New York Gets Fracking
Marcellus Acquifers
New York State’s Department of Environmental Conservation released recommendations on hydraulic fracturing on July 1, 2011 designed to remove the moratorium on use of the technique for recovering oil and natural gas from the Marcellus and Utica Shales that underlie the state.
Concerns had been raised about the impact of fracking on drinking water in New York, and the recommendations are designed to respond to that concern by prohibiting surface drilling within 2,000 feet of public drinking water supplies; on the state’s 18 primary aquifers and within 500 feet of their boundaries; within 500 feet of private wells, unless waived by landowner; in floodplains; on principal aquifers without site-specific reviews; and within the Syracuse and New York City watersheds.
What’s left after all those limitations, you ask?
According to NYDEC more than 80 percent of the Marcellus Shale where oil and gas drilling is viable would are still accessible under these recommendations with permits that assure drillers meet the recommended guidelines.
NYDEC’s draft Supplemental Generic Environmental Impact Statement reviewed the experience and regulations in other states and got 13,000 public comments in considering real or imagined impacts.
The NYDEC says its fracking recommendations are ‘the most comprehensive measures in the country to protect not only drinking water but land, air and environmentally sensitive areas’.
Why New York is Lifting its Fracking Moratorium?
The bottom line is simple, while environmental activists may hate hydraulic fracturing for making more fossil fuel available economically, the potential for economic recovery, growth and job creation from the rapidly growing investment in unconventional oil and gas is very real. New York does not want to miss out of the jobs, tax revenue and economic growth that the resurgence of America’s domestic energy production is producing.
Nothing concentrates the mind of politicians nearly as well as the near term prospect of being left out of a good news story. Not even the US EPA has found reason to object to hydraulic fracturing. The practice has been used since the 1980’s with little evidence of adverse impact.
The benefits are, on the other hand, real and tangible and green—as in dollars and jobs and tax revenue!
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Shovel-Ready Domestic Energy Projects at Work
Every day there is more bad economic news it seems, and even President Obama started campaigning for reelection a year early. But things are different in North Dakota. The only things they worry about there is whether they can hire enough people to meet the labor demand and can they build the pipeline and other infrastructure needed to turn their black gold into real gold fast enough.
Welcome to America’s domestic energy production economics lab experiment!
This science experiment in the potential for putting American technology and entrepreneurship to work in unconventional oil and gas is going well—real well. Monthly oil production is ahead of year over year levels by 23% and up 78.5% over the past two years according to the North Dakota Department of Mineral Resources. Oil production in 2011 has averaged 10.5 million barrels per month, twice the 2008 levels, and three times the rate of five years ago.
President Obama would certainly like to take credit for the growth in jobs and personal income in North Dakota. Oil related jobs more than doubled from 6,800 jobs in May 2009 to 15,200 jobs in May of 2011. North Dakota’s unemployment rate is 3.2% compared to the Us average of 9.1%.
In the first quarter of 2011, North Dakota personal income grew faster than anywhere else in the US at a 6.9% increase four times the national average of 1.8%. As the ripple effect of high employment rolls through the North Dakota economy overall state employment level reached an all-time high in May 2011 and is now 2.5% above the June 2009 level when the recession officially ended.
When that oil gets to market and taxes are paid, North Dakota’s treasury ended up with $237.5 million MORE than projected over the last two years. For May 2011 state income tax revenues beat expectations by 10.6% and sales tax revenue was up 13%.
Maybe that is why resistance to unconventional oil and gas production using horizontal drilling and hydraulic fracturing long stalled in New York State suddenly seems to be easing. Why Pennsylvania is seeing the same signs of growth from its own rationalization of policies and regulations that held back domestic energy production in the Marcellus shale and Utica Shale.
America gets it!
Domestic energy production is one of the most promising avenues for climbing out of our economic hole. Even better it uses American technology, American entrepreneurship, using American workers to harvest American energy and keep American money at home rippling through our economy.
Now that’s a stimulus program we can believe in!
Fracking Safety for Unconventional Oil & Gas Domestic Growth
US Shale Gas Potential to 2035
Fracking Safety Review Panel named even as new unconventional production records are set.
President Obama’s Blueprint for a Secure Energy Future seeks to reduce the U.S.’s dependence on oil and increase the use of renewable energy sources.
North Dakota is doing its part by setting another record production month in March with reports that it pumped 359, 589 barrels of oil per day in March according to the North Dakota Department of Mineral Resources.
But no good deed goes unpunished as the old saying goes so back in Washington DC:
- On April 16, 2011 House Democrats Henry A. Waxman, Edward J. Markey and Dina DeGette released a report they said was “the first comprehensive national inventory of chemicals used by hydraulic fracturing companies during the drilling process.” used by the 14 leading oil and gas service companies in the U.S. They want the industry to disclose all the chemicals used in fracking and want EPA to regulate their use in hydraulic fracturing to prevent groundwater contamination.
- On May 9, 2011 U.S. Department of Energy Secretary Steven Chu formed a subcommittee of his Energy Advisory Board of industry, environmental and state regulatory experts to make recommendations to improve the safety and environmental performance of hydraulic fracturing from shale formations in response to fears that use of fracking chemicals can cause groundwater contamination.
- Frankly, the oil and gas industry has not helped allay concerns about groundwater contamination by its reluctance or refusal to release the ingredients used in fracking fluids. This has fed fears that the chemicals are dangerous and given opponents of horizontal drilling using hydraulic fracturing more ammunition for their NIMBY cause.
The steady increase in domestic oil and natural gas production from unconventional sources is a genuine American energy success story. US DOE’s Energy information Administration says recoverable unconventional natural gas deposits may represent more than 100 years of average domestic supply and oil recovery from unconventional sources is offsetting the foot dragging on drilling in the Gulf and deep water along the coasts needed to replace rapidly depleting conventional vertical drilling resources.
So let’s get on with this health and safety review and set some best practices to assure that hydraulic fracturing is the safe, reliable, effective E&P strategy we think it is for putting America back into the energy production big leagues.
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America’s E&P Mojo is Back!
America’s domestic E&P mojo is Back thanks to American technology and our potential for E&P domestic energy growth from unconventional oil and natural gas plays here at home. The question is whether the Government will tolerate such an unqualified success without smothering it in new regulations.
North Dakota is currently the fourth largest producer of oil in the United States and has been setting new production records almost every month. At the end of 2010 oil production had grown to 342,000 barrels of oil per day (BOPD). The key impediment to even faster growth is the oil pipeline and transport infrastructure limits.
The North Dakota Department of Mineral Resources updated its estimate of recoverable oil in 2008 and 2010 based upon better E&P data and now believes there are 4.0-6.3 billion barrels of recoverable reserves in North Dakota’s Bakken and Three Forks formations alone. And there are additional oil plays including the Lodgepole, Tyler, and Spearfish that are yet to be explored for development.
Stop and think about that for a moment. At the current actual oil production rate of 350,000 barrels of oil per day (BOPD) at the current price of WTI Cushing oil of $112.43 per barrel (4/27/11) North Dakota alone is reducing oil imports by $39.3 million per day or more than $14.4 billion per year annualized.
Energy security we can believe in!
We know from experience with unconventional oil and gas production that it will not always be this way in North Dakota and pother plays as the horizontal drilling technique is effective in extracting the ribbons of oil and natural gas but the size of the plays is typically smaller than the huge conventional oil play pools found in the Gulf of Mexico or Alaska. But studies done by the North Dakota Industrial Commission and Mineral resources Department suggest the Peace Garden State has an undeveloped resource base as large again as that found in Western North Dakota suggesting at least an additional ten to twenty years of intense drilling and development, followed by several more decades of continued petroleum production.
America’s Unconventional Oil and Gas Transformation Underway
Combine the resource potential of North Dakota with those of similar oil plays in other states and it adds up to enough domestic energy production potential to fuel America’s energy transformation. The US EIA reports that US oil production declined in all but one year from 1986 to 2008 and increased in both 2009 and 2010 caused primarily by the increase in deepwater developments in the Federal Gulf of Mexico in 2009 and by the growth in horizontal drilling programs in U.S. shale plays in North Dakota portion of the Bakken formation in 2010. In the Bakken and other shale formations horizontal drilling and hydraulic fracturing have refocused on oil production instead of shale gas production because of higher oil prices and low gas prices thus increasing oil production. Baker Hughes rig count data shows a pronounced trend toward oil horizontal rigs from less than one-third of oil-directed rigs in September 2008. Since then horizontal oil rigs have tripled to about 46% of all rigs.
And then there is Unconventional Gas
US EIA’s Annual Energy Outlook 2011, says there is 2,552 trillion cubic feet (Tcf) of potential natural gas resources in the US. Unconventional natural gas from shale resources are 827 Tcf of this resource estimate, more than double the EIA estimate published last in the AEO2010. Based upon the 2009 rate of U.S. consumption (about 22.8 Tcf per year), that is enough natural for 110 years of use. EIA expects these unconventional gas estimates to grow and other potential oil and gas plays are explored and validated.
Higher oil prices reflect the global tradable market for oil as a commodity. Lower domestic natural gas prices reflect the reality that natural gas trades primarily as a regional commodity. There was a time not long ago when energy experts expected LNG to transform natural gas into the same globally priced commodity as oil. Russia, Qatar and others even considered forming an LNG cartel like OPEC to fix prices for natural gas.
What changed?
American technology demonstrated the potential for horizontal drilling and hydraulic fracturing to unlock the potential of previously uneconomic shale oil and gas plays. North Dakota and Texas were the laboratories for these new technologies and now they are the domestic powerhouses of unconventional oil and gas production.
But the success of this disruptive technology could be undermined by NIMBY restrictions out of fear of groundwater contamination or government restrictions on unconventional oil and gas from the piling on of new regulations. The oil and gas industry needs to ‘get real’ about fracking fluid disclosure and best practices to reduce the risks and mitigate the need for Federal intervention.
But the government also needs to get it priorities straight and recognize that the potential from unconventional oil and gas is a game changer that gives America a competitive advantage today. If the US restricts the use of horizontal drilling or fracking the rigs and expertise working at home today in America will just go elsewhere in the world and America will be stuck with higher imports, higher prices and a weaker economy.
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