Industrywide Issues

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    USFWS Finally Gets Something Right, Relaxes Northern Bat Rule

    This is so unusual, it’s big news. The U.S. Fish and Wildlife Service (USFWS), an organization known for its thuggish behavior, finally got something right. It was just yesterday we were commenting on the need for Williams to begin clearing trees for the Constitution Pipeline in New York State because the Northern long-eared bat, a “threatened” species, roosts in trees in upstate NY between April and October and tree cleaning needs to be done in the months of November to March (see Williams Plans to Start Clearing Trees for Constitution Next Week). Yesterday the USFWS issued their long-awaited “final conservation rule” for the Northern long-eared bat. Environmental radicals were hoping the USFWS would bump the bat from the lower “threatened” designation to the higher “endangered” designation. That didn’t happen. Not only did they not upgrade the designation, the USFWS also loosened the rules so that the oil and gas industry (and others) clearing trees for drill pads and pipelines can legally kill a bat or two as they do so. No longer if you find a single bat does it put that area off-limits. The USFWS recognizes, officially, that the biggest threat to the bat is a spreading fungal disease, and that killing a single bat here or there is not going to affect the population of this species…
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    OH Dem House Members Introduce Bill to Restrict Injection Wells

    Three Democrat members of the Ohio State House of Representatives have just introduced a new bill, HB 422, that will clamp down on injection wells in the state, creating new hoops and regulations for injection wells. Reps. Sean O’Brien (D-Bazetta), Mike O’Brien (D-Warren) and John Patterson (D-Jefferson) want to ban injection wells in hundred-year flood plains, require GPS trackers in brine-hauling trucks, require dye be used when injecting fluids and several other measures. The Dems say they’ve worked with both the industry and environmentalist wackos in crafting the bill. We have a full copy of the bill as introduced, below. One of the provisions is that you can’t have an injection well within 2,000 feet of a…stream, river, watercourse, water well, pond, lake, other body of water (mud puddles?), railroad tracks, or the traveled portion of a public street, road, or highway. That pretty much covers it all. You just can’t have an injection well, period…
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    Europe Puts Halliburton/BH Merger Under a Microscope

    The Halliburton buyout/merger with Baker Hughes continues to be in trouble. In November 2014 MDN first reported on the deal, really Halliburton forcing Baker Hughes, to merge, with Haliburton paying an expected $34.6 billion (see Shotgun Wedding: Halliburton Forces Baker Hughes to Sell). Both companies have major operations in the Marcellus/Utica, so this merger is of keen interest for those of us in the northeast. Along the way both companies have had to sell off certain assets to please government regulators (see Halliburton/Baker Hughes Hold a Pre-Merger Garage Sale). The “marriage” was supposed to happen by the end of last year, but the U.S. Dept. of Justice isn’t satisfied. They have anti-trust concerns that, so far, Halliburton has not been able to address to DOJ’s satisfaction (see DOJ Tells Halliburton/Baker Hughes “No Deal Yet” – What’s Next?). What was a few whispers has become a chorus that the deal may be in trouble (see Whispers Turning in Chorus, Halliburton/BH Deal in Trouble). Add one more worry to the list: The European Commission has launched a “second phase” of their investigation into the deal, which is problematic for Halliburton. The European Commission says they see “serious potential competition concerns” with the deal. Halliburton/BH says, no big deal…
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    Pulling the Curtain Back on EIA 2016/2017 Oil Price Predicition

    Yesterday MDN brought you the latest thinking/preview for where the U.S. Energy Information Administration (EIA) believes energy production and prices will go over the next 12-24 months, something called the Short-Term Energy Outlook (see EIA’s STEO Predicts NatGas Price Constant This Year, Up Next Year). Today we bring you a deeper dive into the EIA’s predictions with respect to the price of crude oil. The EIA forecasts Brent crude oil prices will average $40 per barrel in 2016 and $50/barrel in 2017. West Texas Intermediate (WTI) crude oil prices are predicted to be $38/barrel in 2016 and $47/barrel in 2017. Here’s a bit more background on how the EIA calculates its numbers for crude oil price…
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    Dynegy Proposes 6,300 MW of Shale Gas-Fired Electric Plants in OH

    There is a tug of war brewing in Ohio over who has the best plan to provide an increase in electricity while at the same time complying with Obama’s onerous Clean Power Plan. American Electric Power Company (AEP) and FirstEnergy have floated plans to Ohio that involve a mix of methods to produce electricity. Dynegy, on the other hand, wants to construct 6,300 megawatts of new electric capacity using natural gas-fired plants. AEP and FirstEnergy say Dynegy’s plan is dangerous because it ties the state too closely to one source of electric generation. Are they right?…
    Read More “Dynegy Proposes 6,300 MW of Shale Gas-Fired Electric Plants in OH”

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    Black & Veatch Warns Electric Plants, Time to Prep for CPP is Now

    We’ve written plenty about Obama’s abominable Clean Power Plan, including an article yesterday about how the original plan was corrupted by radical environmentalists to freeze out natural gas (see How Environmentalist Radicals Ruined Obama’s Clean Power Plan). More than half of all states have joined a lawsuit to oppose this draconian “rule” (really an un-legislated law) that would force electric power plants to abandon using coal, natural gas and other fossil fuels in favor of obscenely high-priced so-called renewables. Electric rates will go through the roof, and it’s no joke there may be rolling brownouts and blackouts if fully adopted–we simply can’t generate the amount of electricity we need using renewables. Not now, not for several generations. No wonder states are suing to stop the CPP. But here’s the problem: If power generators don’t start to “comply” with the CPP now, if those lawsuits are not won for whatever reason, energy companies risk being shut down–fined out of existence. Obama and his cronies are using fear of a jackbooted government to force electric generators to comply now–and after they do, even if Obama loses in court he’s still won because he’ll say, “See, they’ve already complied, so it doesn’t make any difference that the regulation was struck down. We’ve made the U.S. a cleaner place. I did it. Me me me. Look at me.” Utter nonsense, but that’s the strategy. Black & Veatch, a huge engineering and construction firm that builds major projects for the energy industry is only too happy to help energy companies comply with the new CPP rules. Black & Veatch says, in essence, that energy companies shouldn’t sit on their hands, hoping to win the lawsuit. The time to act is now…
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    Westlake Chemical Expanding Kentucky Ethane Cracker Capacity

    Westlake logoWestlake Chemical Partners has just announced it will expand ethylene capacity at its Calvert City, Kentucky facility. The expansion will add 70 million pounds of annual ethylene capacity to the Calvert City facility during the first half of 2017. OK, what does this have to do with the Marcellus/Utica? As it turns out, a lot. The Westlake Calvert City petrochemical plant is an ethane cracker plant by a different name. Cracking ethane into ethylene is not the only thing that happens at the facility, but it’s one of the main things that happens there. And the ethane that feeds the cracker at the Calvert City facility comes, in part, from the Marcellus/Utica…
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    Williams Plans to Start Clearing Trees for Constitution Next Week

    Since last October MDN has been calling on Williams, the company planning to build the 124-mile Constitution Pipeline from Susquehanna County, PA to Schoharie County, NY, to take the gloves off and go after New York State, aggressively (see Time to Force NY DEC to Issue Permit for Constitution Pipeline). Earlier this month we re-posted an article from MDN friend Tom Shepstone and his Natural Gas Now website (always excellent, must read) that chronicles where we are at and how we got here with ongoing delays of the Constitution from the NY Dept. of Environmental Conservation (see Time for Williams/FERC to Sue NY & End Constitution Pipe Delays). In short, the DEC is now arbitrarily (for political reasons) intentionally withholding stream crossing permits that are delaying construction of the Constitution. The state is in danger of being sued by, and their authority to grant those permits taken over by, the federal government if they don’t issue those permits forthwith. Williams is attempting to advance the ball, still playing nicey nice, hoping to coax the DEC into issuing the permits. Williams has asked for and received permission (from the DEC) to begin clearing trees along the pipeline’s path, a process that will begin next week. However, rabid anti-drillers have asked NY’s out-of-control Attorney General, Eric Schneiderman, to step in and stop the tree clearing. If Williams doesn’t start the tree clearing now, they risk losing another entire construction season. There is a finite window each year you can clear trees because of nesting Northern long-eared bats, an endangered species…
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    Severance Tax Not a Panacea After All – Down 50%+ in 2015

    There’s been a lot of talk over the past 5+ years in Pennsylvania that the state needs a severance tax. We’ve heard the repeated drumbeat that “eeeevvvvery other oil and gas state has a severance tax and we need one too.” A severance tax would, according to sticky finger Democrats and teachers unions, instantly solve funding shortfalls for education. Bam–solved. It would also fund a variety of “worthy” programs that the beneficent politicians in Harrisburg salivate to fund. A severance tax might even be the cure for cancer–who knows? Just one teeny, tiny problem. With the collapse of prices for oil and gas, and the resulting collapse in drilling, all of those “other states” with a severance tax are now scrambling to make up the difference in the shortfall they face in their own budgets. Turns out a severance tax isn’t a panacea after all. It also turns out an impact fee (PA’s equivalent of a severance tax), while sure to go down, will go down a lot less than a severance tax would. To our PA friends: Are you still happy you traded Tom Corbett, who was smart enough to create the impact fee, for the inept Tom Wolf who’s chasing a St. Elmo’s Fire severance tax? Here’s a look at the rapid fall of severance taxes in key oil and gas states in 2015, by the experts at the U.S. Energy Information Administration…
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    EIA’s STEO Predicts NatGas Price Constant This Year, Up Next Year

    Yesterday the U.S. Energy Information Administration (EIA) released their monthly Short-Term Energy Outlook (STEO) report. It contains some interesting predictions. Among them: EIA predicts the average Henry Hub price for natural gas in 2016, when the year is completed, will end up being $2.65 per million British thermal units (MMBtu). The average price for 2015 at the Henry Hub was $2.63/MMBtu–so the EIA believes this year will be virtually unchanged from last year, when the final chapter is written. The EIA goes on to predict the average HH price in 2017 will be $3.22/MMBtu. Another interesting prediction in this month’s STEO: EIA says natural gas’ share of the electric generation pie will actually fall–with natgas generating 33% of all electricity in 2015 to 31% in 2017. Why? More renewable sources coming online…
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    How Environmentalist Radicals Ruined Obama’s Clean Power Plan

    In an excellent commentary article posted by the Cato Institute, a public policy research organization and “think tank,” the authors explain how President Obama’s so-called Clean Power Plan (CPP) was co-opted by radical environmentalists. Obama’s original CPP had a starring role for natural gas–the single biggest reason why the U.S. has reduced its carbon emissions over the past decade. But then the crazies got involved and Obama, bowing to pressure from the far left, threw natural gas under the bus in the final CPP. Here’s how the Cato experts explain it…
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    The Smartest Man in the Oil (& Gas) Patch: Rusty Braziel

    In 2015 MDN editor Jim Willis had the pleasure of sitting in on a one-day “State of the Energy Markets” presentation by RBN Energy, held in New York City. RBN, for those who don’t know, was founded by the former co-founder of Bentek Energy, Rusty Braziel. Rusty is a legend in the industry. He was there presenting, along with a few other seasoned pros that work for him at RBN. Great session. Jim learned a lot about the energy markets and how they work. And why they work the way they do. Rusty was a guest on Jim Cramer’s Mad Money program (on CNBC) last Friday. We have the video below. Jimmy Cramer calls Rusty “the smartest man on the oil patch” and the only person he consults with when it comes to the price of oil and gas and what’s happening. It’s high praise coming from Cramer. And well deserved. If you want to know why the price of oil (and gas) is doing what it’s doing, give this a watch and read…
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    Debate Rages: How Many Shale Drillers will go Bankrupt?

    Fadel Gheit, senior oil and gas analyst at Oppenheimer & Co., speculated on CNBC on Monday that half of all U.S. shale oil producers could go bankrupt before the price of oil reaches equilibrium. For Gheit, equilibrium price will be somewhere around $60-$70 per barrel. But, he says, it will take a few years to get there. His thesis is that in the meantime oil and gas companies are spending money out the wazoo and cannot sustain it and a good many of them (the smaller ones anyway) will go under. We compare his comments (below) with what Rusty Braziel recently said to Jim Cramer…
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    EIA Jan DPR: Marcellus Production Way Down Again, Utica Up

    EIAYesterday our favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite report, the Drilling Productivity Report (DPR). The January 2016 report shows what the EIA predicts oil and natural gas production will be in February from the seven largest commercial shale plays in the U.S. What does the report (full copy below) show? The biggest drop in production will once again be the biggest natgas producer in the country–the Mighty Marcellus. The EIA predicts the Marcellus will produce 15.222 billion cubic feet per day (Bcf/d) in February, vs. 15.447 Bcf/d in January, a decrease of 225 million cubic feet per day (MMcf/d). Meanwhile the Utica Shale will continue to show an INCREASE in production month over month–from 3.206 Bcf/d in January to 3.249 Bcf/d in February, a 43 MMcf/d increase month over month. The Utica, for a second month in a row, shows the largest increase in natgas production of all seven plays covered in the DPR. Overall the DPR shows that oil production month over month will decrease in February, the seventh month in a row, and natural gas will decrease for the eighth month in a row…
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    Natural Gas and Electricity in U.S. Joined at the Hip

    Increasingly natural gas and electricity production in the U.S. are “joined at the hip.” What do we mean by that? In 2015 more electricity was generated from natural gas-fired generators than from coal-fired generators in the months of April, July, August, September, and October (data for November and December not yet available). Wholesale electricity prices at major trading hubs, on a monthly average basis for on-peak hours, were down 27%-37% across the nation in 2015 compared with 2014–driven largely by lower natural gas prices. It’s not a stretch to declare that natural gas has replaced coal as the #1 energy source for creating electricity. That’s what we mean by nagas and electricity being joined at the hip. Our favorite government agency, the U.S. Energy Information Administration (EIA), provides some context…
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    Which Marcellus/Utica Drillers are Part of the “Thousand Club”?

    It’s difficult to compare apples with apples when it comes to evaluating how productive, or profitable, a hydrocarbon-producing well is. We typically think of wells as “oil wells” or “natural gas wells” or perhaps “wet gas (NGL) wells.” While there are some wells that produce almost all natgas or almost all oil, etc., most wells produce multiple hydrocarbons. Oil wells in the Permian Basin or Eagle Ford Shale (in TX) produce natural gas along with the oil coming out of the well. Many Marcellus and Utica wells in southwestern PA and eastern OH produce very profitable quantities of natural gas liquids, a mish mash of ethane, propane, butane, isobutane, and pentane. And don’t forget condensate (natural gasoline). So how do you compare the relative output/profitability/production for different “types” of wells? One way is to convert all of those hydrocarbons into one hydrocarbon–oil. Specifically, barrels of oil. Once you convert all hydrocarbons into barrels of oil, you have a way to compare apples to apples–comparing wells located in the same shale play or comparing wells from one play with wells from another. Recently the sharp analysts at investment firm Sanford C. Bernstein & Co. ran the numbers to convert and compare wells across different plays. They issued a report showing wells that belong to the “Thousand Club”–wells producing at least 1,000 barrels of oil equivalent per day. Where are the most such wells located? The Eagle Ford Shale, the Bakken Shale, and yes, the Marcellus and Utica Shale. Which drillers are in the club?…
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