Subsidize, baby, subsidize!

By Hilton Price

Another U.S. Presidential election is just around the bend and, as always, this is the one that will make or break us for the rest of time. The issues, at least the ones that stir a large enough constituency, are being argued heatedly in sound bites and video snippets every day. The fight continues on social media, where I’m watching friends torn by differing views, and people shunned and insulted for speaking what they feel is right.

Among the issues is one that pertains to me and probably all of you – subsidies. Oil subsidies tend to be the one railed against the most, but any type of economic business assistance tends to have its own pack of nay-sayers. It’s typically argued that there are more deserving places for the money to go, and that the oil industry can support itself. Honestly, that’s not wrong, but it’s irrelevant.

Shell spent billions of dollars securing the right for its recent Arctic drilling attempt. That attempt was abandoned due to ice and equipment damage. I bring it up not to speak ill of Shell, the company was the victim of Mother Nature and circumstance, but to show that this is an industry which is sometimes forced to make a billion-dollar gamble. It’s an industry where day-to-day business costs millions of dollars, a sum not seen by most people in a lifetime. It’s easily one of the most expensive businesses in the world and honestly, shouldn't it be?

Almost everything I do all day long is possible because of the energy industry, and most of the time it’s oil and gas doing the work. From simple room lighting to my car to the phone in my pocket, the energy industry enables my entire life. Above I mentioned there are places more deserving for subsidiary money to go. Teachers are a perfect example. But not one of those teachers will be able to as effectively do their job, if those classroom lights won’t come on.

And yes, I absolutely think teachers need a pay raise and corporate CEOs (many in the energy sector) need a pay cut, but I don’t want to flip the two. Oil and gas execs are welcome to make more money, even a lot more, if it keeps those industries staffed with people who are looking to produce energy effectively. Keep the lights on, and find new and better ways to do it!

There’s an image problem in the oil and gas sector, at least in how the industry is seen by the country, and maybe the world. I addressed it’s need for a make-over in my last post. Being honest about how the industry spends money, and being transparent about the true costs of the business, will aid in that make-over. There are cuts that need to be made, and adjustments that need attention, but they can be relatively minor. The real cost will be the courage to be honest about the industry’s role in our lives.

What's old is new again- Revisiting energy storage

By Dorothy Davis

The electrical grid is a complex network connecting thousands of power sources with millions of consumers all across the U.S. While producing enough power to supply the energy needs of a nation is an extremely difficult task, just as challenging, if not more so, is the need to balance supply and demand on the grid.

Traditionally, the key approach to addressing this issue has been a centralized one, with power generators adjusting daily production based on anticipated levels of demand. But as the supply and demand picture continues to become more complex, emphasis is beginning to shift again toward energy storage - systems that can hold excess electricity until it is needed and then responsively release it into the grid.

The utilization of energy storage in the U.S. is far from new. A report by the Energy Storage Council (ESC) highlights power generators in the 70’s and 80’s recognized the potential of these technologies - creating a base of large-scale storage facilities that accounted for nearly 3 percent of the nation’s electric capacity by the early 90’s. However, the industry suffered major setbacks under the pressures of deregulation causing development to stall.

In the last decade energy storage technologies have enjoyed a resurgence spurred primarily by the burgeoning electric vehicle industry and private investment. Utilities and investors are again recognizing the broad potential benefits of energy storage technologies for power generators as they strive to meet demand.

The potential economic impacts of energy storage are fairly widespread, but the most basic idea is that these technologies will benefit utilities by maximizing power generation and conservation through reliability. Instability can lead to higher electric costs both because of inefficiencies at the generation level and the need for greater maintenance at lower levels.

The prospective benefits of energy storage are also gaining government attention and support. Most recently, the U.S. Department of Energy announced $43 million in funding from its Advanced Research Projects Agency-Energy (ARPA-E) for 19 new projects aimed at developing energy storage technologies.

Energy storage also offers a more cost effective solution for intermittent renewable energy sources like solar and wind, which are incapable of scaling generation up or down in response to changing demand.

At the same time, energy storage also has the potential to allow for more consistent use of coal-fired power plants, which have difficulty adjusting their output based on demand.

Energy storage holds the potential to address many of the key challenges facing the electric power industry. By raising the overall capacity and flexibility of energy storage helps meet the needs of a high demand modern grid by optimizing existing assets.

With such wide ranging benefits, growing the energy storage sector is certain to open up new and innovative opportunities for the electric power market.

Progress as promised...

By Hilton Price

Growing up, I was a good kid. I listened to my elders, asked before doing anything crazy, and pretty much played by the rules. My cousin Steve, not so much. He was a bit of a problem child. He liked mischief, rarely asked permission, and often found himself on the wrong end of a spanking… or worse.

Steve wasn’t a bad kid. He just had trouble staying on task. This made it harder for him even as he got older, and learned some discipline, because everyone around him still thought of Steve as a bad egg. By the time he was entering high school, he was doing well in class, excelling at extra-curricular activities, and becoming a responsible and thoughtful young man. But the stigma from his childhood still stuck around, leading to some people judging him incorrectly for much of his young adult life.

When Hurricane Isaac started heading toward the Gulf of Mexico this summer, the companies working in the region’s deepwater oil fields took notice. They sent crews away, battened down the hatches, and prepared for the storm. And after the winds and rains had died down, they didn’t rush back to the platforms and start flipping on each switch.

The companies working in the gulf began a series of checks to make sure the equipment was able to safely be restarted before production began again in the Gulf. No company rushed back into business, because no company dared risk overlooking some minor damage from the storm that could grow exponentially once the platform was operating again.

At Power-Gen International 2011’s keynote address, reshaping the image of the oil industry was touted as an important goal for the future. Finding lots and lots of oil and using it to power the world was probably also covered, but the “image reshaping” really stuck in my head. I absolutely agree that this industry should be shouting its best practices to the world, especially when they are followed diligently.

But when the companies returned to the Gulf after Isaac, the public knew little to nothing about the extensive checks underway before production began. I know it’s typically the bad news that gets attention, and “Companies slowly checking everything in the Gulf” is a pretty boring headline, but I also remember a young man I knew growing up who also needed all the good P.R. he could get.

To my new eyes on an old industry, the oil industry and my young cousin Steve have something very important in common. Both need to have their successes celebrated twice as loud as their failures, to ensure those watching understand they are doing good work.

The public’s poor perception of the oil industry isn’t without some cause, but it is certainly overkill. Companies within the industry are constantly working to ensure oil is discovered, extracted, and processed in the most safe, secure, and reliable way possible. The people working in those companies live on this planet too, and are trying to minimize impact on Earth while utilizing its resources. These are good and important companies, and this is (overall) a good industry. But there is a lot of bad press, and overcoming it means publicizing every positive moment.

Just as Steve needed his accomplishments touted twice as loud as his failures, to show his progress and promise, so should the industry be ensuring the good news gets out. It’s the best way to reshape an image, allowing companies to grow, much like my cousin, into even more productive and valuable members of society.

The new leadership needed in energy

By Dorothy Davis

I was recently invited to participate in an energy focused panel for the University of Tulsa’s newly launched Master of Energy Business program. Being in the middle of wrapping up the Summer issue of PennEnergy's EnergyWorkforce magazine, I was inspired by its theme of the Big Crew Change. What had been planned as a presentation on the increasing trend toward integration in the industry became instead a call to my peers to take up the mantle of leadership.

As a member of the PennWell team I am fast approaching my sixth year of being engaged in energy. In my role as content director for one of the most comprehensive energy news portals in the world, I am immersed in all segments of this industry. I live and breathe it. While it is abundantly clear that it is a good time to be in energy, it’s also clear we are on the cusp of change that goes far deeper than our standard boom or bust cycles.

Energy touches everyone. It is as vital, pervasive and complicated as agriculture in its global influence. Energy today, not in some unspecified future, desperately needs to cultivate its next thought leaders. On the near horizon is the loss of close to half of our industry professionals. While this is unfolding, global energy demand is poised to nearly double. Energy professionals both in outlying roles such as mine and in more direct fields such as engineering or the geosciences will need to fill those gaps with fewer tangible resources. It will require a leadership armed with a new set of dynamic guiding principles.

Diversity, collaboration and innovation are the words to remember. While functional and technical specialists will always be needed; those beginning or continuing their professional lives within energy must bring more to the table. For the energy industry to continue to thrive it must extend that table to accommodate more than its traditional business models.

The burdens of a strained global economy, environmental issues, resource limitations and the need to modernize are not petroleum problems or utility problems - they are global challenges. As our industry moves ahead in finding ways to connect and integrate diverse sources across large and small networks to meet these challenges, those of us who strive to lead must do the same with our business approach.

We must adopt an all-of-the above tactic in all things energy. I do not say that lightly. Those words are deeper than a proposed policy or some biased political statement. It is a way forward that respects the heritage of the energy industry while taking the necessary steps to ensure it continues to flourish.

A culture of diversity, collaboration and innovation is required for the years ahead. What once constituted business as usual no longer applies. Business is anything but usual. It is indeed a good time to be in energy, but it’s an even better time to be a trailblazer.

But Syriasly, folks…

By Hilton Price

Nearly a year and half ago, Syrians began an uprising against their government. The protests and armed conflicts revolve around the Ba’ath political party, which many in Syria see as corrupt and beholden to Islamic militant group Hezbollah. The protestors want the Ba’ath party out, and many international governments seem to agree with this sentiment.

It’s hard to know what the U.S. really wants here, due to some baffling maneuvering from Washington. Earlier this month, the U.S. announced new sanctions against the Syrian government and the country’s state-run oil company. However, as sanctions traditionally limit the economic and political options available to a group or country, these latest sanctions seem to be intended to show American concern over the conflict, but not any interest in actually getting involved. They are largely “symbolic,” even according to U.S. officials.

It all reminds me of a bad parenting decision I made a few weeks back. When my little girl refused to go to sleep one night, I found myself struggling to choose a fitting punishment. A time-out would keep her out of bed longer. A spanking would only exacerbate the situation and delay sleep even more. So, as I stood in my daughter’s room, determined to find some way to make her understand she needed to close her eyes and try to sleep RIGHT NOW, I reached for the first toy I saw. With her Etch-a-sketch in my hands, I looked sternly at my little girl and said, “I’m taking this toy away until you can go to sleep.” With that, I closed her door and walked back to the living room.

It took another hour before she finally went to bed. Later that night, I stared at the taken toy wondering what, if anything, I could have done differently. Suddenly, I realized I could not remember ever seeing her play with the Etch-a-sketch.

I called her mom, and sure enough, she also could not remember the toy being used. Grandma, grandpa, and Aunt Judy also had no recollection of seeing the Etch-a-sketch being played with. It was now no wonder my daughter wasn’t bothered by me taking the toy. She didn’t even like the toy!

To my new eyes on an old industry, symbolic sanctions are like punishing a child by taking away a toy it doesn’t like. It may look like a serious action, but it’s really a meaningless gesture.

Punishment has to mean something, or anyone with basic problem-solving skills will see the emptiness of the gesture. I know, because I’ve spent the past couple years with a little someone who has only basic problem-solving skills, and even she would think these sanctions were pointless. Of course, she doesn’t know what a sanction is, but honestly, why would I dare spoil that. I wish I didn’t know what a sanction was. Ah, the ignorant bliss of childhood…

Sorry, where was I? Oh yeah, fake-punishing Syria…

If the U.S. wants to stay out of this conflict, that’s fine. It’s the right of any sovereign nation to determine its involvement in the actions of others. Likewise, if the country wants to say, “We don’t like this, but we’ve got way too much going on right now to deal with this,” I’m okay with that. I don’t remember Syrians jumping into our civil war. Of course, they weren’t an independent country until 1946…

My point is, my little girl knew taking her etch-a-sketch away meant nothing. It wasn’t something she cared about, so losing it was not a problem. The United States’ symbolic sanctions against Syria are the same type of thing. Since they will be meaningless to the Syrian government, they will accomplish nothing.

New swaps definition provides needed exemptions for energy industry

By Dorothy Davis

In 2010 Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act with the primary goal of re-regulating the financial system with stronger consumer protections and greater transparency. But the act's broadly written rules also inadvertently folded in an array of day-to-day transactions carried out by the U.S. energy industry, which frequently uses derivative contracts that are not easily standardized.

Of major concern to energy companies was the possible inclusion of physically deliverable forward contracts as swaps and being designated as swaps dealers if the notional value of their transactions fell into ranges as low as $100 million annually.

Energy companies often enter into long- and short-term physical transactions to buy and sell electricity, natural gas and other fuels to serve customer needs, and sometimes use financial hedges to manage volatile prices, outlines Reuters.

After two years of deliberation, federal regulators have at last approved a definition for swaps under the Dodd-Frank Wall Street Reform and Consumer Protection Agency, which includes crucial exemptions for many energy companies.

The two agencies overseeing the implementation of the new rules - the Commodity Futures Trading Commission and the Securities Exchange Commission - approved the rule on Wednesday, setting in motion more than 20 separate regulations that were waiting only on a definition for swaps.

The financial instruments are intended to help control the risks facing companies by exchanging two distinct streams of revenue. However, there were some worries that certain contracts allowing energy companies to purchase fuel in response to changing consumer demand could fall under the definition, potentially raising costs around the country.

Risk magazine notes that the CFTC ultimately proved receptive to concerns from the energy industry about unnecessarily raising costs in a sector that relied on swaps contracts for legitimate hedging, both with the definition of swaps and the inclusion of an end-user exemption to clearing requirements.

Businesses meeting the newly revised definition of a swap dealers will have 60 days to register after the final rule is published.

Dumping Oil Speculation (and Other Bad Habits)

New Eyes on an Old Industry
By Hilton Price

This year, I finally managed to do something I’d wanted to do for years; quit smoking. Before I worked for the greatest website in the oil & gas sector, I was in television news. If you’re unfamiliar with the behind-the-scenes goings-on of a TV news station, allow to me to impart one important fact: Quitting smoking is next to impossible when you work in TV news. I always promised myself once I left the industry I’d finally quit, and a few short weeks after beginning my tenure with PennEnergy, I made good on my promise.

I remember being a smoker very well. I remember the anticipation of my next cigarette break, especially if it meant getting away from my daily workload for a few minutes. I remember the soothing feeling nicotine had on me, truly a sign of my (at the time) serious addiction. Most of all, I remember how I always knew how bad those little sticks were for my health, and how I smoked them (sometimes eagerly and happily) despite this knowledge.

I bring all this up because in learning about the oil & gas industry, I have been reminded my former tenure with cigarettes. Smoking cigarettes is a lot like oil price speculation. If my new eyes on an old industry understand this right, neither makes any logical sense and seems to only cause harm, yet the practice continues largely unabated every single day.

The process of speculation is headache-inducing due to its complete lack of regard for supply and demand. Oil pricing revolves around futures, essentially a pre-set price for a delivery sometime down the road, making the classic supply/demand model no longer applicable. Now, oil sellers need only offer a price that they believe the buyer will agree to, no matter how the price is determined. The final price could be determined by a gust of wind, conjured from animal bones, or simply pulled from the ether by the imagination of an inebriated hobo. As long as the buyer agrees, congratulations! You just set the price for oil!

It’s a wonder every business across the globe hasn’t adopted this approach to pricing. If they could, I’m sure every store at my local mall would love to implement this. Instead of paying $120 for a pair of jeans today, shoppers would now agree to buy a $500 pair of jeans in 5 years. Denim futures would create a whole new generation of millionaires. Personally, I think having to sign promissory notes would make the whole shopping mall experience a lot more interesting. And don’t get me started on the food court. Panda Express would be the new high-water mark in upscale dining, with reservations made 3 years in advance.

Smoking (and exaggeration) wasn’t my only pointless habit. I’ve also always been a bit of a collector (trading cards, comics, games,) so I understand that sometimes things are priced excessively high. Every comic book store has a few books hanging behind the counter because they are “collectible.” The demand may not be obvious and immediate, but since the book is rare, it can demand a higher price than others.

But we’re not talking about some niche collector market. This isn’t baseball rookie cards or obscure comic books from the 50s. This is the one commodity, besides food, that nearly everyone in every industrialized nation is using. So, we’re essentially ignoring the demand on one of the few items that will always have demand. The growing interest and shrinking cost of renewables means demand for oil will one day be replaced by demand for something else. So, not only are we ignoring the massive demand for oil, we’re failing to take advantage of that demand while it exists! Save the futures and speculator nonsense for 100 years from now, when every home has solar panels and our cars are powered by canola oil. That will be the time to charge prices pulled from thin air. That will be the time to sucker buyers with talk of future pricing. Today is not the time for imagination in pricing. Today is the time to sell the oil to the people that want it for a reasonable price.

But, instead, the success of our speculator market has other countries interested in their own game of financial make-believe. Much like younger friends I had who once considered smoking because they saw me do it, now other countries are considering picking up our bad financial habit. Although, the U.S. is younger than China, so the metaphor is getting a little shaky. Point is, speculation has been successful for some, and now others want in. Meanwhile, there may be a chance that rational thinking could one day return to our own markets.

President Obama, always a favorite topic around the office, announced plans to crack down on speculation. At least, I think I saw that somewhere. As the 24-hour news cycle does, it was soon replaced with other stories. But I swear he said that, and whether it’s a political ploy or a real concern for the man, it’s very much needed. People are getting rich making stuff up, and not in a cool way like Stephen King or DEVO or those guys behind LOST. Their making up pricing, and we’re playing along because we think there’s no other way.

I remember another time I felt like I did something because there was no other way. I smoked cigarettes. Why? Because I had smoked for years, and I was addicted, and it was just part of who I was. Well, then I quit. Now, I don’t smoke. It’s dumb and dangerous and I don’t want any part of that. Speculation is the same. Together, as a planet, we need to quit, and keep our friends, the other countries, from starting. It’s dumb and dangerous and trust me, we don’t want any part of it.

The Path More Regulated: EPA rules generate debate, but little else clear

By Dorothy Davis

One of America's most critical resources is the nation’s electrical grid, an engine of commerce across essentially all industries. The less popular side of the electric generation industry is its role as one of the country's biggest sources of emissions.

While everyone wants to keep the lights on, consumers now more than ever are demanding cleaner energy. In response, the U.S. Environmental Protection Agency (EPA) took decisive action last year to reduce emissions. The new regulations are spread across several major new proposals covering both the energy industry and several other related sectors.

Perhaps the most widely-reported rule has been the Mercury and Air Toxics Standards (MATS), which the EPA hails as the first overarching regulation of emissions of toxic substances ranging from mercury to arsenic. Technically the EPA implemented rules governing mercury emissions under the Bush administration, but these regulations were challenged by local and environmental groups for failing to meet standards set out by the Clean Air Act.

On top of these new emissions limitations, the EPA also imposed restrictions on emissions that travel across state boundaries. The Cross-State Air Pollution Rule (CSAPR) would replace the Clean Air Interstate Rule (CAIR) from 2005 and requires more than two dozen states to reduce their emissions of sulfur dioxide, nitrogen dioxide and ozone. CSAPR has been challenged in court and the industry is currently operating under CAIR while the case is reviewed.

Lastly, a more specifically targeted rule would require that all businesses using boilers and large incinerators to meet specific emissions standards for chemicals such as mercury and other substances like soot, known as the Maximum Achievable Control Technology or MACT standards. Most boilers already meet these standards, but some 1 percent would need maintenance, modification or replacement.
Each of these new rules would be implemented under the timeline laid out in the Clean Air Act, requiring full compliance with the law within three years, with the possibility of a one-year extension at the discretion of the EPA.

The debate over these new rules has involved vehement arguments on either side, with the EPA touting huge potential health savings and many energy companies insisting the costs of implementing these new regulations could prove economically catastrophic.

The impact on electric generation capacity alone could reach a substantial level. The North American Electric Reliability Corporation estimates that, between derated power plants and retirements, the MACT standards alone could lead to the loss of anywhere from 2.9 gigawatts (GW) to 17.6 GW of generation capacity. The CSAPR regulations, meanwhile, could lead to the loss of between 2.8 GW and 7.2 GW.

Combined with all other new regulations the report predicts anywhere from 40 GW to 76 GW of lost capacity. According to the EIA, the highest figure represented more than 7 percent of the country's electricity generation capacity in 2010.

In particular, a report from Credit Suisse projects that around 60 GW of coal-fired power plants are likely to shutter. Given that NERC projected lower-than-usual capacity reserves in some of the affected areas, particularly Texas, in its 2011 Long-Term Reliability Assessment, those losses could prove costly.
Certain sectors expect to be hit particularly hard by the new regulations. The American Forest and Paper Association notes an internal report estimating as many as 36 paper mills might be forced to close without the ability to pay to upgrade outdated boilers. Those closures would cost more than 20,000 jobs. The Council of Industrial Boiler Owners projects even more substantial cuts of 230,000 jobs, suggesting that the vast majority of current boilers are entirely incapable of meeting the proposed standards at all. Replacement and improvement costs are estimated at $14.3 billion.

All told, a report commissioned by the American Coalition for Clean Coal Electricity and composed by National Economic Research Associates found that the net effect through the rest of the decade would be a loss of 1.4 million job-years. That amounts to a net loss of around 175,000 jobs. It also projects electricity rates to rise around 12 percent, imposing its own economic costs.

But not all analyses project economic losses because of the rules. Credit Suisse portrays the new regulations as an opportunity to realize larger profits on existing generating capacity that already does or can meet emissions standards, which represents the majority of all generating capacity. This will necessarily mean higher electricity rates for the affected areas, and potential economic costs as a result, but also means greater stability for natural gas-fired power plants and other electricity generators, as well as the potential for greater investment in new capacity that meets emissions standards.

A Bloomberg Government study goes so far as to suggest that the new EPA regulations will have limited impact on the energy sector and similarly minimal effect on actual emissions.

But other analyses project a more substantially positive impact. The EPA estimates the MATS regulations alone will produce 46,000 temporary construction positions and another 8,000 long-term jobs.
A report put together by environmental advocacy group Ceres and the Institute of Clean Air Companies suggest that the total economic impact of the new rules could mean as many as 1.5 million new jobs over the next five years. Many of these would be shorter-term construction positions, while others would come from long-term jobs with power plants or at environmental control mechanism manufacturers. The remainder would represent the broader impact of these new jobs.

The Economic Policy Institute takes a more inclusive approach, accounting for lost positions in the energy sector and their impact, but still finds a net gain of between 28,000 and 158,000 jobs in the same time frame. The energy industry could stand to lose as many as 17,000 positions, while anywhere from 31,000 to 46,000 jobs could be lost because of higher electricity rates.

However, the energy sector could also gain as many as 35,000 positions as resources shift in other directions, while the pollution control industry would add at least 81,000 jobs. With the net-positive impact on industry jobs, the impact on secondary economies is expected to be substantially positive as well.

So where do all these numbers leave the electric power industry and consumers in terms of the far reaching impact of these new regulations? Nowhere near a clear answer unfortunately. What lies ahead is as always determined by what roads are taken now and that road is still being paved by electric power regulators, providers and consumers.

Spare the rod, spoil the oil-producing nation…

New Eyes on an Old Industry

By Hilton Price

Growing up an only child, I missed out on some of the unique elements of living in a sibling-filled household. Luckily, thanks to Iran, I still get to experience the petty and often meaningless tirades of a selfish child on a regular basis. The country has long been home for random acts of foolishness broadcast to the world, but in recent weeks the petulance, selfishness, and downright silliness have gotten out of hand. For these new eyes on an old industry, it’s clear. The naughty children need to spend more time in time-out.

Iran’s decision to halt oil exports to EU nations in lieu of the upcoming EU oil embargo is as classically juvenile as a tactic can get. It’s the world stage equivalent of “You don’t want it? Well, I wasn’t going to give it to you, anyway!” Does the line sound familiar? It should, you probably said it yourself… when you were 9.

Like many of the impromptu and heated words of children, reality often steps in with other plans. Sure enough, after Iran refused to sell some of its oil, the country was left with unsold oil. That seems a poor choice of endgame for an oil-exporting country. Last I read, some of that unsold oil had been sold, but the clock remains ticking to unload the bulk of it or risk it sitting idle on tankers in the open sea. That possibility, and the resulting unpredictability in the oil-trading markets, has led my new eyes to realize something else about this old industry. Supply and demand is useless here, and that is the cornerstone of Iran’s power in this struggle.

When there’s a potential oil shortage, the price at the pump goes up. When there’s uncertainty in reserves, the price at the pump goes up. When there’s potential that a bunch of unsold oil will be sitting around in tankers on the open sea…, the price goes up? Wait…what? I’ve come to realize the markets don’t seem to reflect the actions of the world in any way similar to business basics. It’s all because of “speculation,” a word that seems to give far too much power to analysts. However, I’m new here and still learning how it works. I’ll try to reign in the urge to go running down the street screaming, “The whole thing is fixed! The game is rigged! We’ll never win!” without at least a little more time in the trenches.

It’s this negative effect on the markets that Iran clearly hopes will drive EU countries back to its oil. The problem is, outside of the markets, Iran has almost no power. The country traditionally exports 2.2 million barrels each day. That seems like a lot, until you consider the typical world consumption of 89 million barrels each day. Then, it quickly becomes a drop in a pretty big bucket. Who’s providing the other 86.8 million? Are any of those countries causing trouble? Norway produces almost as much oil as Iran. When was the last time Norway threatened to close any shipping straits? How much “not for weapons (we swear)” yellow cake are the Norwegians going after? I’m pretty sure the country hasn’t done either of those things. Okay, maybe the yellow cake, but it’s probably just moist, delicious, yellow cake. And who doesn’t love cake?

I can’t answer that, but I can tell you who doesn’t “get” any cake; Naughty children. Even as I bring this blog to a close, I’m reading how Iran is refusing to allow nuclear inspectors onto its military bases, even though it’s believed that is where the country is storing nuclear-related items, possibly even potential weapons. This half-assed approach to openness is another childish maneuver. It’s the world-stage equivalent of “I’ll show you how I cleaned my room, but you’re not allowed to look in my closet.”

Enough is enough. I don’t allow this nonsense in my home, and it shouldn’t be allowed in the interactions between nations. It’s time to put the naughty children in time-out. They clearly need to spend some more time thinking about what they did.

Oh, for frac’s sake…

New Eyes on an Old Industry
By Hilton Price

In the upcoming edition of PennEnergy Workforce Magazine, I’ve contributed an article on why I believe public outcry and government legislation have been good for the fracking industry. It’s pretty compelling stuff. You should read it.

During the week I spent researching the piece, I learned a lot about fracking, far more than I had in the preceding 3 months I’ve been working in the industry. Amid that intense study, I realized two things. First, the theme of my submissions in this recurring blog will be my own ongoing education in the oil and gas industry. Second, no one outside the industry is ever going to be entirely comfortable with fracking. The process is too weird for normal human consumption, and the very nature of how it is performed means someone, and most likely many someones, will always oppose it.

The list of fracking chemicals is shrinking. With each unsuccessful frac (or successful legislation), the number of reliable and permissible chemicals is reduced. That’s a good thing. That means less dangerous junk is pumped underground. For instance, the first frac involved Napalm. I don’t have the list of acceptable chemicals in front of me, but I’m pretty sure that’s not on it anymore. You’d be hard pressed to find someone who would say napalm should be used in anything, expect possibly for blowing stuff up.

Even with napalm and some of the other obviously problematic chemicals removed, the permitted frac fluid list is still littered with a bevy of chemicals not familiar to most people. Unfamiliarity breeds fear. Until the bulk of mankind starts taking a personal interest in high school chemistry, almost every chemical on that list is going to be a source of fear.

Okay, I found the list. There are, admittedly, a few that don’t sound so scary. Take Isopropyl Alcohol, for example. Practically every family has at least one bottle of Isopropyl Alcohol under a bathroom counter in their home. So, seeing that name on the list might not concern everyone. Of course, the chemicals on this list aren’t just sitting on a list or hiding under a bathroom counter, they are being forced into the ground at high pressure and speeds. This brings up the other reason most people won’t ever be “okay” with fracking. It involves pumping stuff into the Earth, a concept that in itself is unsettling to the uninformed.

It’s easy to make assumptions on how people will act, and that’s largely what I’m doing here. So, allow me to add some context. I’m in Tulsa, Oklahoma as I write this. It’s where I live; I didn’t just stop here to write. Over the last few years I’ve grown accustomed to Tulsa’s unique weather anomalies. Severe thunderstorms, epic snowfall, and tornado warnings are just part of the Oklahoma life. Then last year, something else popped up with increasing frequency: earthquakes. I felt two of them, and they were pretty scary. So, I understand why people began trying to find a cause almost immediately. We’re not used to them and we want answers.

Of course, someone from Tulsa posted a story about fracking’s possible link to earthquakes on their social network page. Within minutes, everyone had strong opinions on the topic. It was very cute. Thoroughly uninformed, but very cute. It also exemplified the way people view fracking. The effect of the process isn’t fully understood by people, so the idea of some frac fluid setting off “the big one” makes a weird kind of sense. Geologists have found a connection between fracking and earthquakes, but not in the point-A-leads-to-point-B way the public has embraced. It’s more complex than that, and that complexity, a recurring theme here, is why the public just doesn’t get it.

Lucky for us, the public doesn’t understand a lot of things it discusses, and that’s why in the end we don’t really have to pay too much attention to what they say. From Federal finances to relationships in Hollywood, public discourse is common. Politicians don’t worry about my thoughts during budget debates, and celebrities have never asked for my input on their trysts. As long as the people behind the fracking industry can accept that the process will be discussed by those who aren’t fully informed, it can persevere past the hurdles mass discourse will occasionally toss in its way.

Natural gas prices and shale estimates plummet

While many in the power industry and certainly consumers are grateful for the plummeting prices of natural gas, the news has proven far worse for gas exploration and production companies.

The drop has been attributed to the massive surge in natural gas production from the proliferation of hydraulic fracturing and the recent lull in demand created by an unusually mild winter.

Natural gas prices have slumped from above $4 per million British thermal (Btu) units to below $3 per million Btu; a game changing drop that has prompted many of the nation’s gas producers to begin scaling back operations to focus on higher value resources. All told, the country has 780 natural gas rigs in operation, a 14 percent decline from the same time last year.

Now in an interesting turn of events, the latest estimates of shale natural gas reserves in the U.S. have taken a shocking step backward.Projections released by the U.S. Department of Energy estimate that the country holds around 482 trillion cubic feet of recoverable natural gas from shale basins. That represents a 42 percent decline from the year before when estimates of shale gas reserves were placed at around 827 trillion cubic feet.

Probably the most substantial impact of the updated estimates, however, was the 66 percent reduction in recoverable reserves in the Marcellus shale formation in Pennsylvania, New York, Ohio and West Virginia.

Ironically, it’s the surge in natural gas exploration in shale deposits over the last year that has provided these revised estimates. Last year that basin was estimated to hold 410 trillion cubic feet of gas, enough to fill U.S. gas demand for 17 years at 2010 level. Now, that number has been reduced to 141 trillion cubic feet, or around 6 years.

Nevertheless, the DOE estimates natural gas production will rise even higher than previously predicted despite the smaller resource base.