Columnist
Looking at the job and revenue potential from the Marcellus Shale natural gas formation, it's easy to be grateful for the wisdom and foresight of the benevolent being who blessed Pennsylvania with this economic hope in hard times.
However, looking at how state government handles money, it's also easy to imagine that same being reaching for a chisel to carve out an 11th Commandment:
Thou shalt not let greedy Harrisburg pols squander the rewards of Marcellus Shale.
Here are two quick examples why.
In the midst of the Great Recession, SEPTA workers recently went on strike, outraged by the stinginess of an 11.5 percent pay increase. So Gov. Rendell finds $7 million of tax money for signing bonuses.
The legislature cuts funding for programs like the Philadelphia Veterans Multi-Service & Education Center, but wouldn't trim its own slush fund, estimated last month at $200 million. Maybe lawmakers need the cash for bail as Attorney General Tom Corbett scoops them and staff members up by the busload for misusing taxpayer funds in the Bonusgate scandal.
Now Harrisburg wants more to play with, through a severance tax on natural gas extraction. I say no. The industry says no. Some lawmakers say no. When the governor finally said no last year, the idea was shelved.
But no is unlikely to prevail.
Rendell has raised the tax as a possibility for the next round of state fiscal follies. It's understandable. This year's expected budget woes could make last year look like the good times. And most states impose some kind of tax on the production or removal of oil, gas, or other natural resources.
The revenue can be substantial. Judging by census figures from 2007, severance taxes can be a considerable portion of a state's tax collections: 7.1 percent in West Virginia, 10.6 in Oklahoma, 16.2 in New Mexico. Most states collect far less, but Alaska is the winner at 64.4 percent. The 5 percent severance tax Rendell proposed last year would mean projected revenue of $107 million in its first year, and up to $632 million by 2013-14, according to the Commonwealth Foundation. (That can fluctuate dramatically as prices change.)
It's tough for politicians to ignore such potential. So let's assume the tax is coming. Does it have to go to the state's general fund? No.
Instead, share the bounty with taxpayers, either by adding to the current property-tax rebate programs or by paying a dividend directly to state residents.
Pennsylvania has been in the rebate business since the lottery was started, and increased the effort when slots parlors came online. So the infrastructure is in place.
Alaska offers annual dividends to state residents. It started setting aside oil revenue when the Alaska pipeline began production in the 1970s. First came the Alaska Permanent Fund, with a constitutional protection of the principal. The dividends began in 1982. They can range from $300 to $2,000 per person, with $17 billion spent so far. At last count, the fund balance was a healthy $34 billion - even with recent stock market setbacks.
Lawmakers there still debate whether the fund should cover more state expenses, whether to continue the dividend, or what to do when the oil runs out. But if you have to argue about money, better from atop a $34 billion reserve than a deficit.
Harrisburg has the bickering and deficits without the luxury of a reserve, so saving now when there are so many bills to pay might not seem possible. But such foresight - even if lawmakers skip the dividend part and at least establish a protected fund - would ensure that future generations benefit from the Marcellus windfall, too.
I canvassed some of the gubernatorial candidates about how they would spend severance-tax revenue if it were available. Most at least thought it was a good idea to keep Marcellus money out of the general fund and dedicated to specific purposes.
Among the Democrats, Jack Wagner would target localities affected by drilling and environmental protections; Joe Hoeffel would focus on environmental issues related to drilling as well as expanding the Growing Greener program; Tom Knox would look at job creation; and Chris Doherty would create a low-interest loan program for small businesses and a fund to deal with environmental emergencies. (Republican Corbett did not respond to calls. Democrat Dan Onorato expects to announce a plan soon.)
All address the general welfare, but none provides a direct benefit to individuals, and most leave Harrisburg too much leeway on spending the money.
Long-shot GOP candidate Sam Rohrer, a state representative from Berks County, had the most original idea. He suggests looking at leasing more state lands for drilling and the subsequent royalties. (There's an argument to be made that this would bring in more revenue than a severance tax.) Rohrer would take 50 percent of the royalties and put it toward property-tax relief, with the other half helping local governments with drilling expenses.
I'm not sure if Rohrer's candidacy or ideas will attract much attention, let alone prevail. But it's early, in the campaign and in the debate over natural gas taxes. Still plenty of time for some wisdom and foresight to prevail - and to obey that 11th Commandment.
Inquirer Columnist
Looking at the job and revenue potential from the Marcellus Shale natural gas formation, it's easy to be grateful for the wisdom and foresight of the benevolent being who blessed Pennsylvania with this economic hope in hard times.
However, looking at how state government handles money, it's also easy to imagine that same being reaching for a chisel to carve out an 11th Commandment:
Thou shalt not let greedy Harrisburg pols squander the rewards of Marcellus Shale.
Here are two quick examples why.
In the midst of the Great Recession, SEPTA workers recently went on strike, outraged by the stinginess of an 11.5 percent pay increase. So Gov. Rendell finds $7 million of tax money for signing bonuses.
The legislature cuts funding for programs like the Philadelphia Veterans Multi-Service & Education Center, but wouldn't trim its own slush fund, estimated last month at $200 million. Maybe lawmakers need the cash for bail as Attorney General Tom Corbett scoops them and staff members up by the busload for misusing taxpayer funds in the Bonusgate scandal.
Now Harrisburg wants more to play with, through a severance tax on natural gas extraction. I say no. The industry says no. Some lawmakers say no. When the governor finally said no last year, the idea was shelved.
But no is unlikely to prevail.
Rendell has raised the tax as a possibility for the next round of state fiscal follies. It's understandable. This year's expected budget woes could make last year look like the good times. And most states impose some kind of tax on the production or removal of oil, gas, or other natural resources.
The revenue can be substantial. Judging by census figures from 2007, severance taxes can be a considerable portion of a state's tax collections: 7.1 percent in West Virginia, 10.6 in Oklahoma, 16.2 in New Mexico. Most states collect far less, but Alaska is the winner at 64.4 percent. The 5 percent severance tax Rendell proposed last year would mean projected revenue of $107 million in its first year, and up to $632 million by 2013-14, according to the Commonwealth Foundation. (That can fluctuate dramatically as prices change.)
It's tough for politicians to ignore such potential. So let's assume the tax is coming. Does it have to go to the state's general fund? No.
Instead, share the bounty with taxpayers, either by adding to the current property-tax rebate programs or by paying a dividend directly to state residents.
Pennsylvania has been in the rebate business since the lottery was started, and increased the effort when slots parlors came online. So the infrastructure is in place.
Alaska offers annual dividends to state residents. It started setting aside oil revenue when the Alaska pipeline began production in the 1970s. First came the Alaska Permanent Fund, with a constitutional protection of the principal. The dividends began in 1982. They can range from $300 to $2,000 per person, with $17 billion spent so far. At last count, the fund balance was a healthy $34 billion - even with recent stock market setbacks.
Lawmakers there still debate whether the fund should cover more state expenses, whether to continue the dividend, or what to do when the oil runs out. But if you have to argue about money, better from atop a $34 billion reserve than a deficit.
Harrisburg has the bickering and deficits without the luxury of a reserve, so saving now when there are so many bills to pay might not seem possible. But such foresight - even if lawmakers skip the dividend part and at least establish a protected fund - would ensure that future generations benefit from the Marcellus windfall, too.
I canvassed some of the gubernatorial candidates about how they would spend severance-tax revenue if it were available. Most at least thought it was a good idea to keep Marcellus money out of the general fund and dedicated to specific purposes.
Among the Democrats, Jack Wagner would target localities affected by drilling and environmental protections; Joe Hoeffel would focus on environmental issues related to drilling as well as expanding the Growing Greener program; Tom Knox would look at job creation; and Chris Doherty would create a low-interest loan program for small businesses and a fund to deal with environmental emergencies. (Republican Corbett did not respond to calls. Democrat Dan Onorato expects to announce a plan soon.)
All address the general welfare, but none provides a direct benefit to individuals, and most leave Harrisburg too much leeway on spending the money.
Long-shot GOP candidate Sam Rohrer, a state representative from Berks County, had the most original idea. He suggests looking at leasing more state lands for drilling and the subsequent royalties. (There's an argument to be made that this would bring in more revenue than a severance tax.) Rohrer would take 50 percent of the royalties and put it toward property-tax relief, with the other half helping local governments with drilling expenses.
I'm not sure if Rohrer's candidacy or ideas will attract much attention, let alone prevail. But it's early, in the campaign and in the debate over natural gas taxes. Still plenty of time for some wisdom and foresight to prevail - and to obey that 11th Commandment.
Sunday, January 10, 2010
Predicting Natural Gas Useage is an Art
By Thomas Content of the Journal Sentinel
Posted: Jan. 9, 2010 4:00 p.m.
Wisconsin residents have something to brag about during our long, hard winters.
We can take the bitter cold better - and we don't jump to crank up the thermostat as fast as folks who live farther south.
That's the assessment of Marquette University researcher Ron Brown, who runs a business and educational venture, GasDay, serving one-fifth of the homes in the nation that heat with natural gas.
"One of the things we're doing research on right now is trying to model better how people turn their furnaces on and off," Brown said. "If you have a cold day in September, the tough people here in Wisconsin say, 'It's September. We're not going to turn on the furnace.' "
In other states, Brown has found variation in how warm people keep their homes.
"The farther south you go, the warmer people set their thermostats, Brown said. "We can take the cold better than the people in the South."
On days when it's time for Wisconsin residents to crank up the heat, Brown and students are at work helping utilities forecast how much natural gas homeowners across Wisconsin and beyond will consume.
Using mathematical models built with reams of historical weather and natural gas usage data, the team sends daily forecasts to We Energies and utilities around the country.
The forecasts help utilities decide how much gas to buy on a particular day - and avoid buying too much gas on a day when customers don't use as much as expected.
Case in point: the Arctic blast that gripped much of the nation last week. While Milwaukee's temperatures were below normal, the cold wave that struck Springfield, Mo., was the coldest the city had seen in 13 years.
GasDay's been working with the local utility in Springfield for the past decade, and it paid off last week, said Ron McManus of City Utilities of Springfield. The GasDay forecast for how much natural gas Springfield's 82,000 residents would use was right on the mark.
"It was very, very close to what the actual gas level turned out to be," McManus said. "If GasDay does a good job for us, we can reap a little bit of a financial reward. We're a municipal utility, so that just gets passed on to our customers."
Launched in 1993, GasDay has seen growth in recent years, thanks in part to a wave of utility industry mergers that have added more clients, said Brown, director of GasDay and an associate professor at Marquette.
Marquette doesn't release detailed financial information about GasDay. It wasn't designed as a profit-making enterprise, Brown said, but as a university technology transfer activity that supports research and educational opportunities for students. The program is self-funded, Brown said, bringing in enough revenue to cover business expenses, provide research support for two faculty members and fund salaries for three full-time employees and roughly 20 part-time graduate and undergraduate students.
The project could have become a spinoff business for Brown, but he wanted to keep the focus educational, providing hands-on training for engineering and computer science students.
"If I was interested in getting rich, I would be off campus somewhere, as a spinoff," Brown said. "Running a business inside the university with undergraduate students is not the most efficient thing to do, because they only work 10 or so hours a week between their classes. It's a part-time job for them, and a bunch of them graduate every year. So every May I have an awful lot of talent walk out the door. So we're continually dealing with the turnover of students."
The model projects how much natural gas will be used by utility customers based on historical data and short-term weather forecasts for a given area.
For We Energies, the GasDay program sends out about 14 forecasts four times a day, targeting projected natural gas use in various parts of Wisconsin and Michigan's Upper Peninsula.
Gas buyers at We Energies can then notify the operators of the various pipelines that ship natural gas into the state how much they will buy during the coming day.
"They'll change their source of gas for a fraction of a cent difference in price to save money," Brown said.
Saves utility money
Jim Voss, manager of gas purchasing at We Energies, said the Marquette partnership has been a strong one and that the GasDay model has worked well to save the utility from facing penalties from companies that operate natural gas pipelines on the coldest days of the winter. Customers' gas use on such days is often tough to forecast.
"It saves us when we have the very, very cold weather. Obviously the pipelines only have a certain amount of capacity that they can move the gas across, so we need to be as accurate as we can in projecting out our demand," Voss said. "The pipelines, to protect themselves, have some very significant cost penalties if we would take more gas than we're entitled to."
It's hard to quantify how much the utility has saved over the years because of GasDay, but Voss estimates savings in excess of $1 million per year in fees paid to pipeline operators. GasDay also contributes to a more efficient management of the company's purchase of approximately $1 billion in natural gas each year. Every 1% not spent on natural gas represents savings of $10 million.
The project started more than 15 years ago when utility officials expressed frustration to Brown that they didn't have a good handle on how much natural gas customers were going to use on a given day.
GasDay now has 22 customers in 21 states and is running demonstrations for four potential new customers.
"This is far and away our best year," Brown said.
Good experience
Wisconsin's had some below-zero wind chills already this winter, but its memorable bitter cold snaps include 1994 and, most recently, February 2007. Milwaukee closed public schools for two days as temperatures fell to 12 below zero with wind chills of 31 degrees below zero.
Marquette University and GasDay remained open for business.
"I told my students to get out and play in it because it was a day we were going to be talking about for a long time to come," Brown said.
The hands-on training provides engineering students with the opportunity to become more productive workers after they graduate. One former GasDay student employee was named new hire of the year by her employer, Cypress Semiconductor.
"It's because she learned how to talk to people from different disciplines and learned how to solve problems and communicate. That's a great skill to teach an engineer," Brown said.
Becky Kohl, 19, of New Berlin started working at GasDay last summer and found it a much better job for her than "typical teenager work."
"I like the fact that it's a real job," she said.
And it's keeping her ahead of the pack in class, too. When her computer science class started learning how to batch files, that was something she'd already been doing - in the GasDay lab.
Nathan Wilson worked at GasDay as a student and now leads the software development team as an employee.
The job gives him training in managing other software developers and gives him more challenging work than most new grads get in their first engineering jobs, he said.
"It's great, especially with the job market the way it is," he said.
Some are tougher
For Voss and managers of natural gas for other utilities, the worst nightmare is running out of natural gas on the coldest day of the year. But customers don't always crank up the heat at the first sign of cold weather.
The typical customer reaction on Day One: Put on a sweater. But if a bitter cold snap persists, we turn up the heat if we're feeling chilly on Day Two.
"We call it the 'heck-with-it hook,' " Brown said.
But Badger State residents should hold off on bragging too much about how hardy we are.
Said Brown, "We just started forecasting loads in Alaska, and they're tougher than we are."
Posted: Jan. 9, 2010 4:00 p.m.
Wisconsin residents have something to brag about during our long, hard winters.
We can take the bitter cold better - and we don't jump to crank up the thermostat as fast as folks who live farther south.
That's the assessment of Marquette University researcher Ron Brown, who runs a business and educational venture, GasDay, serving one-fifth of the homes in the nation that heat with natural gas.
"One of the things we're doing research on right now is trying to model better how people turn their furnaces on and off," Brown said. "If you have a cold day in September, the tough people here in Wisconsin say, 'It's September. We're not going to turn on the furnace.' "
In other states, Brown has found variation in how warm people keep their homes.
"The farther south you go, the warmer people set their thermostats, Brown said. "We can take the cold better than the people in the South."
On days when it's time for Wisconsin residents to crank up the heat, Brown and students are at work helping utilities forecast how much natural gas homeowners across Wisconsin and beyond will consume.
Using mathematical models built with reams of historical weather and natural gas usage data, the team sends daily forecasts to We Energies and utilities around the country.
The forecasts help utilities decide how much gas to buy on a particular day - and avoid buying too much gas on a day when customers don't use as much as expected.
Case in point: the Arctic blast that gripped much of the nation last week. While Milwaukee's temperatures were below normal, the cold wave that struck Springfield, Mo., was the coldest the city had seen in 13 years.
GasDay's been working with the local utility in Springfield for the past decade, and it paid off last week, said Ron McManus of City Utilities of Springfield. The GasDay forecast for how much natural gas Springfield's 82,000 residents would use was right on the mark.
"It was very, very close to what the actual gas level turned out to be," McManus said. "If GasDay does a good job for us, we can reap a little bit of a financial reward. We're a municipal utility, so that just gets passed on to our customers."
Launched in 1993, GasDay has seen growth in recent years, thanks in part to a wave of utility industry mergers that have added more clients, said Brown, director of GasDay and an associate professor at Marquette.
Marquette doesn't release detailed financial information about GasDay. It wasn't designed as a profit-making enterprise, Brown said, but as a university technology transfer activity that supports research and educational opportunities for students. The program is self-funded, Brown said, bringing in enough revenue to cover business expenses, provide research support for two faculty members and fund salaries for three full-time employees and roughly 20 part-time graduate and undergraduate students.
The project could have become a spinoff business for Brown, but he wanted to keep the focus educational, providing hands-on training for engineering and computer science students.
"If I was interested in getting rich, I would be off campus somewhere, as a spinoff," Brown said. "Running a business inside the university with undergraduate students is not the most efficient thing to do, because they only work 10 or so hours a week between their classes. It's a part-time job for them, and a bunch of them graduate every year. So every May I have an awful lot of talent walk out the door. So we're continually dealing with the turnover of students."
The model projects how much natural gas will be used by utility customers based on historical data and short-term weather forecasts for a given area.
For We Energies, the GasDay program sends out about 14 forecasts four times a day, targeting projected natural gas use in various parts of Wisconsin and Michigan's Upper Peninsula.
Gas buyers at We Energies can then notify the operators of the various pipelines that ship natural gas into the state how much they will buy during the coming day.
"They'll change their source of gas for a fraction of a cent difference in price to save money," Brown said.
Saves utility money
Jim Voss, manager of gas purchasing at We Energies, said the Marquette partnership has been a strong one and that the GasDay model has worked well to save the utility from facing penalties from companies that operate natural gas pipelines on the coldest days of the winter. Customers' gas use on such days is often tough to forecast.
"It saves us when we have the very, very cold weather. Obviously the pipelines only have a certain amount of capacity that they can move the gas across, so we need to be as accurate as we can in projecting out our demand," Voss said. "The pipelines, to protect themselves, have some very significant cost penalties if we would take more gas than we're entitled to."
It's hard to quantify how much the utility has saved over the years because of GasDay, but Voss estimates savings in excess of $1 million per year in fees paid to pipeline operators. GasDay also contributes to a more efficient management of the company's purchase of approximately $1 billion in natural gas each year. Every 1% not spent on natural gas represents savings of $10 million.
The project started more than 15 years ago when utility officials expressed frustration to Brown that they didn't have a good handle on how much natural gas customers were going to use on a given day.
GasDay now has 22 customers in 21 states and is running demonstrations for four potential new customers.
"This is far and away our best year," Brown said.
Good experience
Wisconsin's had some below-zero wind chills already this winter, but its memorable bitter cold snaps include 1994 and, most recently, February 2007. Milwaukee closed public schools for two days as temperatures fell to 12 below zero with wind chills of 31 degrees below zero.
Marquette University and GasDay remained open for business.
"I told my students to get out and play in it because it was a day we were going to be talking about for a long time to come," Brown said.
The hands-on training provides engineering students with the opportunity to become more productive workers after they graduate. One former GasDay student employee was named new hire of the year by her employer, Cypress Semiconductor.
"It's because she learned how to talk to people from different disciplines and learned how to solve problems and communicate. That's a great skill to teach an engineer," Brown said.
Becky Kohl, 19, of New Berlin started working at GasDay last summer and found it a much better job for her than "typical teenager work."
"I like the fact that it's a real job," she said.
And it's keeping her ahead of the pack in class, too. When her computer science class started learning how to batch files, that was something she'd already been doing - in the GasDay lab.
Nathan Wilson worked at GasDay as a student and now leads the software development team as an employee.
The job gives him training in managing other software developers and gives him more challenging work than most new grads get in their first engineering jobs, he said.
"It's great, especially with the job market the way it is," he said.
Some are tougher
For Voss and managers of natural gas for other utilities, the worst nightmare is running out of natural gas on the coldest day of the year. But customers don't always crank up the heat at the first sign of cold weather.
The typical customer reaction on Day One: Put on a sweater. But if a bitter cold snap persists, we turn up the heat if we're feeling chilly on Day Two.
"We call it the 'heck-with-it hook,' " Brown said.
But Badger State residents should hold off on bragging too much about how hardy we are.
Said Brown, "We just started forecasting loads in Alaska, and they're tougher than we are."
Saturday, January 9, 2010
Rig Count for Natural Gas Wells Up by 22 to 781 Rigs
NEW YORK, Jan 8 (Reuters) - The number of rigs drilling for natural gas in the United States rose 22 this week to 781, according to a report on Friday by oil services firm Baker Hughes in Houston.
The U.S. natural gas drilling rig count has rebounded after bottoming at 665 on July 17, its lowest level since May 3, 2002, when there were 640 gas rigs operating.
But the rig count is still down sharply since peaking above 1,600 in September 2008. It currently stands at 458 below the same week last year.
Many gas producers had scaled back drilling operations earlier this year with credit tight and natural gas cash prices sinking this summer to $2.50 per million British thermal units (mmBtu), a 7-1/2 year low and down some 80 percent from July 2008 highs above $13.
But gas prices have been on a steady uptrend for the last three months, rallying 15 percent in December alone to more than $5.50 as a steady stream of cold air kicked up demand.
Some traders fear prices are now high enough to encourage more onshore drilling, noting nearly all shale gas production is profitable near that level.
While drilling has dropped over the past year or so, traders noted production has not slowed much, with recent government data showing gross September gas output in the lower 48 states down 2.2 percent from August but up more than 11 percent from year-earlier levels when two Gulf of Mexico storms crippled output.
Many traders agreed more rig cuts may be necessary to balance the market, with gas inventories still at record highs for this time of year and demand, particularly from the industrial sector, down sharply due to a lackluster economy. (Reporting by Edward McAllister; Editing by Christian Wiessner)
The U.S. natural gas drilling rig count has rebounded after bottoming at 665 on July 17, its lowest level since May 3, 2002, when there were 640 gas rigs operating.
But the rig count is still down sharply since peaking above 1,600 in September 2008. It currently stands at 458 below the same week last year.
Many gas producers had scaled back drilling operations earlier this year with credit tight and natural gas cash prices sinking this summer to $2.50 per million British thermal units (mmBtu), a 7-1/2 year low and down some 80 percent from July 2008 highs above $13.
But gas prices have been on a steady uptrend for the last three months, rallying 15 percent in December alone to more than $5.50 as a steady stream of cold air kicked up demand.
Some traders fear prices are now high enough to encourage more onshore drilling, noting nearly all shale gas production is profitable near that level.
While drilling has dropped over the past year or so, traders noted production has not slowed much, with recent government data showing gross September gas output in the lower 48 states down 2.2 percent from August but up more than 11 percent from year-earlier levels when two Gulf of Mexico storms crippled output.
Many traders agreed more rig cuts may be necessary to balance the market, with gas inventories still at record highs for this time of year and demand, particularly from the industrial sector, down sharply due to a lackluster economy. (Reporting by Edward McAllister; Editing by Christian Wiessner)
Friday, January 8, 2010
Natural Gas Prices Rise on the Spot Market - $9.92/MMBtu
http://www.cattlenetwork.com/Natuarl-Gas-Outlook--Spot-Prices-Rise-With-Increases-Over-10-Percent/2010-01-07/Article.aspx?oid=973402
Prices
Since last Wednesday, December 30, natural gas spot prices increased in all markets east of the Rockies. Frigid temperatures throughout most of the lower 48 States and rising crude oil prices appear to have contributed to rising natural gas prices. Price increases since last Wednesday ranged between $0.06 and $7.89 per MMBtu. In general, prices increased by less than $1 per MMBtu at most market locations on the week. However, significant price run-ups in select regions of the lower 48 States characterized the week. The largest price increases were generally concentrated in the heavy natural gas heating demand areas of the Northeast and Midcontinent. In the Northeast region, prices climbed between $1.01 and $4.19 per MMBtu at most market locations, while the Midcontinent posted gains ranging between $1.00 and $2.31 per MMBtu. The largest weekly price increase in the lower 48 States occurred at the Florida citygate, where prices rose $7.89 per MMBtu, or 127 percent, to average $14.12 per MMBtu in trading yesterday. This substantial price increase may be the result of high natural gas demand in the region, which contributed to constrained pipeline capacity and an Overage Alert Day on the Florida Gas Transmission System (see Transportation Update below). Although price increases elsewhere were significantly less pronounced, weekly gains of more than 10 percent occurred at most market locations. In contrast to the overall upward trend in the Northeast and Midcontinent, prices in northern California and a couple points in the Rockies declined between 5 and 26 cents per MMBtu, or about 1 to 2 percent, on the week.
With the recent price increases, natural gas spot prices at the Henry Hub are now trading above year-ago levels. With the persistence of wintry weather throughout most of the lower 48 States since December 23, natural gas prices are now trading above year-ago levels for the first time since October 2008. At $6.47 per MMBtu in trading on January 6, prices at the Henry Hub were 9 percent, or 37 cents per MMBtu, above year-ago levels. Natural gas spot prices at the Henry Hub consistently have traded below year-earlier levels since October 6, 2008.
Natuarl Gas Outlook: Spot Prices Rise With Increases Over 10 Percent
At the NYMEX, the prices for natural gas delivery contracts through January 2011 increased by roughly 20 cents per MMBtu, or about 3 percent, during the report week. On the week, the price of the February contract increased 30 cents per MMBtu, or about 5 percent, posting the largest gain on the 12-month (February 2010 through January 2011) futures strip. The other remaining 11 contracts on the 12-month strip rose between 13 and 26 cents per MMBtu, or about 2 to 4 percent. Overall, prices for the 12-month futures strip averaged $6.19 per MMBtu as of Wednesday, January 6. Prices for delivery for the remainder of 2009-2010 heating season (February 2010 through March 2010) averaged $5.98 per MMBtu. The January 2010 contract expired in trading on December 29, 2009 at $6.01 per MMBtu, climbing $2.39 per MMBtu, or 66 percent, during its tenure as the near-month contract. Since becoming the near-month contract on December 30, the February 2010 contract has traded at a discount to the Henry Hub spot price, suggesting that producers have incentives to withdraw natural gas from storage to meet current demand for natural gas.
Storage
Working gas in storage decreased to 3,123 Bcf as of Friday, January 1, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net withdrawal was 153 Bcf, compared with last year’s net withdrawal of 61 Bcf for the report week. Colder-than-normal temperatures likely contributed to the above-normal rate of withdrawals during the report week. Working gas inventories are 286 Bcf higher than year-ago levels and 316 Bcf above the 5-year average level (2005-2009). Working gas in storage continues to exceed historical levels by significant margins for this time of year in each of the three storage regions.
Temperatures were generally colder than normal in most Census Divisions in the lower 48 States during the week ended December 31, 2009. Based on the National Weather Service’s degree-day data, temperatures in the lower 48 States during the week were, on average, about 1 degree colder than normal and 8 degrees colder than last year’s levels (see Temperature Maps and Data). Temperatures were warmest in the Pacific Census Division, where the average temperature was 46 degrees. Elsewhere in the lower 48 States, average temperatures ranged between 19 and 40 degrees. In contrast to the rest of the lower 48 States, the Middle Atlantic and East North Central Census Divisions reported warmer-than-normal temperatures.
Natuarl Gas Outlook: Spot Prices Rise With Increases Over 10 Percent
Other Market Trends
Cold weather increases residential natural gas consumption by 16 percent in October. EIA released the December 2009 Natural Gas Monthly (NGM), including data through October 2009, on December 29. Delivered volumes of natural gas increased from 47.3 Bcf per day in September to 48.4 Bcf per day in October, likely the result of cooler weather and increased space-heating demand. Residential consumption jumped from 4 Bcf per day in September to about 8 Bcf per day in October. Residential consumption in October was almost 16 percent higher than its year-ago level of 6.9 Bcf per day and 18 percent higher than the 5-year (2004-2008) average for the month of 6.8 Bcf per day. Additionally, heating degree-days in October 2009 totaled 331, 18 percent higher that the 281 heating degree-days in October 2008. Industrial and commercial consumption also increased, while deliveries to electric power customers declined from 22.9 Bcf per day in September to 17.3 Bcf per day in October. According to the NGM, dry natural gas production rose to 57.6 Bcf per day in October 2009, from 56.6 Bcf per day the previous month. Production in October was about 5 percent higher than the same month in 2008, when dry production totaled 54.9 Bcf per day. Aggregate dry production from January through October 2009 was 17,565 Bcf, compared with 16,903 Bcf for the same period in 2008. Wellhead prices increased about 23 percent, from $2.92 per thousand cubic feet (Mcf) in September to $3.60 per Mcf in October. The average wellhead price in October was about 43 percent lower than their year-ago levels of $6.36 per Mcf.
Lower Prices Hurt Oil and Natural Gas Revenues in 2008. EIA released Performance Profiles of Major Energy Producers 2008 on December 24, 2009, which included results from reports of financial and operating data from 27 U.S.-based major energy companies. Net income of oil and natural gas producers submitting information to EIA fell to a 5-year low in 2008, dropping from $127 billion in 2007 to $87 billion in 2008. According to the report, declines in both oil and natural gas prices over 2008 slowed revenue growth, while operating costs increased sharply. Both upstream and downstream profits fell in 2008. Worldwide production of natural gas increased, according to the report, while worldwide reserve additions fell. When reporting reserves, companies must use year-end prices. The decline in prices over 2008 likely led to the decrease in reserve additions, according to the report. The companies included in the report represent 41 percent of U.S. crude oil production, and 43 percent of U.S. natural gas production in 2008.
EIA Issues Report on Revisions in Natural Gas Monthly Consumption and Price Data, 2004-2007. On December 31, 2009, EIA issued a report detailing revisions to preliminary data published in the Natural Gas Monthly prior to publication as final data. The preliminary data reflect Form EIA-857, “Monthly Report of Natural Gas Purchases and Deliveries to Consumers,” while final adjusted figures reflect results from the EIA-176, “Annual Report of Natural and Supplemental Gas Supply and Disposition.” Overall, there was no pattern in 4-year and annual mean revision errors, suggesting that a variety of factors, including market conditions and State- and respondent-specific issues, were responsible for the revisions. The full report is available here: http://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2009/ngmrevisionstudy/ngmrevisionstudy.pdf
FERC Releases Environmental Impact Statement on the Bison Pipeline Project. On December 29, 2009, the Federal Energy Regulatory Commission (FERC) released an environmental impact statement (EIS) for natural gas pipeline facilities by Bison Pipeline, LLC. The Bison Pipeline would traverse Wyoming, Montana, and North Dakota. The pipeline would consist of 301.2 miles of new 30-inch diameter pipeline with the capacity to transport 477 million cubic feet (MMcf) of natural gas per day. Facilities would also include a compressor station, 2 meter stations, 19 mainline valves, and 3 pig launcher facilities. The pipeline would have a connection with the Northern Border pipeline system near Northern Border’s Compressor Station #6, located in Morton County, North Dakota. FERC’s EIS concluded that the project would result in some adverse environmental impacts. However, the proposed project’s compliance with applicable laws, regulations, and additional measures the EIS recommended during construction and operation would mitigate these adverse impacts.
Natural Gas Transportation Update
- Many interstate pipelines issued operational notices limiting flexibility for imbalances this week, citing extreme weather conditions and high demand for transportation services. In the Midwest, Northern Natural Gas Company today (January 7) issued a System Overrun Limitation (SOL) for its market areas in Iowa, Minnesota, and Wisconsin. The SOL restricts deliveries from the system exceeding nominations. The company cited “much lower-than-normal system-weighted temperatures” when informing customers that quantities received above nominations will be subject to penalties. As a result of extreme temperatures in supply areas, Natural Gas Pipeline Company of America (NGPL) reported being at capacity for delivery points in Indiana and Illinois. NGPL also reported interruptions to supply in Arkansas on Tuesday, January 5, as a result of cold weather. “Freeze-offs,” or temporary interruptions of production because of equipment malfunctions resulting from cold temperatures occurred in the State, affecting more than 200 MMcf per day of supply on the system, according to the pipeline company.
- As the coldest temperatures of the current weather system moved across the country, pipeline companies with market areas in the Northeast prepared for large-scale demand increases. Citing high demand conditions on its system, Texas Eastern Transmission Corporation, a subsidiary of Spectra Energy Corporation, on Wednesday, January 6, announced interruptions of all non-firm services for supplies through Chester Junction, located outside of Philadelphia, Pennsylvania, as well as deliveries downstream of Perulack, Pennsylvania, which is slightly west of Harrisburg. Similar restrictions are in place at critical areas on Algonquin Gas Transmission Company and East Tennessee Natural Gas Company, both of which Spectra Energy also owns.
- With extreme weather conditions also occurring in the Southeast, pipelines such as Florida Gas Transmission Company (FGT) and Southern Natural Gas Company (SNG) reported restrictions in transportation services as well. FGT on Tuesday, January 5, reduced the acceptable level of imbalances on its system from 10 percent to 5 percent, citing very high demand flow and temperatures below 40 degrees in its system territory. SNG was allocating available capacity among shippers for the gas day of Thursday, January 7. In addition, SNG experienced an unscheduled outage on its 24-inch diameter second North Main Line in west-central Mississippi, upstream of its Louisville Compressor Station. SNG isolated and removed the line from service Wednesday morning, but confirmed that there would be no immediate impact to shipper nominations.
- Also in the Southeast, Monroe Gas Storage Company, LLC declared a force majeure event for January 6 and 7 because of the extreme weather in Mississippi. The company, which owns a storage field with a working gas capacity of 12 Bcf in Monroe County, Mississippi, said that operational freeze-offs were affecting its ability to withdrawal gas. The company ceased providing interruptible withdrawal services, and reduced all firm withdrawal service on a pro-rata basis to approximately 62 percent of maximum contract withdrawal quantities.
Prices
Since last Wednesday, December 30, natural gas spot prices increased in all markets east of the Rockies. Frigid temperatures throughout most of the lower 48 States and rising crude oil prices appear to have contributed to rising natural gas prices. Price increases since last Wednesday ranged between $0.06 and $7.89 per MMBtu. In general, prices increased by less than $1 per MMBtu at most market locations on the week. However, significant price run-ups in select regions of the lower 48 States characterized the week. The largest price increases were generally concentrated in the heavy natural gas heating demand areas of the Northeast and Midcontinent. In the Northeast region, prices climbed between $1.01 and $4.19 per MMBtu at most market locations, while the Midcontinent posted gains ranging between $1.00 and $2.31 per MMBtu. The largest weekly price increase in the lower 48 States occurred at the Florida citygate, where prices rose $7.89 per MMBtu, or 127 percent, to average $14.12 per MMBtu in trading yesterday. This substantial price increase may be the result of high natural gas demand in the region, which contributed to constrained pipeline capacity and an Overage Alert Day on the Florida Gas Transmission System (see Transportation Update below). Although price increases elsewhere were significantly less pronounced, weekly gains of more than 10 percent occurred at most market locations. In contrast to the overall upward trend in the Northeast and Midcontinent, prices in northern California and a couple points in the Rockies declined between 5 and 26 cents per MMBtu, or about 1 to 2 percent, on the week.
With the recent price increases, natural gas spot prices at the Henry Hub are now trading above year-ago levels. With the persistence of wintry weather throughout most of the lower 48 States since December 23, natural gas prices are now trading above year-ago levels for the first time since October 2008. At $6.47 per MMBtu in trading on January 6, prices at the Henry Hub were 9 percent, or 37 cents per MMBtu, above year-ago levels. Natural gas spot prices at the Henry Hub consistently have traded below year-earlier levels since October 6, 2008.
Natuarl Gas Outlook: Spot Prices Rise With Increases Over 10 Percent
At the NYMEX, the prices for natural gas delivery contracts through January 2011 increased by roughly 20 cents per MMBtu, or about 3 percent, during the report week. On the week, the price of the February contract increased 30 cents per MMBtu, or about 5 percent, posting the largest gain on the 12-month (February 2010 through January 2011) futures strip. The other remaining 11 contracts on the 12-month strip rose between 13 and 26 cents per MMBtu, or about 2 to 4 percent. Overall, prices for the 12-month futures strip averaged $6.19 per MMBtu as of Wednesday, January 6. Prices for delivery for the remainder of 2009-2010 heating season (February 2010 through March 2010) averaged $5.98 per MMBtu. The January 2010 contract expired in trading on December 29, 2009 at $6.01 per MMBtu, climbing $2.39 per MMBtu, or 66 percent, during its tenure as the near-month contract. Since becoming the near-month contract on December 30, the February 2010 contract has traded at a discount to the Henry Hub spot price, suggesting that producers have incentives to withdraw natural gas from storage to meet current demand for natural gas.
Storage
Working gas in storage decreased to 3,123 Bcf as of Friday, January 1, according to EIA’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net withdrawal was 153 Bcf, compared with last year’s net withdrawal of 61 Bcf for the report week. Colder-than-normal temperatures likely contributed to the above-normal rate of withdrawals during the report week. Working gas inventories are 286 Bcf higher than year-ago levels and 316 Bcf above the 5-year average level (2005-2009). Working gas in storage continues to exceed historical levels by significant margins for this time of year in each of the three storage regions.
Temperatures were generally colder than normal in most Census Divisions in the lower 48 States during the week ended December 31, 2009. Based on the National Weather Service’s degree-day data, temperatures in the lower 48 States during the week were, on average, about 1 degree colder than normal and 8 degrees colder than last year’s levels (see Temperature Maps and Data). Temperatures were warmest in the Pacific Census Division, where the average temperature was 46 degrees. Elsewhere in the lower 48 States, average temperatures ranged between 19 and 40 degrees. In contrast to the rest of the lower 48 States, the Middle Atlantic and East North Central Census Divisions reported warmer-than-normal temperatures.
Natuarl Gas Outlook: Spot Prices Rise With Increases Over 10 Percent
Other Market Trends
Cold weather increases residential natural gas consumption by 16 percent in October. EIA released the December 2009 Natural Gas Monthly (NGM), including data through October 2009, on December 29. Delivered volumes of natural gas increased from 47.3 Bcf per day in September to 48.4 Bcf per day in October, likely the result of cooler weather and increased space-heating demand. Residential consumption jumped from 4 Bcf per day in September to about 8 Bcf per day in October. Residential consumption in October was almost 16 percent higher than its year-ago level of 6.9 Bcf per day and 18 percent higher than the 5-year (2004-2008) average for the month of 6.8 Bcf per day. Additionally, heating degree-days in October 2009 totaled 331, 18 percent higher that the 281 heating degree-days in October 2008. Industrial and commercial consumption also increased, while deliveries to electric power customers declined from 22.9 Bcf per day in September to 17.3 Bcf per day in October. According to the NGM, dry natural gas production rose to 57.6 Bcf per day in October 2009, from 56.6 Bcf per day the previous month. Production in October was about 5 percent higher than the same month in 2008, when dry production totaled 54.9 Bcf per day. Aggregate dry production from January through October 2009 was 17,565 Bcf, compared with 16,903 Bcf for the same period in 2008. Wellhead prices increased about 23 percent, from $2.92 per thousand cubic feet (Mcf) in September to $3.60 per Mcf in October. The average wellhead price in October was about 43 percent lower than their year-ago levels of $6.36 per Mcf.
Lower Prices Hurt Oil and Natural Gas Revenues in 2008. EIA released Performance Profiles of Major Energy Producers 2008 on December 24, 2009, which included results from reports of financial and operating data from 27 U.S.-based major energy companies. Net income of oil and natural gas producers submitting information to EIA fell to a 5-year low in 2008, dropping from $127 billion in 2007 to $87 billion in 2008. According to the report, declines in both oil and natural gas prices over 2008 slowed revenue growth, while operating costs increased sharply. Both upstream and downstream profits fell in 2008. Worldwide production of natural gas increased, according to the report, while worldwide reserve additions fell. When reporting reserves, companies must use year-end prices. The decline in prices over 2008 likely led to the decrease in reserve additions, according to the report. The companies included in the report represent 41 percent of U.S. crude oil production, and 43 percent of U.S. natural gas production in 2008.
EIA Issues Report on Revisions in Natural Gas Monthly Consumption and Price Data, 2004-2007. On December 31, 2009, EIA issued a report detailing revisions to preliminary data published in the Natural Gas Monthly prior to publication as final data. The preliminary data reflect Form EIA-857, “Monthly Report of Natural Gas Purchases and Deliveries to Consumers,” while final adjusted figures reflect results from the EIA-176, “Annual Report of Natural and Supplemental Gas Supply and Disposition.” Overall, there was no pattern in 4-year and annual mean revision errors, suggesting that a variety of factors, including market conditions and State- and respondent-specific issues, were responsible for the revisions. The full report is available here: http://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2009/ngmrevisionstudy/ngmrevisionstudy.pdf
FERC Releases Environmental Impact Statement on the Bison Pipeline Project. On December 29, 2009, the Federal Energy Regulatory Commission (FERC) released an environmental impact statement (EIS) for natural gas pipeline facilities by Bison Pipeline, LLC. The Bison Pipeline would traverse Wyoming, Montana, and North Dakota. The pipeline would consist of 301.2 miles of new 30-inch diameter pipeline with the capacity to transport 477 million cubic feet (MMcf) of natural gas per day. Facilities would also include a compressor station, 2 meter stations, 19 mainline valves, and 3 pig launcher facilities. The pipeline would have a connection with the Northern Border pipeline system near Northern Border’s Compressor Station #6, located in Morton County, North Dakota. FERC’s EIS concluded that the project would result in some adverse environmental impacts. However, the proposed project’s compliance with applicable laws, regulations, and additional measures the EIS recommended during construction and operation would mitigate these adverse impacts.
Natural Gas Transportation Update
- Many interstate pipelines issued operational notices limiting flexibility for imbalances this week, citing extreme weather conditions and high demand for transportation services. In the Midwest, Northern Natural Gas Company today (January 7) issued a System Overrun Limitation (SOL) for its market areas in Iowa, Minnesota, and Wisconsin. The SOL restricts deliveries from the system exceeding nominations. The company cited “much lower-than-normal system-weighted temperatures” when informing customers that quantities received above nominations will be subject to penalties. As a result of extreme temperatures in supply areas, Natural Gas Pipeline Company of America (NGPL) reported being at capacity for delivery points in Indiana and Illinois. NGPL also reported interruptions to supply in Arkansas on Tuesday, January 5, as a result of cold weather. “Freeze-offs,” or temporary interruptions of production because of equipment malfunctions resulting from cold temperatures occurred in the State, affecting more than 200 MMcf per day of supply on the system, according to the pipeline company.
- As the coldest temperatures of the current weather system moved across the country, pipeline companies with market areas in the Northeast prepared for large-scale demand increases. Citing high demand conditions on its system, Texas Eastern Transmission Corporation, a subsidiary of Spectra Energy Corporation, on Wednesday, January 6, announced interruptions of all non-firm services for supplies through Chester Junction, located outside of Philadelphia, Pennsylvania, as well as deliveries downstream of Perulack, Pennsylvania, which is slightly west of Harrisburg. Similar restrictions are in place at critical areas on Algonquin Gas Transmission Company and East Tennessee Natural Gas Company, both of which Spectra Energy also owns.
- With extreme weather conditions also occurring in the Southeast, pipelines such as Florida Gas Transmission Company (FGT) and Southern Natural Gas Company (SNG) reported restrictions in transportation services as well. FGT on Tuesday, January 5, reduced the acceptable level of imbalances on its system from 10 percent to 5 percent, citing very high demand flow and temperatures below 40 degrees in its system territory. SNG was allocating available capacity among shippers for the gas day of Thursday, January 7. In addition, SNG experienced an unscheduled outage on its 24-inch diameter second North Main Line in west-central Mississippi, upstream of its Louisville Compressor Station. SNG isolated and removed the line from service Wednesday morning, but confirmed that there would be no immediate impact to shipper nominations.
- Also in the Southeast, Monroe Gas Storage Company, LLC declared a force majeure event for January 6 and 7 because of the extreme weather in Mississippi. The company, which owns a storage field with a working gas capacity of 12 Bcf in Monroe County, Mississippi, said that operational freeze-offs were affecting its ability to withdrawal gas. The company ceased providing interruptible withdrawal services, and reduced all firm withdrawal service on a pro-rata basis to approximately 62 percent of maximum contract withdrawal quantities.
Thursday, January 7, 2010
Rule Changes for Drilling Natural Gas on US Leases
Associated Press
WASHINGTON -- Interior Secretary Ken Salazar on Wednesday announced policy changes he said would bring more scrutiny and a greater public voice in how oil and gas leases are awarded on public lands.
Mr. Salazar said the changes should ensure stricter environmental standards in oil and gas leasing while bringing more clarity to the process for energy companies hoping to drill on public lands, mostly in Western states.
"We don't believe we ought to be drilling anywhere and everywhere," Mr. Salazar said at a news conference. "We believe we need a balanced approach and a thoughtful approach" that allows development of oil and gas leases on public lands while also protecting national parks, endangered species and municipal watersheds.
Mr. Salazar, a Democratic former senator from Colorado, criticized the Bush administration for what he called a "headlong rush" to lease public lands. Early last year, Salazar suspended 60 of 77 leases in Utah approved in that administration's waning days.
The changes announced Wednesday are intended to bring greater consistency and public engagement to onshore oil and gas leasing, Mr. Salazar said, with a goal of reducing legal challenges that have cost taxpayers millions of dollars and energy companies months or even years of delays.
About 1% of oil and gas leases on public lands were protested in 1998, he said, a figure that jumped to about 40% in 2008. The main reason for the increase was that leases were offered in places where they shouldn't have been or without enough agency scrutiny or public participation, Mr. Salazar said.
"In the prior administration the oil and gas industry was the king of the world. Whatever they wanted happened," he said.
Democrats and environmental groups hailed the announcement, saying it marked a significant step toward a balanced, common-sense approach to energy development on public lands.
"The reforms announced today will help ensure that wildlife, water, and our public lands receive the important protections they deserve," said Carl Pope, executive director of the Sierra Club.
But Republicans and industry groups said the changes would continue the Obama administration's pattern of delaying development of natural gas on federal lands in the West. The changes will create extra layers of red tape that will allow government bureaucrats to trump the expertise of geologists and engineers, the Independent Petroleum Association of Mountain States said in a statement.
Kathleen Sgamma, the group's director of government affairs, said the Interior Department was blocking more than $100 million worth of leases that companies have paid for but can't gain access to.
"This administration has leased less acreage than any other on record and appears determined to throw up every roadblock possible to stall and ultimately halt energy development on federal lands," said Rep. Doc Hastings (R., Wash.), the senior Republican on the House Natural Resources Committee.
But Rep. Nick Rahall (D., W.Va.), the panel's chairman, said the changes "move us closer to balancing the scales after a decade in which oil and gas companies had free reign to run roughshod on America's public lands."
Copyright © 2010 Associated Press
WASHINGTON -- Interior Secretary Ken Salazar on Wednesday announced policy changes he said would bring more scrutiny and a greater public voice in how oil and gas leases are awarded on public lands.
Mr. Salazar said the changes should ensure stricter environmental standards in oil and gas leasing while bringing more clarity to the process for energy companies hoping to drill on public lands, mostly in Western states.
"We don't believe we ought to be drilling anywhere and everywhere," Mr. Salazar said at a news conference. "We believe we need a balanced approach and a thoughtful approach" that allows development of oil and gas leases on public lands while also protecting national parks, endangered species and municipal watersheds.
Mr. Salazar, a Democratic former senator from Colorado, criticized the Bush administration for what he called a "headlong rush" to lease public lands. Early last year, Salazar suspended 60 of 77 leases in Utah approved in that administration's waning days.
The changes announced Wednesday are intended to bring greater consistency and public engagement to onshore oil and gas leasing, Mr. Salazar said, with a goal of reducing legal challenges that have cost taxpayers millions of dollars and energy companies months or even years of delays.
About 1% of oil and gas leases on public lands were protested in 1998, he said, a figure that jumped to about 40% in 2008. The main reason for the increase was that leases were offered in places where they shouldn't have been or without enough agency scrutiny or public participation, Mr. Salazar said.
"In the prior administration the oil and gas industry was the king of the world. Whatever they wanted happened," he said.
Democrats and environmental groups hailed the announcement, saying it marked a significant step toward a balanced, common-sense approach to energy development on public lands.
"The reforms announced today will help ensure that wildlife, water, and our public lands receive the important protections they deserve," said Carl Pope, executive director of the Sierra Club.
But Republicans and industry groups said the changes would continue the Obama administration's pattern of delaying development of natural gas on federal lands in the West. The changes will create extra layers of red tape that will allow government bureaucrats to trump the expertise of geologists and engineers, the Independent Petroleum Association of Mountain States said in a statement.
Kathleen Sgamma, the group's director of government affairs, said the Interior Department was blocking more than $100 million worth of leases that companies have paid for but can't gain access to.
"This administration has leased less acreage than any other on record and appears determined to throw up every roadblock possible to stall and ultimately halt energy development on federal lands," said Rep. Doc Hastings (R., Wash.), the senior Republican on the House Natural Resources Committee.
But Rep. Nick Rahall (D., W.Va.), the panel's chairman, said the changes "move us closer to balancing the scales after a decade in which oil and gas companies had free reign to run roughshod on America's public lands."
Copyright © 2010 Associated Press
Wednesday, January 6, 2010
Noble Energy Buys Suncor Energy America Natural Gas Assets
HOUSTON, Jan. 5 /PRNewswire-FirstCall/ -- Noble Energy, Inc. (NYSE: NBL) announced today that it has entered into a definitive agreement to acquire substantially all of the Rockies upstream assets of Petro-Canada Resources (USA) Inc. and Suncor Energy (Natural Gas) America Inc. for $494 million. The Company estimates total proved reserves to be 53 million barrels of oil equivalent (MMBoe), 45 percent of which are liquids and 80 percent within the liquid-rich Wattenberg field, Noble Energy's largest onshore U.S. asset. The acquisition will add about 10 thousand barrels of oil equivalent per day (MBoe/d) or 46 million cubic feet of natural gas and 2,500 barrels of liquids to Noble Energy's daily production base. Included in the purchase is 340 thousand total net acres, nearly 200 thousand of which are located in the Greater DJ Basin.
Total net risked resources (proven, probable and possible) are estimated at 103 MMBoe. Noble Energy has identified several thousand projects associated with the assets being acquired, including over 2,000 Codell/Niobrara drilling locations in Wattenberg. The Company plans to add two rigs to its Wattenberg program in 2010 as a result of the transaction, increasing the Company's operated drilling activity in the field to eight rigs. Including activity on acreage outside Wattenberg, Noble Energy expects to grow net production from the assets to approximately 20 MBoe/d by 2012, with a focus on increasing liquids contribution.
David L. Stover, Noble Energy's President and COO, said, "The addition of complimentary drilling locations and opportunities in Wattenberg allows Noble Energy to continue to strengthen this core area. We now control a leasehold position of over 530 thousand net acres in the central DJ Basin with net production approaching 52 thousand barrels equivalent per day. Utilizing our technical and operational expertise, we now have an even larger platform from which to unlock further potential in the Wattenberg field and the overall basin."
The acquisition is expected to close late in the first quarter 2010 and will be subject to customary closing conditions. Funding is expected to be provided through the company's existing credit facility.
Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company operates primarily in the Rocky Mountains, Mid-Continent, and deepwater Gulf of Mexico areas in the United States, with key international operations offshore Israel and West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Visit Noble Energy online at www.nobleenergyinc.com.
This news release may include projections and other "forward-looking statements" within the meaning of the federal securities laws. Any such projections or statements reflect Noble Energy's current views about future events and financial performance. No assurances can be given that such events or performance will occur as projected, and actual results may differ materially from those projected. Risks, uncertainties and assumptions that could cause actual results to differ materially from those projected include, without limitation, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition, government regulation or other action, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy's business that are detailed in its Securities and Exchange Commission filings. Words such as "anticipates," "believes," "expects," "intends," "will," "should", "may," and similar expressions may be used to identify forward-looking statements. Noble Energy assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.
The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this news release, such as "resources," that the SEC's guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in our Forms 10-K and 10-Q, File No. 1-07964, available from Noble Energy's offices or website, http://www.nobleenergyinc.com. These forms can also be obtained from the SEC by calling 1-800-SEC-0330.
01/05/10
SOURCE Noble Energy, Inc.
Total net risked resources (proven, probable and possible) are estimated at 103 MMBoe. Noble Energy has identified several thousand projects associated with the assets being acquired, including over 2,000 Codell/Niobrara drilling locations in Wattenberg. The Company plans to add two rigs to its Wattenberg program in 2010 as a result of the transaction, increasing the Company's operated drilling activity in the field to eight rigs. Including activity on acreage outside Wattenberg, Noble Energy expects to grow net production from the assets to approximately 20 MBoe/d by 2012, with a focus on increasing liquids contribution.
David L. Stover, Noble Energy's President and COO, said, "The addition of complimentary drilling locations and opportunities in Wattenberg allows Noble Energy to continue to strengthen this core area. We now control a leasehold position of over 530 thousand net acres in the central DJ Basin with net production approaching 52 thousand barrels equivalent per day. Utilizing our technical and operational expertise, we now have an even larger platform from which to unlock further potential in the Wattenberg field and the overall basin."
The acquisition is expected to close late in the first quarter 2010 and will be subject to customary closing conditions. Funding is expected to be provided through the company's existing credit facility.
Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company operates primarily in the Rocky Mountains, Mid-Continent, and deepwater Gulf of Mexico areas in the United States, with key international operations offshore Israel and West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Visit Noble Energy online at www.nobleenergyinc.com.
This news release may include projections and other "forward-looking statements" within the meaning of the federal securities laws. Any such projections or statements reflect Noble Energy's current views about future events and financial performance. No assurances can be given that such events or performance will occur as projected, and actual results may differ materially from those projected. Risks, uncertainties and assumptions that could cause actual results to differ materially from those projected include, without limitation, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition, government regulation or other action, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy's business that are detailed in its Securities and Exchange Commission filings. Words such as "anticipates," "believes," "expects," "intends," "will," "should", "may," and similar expressions may be used to identify forward-looking statements. Noble Energy assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.
The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this news release, such as "resources," that the SEC's guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in our Forms 10-K and 10-Q, File No. 1-07964, available from Noble Energy's offices or website, http://www.nobleenergyinc.com. These forms can also be obtained from the SEC by calling 1-800-SEC-0330.
01/05/10
SOURCE Noble Energy, Inc.
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