Industrywide Issues

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    Evil Corporate Raider Carl Icahn Claims Another CEO Scalp

    In what has become an all-too-familiar pattern, evil corporate raider Carl Icahn has struck again, claiming another CEO scalp. Like he did with Chesapeake Energy, Icahn increased his stake in another oil and gas company, Cheniere Energy, about to export the very first shipment of exported LNG from the Lower 48 states. After Icahn grabbed a big share of Cheniere (13.8%), he forced out the company’s co-founder and CEO, Charif Souki. It’s disgusting, it’s immoral, it’s unethical–but unfortunately, it’s legal and even vaunted by investors who worship at the alter of the Almighty Buck. Like the case of Aubrey McClendon being forced out of the company he founded, Chesapeake Energy, Souki was a maverick, and he erred by taking too much OPM–other people’s money. The firing of Charif Souki certainly takes the luster and excitement off the company’s pending first export shipment of LNG. If Cheniere goes bankrupt (not beyond the realm of possibility as Souki is credited with keeping the company afloat), it will be because of Icahn’s action. Investors can thank old Carl. What’s happening, of course, is that Icahn wants to put some new financial paint on the company so he can flip it in a year or two, adding more billions to his existing billions. Jerk. The company has appointed an interim CEO (board member Neal Shear) while they look for a new hatchet man like Ichan did at Chesapeake with Doug Lawler. Let the firings begin!…
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    Dartmouth Study: Fracking Causes Toxic Metal Wastewater

    We call attention to a newly published study from three researchers at Dartmouth College. The new research paper, recently published in the journal Applied Geochemistry, is titled, “Reductive weathering of black shale and release of barium during hydraulic fracturing” (sorry, we don’t have a full copy to share with you). In reading over the Dartmouth press release, it appears the researchers have found evidence that plain water itself, water without extra chemicals added to it, will, under pressure a mile or more down, facilitate or somehow combine with shale and cause barium to leach out of the shale. The research is based on samples from three drill cores from the Marcellus Shale in Pennsylvania and New York. Our understanding of just what they are saying is far from perfect. It seems to us the importance of what they claim to have found is that produced water, which is water that comes from the borehole long after the initial frack flowback water has returned to the surface, contains a lot of barium (and some mild radioactivity) and that produced water must be disposed of safely. You can’t just cart produced water to the local sewage treatment plant and drop it off. That seems to be what they’re saying with this research. You read the description for yourself and tell us what you think it says…
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    Don’t Know Jack: Politician Lobbies for High OH Severance Tax

    The Marcellus and Utica Shale industry, like all shale industries in the U.S., is getting clobbered. Prices are at historic lows for natural gas–with no prospects it will go higher anytime soon (see Natural Gas Prices Hits 14-Year Low – When Will it Rebound?). Drillers (otherwise known as producers or E&Ps) can’t make a profit. Those who are making a profit are realizing profits that are razor thin–like break-even. So what does a “brilliant” politician like Ohio State Rep. Jack Cera (Democrat) lobby and advocate and agitate for? Raising the severance tax on shale drillers in Ohio. How utterly dense can you possibly be to not see that doing such a thing in this low-price climate would essentially shut down the Utica industry in the state? Or perhaps that’s what Jack really wants?…
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    Whispers Turning in Chorus, Halliburton/BH Deal in Trouble

    Just one week ago MDN alerted you to what were (then) whispers that the Halliburton buyout of Baker Hughes not be the done deal they portrayed it as (see Is the Halliburton Buyout of Baker Hughes in Trouble?). The whispers that there’s trouble in regulatory paradise around this deal are quickly becoming a chorus. Here are a couple of more articles, from reliable and respected news services, questioning whether or not the merger will happen…
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    New Dust Regulation Latest Obama Attempt to Regulate O&G

    The Obama Administration continues to push aggressive new regulations (i.e. unlegislated laws) to control the oil and gas industry in the United States. We’ve covered, extensively, the EPA’s egregious violations in this respect. Another agency that hassles the industry is OSHA–the Occupational Safety and Health Administration, part of the U.S. Dept. of Labor. Obama’s OSHA weenies are set to push through new dust regulations that will affect the drilling industry. These new standards apply to silica (or sand) dust. Silica is used in fracking. Here’s the latest attack on the industry…
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    Time to Revoke Tax Exempt Status of Anti-Drilling Non-Profits

    MDN friend and ace blogger Tom Shepstone, writing on his always-excellent Natural Gas Now website, makes a strong case for the IRS to investigate and revoke the tax exempt status of the anti-drilling non-profit “charity” Clean Air Council (based in Philadelphia). The Clean Air Council is nothing more than a front group that uses money from the Heinz Endowments and William Penn Foundation in a shell game to keep their anti-drilling activities at arm’s length. Plausible deniability. We would add one more organization to the list for investigation and revocation of tax exempt status: THE Delaware Riverkeeper, which is also funded in part by Heinz and William Penn. Here’s a re-posting of Tom’s excellent article…
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    EPA’s Use of Social Media Propaganda to Support WOTUS was Illegal

    EPA-logo.jpgThe politicization of the federal Environmental Protection Agency (EPA)–a government agency that should be, by law, devoid of politics–has caught up with the Obama Administration. The Government Accountability Office (GAO) has found that the EPA, in using social media to urge the public to back Obama’s aggressive new redefinition for Waters of the United States (or WOTUS), was in fact illegal. We previously wrote about this draconian new “rule” ginned up by the EPA and the Army Corps of Engineers (see EPA Power Grab: Redefines Waters of the U.S. to Include Everything). The EPA broke the law by engaging in overt politicking–pushing “propaganda” (the word used by the GAO) to support the WOTUS rule. The GAO has just released a sweeping opinion (full copy below) that details chapter and verse just how the EPA broke the law with their propagandizing on social media. The question we have is this: If somebody broke the law, will somebody go to jail? Fat chance. None other than the New York Times was forced to cover the EPA propaganda story–something distasteful and a bit beneath the erudite reporters at the Times…
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    EPA’s McCarthy Brags Coal “No Longer Marketable” – Gunning for O&G

    Gina McCarthyEPA Administrator Gina McCarthy appears to be drunk on her own power. When quizzed about fossil fuel energy at the Paris Climate Conference, McCarthy, in answering questions about coal and its use in China and elsewhere, quipped, “Coal is no longer marketable.” She should know. She’s made it that way on purpose. You may think, “So what! It’s coal. It’s dirty. Natural gas is a better alternative.” Don’t think natural gas and oil aren’t next up on the hit list for McCarthy and the Obama gang: “McCarthy made it clear she is also working to limit methane emissions, particularly from oil and natural gas. Methane, the primary component in the product commonly known as natural gas, is 25 times more potent in trapping heat in the atmosphere than CO2.” These idiots will not stop until they have eliminated, BY FORCE, the use of fossil fuels for energy. That is the plan. They must be opposed, vigorously…
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    Research: Shale Energy Turning Voters into Republicans

    This one is downright fascinating for political junkies like MDN editor Jim Willis. For years now Jim has been saying that in very broad brush strokes Republicans (i.e. conservatives) typically support shale drilling and Democrats (i.e. liberals) typically oppose it. Yes, that’s very broad and there are certainly notable exceptions. But we’re talking on average, that’s how it sorts out, that has been our observation in closely watching this issue for years. And now we have objective, scientific research to back it up. A new research paper has just been published by three researchers, one from Bocconi University (in Italy), one from The Wharton School at the University of Pennsylvania, and one from the Carroll School of Management at Boston College. The paper, titled “Voter Preferences and Political Change: Evidence From the Political Economy of Shale Booms” (full copy below) documents where there is shale drilling, voters have shifted their votes away from Democrats and to Republicans, and that the voting behavior of elected officials in shale regions has become more conservative that it was previously. Cool! We always suspected as much–now we have proof…
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    Looks Like a March 2016 Wedding for ETE & Williams

    In September Williams finally relented and accepted a buyout/merger offer from Energy Transfer Equity (see Williams Accepts ETE’s “Indecent Proposal” – Price Went Down $10B). Deals like this one, with ETE paying $37.7 billion for Williams, take time to complete. There are lots of regulatory hoops to jump through. The two companies said in their original announcement they expect the deal will be done in “the first half of 2016.” Smart move on their part to not commit to a specific date too early. From an announcement issued yesterday, we now have a much better idea of the timing. The announcement says the two companies are complying with certain regulatory requests and that they won’t get hitched before March 18, 2016. Which means if all goes well in regulatory hell between now and then, we’ll have a March wedding…
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    Piedmont Natural Gas CEO’s Pure Gold Parachute – $14.4M

    In October Duke Energy, the largest electric power holding company in the United States and a utility with 7.3 million customers in the southeast and Midwest, announced they had cut a deal to buy Piedmont Natural Gas for $4.9 billion in cash and the assumption of $1.8 billion in existing debt–for a total deal price of $6.7 billion (see Duke Energy Buys Piedmont NatGas for $6.7B, Marcellus Connection). Piedmont is a midstream and natgas LDC, or local distribution company/utility, with operations primarily in North Carolina, South Carolina and Tennessee. At least one person is going to make a boatload of money from the deal. Piedmont’s CEO Tom Skains will get a $14.4 million severance check when the deal goes through. Looks like the color of Skains’ parachute is pure gold…
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    Natural Gas Prices Hits 14-Year Low – When Will it Rebound?

    gas oil priceThe price of natural gas hit a 14-year low yesterday. Ouch. We don’t normally report on the ups and downs of natgas prices because, well, because it goes up and down–all the time. Broad trends in the price we report on, but not the day-to-day vagaries of natgas prices. But we are today. Why? Because there appears to be no end in sight for these low prices. MDN editor Jim Willis lives in the Binghamton, NY area. It’s usually cold and cloudy in Binghamton in the winter–from about the end of October to mid-April. No lie. Winter is typically that long around these parts. Yesterday? Mid-60s. Today? In the 50s and sunny. We do love it–but it’s beginning to freak us out! Point: As was predicted by natural gas weather guys we heard a few months ago at a Bloomberg meeting in NYC, the weather in the northeast during this monster El Niño winter will be drier than usual and warmer than usual. Translation: We’re going to use a whole lot less heating fuel and natural gas. More supply than demand means prices go down and they stay down. And that’s just what’s happening. Traders are giving up on a cold snap causing prices to rebound, and that capitulation is reflected in the price of natural gas…
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    Where Do Drillers Like CONSOL Think Gas Prices are Heading?

    Where do Marcellus/Utica drillers believe the price of natural gas in the northeast is heading over the next few years? Wouldn’t you love to be a fly on the wall in boardroom meetings where gas price is discussed? We have the next best thing. It’s called hedging. Drillers (and others who buy and sell natural gas) often engage in a practice called hedging, which is, in a simplified explanation, a contract to sell (or buy) a commodity like natural gas at an agreed-on price at a future date. There is an element of risk in hedging. What if the price goes a lot higher? You have to sell at the lower price you agreed to. What if the price goes a lot lower? You’ve covered your derriere by locking in a higher price for the gas your produce. If you look at the hedging contracts gas companies strike, you get a sense for where they believe the price will go. We have an example from CONSOL Energy which has just released details of their hedging for the next few years. Where does CONSOL believe the price of natural gas is going from now until 2018? In a word, down…
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    Poly(ethylene) Wants a Cracker: OH Study Predicts Ethane Tsunami

    A researcher and “Executive in Residence” from Cleveland State University, Andrew Thomas, writes about a new study produced by the University “to better understand the ramifications of huge quantities of natural gas and liquid ethane being produced in Ohio.” Unfortunately we were unable to track down a copy of the full study and its results, but we do have the summary as contributed by Thomas in writing for Crain’s Cleveland Business. And wow, what insights we gain! Thomas says the study he worked on concludes that even in this down market, Ohio’s production of natural gas liquids (NGLs), specifically ethane, is on a rocket ride to the moon. He says, “Ohio’s about to see an ethane tsunami.” He also says if all four ethane crackers that have been floated as possibilities for the region get built, that would only sop up one-third of the ethane supply projected to be produced in the Marcellus/Utica. Here’s the high-level but very exciting and insightful news coming from this study…
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    Township in Lebanon County, PA Welcomes Atlantic Sunrise Pipeline

    One township in Lebanon County, PA hasn’t caved to the very loud (and very small in number) anti-pipeline ninny nannies–and that has them spinning and sputtering. South Annville Township supervisors decided last Wednesday night that they would NOT pass a resolution expressing opposition to Williams’ Atlantic Sunrise pipeline. Why not? Because (a) its a meaningless gesture–FERC won’t consider it in their decision-making, and (b) there are a lot of people in the town who WANT the pipeline. So kudos to the supervisors of South Annville Twp for doing the right thing…
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    Here’s How Drilling Slowdown Affects the Marcellus Supply Chain

    Yes, the slowdown in drilling IS having effect–everywhere, including the Pennsylvania Marcellus Shale. Supply chain companies–those companies not directly involved with drilling but supply goods and services to other companies that are directly involved–are feeling the effects. From hotels and restaurants to a men’s clothing store, the slowdown is having an effect. But it’s not all bad news…
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