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August 03 2012

12:00

Delaware Tax Haven: The Other Shale Gas Industry Loophole

Most people think of downtown Houston, Texas as ground zero for the oil and gas industry. Houston, after all, serves as home base for corporate headquarters of oil and gas giants, including the likes of BP America, ConocoPhillips, and Shell Oil Company, to name a few.

Comparably speaking, few would think of Wilmington, Delaware in a similar vein. But perhaps they should, according to a recent New York Times investigative report by Leslie Wayne.

Wayne's story revealed that Delaware serves as what journalist Nicholas Shaxson calls a "Treasure Island" in his recent book by that namesake. It's an "onshore tax haven" and an even more robust one than the Caymen Islands, to boot.

The Delaware "Island" is heavilized utilized by oil and gas majors, all of which are part of the "two-thirds of the Fortune 500" corporations parking their money in The First State.

Delaware is an outlier in the way it does business,” David Brunori, a professor at George Washington Law School told The Times. “What it offers is an opportunity to game the system and do it legally.”

The numbers are astounding. "Over the last decade, the Delaware loophole has enabled corporations to reduce the taxes paid to other states by an estimated $9.5 billion," Wayne wrote

"More than 900,000 business entities choose Delaware as a location to incorporate," explained another report. "The number…exceeds Delaware's human population of 850,000."

Marcellus Shale Frackers Utilize the "Delaware Loophole" 

The New York Times story also demonstrated that the shale gas industry has become an expert at utilizing the "Delaware Loophole" tax haven to dodge taxes, just as it is a champion at dodging chemical fluid disclosure and other accountability to the Safe Drinking Water Act, thanks to the "Halliburton Loophole." The latter is explained in great detail in DeSmogBlog's "Fracking the Future."

Utilization of the "Delaware Loophole" is far from the story of a few bad apples gone astray for the industry. As Wayne explains, the use of this "onshore tax haven" is the norm.

More than 400 corporate subsidiaries linked to Marcellus Shale gas exploration have been registered in Delaware, most within the last four years, according to the Pennsylvania Budget and Policy Center, a nonprofit group based in Harrisburg that studies the state’s tax policy.

In 2004, the center estimated that the Delaware loophole had cost the state $400 million annually in lost revenue — and that was before the energy boom.

More than two-thirds of the companies in the Marcellus Shale Coalition, an industry alliance based in Pittsburgh, are registered to a single address: 1209 North Orange Street, according to the center.

These fiscal figures, as Wayne points out, predate the ongoing shale gas "Gold Rush" in the Marcellus. SEIU of Pennsylvania has calculated $550 million/year in lost tax revenue in the state from the shale gas industry due to the loophole.

The Pennsylvania House of Representatives set out to tackle the "Delaware Loophole" quagmire in the spring of 2012, but merely offered half-measure legislation that would have allowed corporations - including the frackers - to continue gaming the system. Coryn S. Wolk of the activist group Protecting Our Waters summarized the bill in a recent post:

In March, 2012, the Pennsylvania House of Representatives created a bipartisan bill, HB 2150, aimed at closing corporate tax loopholes. However, as the Pennsylvania Budget and Policy Center noted in their detailed opposition to the bill, the bill would have cost Pennsylvania more money by soothing corporations with major tax cuts and leaving the loopholes accessible to any clever accountant.

Tax cheating in Delaware goes far above and beyond the Marcellus Shale. All of the oil and gas majors, with operations around the world, take full advantage of all Delaware has to offer.

"Piping Profits"

If things in this sphere were only limited to shale gas companies operating in the Marcellus Shale, the battle would seem big. Big, but not insurmountable.

Yet, as the Norway-based NGOPublish What You Pay points out in a recent report titled, "Piping profits: the secret world of oil, gas and mining giants," the game is more rigged than most would like to admit.

How rigged? Overwhelmingly so.

The report shows that ConocoPhillips, Chevron, and ExxonMobil have 439 out of their combined 783 subsidiaries located in well-known tax havens around the world, including in Delaware. All three companies maintain fracking operations, as well, meaning they benefit from both the Halliburton and Delaware Loopholes.

Adding BP and Shell into the mix, Publish What You Pay revealed that the five majors have 749 tax haven subsidiaries located in Delaware out of a grand total of 3,632 global tax haven subsidiaries. This amounts to 20.6-percent of them, to be precise.

These figures moved Publish What You Pay's Executive Director, Mona Thowsen, to conclude, “What this study shows is that the extractive industry ownership structure and its huge use of secrecy jurisdictions may work against the urgent need to reduce corruption and aggressive tax avoidance in this sector."

Tax Justice Network: $21-$32 Trillion Parked in Offshore Accounts

A recent lengthy report titled "The Price of Offshore Revisited" by the Tax Justice Network reveals just how big of a problem tax havens are on a global scale, reaching far beyond Delaware's boundaries.

As Democracy Now! explained,

[The] new report…reveals how wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in what are known as offshore accounts or tax havens. The conservative estimate of $21 trillion—conservative estimate—is as much money as the entire annual economic output of the United States and Japan combined. The actual sums could be higher because the study only deals with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts.

The inquiry…is being touted as the most comprehensive report ever on the "offshore economy." 

The Democracy Now! interview below is worth watching on the whole, as oil and gas industry "offshoring" is but the tip of the iceberg.

Photo CreditGunnar Pippel | ShutterStock

Exhaustive Study Finds Global Elite

August 01 2012

15:05

A "War on Shale Gas"?

Since late 2009, there’s been a slowly-growing wave of attacks from the unconventional oil and gas industry on media outlets that cover the controversies surrounding hydraulic fracturing (fracking) and other shale gas practices. Reporters who write for publications ranging from Rolling Stone to Reuters to the New York Times have had their professional bona fides called into question after unearthing documents and facts that challenge claims that fracked shale gas is cheap, abundant, and clean.

These industry attacks on media occur against the backdrop of a larger campaign to establish unconventional oil and gas at the forefront of the nation’s energy options.

Only a few years ago, it seemed likely that gas would increasingly be a mainstay of power generation, especially in the wake of high profile disasters like the Massey Upper Big Branch coal mine disaster and the BP oil gusher in the Gulf of Mexico. The industry (at the time) received support from surprising allies like the Sierra Club and the Center for American Progress. Fukushima tarnished the nuclear industry, further shifting momentum towards shale gas for utility-scale electricity generation.

But a popular movement fueled by growing concerns about water contamination and public health impacts posed by fracking, coupled with a clearer look by press and by Wall Street analysts at the industry’s claims, has threatened to derail the ascendency of unconventional gas.

Quite often, rather than responding to the issues raised in a responsible fashion, industry PR shops have questioned the motives and qualifications of journalists who investigate the problems with shale gas development, and especially those who delve into the industry’s economic prospects.

The attacks against reporters are noteworthy in part because they are so personal.

Although our expectations for honesty and fairness were quite low, the writer failed to reach even that low bar,” Michael Kehs, the vice president of strategic affairs and public relations at Chesapeake Energy, wrote in an open letter responding to Rolling Stone’s expose of the company’s financial precariousness.

Ad hominem responses like this shift focus away from the issues raised in the coverage, and attempt to turn the discussion towards motives – or deep character flaws — that the industry claims reporters harbor.

Often, the allegation is that the media is biased, even if the reasons for that bias are unclear (perhaps because it doesn’t exist).

“You really have to wonder why the New York Times is campaigning against cleaner-burning, domestically produced natural gas,” wrote Ken Cohen, ExxonMobil vice president of public and government affairs, in a blog piece after the Times ran a piece airing industry insiders’ doubts about shale gas.

Nowhere was this vision and practice of the industry better on display than at the “Media & Stakeholder Relations: Hydraulic Fracturing Initiative 2011” conference in Houston last year, where industry PR officials gathered to strategize how to "overcome public concern" surrounding their operations. (This is the same conference where DeSmogBlog learned about the industry's use of military psychological warfare (PSYOPs) tactics in U.S. communities, and that drillers view growing community resistance to fracking as "an insurgency.")

A representative from the American Petroleum Institute spent an entire hour leading the group through an analysis of New York Times articles, especially those written by investigative reporter Ian Urbina.

Again and again, the Times coverage was referred to as a “war on shale gas.”

So, as we look at this overall at API, one of the first questions we ask is: ‘how successful is the New York Times’ war on shale gas?’” said Linda Rozett, Vice President of Communications at the American Petroleum Institute. [starting around 9:25 in this recording]

Of course, no explanation as to why the Times would launch a “war” on shale gas was proffered.  The accuracy of the facts reported was also not discussed (perhaps because many of the Times' shale gas articles are accompanied by thousands of pages of leaked documents, sometimes from the industry itself). But the sense of victimization was palpable.

“In every case, the New York Times is the worst, in terms of coverage of our issues,” the API's Linda Rozette said.

This defensive industry reaction to media coverage is by no means limited to the Rolling Stone or The Times. The unconventional oil and gas industry has aggressively gone up against reporters and editors of all stripes, at publications large and small.

One of the first people to raise questions about shale gas’s potential was Arthur Berman, a former Amoco geologist who, at the time, was a long-time contributing editor for an industry magazine called World Oil.

But when Berman raised important questions about the ways the shale gas industry calculated their reserves, his column was cancelled by the magazine — amidst pressure from shale gas companies like Petrohawk. Mr. Berman resigned in protest, and within a few days, his editor, Perry Fischer, was fired

The industry denied that it was responsible — “It is doubtful that his termination was a direct result of comments made by Petrohawk,”  the company’s Investor Relations Vice President Joan Dunlap told a Houston Chronicle reporter at the time – but those involved had something different to say.

Let me be clear: The decision to pull Art's column was due to pressure from these two companies,” Fischer later wrote.

Despite this, Arthur Berman was undeterred. He has gone on to become a persistent thorn in the industry’s side, and the issues he’s raised have been picked up by countless publications ranging from the staid Financial Times, trade publications like Platts and mass media outlets like CNN

As Mr. Berman has become more prominent, he has again found himself a target for mudslinging by the industry. This was on display in the wake of a New York Times report last year that cited Mr. Berman’s analysis.

And also, to say that he, a handful of unnamed critics of the industry, and a goat cheese farmer from Fort Worth, and a third-tier geologist who considers himself a reservoir engineer, that somehow they know more about the shale gas revolution in America than companies that have combined market caps of almost $2 trillion and have spent hundreds of billions of dollars to develop these new resources, I mean, it's ludicrous.”


That's how Aubrey McClendon, CEO of Chesapeake Energy, described the New York Times' coverage on Mad Money on June 28, 2011, apparently referring to reporter Ian Urbina and the speakers in emails he published, shale gas skeptic and federal reserve board advisory member Deborah Rogers, and Art Berman, the so-called “third-tier geologist.”

Jim Cramer, the show’s host, also questioned Berman's and the Times’ credibility, saying: “If we're being duped by the nat gas industry, as this article suggests, then how come Exxon Mobil spent 31 billion to buy nat gas giant XTO? Were they fooled, too?”

It’s worth noting that Art Berman’s analysis is looking highly prescient these days. Official government estimates for shale gas have been slashed significantly. And the most basic element of his thesis – that caution is in order because it’s too early to know for sure how much and how long fracked wells will produce  — has even been echoed by an unexpected source: former CEO of ExxonMobil Lee Raymond.

It’s going to be a little while before people are really confident that there is going to be a sufficient amount of gas for 30 years to support the construction of an LNG plant,” Mr. Raymond told Bloomberg News during a February interview. “I’m frankly not sure that we have enough experience with shale gas to make the kind of judgment you’d have to make.”


Questions about Aubrey McClendon’s Chesapeake Energy in particular have come into sharper focus in light of a series of revelations by a team of over a half-dozen Reuters reporters, based on documents that show Chesapeake colluded with its competitors to drive down lease prices in Michigan, McClendon has borrowed heavily from lenders who do business with Chesapeake and ran a shady hedge fund on the side.

This Reuters series has sparked investigations into Chesapeake Energy’s books by the Department of Justice, the Securities and Exchange Commission and the Internal Revenue Service. It has also led to McClendon’s ouster as board chairman (though not as CEO) and driven Wall Street investors to scrutinize the company's declining value for months.

But even these reports have come under fire and labeled attacks against the industry:

Another week, another “cut” at Chesapeake Energy and its flamboyant CEO Aubrey McClendon. Death by a thousand cuts will work, as long as in the end it’s death, right? And that’s exactly what the mainstream media is clamoring for.

A new hit piece by Reuters attempts to smear McClendon and in the process snags Canadian company Encana. …

ran an un-bylined piece in Marcellus Drilling News, a website that lists the Marcellus-region branch of the shale gas industry’s most aggressive PR shop, Energy in Depth, as among its key sponsors

Ultimately, industry proponents may find that these sorts of unsubstantiated allegations of animus are subject to the law of diminishing returns. The field is increasingly crowded with reporters and columnists who have had their professional credentials questioned, had their coverage labeled a “hit piece,” or been accused of waging a “war” against shale gas. And the investigative reporting that prompts howls from the shale gas industry increasingly earns respect and accolades from fellow journalists.

How much longer can the shale gas industry attempt to play the victim, when all the evidence compiled by investigative journalists points to significant cause for concern about threats to drinking water and public health, as well as the economic fallout of the shale gas bubble

Perhaps the shale gas industry should spend less time on attack-dog PR, and more time acting responsibly to address its many risks. 

July 27 2012

10:30

Exposed: Pennsylvania Act 13 Overturned by Supreme Court, Originally an ALEC Model Bill

On July 26, the Pennsylvania Supreme Court ruled PA Act 13 unconstitutional. The bill would have stripped away local zoning laws, eliminated the legal concept of a Home Rule Charter, limited private property rights, and in the process, completely disempowered town, city, municipal and county governments, particularly when it comes to shale gas development.

The Court ruled that Act 13 "…violates substantive due process because it does not protect the interests of neighboring property owners from harm, alters the character of neighborhoods and makes irrational classifications – irrational because it requires municipalities to allow all zones, drilling operations and impoundments, gas compressor stations, storage and use of explosives in all zoning districts, and applies industrial criteria to restrictions on height of structures, screening and fencing, lighting and noise."

Act 13 — pejoratively referred to as "the Nation's Worst Corporate Giveaway" by AlterNet reporter Steven Rosenfeld — would have ended local democracy as we know it in Pennsylvania.

"It’s absolutely crushing of local self-government," Ben Price, project director for the Community Environmental Legal Defense Fund (CELDF), told Rosenfeld. "It’s a complete capitulation of the rights of the people and their right to self-government. They are handing it over to the industry to let them govern us. It is the corporate state. That is how we look at it."

Where could the idea for such a bill come from in the first place? Rosenfeld pointed to the oil and gas industry in his piece.

That's half of the answer. Pennsylvania is the epicenter of the ongoing fracking boom in the United States, and by and large, is a state seemingly bought off by the oil and gas industry.

The other half of the question left unanswered, though, is who do oil and gas industry lobbyists feed anti-democratic, state-level legislation to?

The answer, in a word: ALEC.

PA Act 13, Originally an ALEC Model Bill 

The American Legislative Exchange Council (ALEC) is in the midst of hosting its 39th Annual Meeting this week in Salt Lake City, Utah. ALEC is appropriately described as an ideologically conservative, Republican Party-centric "corporate bill mill" by the Center for Media and Democracy, the overseer of the ALEC Exposed project. 98 percent of ALEC's funding comes from corporations, according to CMD**.

ALEC's meetings bring together corporate lobbyists and state legislators to schmooze, and then vote on what it calls "model bills." Lobbyists have a "voice and a vote in shaping policy," CMD explains. They have de facto veto power over whether their prospective bills become "models" that will be distributed to the offices of politicians in statehouses nationwide.

A close examination suggests that an ALEC model bill is quite similar to the recently overturned Act 13. 

It is likely modeled after and inspired by an ALEC bill titled, "An Act Granting the Authority of Rural Counties to Transition to Decentralized Land Use Regulation." This Act was passed by ALEC's Energy, Environment, and Agriculture Task Force at its Annual Meeting in August 2010 in San Diego, CA

The model bill opens by saying that "…the planning and zoning authority granted to rural counties may encourage land use regulation which is overly centralized, intrusive and politicized." The model bill's central purpose is to "grant rural counties the legal authority to abandon their planning and zoning authority in order to transition to decentralized land use regulation…"

The key legal substance of the bill reads, "The local law shall require the county to repeal or modify any land use restriction stemming from the county’s exercise of its planning or zoning authority, which prohibits or conditionally restricts the peaceful or highest and best uses of private property…"

In short, like Act 13, this ALEC model bill turns local democractic protections on their head. Act 13, to be fair, is a far meatier bill, running 174 pages in length. What likely happened: Pennsylvania legislators and the oil and gas industry lobbyists they serve took the key concepts found in ALEC's bill, ran with them, and made an even more extreme and specific piece of legislation to strip away Pennsylvania citizens' rights.

There were many shale gas industry lobbyists and those affiliated with like-minded think-tanks in the house for the Dec. 2010 San Diego Energy, Environment, and Agriculture Task Force Meeting where this prospective ALEC model bill became an official ALEC model bill. They included Daren Bakst of the John Locke Foundation (heavily funded by the Kochs), Russel Harding of the Mackinac Center for Public Policy (also heavily funded by the Koch Family Fortune), Kathleen Hartnett White of the Texas Public Policy Foundation (again, heavily funded by the Kochs), Mike McGraw of Occidental Petroleum, and Todd Myers of the Washington Policy Center (a think tank that sits under the umbrella of the Koch Foundation-funded State Policy Network).

A Model That's Been Passed and Proposed Elsewhere

The Act Granting the Authority of Rural Counties to Transition to Decentralized Land Use Regulation model bill has made a tour to statehouses nationwide, popping up in Ohio, Idaho, Colorado, and Texas. The model passed in some states, while failing to pass in others.

Here is a rundown of similar bills that DeSmogBlog has identified so far:

Ohio HB 278

Long before the ALEC model bill was enacted in 2010, Ohio passed a similar bill in 2004, HB 278, which gives exclusive well-permitting, zoning, and regulatory authority to the Ohio Department of Natural Resources (ODNR). Ohio is home to the Utica Shale basin.

Mirroring ALEC's model, HB 278 gives the "…Division of Mineral Resources Management in the Department of Natural Resources…exclusive authority to regulate the permitting, location, and spacing of oil and gas wells in the state.."

Could it be that the ALEC model bill was actually inspired by HB 278? It's very possible, based on recent history.

As was the case with ALEC's hydraulic fracturing chemical fluid "disclosure" model bill (actually rife with loopholes ensuring chemicals will never be disclosed), ALEC adopted legislation passed in the Texas state legislature as its own at its December 2011 conference.

Idaho HB 464 

Idaho's House of Representatives passed HB 464 in February 2012 in a 54-13-3 roll call vote. A month later, the bill passed in the Senate in a 24-10-1 roll call vote. Days later, Republican Gov. Butch Otter signed the bill into law.

Key language from HB 464 reads

It is declared to be in the public interest…to provide for uniformity and consistency in the regulation of the production of oil and gas throughout the state of Idaho…[,] to authorize and to provide for the operations and development of oil and gas properties in such a manner that a greater ultimate recovery of oil and gas may be obtained.  (Snip)

It is the intent of the legislature to occupy the field of the regulation of oil and gas exploration and production with the limited exception of the exercise of planning and zoning authority granted cities and counties…

The Democratic Party State Senate Minority Office was outraged about the bill's passage. 

"[HB] 464 establishes Idaho law governing oil and gas exploration and development including limits to local control over the location of wells, drilling processes, water rights and the injection of waste materials into the ground," reads a press release by the Idaho State Senate Minority Office. "[HB 464] preempts local land-use planning statute dating back to 1975. Counties will have little input in the permitting process whereby well sites are selected (or restricted) and no role in planning and zoning."

Sound familiar? Like PA Act 13 and the ALEC model? It should.

Full-scale fracking has yet to take place in Idaho, though the race is on, with Idahoans signing more and more leases with each passing day. Thanks to gas industry lobbyists' use of ALEC's model bill process, the industry will have far fewer hurdles to clear in the state when the race begins. 

Colorado SB 88

The Demoratic Party-controlled Colorado State Senate struck down an ALEC copycat bill, SB 88, in February 2012.

The Bill Summary portion of SB 88 explains the bill concisely, mirroring, once again, PA Act 13 and the ALEC Model Bill: "…the Colorado oil and gas conservation commission has exclusive jurisdiction to regulate oil and gas operations, and local regulation of oil and gas operations is preempted by state law."

Colorado sits atop the Niobrara Shale basin. Like Pennsylvania, it has seen many cities successfully move to ban fracking, making the goal of a bill of this nature all the more obvious.

From Colorado Springs to Boulder County, cities and counties across Colorado have passed measures against fracking,” Sam Schabacker of Food and Water Watch told the Colorado Independent at the time SB 88 was struck down. “This bill is an attempt by the oil and gas industry to strip local governments of what little power they have to protect their citizens and water resources from the harms posed by fracking.” 

Far from a completed debate, as covered in a June 2012 follow-up story by the Colorado Independent, things are just getting underway on this one in The Centennial State.  

I don’t know where it goes from here. I suspect there is a happy medium and there is a compromise that can be reached,” Democratic Party State Senate President Brandon Shaffer told the Independent. “I also suspect next year additional legislation will come forward on both sides of the spectrum. Ultimately I think the determination will be made based on the composition of each of the chambers. If the Democrats are in control of the House and Senate, there will be more emphasis on local control.”  

Former Sen. Mike Kopp (R) was one of the public sector attendees at the Dec. 2010 Energy, Environment, and Agriculture Task Force Meeting where the ALEC model bill passed. 

Texas HB 3105 and SB 875

In May 2011, TX SB 875 passed almost unanimously. The bill essentially calls for the elimination, in one fell swoop, of the common law of private nuisance in Texas.

SB 875's key operative paragraph explains,

[Entities] subject to an administrative, civil, or criminal action brought under this chapter for nuisance or trespass arising from greenhouse gas emissions [have] an affirmative defense to that action if the person's actions that resulted in the alleged nuisance or trespass were authorized by a rule, permit, order, license, certificate, registration, approval, or other form of authorization issued by the commission or the federal government or an agency of the federal government…

Texas — home to the Barnett Shale basin and the Eagle Ford Shale basin — played a dirty trick here, but what else would one expect from the government of a Petro State?

The ALEC model bill calls for a transition from centralized power by local governments to individual property rights under the common law of private nuisance, a civil suit that allows those whose private property has been damaged to file a legal complaint with proper authorities. Now, under the dictates of SB 875, even these rights have been eviscerated.

Perhaps Texas exemplifies a realization of the oil and gas industries' ideal world: legal rights for no one except themselves.

"This [bill allows] the willful trespass onto private property of chemicals and or nuisances, thus destroying the peaceful enjoyment of private property, which someone may have put their life savings into," Calvin Tillman, former Mayor of Dish, Texas and one of the stars of Josh Fox's Academy Award-nominated documentary film, "Gasland," wrote in a letter. "Therefore, private citizens would have no protection for their private property if this amendment was added."

HB 3105's key language, meanwhile, makes the following illicit (emphases mine): 

the adoption or issuance of an ordinance, rule, regulatory requirement, resolution, policy, guideline, or similar measure…by a municipality that..has effect in the extraterritorial jurisdiction of the municipality, excluding annexation, and that enacts or enforces an ordinance, rule, regulation, or plan that does not impose identical requirements or restrictions in the entire extraterritorial jurisdiction of the municipality…or damages, destroys, impairs, or prohibits development of a mineral interest

This bill, unlike SB 875, never passed, though if it did, it would do basically the same thing as PA Act 13 and the ALEC model. If it ever does pass, however, it would mean that Texans would have literally no legal standing to sue the oil and gas industry for wrongdoing in their state.

ALEC's Bifurcated Attack: Erode Local Democracy, Strip Federal Regs,

Coming full circle, though PA Act 13 was struck down, for now, as constitutional, that doesn't necessarily mean ALEC copycat versions like it won't start popping up in other statehouses nationwide. 

Sleep on this for awhile. There's more to come.

Part two of DeSmog's investigation on ALEC's dirty energy agenda will show that, along with pushing for the erosion of local democracy as we know it today, ALEC has also succeeded in promulgating legislation that would eliminate Environmental Protection Agency (EPA) power to regulate greenhouse gas emissions - another Big Business giveaway of epic proportions.

If anything is clear, it's this: statehouses have become a favorite clearinghouse for polluters to install the "Corporate Playbook" in place of democracy.

Stay tuned for Part Two of DeSmog's investigation, coming soon.

(**Full Disclosure: Steve Horn is a former employee of CMD and worked on the ALEC Exposed project)

Image Credit: Center for Media and Democracy | ALEC Exposed

April 01 2012

23:22

March 06 2012

15:34

Experts Air Serious Concerns Before New York Fracking Decision

Two recent court decisions  in New York state upheld the right of towns to use zoning laws to limit or even ban fracking within their borders. Other states and cities such as DallasMaryland, and North Carolina, are still trying to figure out whether, and if so how, to proceed with new drilling.

But the big decision that concerned citizens are watching is the one to be made by New York Gov. Andrew Cuomo about his state’s moratorium. New York received more than 40,000 public comments on fracking and is plowing through them now.

The state has yet to publish those documents on the web, but DeSmogBlog has obtained many of them. Here is our initial shortlist of comments that offer the most important warnings and useful insights.

A Hidden Threat?

One of the most overlooked but potentially dangerous public health issues relating to unconventional gas drilling is radon. This odorless and radioactive gas comes up from the wells mixed with the gas that gets piped to consumers. Highly carcinogenic, radon is the second leading cause of lung cancer, just behind cigarette smoking, according to the EPA.

In his comments, Dr. Marvin Resnikoff, director of Radioactive Waste Management Associates, concludes that radon levels in the gas that will come from Marcellus and likely be delivered to nearly 12 million New York residents will be far higher than current levels. As a result, “the potential number of fatal lung cancer deaths due to radon in natural gas from the Marcellus shale range from 1,182 to 30,448” he writes.

read more

February 08 2012

05:14

China Looks To Stephen Harper For Lessons In Dirty Energy Exploitation

Canadian Prime Minister Stephen Harper is in China this week to meet with Chinese leaders about how both countries can profit big by exploiting China’s shale gas reserves, as well as by importing Canadian tar sands oil. Harper is scheduled to meet with both Chinese officials, as well as heads of oil and gas companies during his four-day visit to the country.

More on the specifics of who will be attending these meetings, from Reuters Canada:

During his trip Harper will meet President Hu Jintao and Premier Wen Jiabao as well as two important regional players - Chongqing Communist Party chief Bo Xilai and Wang Yang, the chief of Guangdong province.

The Canadian mission, which will arrive in Beijing on Tuesday, is the largest of its kind since 1998. Guests include top executives from Shell Canada, Enbridge and Canadian Oil Sands as well as uranium producer Cameco Corp and mining firm Teck Resources Ltd.

Other firms include plane and train maker Bombardier Inc, Air Canada, Eldorado Gold Corp, SNC-Lavalin Group Inc, Canfor Corp and West Fraser Timber Co Ltd.

After the United States’ rejection last month of the Keystone XL pipeline, Canadian officials are hoping to reap a profit in the world’s largest emerging market. But any energy trade deals would certainly benefit both sides, as just last week PetroChina, parent of China’s largest oil producer, purchased a 20% stake in a Canadian shale gas project being run by Royal Dutch Shell.

Chinese oil companies are hoping that their cooperation with Shell and the Canadian government will help them use these valuable resources to teach officials more about the process of extracting shale gas, mostly through fracking.

Just last year, with some financing through other Chinese oil companies, Shell invested more than $400 million in Chinese shale gas projects, which included the drilling of at least 15 different shale extraction wells.

read more

Reposted by02mydafsoup-01 02mydafsoup-01

January 20 2012

05:24

72 Percent of Ohioans Want A Fracking Moratorium, Citing Need For More Study

The unconventional gas industry's latest rush in the United States will land it in the state of Ohio, but a recent poll shows that the state's residents are not rolling out the red carpet for an industry famous for threatening drinking water supplies, causing earthquakes, noise and air pollution and trying to proliferate global addiction to fossil fuels.

Results from a Quinnipiac University poll released today shows that 59 percent of those polled have heard of or read about hydraulic fracturing, or "fracking," the complex and risky process that enables unconventional gas drilling. A whopping 72 percent of Ohioans familiar with fracking support a moratorium on the process until it is studied further.

The other 41-percent of citizens are likely to follow suit once they discover what is headed their way, and how little this industry will help them from a financial point of view in the long run.

Ohio recently found itself with the fracking shakes, as magnitude 4.0-level earthquakes struck near Youngstown on New Year's Eve. Scientists suspect the earthquakes resulted from a wastewater injection well disposing of fracking brine from Pennsylvania. The Christian Science Monitor explained in a story that the "quake triggered shaking reportedly felt as as far away as Buffalo, N.Y., and Toronto." 

These fracking-related earthquakes are not an aberation, but rather a repeated occurence linked to fracking in Texas, Oklahoma, and Arkansas, as well as abroad in the U.K., in the city BlackpoolAl Jazeera English recently ran a story on the Ohio fracking-induced earthquakes. Watch:

  

Fears 'fracking' causes Ohio Quakes

Multinational Gas Corporations Head to Ohio

On the financial side of things, the gas industry's rush to drill the Utica Shale is led by the nation's largest unconventional gas corporation, Chesapeake Energy. Chesapeake has a huge joint ownership stake in the Utica Shale with Total SA, the French oil and gas conglomerate. As DeSmogBlog wrote a bit over a month ago, "Total S.A. is positioning itself to acquire 25 percent of Chesapeake Energy’s stake in Ohio's Utica Shale, valued at $2.14 Billion." 

Also in on the hunt for gas in the Utica are industry giants Royal Dutch ShellChevronExxonMobil, Anadarko Petroleum, and Range Resources, a corporation now infamous for its use of psychological warfare tactics to "win the hearts and minds" of U.S. citizens in the neighboring Marcellus Shale basin.

So much for "energy independence," "boosting the local economy," and small, independent "mom and pop" gas industry start-ups.

Thankfully, Ohioans aren't drinking the kool-aid and have chosen, like the citizens of Bulgaria</a> recently did, to <a href=" https:="">fight back against the industry's destructive deceit. They are wise to demand a moratorium on fracking, which DeSmogBlog called for in Fracking The Future.

Time will tell if they succeed.

January 11 2012

15:47

Shale Gas Bubble: Bloomberg News Confirms NY Times Finding That Fracking Boom Is a Bust

As news outlets across America take a more rigorous look at shale gas and fracking issues, it’s encouraging to see how the media coverage is finally starting to cut through the oil industry’s misleading rhetoric to explore the realities of the myth of gas as a viable ‘bridge fuel.’

The gas industry’s loud-mouthed front group, Energy In Depth, repeatedly attacked The New York Times for their excellent Drilling Down series last year, focusing particular ire on journalist Ian Urbina. EID’s penchant for attacking the messenger shows no sign of letting up in 2012, but as other news outlets look more closely, they are not only confirming what the NY Times series found, but also adding additional evidence of the many problems with shale gas development.

The latest effort from Bloomberg News, “Shale Bubble Inflates on Near-Record Prices,” illustrates how the media’s grasp of the unconventional energy industry landscape has evolved and improved in recent months. 

This excellent reporting by Bloomberg confirms many of the facts that The New York Times reported last summer in “Insiders Sound an Alarm Amid a Natural Gas Rush” and “Behind Veneer, Doubt on Future of Natural Gas.”

While many major outlets have covered the myriad environmental and public health risks of fracking and related drilling practices, the NY Times and now Bloomberg have both exposed the fact that the economics of risky and expensive unconventional gas recovery simply don’t match up with industry geologists’ claims of a “nearly limitless” supply.

Investors are increasingly taking notice of the unpredictable nature of this industry and questioning its risky behavior. Is there really as much gas down there as the industry claims? If so, how much is economically recoverable?

Remember that oil and gas companies have purchased or leased an enormous amount of land without any assurance that it will produce anything. Now they’re drilling multi-million dollar wells to explore, and often blanking or failing to meet expectations when they find recoverable gas.

Let’s look at the similarities in what both the Times and Bloomberg found in their investigations.

The Times reported that industry officials were quietly saying that shale gas has inherent risks, geology varies and the data is sparse. An excerpt from the Times article ‘Insiders Sound an Alarm Amid a Natural Gas Rush’:

…the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells. …
Company data for more than 10,000 wells in three major shale gas formations raise further questions about the industry’s prospects…The data show that while there are some very active wells, they are often surrounded by vast zones of less-productive wells that in some cases cost more to drill and operate than the gas they produce is worth. Also, the amount of gas produced by many of the successful wells is falling much faster than initially predicted by energy companies, making it more difficult for them to turn a profit over the long run. If the industry does not live up to expectations, the impact will be felt widely. Federal and state lawmakers are considering drastically increasing subsidies for the natural gas business in the hope that it will provide low-cost energy for decades to come…There is undoubtedly a vast amount of gas in the formations. The question remains how affordably it can be extracted.” (emphases mine)

Recall that the industry front group Energy In Depth and other industry outlets tried to smear Urbina and the Times for airing concerns from market and industry analysts about shale gas economics back in June. Energy In Depth accused Urbina of using “tricks” and EID’s Marcellus Initiative quoted Chesapeake Energy CEO Aubrey McClendon claiming he “sums up the fallacy in the NYT’s premise [on economically recoverable shale gas] quite succinctly.” 

But in Tuesday’s Bloomberg piece, industry folks are now stepping forward and making awfully similar points. For example, here is what Bloomberg reported:

The quirky nature of shale geology means the risks are high that an investment made in a sparsely drilled prospect will go bust, Nikhanj said. Rock density, porosity and pressure levels vary widely within each field, which means one parcel may hold enough fuel to justify prices of $30,000 or $50,000 an acre, while the adjacent land is almost worthless to drillers.”…
“Surging prices for oil and gas shales, in at least one case rising 10-fold in five weeks, are raising concern of a bubble as valuations of drilling acreage approach the peak set before the collapse of Lehman Brothers Holdings Inc.”…
“As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc. (IHS)”…
“I don’t feel confident that the prices being paid now are justified,” Del Pozzo said in a telephone interview from Norwalk, Connecticut. “I’m wary.”

The Times also published dozens of emails from industry and regulators confirming the risk of shale investment:

They discuss the uncertainties about how long the wells will be productive as well as the high prices some companies paid during the land rush to lease mineral rights. They also raise concerns about the unpredictability of shale gas drilling.” 

And now look at the Bloomberg piece. It also calls attention to the hazards of investing huge sums before the costs of developing the shale gas plays are understood:

Hunt, the closely held Dallas company founded by Texas tycoon H.L. Hunt in 1934, has only drilled ‘a handful’ of wells in its Eagle Ford shale acreage, which means it doesn’t yet know how extensive or rich those holdings are, Del Pozzo said. Similarly, because drilling in the Utica shale in the U.S. northeast still is in its infancy, the geological characteristics and potential bounty of the region are hard to assess, said Manuj Nikhanj, head of energy research at ITG Investment Research Inc.
‘The big risk is that people are jumping in with both feet too early,’ Nikhanj said in a telephone interview from Calgary. “‘Of course, the other side of that is that if they wait, they risk missing out on what could turn out to be a big deal.’”
U.S. gas explorers including Chesapeake and Devon Energy Corp. (DVN) are selling interests in shale fields to international energy companies such as Total and Sinopec to finance drilling on leases acquired during a “massive land grab” in 2007 and 2008 as oil and gas prices soared to record highs, O’Neill of Bloomberg Industries said.
The plunge in energy prices that followed Lehman’s bankruptcy and subsequent global financial crisis left operators like Chesapeake too poor to fulfill clauses that set deadlines for finishing wells on pain of forfeiting the leases, O’Neill said.

As of Tuesday night, the folks at Energy In Depth have not uttered a peep about the Bloomberg findings.

And there are plenty of other examples of media roundly debunking the previous defensive claims of industry and their captive regulators.

For example, an article this week on Seeking Alpha took a close look at Cabot Oil and Gas’s prospects for 2012, and concluded that the company could not maintain its growth, and share prices would stabilize or drop despite the fact that Cabot drilled 16 of the 20 best Marcellus wells last year.

In sum, COG is a fast grower, but it is heading down an unsustainable path. It cannot sustain its current growth without incurring a lot of new debts by buying new land, etc. Such debts in themselves would tend to make investors more wary of the stock,” wrote the analyst. “Showing good results now to the detriment of a better longer term plan is a losing long term strategy in this market.”

For the past year, Pennsylvania has been arguing that it has everything under control.

Remember the vitriolic reaction to this NY Times story on PA wastewater problems?  Well, the Pittsburgh Post-Gazette ran a story this Monday revealing that the Department of Environmental Protection lost track of nearly 500 wells in Pennsylvania. Wells were drilled, but DEP records are missing or wrong — meaning that state regulators do not even know how many Marcellus wells are in Pennsylvania. See "DEP's Marcellus Shale drilling numbers do not add up."

On the same day, the Associated Press reported that Cabot Oil and Gas polluted three water wells in Susquehanna County with methane gas. 

Though there is still a long way to go, there is no denying that media analysis of the unconventional gas industry has improved over the past year. More journalists are asking tough questions and challenging the industry’s talking points. When news outlets make such an informed attempt, they are able to cut through the industry’s smoke screens.

This level of scrutiny should be standard practice everywhere instead of the bogus “balance” frame that many outlets embrace, allowing industry PR pollution to contaminate the public conversation. It’s promising to see that some journalists and news outlets are waking up to this.

Kudos to Bloomberg and other outlets that are exposing the shale gas bubble and the other dangerous distractions inherent in the “gas as bridge fuel” myth that is putting off the truly transformative switch to a clean energy economy.

 

Image credit: Complot | Shutterstock

December 09 2011

18:34

Another LNG Deal Inked, Fracking Export Bonanza Continues

On December 7, the Federal Energy Regulatory Commision (FERC) granted a 30-year license to Jordan Cove LNG (liquefied natural gas), located in Coos Bay, Oregon, to transform its existing import terminal license into an export terminal license. It would be the first LNG export terminal on the west coast of the U.S., with multiple LNG export terminals also in the negotiation phase, set to be located on the west coast in Kitimat, British Columbia.

KMTR-TV explains where the unconventional gas, procured via the toxic fracking process explained thoroughly in DeSmogBlog's "Fracking the Future: How Unconventional Gas Threatens our Water, Health, and Climate," will come from for Jordan Cove:

Construction of the Ruby Pipeline has brought gas from Wyoming to Southern Oregon, where it is sent to California. Construction of a new pipeline would link Ruby with Jordan Cove.

El Paso Natural Gas, a subsidiary of El Paso Corporation, owns the Ruby Pipeline. "Ruby is a 680-mile, 42-inch interstate natural gas pipeline," according to its website.

The pipeline that KMTR-TV is referring to, which would link Ruby with Jordan Cove, is called the Pacific Connector Pipeline, and is proposed to be a "234-mile, 36-inch diameter pipeline," according to its website

Wyoming is home to the Niobrara Shale basin, which the Environmental Protection Agency recently revealed as a site of groundwater contamination linked to the fracking process.

LNG from Jordan Cove LNG will be exported to the Asian market, which is willing to pay three times more for the fracked gas than the domestic market. In a September interview with the business journal Platts, Jordan Cove LNG project manager Robert Braddock stated the rationale behind converting Jordan Cove into an export terminal: "we would have certainly much closer access to the Asian markets."

This is but a small piece of a much bigger, broader picture of foreign-based multinational corporations investing in U.S. shale operations in order to benefit from the export potential. This will mean higher prices for U.S. consumers, despite industry claims to champion U.S. energy independence and "affordable" energy.

A Foreign Flurry to Profit from U.S.-Based Shale Gas

Two important investigative reports on the subject came out recently, one by Food and Water Watch and another by the Pittsburgh Tribune-Review. Both of the reports show that, contrary to the claims made by the oil and gas industry that fracking for unconventional energy will "boost local economies," fracking is increasingly revealing itself as a boon for huge multinational corporations, often not even based in North America, but in foreign locales.

"Foreign investment poured into American gas and oil shale fields through three quarters of 2011, amounting to $24.5 billion of the total $39.9 billion in deals," revealed the Tribune-Review

Furthermore, as DeSmogBlog previously revealed, the Federal Energy Regulatory Commission (FERC) has approved two LNG export deals, both in Sabine Pass, Texas, with many many more FERC deals in the middle of the approval process.

The map below, produced by the Tribune-Review, best portrays who stands to gain from the North American fracking boom happening in every crevice of the United States. "Boosting the local economy"? As can be seen quite clearly, this is merely a pipe dream.

December 02 2011

21:34

Smeared But Still Fighting, Cornell's Tony Ingraffea Debunks Gas Industry Myths

Cornell University Professors Robert Howarth and Anthony Ingraffea made waves in April 2011 when they unveiled what is now known simply as the "Cornell Study."

Published in a peer-reviewed letter in the academic journal Climatic Change Letters, the study revealed that, contrary to the never-ending mythology promulgated by the gas industry, unconventional ("natural") gas, procured via the infamous hydraulic fracturing (fracking) process, likely emits more greenhouse gas pollution into the atmosphere during its life cycle than does coal. DeSmogBlog documented the in-depth details of the Cornell Study in our report, "Fracking the Future: How Unconventional Gas Threatens our Water, Health, and Climate."

Since the report was published, the Cornell Study has receieved serioius backlash from the gas industry, in particular from Energy in Depth, the industry's go-to front defensive linebackers on all things fracking related. DeSmogBlog revealed earlier this year that Energy in Depth is an industry front group created by many of the largest oil and gas companies, contrary to its preferred "mom and pop" image. 

Dr. Anthony Ingraffea wrote a must-read piece this week for CBC News, "Does the natural gas industry need a new messenger?

In his article, Dr. Ingraffea discusses and debunks many key gas industry myths, which he explained "always have at least a kernel of truth, but you have to listen to the whole story, carefully, not just the kernel."

"With decades of geopolitical influence and billions of dollars on the table, it is not surprising that the gas industry has perpetuated…myths to keep the public in the dark, regulators at bay, and the wells flowing," Ingraffea writes.

Let's review four of the myths exploded by Dr. Ingraffea:

Myth One: "Fracking is a 60-year-old, safe, well proven technology"

Dr. Ingraffea writes:

Yes, fracking is 60 years old. But using this shorthand obscures the truth that what’s at issue here isn’t really just fracking. It's the entire process of coaxing gas from shale using high-volume, slickwater fracking with long laterals from clustered, multi-well pads.

Myth Two: "Fluid migration from faulty wells is rare"

Ingraffea dismantles this one:

Fluid migration is not rare. For example, industry researchers Watson and Bachu, in a Society of Petroleum Engineers paper in 2009, examined 352,000 Canadian wells and found sustained casing pressure and gas migration…Most recently, the U.S. Environmental Protection Agency found benzene, methane and chemicals in water-monitoring wells in Pavilion, Wyoming…

Myth Three: "The use of clustered, multi-well drilling pads reduces surface impacts"

Ingraffea:

Such pad sites are large and growing, up to 10 acres or more. Newer sites, in Canada, are bigger than 50 acres, and each will leave behind clusters of wellheads and holding tanks for decades.

Cluster drilling facilitates and prolongs intense industrialization and leaves a larger, more concentrated, and very long-term footprint, not a smaller and shorter one.

Myth Four: "Natural gas is a 'clean' fossil fuel"

This one would be laughable if so many people did not believe it. As the old adage goes, "A lie can travel halfway 'round the world while the truth is putting on its shoes."

Ingraffea on this whopper:

NASA climate scientist Drew Shindell’s work, published in the prestigious journal, Science, shows that methane – natural gas – is 105 times more powerful than carbon dioxide as a global warming contributor over a 20-year time horizon, and 33 times more powerful over a century.

He proceeds to explain that methane gas is prone to leakage, which is not taken into account when proponents tout gas as a "clean" source of energy:

Leaks happen routinely during regular drilling, fracking and flowback operations, liquid unloading, processing, and along pipelines and at storage facilities.

The rate of leakage is anywhere from 3.6 per cent to 7.9 per cent of the lifetime of production of a shale gas well, which means from three to 200 per cent greater leakage rate than from conventional gas wells.

Exposing Other Mythology, Making a Plea For Truth 

Dr. Ingraffea also discusses other myths the gas industry relies upon on a daily basis, including "jobs created," "gas for energy independence," gas as a "bridge fuel" toward renewable energy, among others. All of these lies and misdirections have been debunked on multiple occasions, by numerous sources.

Concluding where he began his article, Ingraffea makes a plea to his readers: "keep asking questions, dig for the truth, and you’ll get the whole story."

December 01 2011

22:43

LNG Groundhog Day: Cheniere Energy Signs Yet Another Gas Export Deal on Gulf Coast

Another day, another unconventional gas export deal signed. Nascent North American LNG (liquefied natural gas) export deals are happening so fast and furiously that it is hard to keep track of them all.

The latest: On November 21, Cheniere Energy Partners signed a 20-year LNG export deal with Gas Natural Fenosa, an energy company which operates primarily in Spain but also in such countries as Italy, Mexico, Colombia, Argentina, and Morocco. Cheniere will maintain the Sabine Pass LNG export terminal located off of Sabine Lake between Texas and Louisiana, which feeds into the Gulf of Mexico, while Gas Natural Fenosa will ship the gas to the global market.

Cheniere, which made waves when its CEO Charif Souki announced that his corporation's business model would center exclusively around LNG export terminals, also recently signed a 20-year export deal with BG Group, short for British Gas Group.

Like the recent export deal with BG Group, which involves carrying fracked unconventional gas from various shale basins around the United States via pipelines to the Sabine Pass LNG export terminal, the Gas Natural Fenosa deal also centers around the export of gas from Sabine Pass to the global market.

This new deal will presumably center around shipment of LNG to the Latin American market, whereas the BG Group deal centers around exports to the European market.

A press release explaining the details of the deal reads, “LNG will be loaded onto Gas Natural Fenosa's vessels…[with] twenty years commencing upon the date of first commercial delivery, and an extension option of up to ten years. LNG deliveries are expected to commence in 2016.”

It is increasingly clear that export is the name of the game for the gas companies fracking all over America, exploding the industry's claims to support U.S. energy independence.

A recent Senate hearing confirmed that the industry's plans to export gas from the U.S. will raise gas prices for Americans.

So much for that oil and gas industry canard that unconventional gas fracking "promises more affordable energy for Americans."

 

Image Credit: Oleksandr Kalinichenko / Shutterstock

November 16 2011

19:24

Senate Hearing Confirms Natural Gas Export Plans Will Raise Prices For Americans

Considering the rate at which natural gas resources are being developed, and the sudden push from industry to export the product, it might come as a surprise that the Senate’s Energy Committee hadn’t had a hearing on liquified natural gas (LNG) since 2005.

Last Tuesday, for the first time in six years, Senators brought the issue back to the Capitol spotlight, as they considered the impact of exporting LNG on domestic prices.

In order to export or import natural gas, companies can either transport it through pipelines, or ship it as liquefied natural gas (LNG). LNG is natural gas cooled to -260 degrees Fahrenheit, at which point the gas becomes a liquid. Back in 2006, LNG imports far outstripped exports, and industry used that trade deficit to push for a massive expansion of domestic drilling, relying heavily on the argument for American “energy security.”

Now that that expansion is well-underway, with the infamous Utica and Marcellus shales the frontier of rapid development, utilizing controversial fracking and horizontal drilling techniques, the industry is eager to start exporting LNG to international markets where the fuel fetches a much heftier price.

The Senate hearing comes in the wake of a massive 20-year, $8 billion deal between the British BGGroup and Houston-based Cheniere Energy.

The amount of LNG represented in that deal alone amounts to roughly 3.3 percent of all current U.S. natural gas consumption.There are currently four other export applications on the desks of the Department of Energy (Dominion Energy’s Jordan Cove project, which I wrote about here, is another), and together they would be the equivalent of 10 percent of current U.S. natural gas use, according to Chris Smith, a Deputy Assistant Secretary of Oil & Gas at the DOE.

Exporting that amount of LNG alone is, lawmakers worry, enough to impact domestic prices. Earlier this year, when the DOE approved  the export permit for the Sabine Pass LNG project in Louisaiana (where the Cheniere LNG would ship off towards Europe), the department admitted that the project would raise gas prices in the U.S. by more than 10 percent.

Speaking at the hearing last Tuesday, Senator Ron Wyden of Oregon put Smith on the spot as to the rational of that decision:

Clearly, the department believes that raising natural gas pries by 10 percent meets the public interest test required by the Natural Gas Act…My question is, does the department believe that raising gas prices by five times that amount would be in the public interest?

The agency must determine whether the export projects are in the “national interest” during the approval process.

These first five proposed export deals represent, as Reuters referred to the Cheniere deal, “a new  chapter in the shale gas revolution that has redefined global markets."

Many energy experts, environmentalists, and lawmakers like Senator Wyden are concerned that, despite the rhetoric, a massive expansion of natural gas drilling won’t actually improve America’s energy security or self-reliance, but will only help the gas companies reach more lucrative foreign markets, leaving Americans to clean up the mess and pay for any pollution, spills, or long-term ecosystem degradation, as well as paying higher natural gas prices.

As proof of the industry’s intention to tie into a global market, Wyden held up a graph of LNG prices worldwide, showing that prices are up to three times higher overseas than they are in the United States.

(DeSmogBlog has contacted Senator Wyden’s office for a clearer copy of that graph, and will post it when we receive it.)

Showing the graph, Wyden warned, "Exports in the United States are going to make natural gas like the oil market. That’s why I’m concerned about what these price hikes could mean for our businesses and our consumers.”

Some other interesting bits from Wyden's testimony:

“I’m trying to get my arms around where the department is going to draw the line. Given the fact that prices overseas are many times higher than North American prices, my question really deals with how high do you think the price of the natural gas in the United States can go up as a result of these exports and still meet the public interest test?
Is there anything else you can tell me about how the department is going to draw the line so we can tell American businesses and consumers that they’re going to be able to get affordable natural gas as a result of this new export policy?”
“We’re going to be looking at impact on GDP. We’re going to be looking at jobs. We’re going to be looking at impact on a balance of trade. Some of those factors will be affected by the price itself. So we understand the importance that price holds.
“We also understand that natural gas at these export levels remains an inherently local domestic commodity. Prices are higher in Asia, but if you compare natural gas with oil, oil is a globally fungible commodity where you have enough transportation infrastructure to move oil from market to market. Whereas the ability to couple prices in the United States with prices in Asia, there simply isn’t the infrastructure that would allow you to do that at this point in time.”

Also providing testimony was Jim Collins, director of underground utilities for the city of Hamilton, Ohio. Collins argued that exporting LNG would tie the country to international markets, and would increase domestic prices and cause Americans’ utility bills to rise. Collins is no anti-gas crusader. He supports the use of natural gas as a transportation fuel and electricity producer, but is worried that the export strategies of gas companies will leave Americans worse off.

Today, the vast  majority of natural gas exports from the United States travel through pipelines into Mexico and Canada. Only about 5 percent of natural gas exports currently leave our borders as LNG from coastal ports. (I dug deeper into the natural gas trade numbers in this earlier post.)

As of last year, there were 11 LNG terminals in the United States, only one of which — Sabine Pass — is approved for exports. That the industry is lobbying so hard to open up other terminals for overseas shipping is proof that the "energy security" claims they're making to rally favor around rapid shale gas development are disingenuous at best.

It's worth noting that natural gas imports are still far greater than exports, and current natural gas demand still outstrips domestic supply. If "energy security" were the real goal, then the companies should be content closing the gap of domestic supply and demand.

But because the gas industry intends to tie into the more lucrative foreign markets as soon as possible, Americans will wind up paying higher energy bills, and will be left with all the risk, and cleaning up all the industry's pollution and waste. Which is why so many energy experts, environmentalists and lawmakers see natural gas exports as a lose-lose for America.

September 19 2011

20:01

Counterpoint on Shale Gas and the Future of Fracking

Recently the peer-reviewed scientific journal Nature published a ‘pros vs. cons’ piece on the production of unconventional gas from shale. The tête-à-tête, led by Terry Engelder on the pro side and Robert Howarth and Anthony Ingraffea on the con side, weighs the risks and benefits of gas production as it relates to the economy and human and environmental health.

Howarth and Ingraffea, authors of the first peer-reviewed study on lifecycle emissions from unconventional gas production, are solemn in their assessment: “shale gas isn’t clean, and shouldn’t be used as a bridge fuel” to a clean energy future. Their recommendation is based on the risks involved with high-volume slick-water hydraulic fracturing, or fracking, as it exists in its present form.
 
Although the industry claims to have performed over one million fracking operations since the 1940s, Howarth and Ingraffea counter that the current technology is still relatively new and has only been in operation for a decade. Modern fracking bears little resemblance to its historic counterpart and requires greater amounts of water and chemicals, deeper drilling and higher pressures. All these differences combine to make fracking an unavoidably dangerous process. Howarth and Ingraffea also claim that a switch to unconventional gas will not substantially alleviate global warming in the near future.
 
Unconventional gas drilling creates problematic waste, not only for the air, but also for land and water. And despite progress made in the regulatory structure surrounding gas drilling, if there is any to celebrate, the process is still inherently dangerous, secretive and exempt from the federal statutes designed to protect human and environmental health. 
 
Overall, when you consider the risks, there is little to prop up unconventional gas as the "clean" fuel of the future. Furthermore, the amount of time and resources devoted to shale gas development stifle the production and commitment to true alternatives.

For all of these reasons, Howarth and Ingraffea call for a moratorium on fracking “to allow for better study of the cumulative risks to water quality, air quality and global climate.”
 
“Only with such comprehensive knowledge,” they claim, “can appropriate regulatory frameworks be developed,” the Cornell University professors conclude.
 
But Terry Engelder, a geologist with years of experience working for the gas industry, poses a bold counter claim to Howarth and Ingraffea: “fracking is crucial to global economic stability” and “the economic benefits outweigh the environmental risks.”

Yet Engelder’s assessment rests on a number of assumptions that may prove unsupportable in the long run. 
 
Engelder’s first assumption is that America’s unconventional gas reserves are enough to uphold tremendously high projections of gas production. Such projections underpin the ‘energy security’ of turning to unconventional gas in the wake of oil’s decline. Some say we have about a century’s worth of domestic gas to carry us through to a clean energy future. This will give us energy and economic security as well as a high employment rates and standards of living. (Howarth and Ingraffea, however, point out that emerging data, from the Post Carbon Institute and the U.S. Geological Survey, find these projections to be greatly exaggerated.)
 
Engelder also presumes that public approval of fracking will support a steady increase in unconventional gas drilling across the country, the increase needed to achieve production projections. Unconventional wells only produce for a short amount of time so a steady increase in production means many new wells must be drilled. But an increase in fracking may have the consequence of increased resistance, which is something already happening across the nation. Opposition to fracking will certainly get in the way of uninhibited drilling, a point Engelder seems to overlook. In fact, Engelder seems to rely upon continued support from people in drilling regions where they are less likely to become anti-drilling activists.
 
The final assumption that Engelder makes surrounds the broad scope of human and environmental harm. Sounding much like an industry front man, Engelder downplays the risks associated with fracking, suggesting that water contamination has not and will not occur, that methane contamination is basically harmless and naturally occurring, that industry mistakes, like leaks and blowouts “are like all accidents caused by human error – an unpredictable risk with which society lives.” Engelder wants to at once suggest that there are no unmanageable problems associated with fracking and, where there are problems, call them a necessary evil.
 
In a post-Macondo world, the vague and nonchalant treatment of such serious risks is brazen and inexcusable.
 
Engelder writes that in the case of fracking “fear levels exceed the evidence.” But this statement holds none of the practical wisdom of Howarth and Ingraffea’s final words: “gas should remain safely in the shale, while society uses energy more efficiently and develops renewable energy sources more aggressively.”

September 13 2011

18:35

Environmental Impact Deemed "Limited" For Potentially Explosive Shale Gas Pipeline Into Lower Manhattan

Last Friday, exactly one year after the massive natural gas pipeline blast that killed eight and leveled a San Bruno, California neighborhood, the Federal Energy Regulatory Commission (FERC) brought the controversial New Jersey-New York gas line one step closer to construction.

The pipeline, as proposed by Spectra Energy, would carry shale gas through a number of New Jersey towns, under the Hudson River, and into the Meatpacking District of Lower Manhattan. On Friday, FERC released a draft Environmental Impact Statement (EIS) that gave preliminary approval for construction of the pipeline and all of the related aboveground facilities. The EIS runs over 800 pages long, so I wasn’t able to give it a thorough read (you can find links to all the sections here), but the Executive Summary gave every indication that the line would be approved. FERC found “that construction and operation of the NJ-NY Project would result in limited adverse environmental impacts” and that “[T]hese limited impacts would mostly occur during the period of construction.”

For all the detailed discussion of wetlands and waterways and noise pollution and archaeological sites, there’s one major risk — environmental and public safety — that the report glosses over.

What happens if there’s an explosion? New Jersey-New York City shale gas pipeline map



Granted, it isn’t the role of an EIS to disqualify a pipeline on pure disaster risk potential, but you’d think that it would have to address the environmental impacts associated with the very real potential for explosive accidents. FERC finds just a “slight increase in risk” to residents who live near this 30 inch shale gas pipeline.

The pipeline and aboveground facilities associated with the NJ-NY Project would be designed, constructed, operated, and maintained to meet or exceed the DOT Minimum Federal Safety Standards in Title 49 Code of Federal Regulations (CFR) Part 192 and other applicable federal and state regulations. By designing and operating the proposed Project in accordance with the applicable standards, the Project would represent only a slight increase in risk to the nearby public.

The public safety advocates behind NoGasPipeline.org make the case that the proposed NJ-NYC gas line would be roughly the same size and rely on the same pressure as that which caused the deadly San Bruno blast. Of course, that San Bruno line was old — originally installed in 1956, but a recent report by the National Transportation Safety Board blamed lax regulatory oversight and PG&E’s inadequate safety monitoring for the fatal tragedy.

Spectra has already lost local confidence in their safety measures. As reported by Natural Gas Watch in June, federal regulators cited Spectra with “17 inadequacies in its pipeline safety operations and procedures" for things like "continuing pipeline surveillance" and "welding procedures."

The folks at Natural Gas Watch mapped out a rough version of potential impacts if a blast similar to San Bruno were to occur at the pipeline's point of entry into Manhattan.

shale gas blast New Jersey New York shale gas line explosion

The citizens behind NoGasPipelines.org also created a "blast map" on the New Jersey side of things that is actually far more detailed and every bit as jaw-dropping.

Upon receiving the draft EIS, Jersey City Mayor Jerramiah Healy expressed his disappointment in no unclear terms. The report "does not address our primary concerns, which are the safety and security of our residents and the impact on the future development of our city," Healy said in a statement. "Additionally, we feel strongly that there are serious environmental impacts that this would have on our community and our residents, and we remain vehemently opposed to this project."

The public now has 45 days to comment on the draft EIS before the final version is prepared. You can e-file your comments here until October 31st.

July 16 2011

17:44

Post Carbon Institute Analysis Suggests Shale Gas (Still) Worse Than Coal For Climate

Shale gas cannot provide a low carbon “interim” fuel for the transition to a clean energy future, according to David Hughes, fellow at the Post Carbon Institute (PCI). Gas advocates have long advertized unconventional gas as a clean alternative to coal and other polluting fossil fuels. But the cleanliness of unconventional gas is challenged by others who claim that lifecycle greenhouse gas (GHG) emissions from shale gas are in fact higher than coal. 

One such claim, maintained by a group of scientists from Cornell University led by Dr. Robert Howarth, puts shale gas GHG emissions 20 to 100 percent higher than coal on a 20-year timeframe. Their study, published in the peer-reviewed Climactic Change Letters, has received enormous criticism from the gas industry and its supporters. Several reviews have challenged the integrity of the Cornell study, including a presentation given by scientist Timothy Skone from the National Energy Technology Laboratory (NETL). According to Skone, GHG emissions from gas are 48 percent lower on a 20-year timeframe.

In an analysis entitled “Lifecycle Greenhouse Gas Emissions From Shale Gas Compared to Coal,” Hughes compares the two conflicting conclusions to get to the source of the disparity. With a little number crunching, he discovers that there may be less of a disagreement than meets the eye.

The difference can be accounted for, writes Hughes, by taking a closer look at each report’s methodology and considering the veracity of their numbers. Selective data usage is significant for the outcome of any study, he says, and “depending on input assumptions, one can get any answer one wants out of the analytical process.”

The Cornell report limits its scope to shale gas, which is projected to account for 40 percent of all U.S. production by 2035. The emissions rates for shale gas production are significantly higher than those from conventional gas. The NETL presentation, in distinction, examines averages from all forms of gas: conventional, coalbed methane, tightsand and shale.

And while the Cornell study considers all aspects of extraction, processing, transmission, storage and distribution to arrive at a fugitive methane rate of 3.6 to 7.9 percent of total production, the NETL presentation estimates overall fugitive methane emissions at 1.52 percent, an amount that excludes distribution emissions. The lower percentage also assumes that gas producers use flaring techniques more frequently than venting, which will significantly reduce GHG impacts. 

The NETL figure, says Hughes, is a surprising 31 percent lower than EPA inventory data. 

NETL does not cite all of its sources and uses numerous figures for emission rates and total production estimates that differ significantly from those of the Environmental Protection Agency (EPA), Government Accounting Office (GAO) and the Energy Information Administration (EIA). The emission assumptions for the Cornell study, although at times criticized for differing from federal estimates due to data scarcity, are explicitly laid out in their peer-reviewed article. 

Hughes’ analysis demonstrates that were the NETL methane emission figures revised to reflect those reported by the EPA, the presentation’s emission findings would change drastically, jumping up to 3.31 percent, almost approaching the low end of 3.6 percent reported by the Cornell team.

Methane emissions are usually understood as percentages of total production. By assuming much higher production rates than the Cornell team, Skone arrives at significantly lower emissions percentage. The NETL presentation estimates that 3 billion cubic feet are ultimately recovered from an average well while the Cornell study averages 1.24 bcf for an average shale gas well, a number supported by EPA estimates. 

When Hughes adjusted the NETL figure to reflect EPA production and emission rates, he found that the presentation’s final numbers are “comparable” to the Cornell study, and are actually a bit higher.

Hughes has more to say about the integrity of the Cornell study, but in the end demonstrates that, no matter how you look at it, the dream of clean unconventional gas is increasingly difficult to support.

June 11 2011

20:15

Post Carbon Institute Debunks False Hope Of Gas As ‘Bridge Fuel’

Touted by industry as a “clean energy” panacea, unconventional gas is widely heralded as deliverance from air pollution to global warming to foreign energy dependence. It is clean, the drillers say, and there is plenty of it. Descriptions like ‘trillions of cubic feet’ and ‘more than a century’s worth’ are becoming commonplace, used to prop up the vision of a clean, affordable and homegrown unconventional gas future.

But like most things that sound too good to be true, unconventional gas is no exception, as DeSmogBlog pointed out in our own recent report “Fracking the Future.”

Now, continuing to dispel some of the most egregious misconceptions regarding the future of gas, Post Carbon Institute Fellow David Hughes recently released a new report entitled Will Natural Gas Fuel America in the 21st Century?

In his report, Hughes takes on three myths undergirding our gas ambitions: that hydraulic fracturing and horizontal drilling have guaranteed our access to a century’s worth of fuel; that the price of natural gas, which has been historically volatile, will remain low; and that, from a global warming and public health perspective, natural gas is a clean and safe alternative to other fossil fuels.<!--break-->

These assumptions, Hughes writes, are what agencies like the U.S. Energy Information Administration are relying on when it forecasts an increased reliance on shale gas in the coming decades, up to 47 percent of all domestic gas production by 2035. They are also what lies behind President Obama’s recent endorsement of natural gas as “clean” in his “Blueprint for a Secure Energy Future” and the new incentives for transforming America’s vehicle fleet. Other well-regarded environmental organizations like the Worldwatch Institute also joined the gas chorus, suggesting the potential for gas to act as a ‘bridge fuel’ during the transition away from other disastrous energy sources like coal and tar sands oil.

However, the somber lessons of the last decade’s worth of unprecedented drilling across the continent have demonstrated that the ideals behind our burgeoning commitment to gas are unfounded, if not outright nonsensical. If the growing archive of first hand accounts of toxic water and air pollution haven’t made us rethink industry claims, then the steady stream of independent scientific research questioning the fuel’s availability, affordability, safety and cleanliness might do the trick.

Another integral aspect of Hughes’ take-down of the shale gas dream is the impracticable wholesale transition of the nation’s fuel systems to gas. The scope of such a transformation – which would require the dismantling of old energy plants, vehicles, fueling stations and pipeline infrastructure and their subsequent retrofitting or replacement on a nationwide scale – is beyond any realistic economic means, especially with the fragility of the current U.S. economy. 

To support such a costly overhaul, domestic gas production would have to increase by over 100 percent, far above even the most optimistic projections. To retrofit one existing vehicle with a natural gas system currently costs approximately $10,000 in the U.S. And while fueling stations across the country could be switched to compressed natural gas (CNG) to supply smaller vehicles, only liquefied natural gas (LNG) is sufficiently dense to supply larger vehicles like long-haul trucks. LNG must be stored at -162 degrees Celsius and so would require a separate fueling infrastructure. 

In effect, beyond the troubling aspects of its production via fracking, the very notion that unconventional gas has the capacity to provide the nation with a ‘bridge fuel’ is completely misguided. In the first place, there simply is not enough of the fuel to support such deep dependence. 

Secondly, such a switch would also require tremendous amounts of additional resources to carry through, which introduces the additional concern of collateral emissions. And this doesn’t even touch on the equally laborious and resource-intensive replacement of coal-fired power plants. 

When considering the costs associated with committing to unconventional gas as an ‘interim’ fuel, it seems an absurdity, especially when the capital required could be directly invested in the production of truly clean renewable energy. 

Perhaps some were willing to shrug off the unfortunate environmental impacts of gas drilling to somehow usher in a clean energy future, one that held the promise of domestic energy security. But if we cannot rely upon the viability of gas as a clean, bountiful or secure energy alternative, then we must begin to consider, and invest in truly clean energy.

Hughes puts it well in his conclusion: “when it comes to fossil fuels there is no such thing as a free lunch.”

June 09 2011

17:58

Gas Fracking War In British Columbia’s Wildlands

Independent Members of the Legislative Assembly (MLA) in British Columbia are calling upon Premier Christy Clark to launch a comprehensive investigation into hydraulic fracturing. This demand comes late in the game, some say, after the world’s largest fracking operations have already taken place in the remote and pristine wilds of the province.

BC’s two Independent MLAs, Bob Simpson and Vicki Huntington, are not alone in their request for a full examination of the human and environmental health implications of the province’s unconventional gas resources. Supporting the appeal are numerous citizen and environmental groups, journalists, and First Nation’s representatives. They believe the rapid development of gas in BC’s north is taking place without consideration of the costs to public health and safety.

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Bob Simpson, MLA for Caribou North, worries that mounting public concern could lead to a high profile confrontation between industry and environmental groups, much like those seen in the 1990s over logging practices. “I’m concerned this is going to be our next war in the woods,” Simpson says. 

The growing list of threats to drinking water and public health posed by fracking is the chief driver behind the recent call for a thorough, non-partisan investigation into the process by a special legislative committee. 

“It is incumbent on the government to ensure it fully understands the cumulative impacts associated with developing this resource,” says Vicki Huntington, MLA for Delta South, adding that public policy is forcing the rapid expansion of unconventional gas in regions like BC’s northeast.  

In light of growing public concerns, the MLAs are demanding a full review of the economic, environmental and health implications of unconventional gas drilling before the province encourages further development.

More courageous jurisdictions, such as Quebec and New York, have called for a moratorium on hydraulic fracturing and unconventional gas development until the risks associated with the practice can be more fully understood. New York just extended its ban on fracking for another year, urging caution until scientists can conduct the necessary safety studies. The MLAs and additional signees wonder why BC has not taken the same precautionary approach. Which begs the question: what are these other jurisdictions protecting that we are not?

One of the endorsing signees, Ben Parfitt of the BC Centre for Policy Alternatives, has already answered that question. In a report written for the Program on Water Issues at the Munk School of Global Affairs, Parfitt outlines the immense scale of fracking operations in BC’s northeast, calling the region the “epicenter” of unconventional gas development. 

In the province’s Horn River Basin, industry giants like Encana and Apache Corp. have conducted operations of a previously unimaginable size. A single fracking operation in early 2010 at Two Island Lake spanned for 111 days straight,  blasting 724 separate wells and using 5.6 million barrels of BC’s fresh water, diverted from local waterways.

Encana and Apache have plans to eclipse these numbers on two new well pads hosting 28 wells that will extend for even greater vertical distances underground. The project will require an estimated 2.12 million cubic meters of water. For reference, that much water would fill 848 Olympic sized swimming pools. 

The BC Oil and Gas Commission oversees the gas industry’s activities, including water withdrawals. The Commission, which did not have a hydrogeologist on staff until mid 2010, has issued hundreds of temporary water withdrawal permits granted under Section 8 of the Water Act. Generally, industry in BC must apply for long term water licenses through official bodies such as the Ministry of Environment that assess the broader environmental implications of water withdrawal for a given area. However, the oil and gas industry enjoys exceptional treatment, allowed to apply directly to the Oil and Gas Commission, a conflicted agency simultaneously tasked with encouraging the “sound development” of these fossil fuel resources. 

Section 8 approvals are ‘rolled over’ from year to year, meaning that companies can make continuous water withdrawals without any of the normally required ecological evaluation; a practice that the BC Oil and Gas Commission’s new hydrogeologist, Allen Chapman, admits is illegal.

The Commission, financially supported by the industry, has come under fire, even from the province’s Auditor General, who finds that “while the OGC has supported the development of some tools and methodologies to assess cumulative effects, no formal provincial program is yet in place to help manage the environmental effects of developments on the land base.”

With industry projections of up to 50,000 wells for the Horn River Basin alone, 200 of those planed for 2012, the initiation of a full-scale investigation cannot come too quickly. In fact, the call for such a review may be too late as the industry plows ahead with the fracking boom.  

Set to break its own records for the largest fracking operations in history, Parfitt suggests that unconventional gas fracking in BC may already be posing an environmental threat equivalent to the Alberta tar sands.

Image Credit: Interactive map of gas drilling in the Horn River Basin from the Unconventional Gas Center.

May 05 2011

11:48

Ukraine Makes a Bet on Shale-Gas Extraction

Ukraine already controls the pipelines through which Russia transports its natural gas to Europe. By also finding a greater source of its own natural gas, it would be hoping to reduce Russia's clout.

April 19 2011

23:49

Gas Industry Admits Water Contamination in Pennsylvania, Drillers Told To Stop Fracking Wastewater Delivery To POTWs

Pennsylvania news outlets reported two major developments in the controversy over fracking and unconventional gas today. The president of the Marcellus Shale Coalition has admitted publicly that fracking has contaminated local drinking water supplies in Pennsylvania.

And PA governor Tom Corbett has ordered gas drillers to stop taking fracking wastewater to public water treatment facilities (POTWs).

Carnegie Mellon University Professor Jeanne VanBreisen was first to discover high levels of bromides in drinking water sourced from rivers that have received treated fracking wastewater. Bromide is a salt also found in drilling wastewater from fracking operations.

The news is extra worrisome because bromides, when combined with chlorine at water treatment plants, can create bromates trihalomethanes, which are linked to bladder cancer, miscarriage and still births.<!--break-->

As a result of this shocking discovery, today the Pennsivania Department of Environmental Protection ordered Marcellus Shale gas drillers to stop trucking wastewater to 15 treatment plants in the state.

The industry's admission that dirty gas fracking is causing drinking water contamination is long overdue, and welcomed.  Now the state of Pennsylvania has every reason to place an immediate halt on fracking operations until the gas industry is held accountable for its damage to the state's water supply. This troubling news is yet another reason why fracking for unconventional gas needs to be banned nationwide until the gas industry can prove it isn't causing damage to public health, water supplies and the global climate.

Photo credit: David Turnbull

April 18 2011

12:01

Cornell Gas Study Stirs Heated Debate

In suggesting that unconventional natural gas production might be worse for the climate than previously thought, critics say, the authors measured the warming potential of leaked methane over an overly short 20-year time frame.
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