Energy and climate policy, politics, and other stuff

On April 18, 2012, EPA issued rules governing the capture of methane and VOCs from oil and gas hydraulic fracturing operations. Promulgated under the NSPS, the rules only apply to newly drilled wells. Also, EPA gave industry until 2015 to comply with the rules. Until then “green completions” will be voluntary (unless mandated by another entity such as a state, which is the case in Colorado). More information on the EPA rule is available here.

The Washington Post ran an AP article today that does a nice job of summarizing some of the odd supply-side dynamics behind the current record low natural prices (which Henry Hub listed at $2.04 per mmBtu as of April 4, 2012).

Natural gas prices are at a 10-year low, a dynamic fueled in part by the spate of unconventional shale gas that has come onto the market in recent years. Normally, you would expect producers to turn down production, thus diminishing the supply of natural gas on the market and driving prices back up. The problem is they’ve been doing just that, but still the production volume has barely nudged downward. The article notes that in just the past five months the “number of drilling rigs exploring for natural gas has fallen by 30 percent to 658.” Figure 1 shows the annual number of U.S. Natural Gas Rotary Rigs in Operation from 1998 through 2011. The total drops from 1,491 in 2008 to 943 in 2010.

Fig. 1 - U.S. Natural Gas Rotary Rigs in Operation (Number of Elements)

Take a look at the Figure 2, an EIA chart which shows U.S. Natural Gas Gross Withdrawals from Shale Gas for the time period of January 2007 to December 2010. Notice the output for 2010: nadda.

Fig. 2 - U.S. Natural Gas Gross Withdrawals from Shale Gas (Million Cubic Feet)

Now take a look at the third chart, which shows U.S. Natural Gas Gross Withdrawals from Oil Wells for the period of 2007 through 2010 (Fig 3). You’ll notice the output begins to tick upward in 2008.

Fig. 3 - U.S. Natural Gas Gross Withdrawals from Oil Wells (Million Cubic Feet)

So here’s what’s happening. Instead of just being left idle, the gas rigs have been redirected to oil production, which makes great sense since a barrel of crude is currently trading just north of $100 per barrel. And production of oil pretty much always results in the production of associated gas.

Normally, price impacts from an oversupply of natural gas can be somewhat tempered by using the nation’s capacity for natural gas storage. The gas can be stored until when it’s needed. The problem now, however, is that we are pretty close to running out of storage space for natural gas. Figure 4 shows how far above the current trend is above five-year storage average. When that happens …

Fig. 4 - Working Gas in Underground Storage Compared with 5-Year Range

You’ve got to be kidding me . . . this from Greenwire:

‘Fracosaurus’ is star of pro-fracking coloring book (06/20/2011)

A Canadian energy company has created a coloring book it hopes will deliver a kid-friendly message about hydraulic fracturing.

The message in the book by Talisman Energy Inc. is overtly pro-drilling, as the leading character, a friendly “fracosaurus” named Talisman Terry, suggests to readers that the process is smart, safe and American.

One page of the book — which is available for free as a PDF on Talisman’s website — compares the height of a rig to the height of the Statue of Liberty and a California Redwood tree.

“There’s an emblem of America, an emblem of technology, an emblem of nature and an emblem of business,” said Lori Campbell, a children’s literature professor at the University of Pittsburgh. “It’s sending the message that we should be free to do whatever.”

Kid-friendly patriotic messaging from oil and gas companies is nothing new. Another friendly animal, Chesapeake Energy Corp.’s orange beagle named Chesapeake Charlie, touts gas from hydraulic fracturing as a “clean-burning, affordable abundant and American fuel.”

But issues surrounding the environmental and economic controversies about accessing gas trapped in the Marcellus Shale are not covered in the pages of “Talisman Terry,” an omission that has led to some concern.

An all-smiles book “undermines any of the negativity by making it all about fun and games,” Campbell said.

Talisman officials said kids cannot grasp the complexities of natural gas drilling.

“Let’s keep in mind our audience. If you’re talking age nine or younger, you can’t get into the questions like, ‘What is in fracking fluid?’” said Natalie Cox, the firm’s head of U.S. communications. “If we were making a presentation to the governor in Harrisburg, we’d get into technical details. But we wouldn’t give him a coloring book, either.”

The book is an effort to “create change in society by targeting children,” which could be dangerous but is far from brainwashing, Campbell said (Erich Schwartzel, Pittsburgh Post-Gazette, June 19). — PK