Original Article

Crude oil futures held steady around $80 per barrel Wednesday following a larger than expected rise in oil inventories, having already suffered steep declines earlier in the morning.

The U.S. Department of Energy reported a 2.8 million barrel rise in crude oil inventories, larger than the 700,000-barrel rise predicted by the average of analyst forecasts.

Oil prices actually rose after the numbers were released, but were still down due steep early declines caused by concerns over debt problems in southern Europe. Light, sweet crude for June delivery on the New York Mercantile Exchange declined $2.30, or 2.8%, to $80.44 a barrel in recent trading, after dropping to $79.15 a barrel earlier in the morning, it’s lowest intraday price in nearly six weeks. June Brent crude on the ICE futures exchange declined $2.36, or 2.8%, to $83.31 a barrel.

The market “had already anticipated the worst” from the oil supply data, said Andy Lebow, a broker with MF Global in New York. “The numbers were already discounted by the market’s bearish tone over the last two days,” he said.

Oil plummeted from an intraday high of $87.15 a barrel over the last two days as riots in Greece raised concerns about the government’s ability to enforce austerity measures necessary to receive a financial aid package from the European Union and the International Monetary Fund. Investors fled risky assets including stock and oil and other commodities into the perceived safety of the dollar.

The Energy Department also reported a greater than expected build of gasoline stockpiles. Gasoline inventories rose 1.3 million barrels, compared to expectations of a 100,000 barrel build. Distillates including heating oil and diesel fuel rose by 600,000 barrels, less than the expected 1.5 million barrel increase.

Gasoline and heating oil futures also recovered ground from the morning’s declines after the data was released. Front-month June reformulated gasoline blendstock, or RBOB, recently traded down 7.29 cents, or 3.1%, lower at $2.2493 a gallon. June heating oil recently traded 6.34 cents, or 2.8%, lower at $2.1961 a gallon.

Original Article

The last group of more than 100 south Caddo Parish residents evacuated from the homes after gas was detected leaking from a well and in groundwater are expected to head home today, the Caddo sheriff’s office says.

Re-entry to the evacuated area off Norris Ferry Extension is expected to begin at 10 a.m.

“Teams are staging now at Fire Station 22 and will probably begin re-entry as soon as residents start showing up,” the release said.

It has been 16 days since the gas situation began on the Exco Operating Company site on Norris Ferry Road in south Caddo Parish, where four dozen families now have spent more than two weeks away from their homes because of the instability of two and perhaps three natural gas wells contained in the small drilling footprint.

Of concern was the volume of natural gas being released from the well site, which contains three wells. The first is a 2-year-old non-producing well that was shut before Exco’s movement onto the site. The second was drilled into the Haynesville Shale, but had yet to be fracked. Drilling was under way on the third when the company hit a gas pocket two weeks ago, forcing the first round of evacuations. That well was plugged with cement,. Exco crews then skidded the rig back to the second well.

Original Article

The catastrophic oil spill unfolding in the gulf has provided the environmental community with a rare opportunity to shift public opinion on climate and energy issues, an opening on which it has been quick to capitalize.

National environmental groups — including the Sierra Club and the Natural Resources Defense Fund — have rushed volunteers and scientific experts to the Gulf of Mexico to help with the cleanup in the aftermath of the Deepwater Horizon rig’s collapse. But they are also holding news conferences, filming TV spots and organizing protest rallies, all aimed at persuading lawmakers to block new offshore oil drilling and pass legislation curbing U.S. greenhouse gas emissions.

“It’s very difficult, in our society, to cut through the din and get people to listen and pay attention,” said Friends of the Earth Managing Director David Hirsch, whose group is preparing TV ads on the issue. “Unfortunately, these are the times when it happens. These are the moments when you can be heard.”

Jack Gerard, president of the American Petroleum Institute, questioned environmentalists’ tactics. “It’s unfortunate that some would seize on a tragic accident to push a political agenda,” Gerard said. “We don’t have the facts yet.”

Although the exact cause of the blowout remains unclear, activists have used the spill to bolster their argument that the risks of offshore oil exploration outweigh its benefits, and that the United States would be better off focused on promoting alternative energy sources.

“This does serve as a wake-up call, to both the administration and Congress, to focus more effort on reducing the demand for oil,” said Sierra Club Executive Director Michael Brune.

A little over a month ago, it appeared that environmentalists would have to accept the prospect of expanded oil drilling off the U.S. coasts, as President Obama identified new areas for exploration and the three senators working on a bipartisan climate bill — John F. Kerry (D-Mass.), Lindsey O. Graham (R-S.C.) and Joseph I. Lieberman (I-Conn.) — inserted offshore drilling provisions into their draft. But now the administration has said it will review its proposal, and two GOP governors — California’s Arnold Schwarzenegger and Florida’s Charlie Crist — have reversed course and said they oppose any drilling off their state’s shores.

At least two Democratic senators, Robert Menendez (N.J.) and Bill Nelson (Fla.), have said they won’t support a climate proposal that encourages offshore drilling, and even some moderate Republican senators say they want to reexamine the role offshore drilling should play in the nation’s energy supply. “Whether it should be there in the future is an open question,” said Sen. Richard G. Lugar (R-Ind.).

BP was one of three major oil companies prepared to endorse the compromise Senate climate bill last month — Lieberman described them to reporters in late March as “our new friends” — and Lieberman indicated Tuesday that he did not think the senators would pull offshore oil drilling from the package before they formally introduced it.

But a Democratic Senate aide who spoke on the condition of anonymity said when it comes to the bill’s drilling language, “We will have to change things from where they were before, but we need to figure out what that is.” The aide that the bill’s sponsors are encouraged by the fact that the spill has “engaged and activated a large part of the environmental community. We feel like this is a really good opportunity for us.”

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Reaching a drilling compromise that will attract Republican support without alienating Democrats such as Menendez and Nelson remains a challenge. For the moment, however, environmentalists appear to think they have the upper hand. The Sierra Club has not only mobilized 2,000 people to volunteer in the Gulf states, it will hold a “Clean It Up” rally Saturday in New Orleans along with simultaneous “solidarity events” such as demonstrations at BP gas stations around the country and mock oil spills that will involve temporarily laying black trash bags on beaches. Dozens of green groups now participate in a daily “oil disaster war room call” to plot their strategy.

“I’m not crazy about what got it there, but we’ve got to take, advantage of it,” Ocean Conservancy President Vicki Spruill said of the spill’s moment in the media spotlight. “We’ve got to turn this crisis into an opportunity.”

But Obama and his top deputies have yet to talk about reducing the nation’s dependence on fossil fuels in connection with the oil spill, something that worries environmentalists such as Brune.

“There’s no mention yet of how to get to the root of this,” he said. “If we’re not getting to the root problem — our addiction to oil — we’re going to see this problem repeated again and again.”

Original Article

BISMARCK — Meeting the world’s growing energy demands in economically and environmentally sound ways will be more difficult than sending someone to the moon, a top oil executive said Tuesday in Bismarck.

Clarence Cazalot Jr., president and CEO of Marathon Oil Corp., the nation’s fourth-largest petroleum firm, gave the capstone address at the 18th Williston Basin Oil Conference and Expo that ended Tuesday.

Cazalot also announced the Houston-based company’s first quarter net income came in at $457 million, up 69 percent over the year-ago figure of $282 million. He cited the recovering world economy and higher oil prices in a news release. In his speech, he said the wish of people worldwide to share in such prosperity is driving up energy needs.

The globe’s population is projected to grow from 6.5 billion to 8 billion by 2030. Even now, 1.5 billion people don’t have daily access to electricity and want it, he said.

Combined with such growing demand from undeveloped nations, that means energy needs will increase 40 percent in the next 20 years, according to the International Energy Agency, Cazalot said.

“That’s roughly equivalent to adding two countries the size of the United States to the world’s consumption,” he said.

It means world oil production will have to rise from 85 million barrels a day to about 100 million barrels a day, and half of it will have to come from new sources as old fields die off, said Cazalot, who spent a career as a geophysicist and petroleum geologist, often in offshore drilling.

“To put this in perspective, that’s equivalent to adding the supply of four more Saudi Arabias in the next 20 years,” Cazalot said. Finding it won’t be easy, but North Dakota is a part of the answer, he said.

North Dakota last year set its own record by producing 80 million barrels, and state oil industry leaders think that will rise to about 100 million barrels in the next year or two.

Diversity needed

But oil is only part of the answer, he said.

“Now I know this is a petroleum conference, but I must say that I believe there is no question renewable energy is an essential and growing part of our future energy mix, and Marathon is indeed investing in both conventional and advanced biofuels.”

North Dakota’s doing a good job in biofuels, too, he said.

“But the fact is that all of the world’s biomass, wind, solar, wave, tide and geothermal energy today accounts for about 10 percent of total energy supply,” he said.

That makes calls within Congress and elsewhere to replace fossil fuels with renewable energy and cut greenhouse gas emissions by up to 80 percent in only 40 years “political rhetoric and posturing,” he said.

The challenge of finding needed new energy “is far greater than putting a man on the moon (and) must be addressed in a rational, fact-based manner that taps the leadership and finest critical-thinking skills of people across the entire spectrum, regardless of ideology or political affiliation.”

He said investing more in energy efficiency, such as upping car fuel standards to 35 miles per gallon, could cut energy demand by 20 percent.

At the same time, all forms of energy production, from renewables to nuclear and fossil fuels, need to grow, he said.

“Diversity equals security and comes in two forms: diversity in the forms of energy we use and diversity as to where the energy comes from,” Cazalot said.

Oil and gas promise the most potential for rapid, smart growth to meet demand, while biofuels, for example, still face many questions about how economically they can be produced, he said.

Natural gas production should be increased because the U.S. has a 100-year supply, and it’s cleaner than other fossil fuels, he said.

Oilwise, the United States is the world’s third-largest oil producer. But only 5 percent of federally owned lands are open for development, Cazalot said, calling for more access in Alaska and off the nation’s coasts.

“President Obama’s recent proposal to open areas of the Atlantic Ocean and Gulf of Mexico to new exploration and production is a positive development, but specifics remain unclear, and any such activity is likely years away.

“However, I will say that given the current oil spill in the Gulf, our industry will need to redouble its efforts to demonstrate our ability to safely develop these resources, which are so vital to our nation’s economy and our standard of living,” he said.

Innovation and new technology, such as that being demonstrated almost daily in North Dakota’s oil patch as previously unreachable oil supplies are getting drilled, can provide the answers to meeting the world’s energy needs, he said.

For example, the relatively new process of Carbon Capture and Sequestration is storing CO2 out of harm’s way in the ground while facilitating the drilling of difficult to reach oil.

Marathon is working to use CCS in its work in Canada’s oil sands, which have eight times more oil as U.S. reserves hold now, Cazalot said.

It’s all part of how energy companies are going invest what’s projected as up to $30 trillion to meet the world’s energy needs by 2030, he said.

Marathon has invested $1 billion already in North Dakota’s Bakken oil formation and plans to spend another $1.5 billion over the next few years, much of it in what is expected to be the next big play, the Three Forks formation under the Bakken, Cazalot said.

Ron Ness, executive director of the North Dakota Petroleum Council, which with the state’s Oil and Gas Division organized the conference, said at final count it drew a record 2,750 people from 42 states, several Canadian provinces and a half-dozen foreign countries.

Next year’s conference will be held in Regina, Sask.

SETH BORENSTEIN (AP)

Original Article

HOUSTON — America is seeing the usually hidden costs of fossil fuels — an oil spill’s potential for huge environmental and economic damage, and deaths in coal and oil industry accidents.

But don’t expect much to change. America and the world crave more oil and coal, no matter the all-too-risky ways needed to extract those fuels.

“We are absolutely addicted and we have no methadone. All we have is the hard stuff,” said Larry McKinney, director of the Harte Research Institute for Gulf of Mexico Studies at Texas A&M University Corpus Christi. “The reality is we’re on it, this incident has happened and what we have to do is figure out how we can move forward.”

The United States is increasing its dependence on oil and other fossil fuels. And more domestic oil has to come from offshore because the land is producing less. The alternatives of renewable energy aren’t cheap and aren’t progressing quickly despite three decades of energy crises and legislation.

Oil industry officials, such as former Shell Oil Co. President John Hofmeister, see the well blowout in the Gulf of Mexico as defeat being snatched from the jaws of victory. A Democratic president had just opened up to drilling areas of U.S. coastline that once seemed untouchable. “Drill baby drill” has been replaced with the phrase, “Whoa, there.”

Myron Ebell of the conservative Competitive Enterprise Institute, which usually rails against too much government intervention into business, spoke Tuesday of the need for “more scrutiny of the industry” and regulations. That way drilling can continue.

BP’s leaking well off the coast of Louisiana is that much of a game changer — at least in the way people talk.

Environmental activists see this as a moment when the public pushes aside an industry — like the Three Mile Island nuclear plant’s partial meltdown did to nuclear energy.

“The thing that we had hoped would never happen has just happened,” said Anna Aurilio, Washington office director for Environment America. “I think this has potential to really reset the conversation of climate and energy.”

Likewise President Barack Obama’s White House sees this as coinciding with the $80 billion in stimulus money already spent and going partly toward moving America’s effort away from fossil fuels to a greener energy economy.

“We need a new energy plan for this country … that begins a transition to renewable and battery technology,” White House energy and climate change senior adviser Carol Browner told The Associated Press Tuesday. “We can push and have been pushing for legislation that will begin the change.”

An odd but understandably muted tone has been adopted by both oil interests and many environmentalists. Aurilio had a hitch in her voice as she said: “Quite frankly, we’re heartbroken. This disaster is touching us personally. This is something to pray that will never happen again.”

Here in Houston, capital of the American oil industry, those at an offshore drilling technology conference don’t like to say it too much or publicly — but no one is too worried about a public turning its back on oil and coal.

Why? They know there is not much of an alternative.

“There will be a temptation in that direction. When you see the risks of hydrocarbons you have to ask yourself, is this as good as it gets?” former Shell president Hofmeister told The Associated Press. “The good news is that hydrocarbon for all of its risks — meaning coal, gas and oil — is much less risky today than it was earlier in the industry’s history.”

Hofmeister, author of the new book “Why We Hate the Oil Companies,” said that America not only has to keep drilling for more oil in places like the Gulf of Mexico, but increase its drilling.

By 2020 if drilling is limited, he said: “We will be in a new age in this country. It will be called the age of the energy abyss.”

Hofmeister said no industry is hated more than the oil industry — it polls even lower than the federal government — but until the internal combustion engine is replaced, people will demand more oil. Especially when gas prices hit $4 a gallon — something Browner said can’t be blamed on the oil spill since the well was an exploratory one, not one already supplying fuel.

“More and more of our oil and gas has to come from offshore. All you have to do is look at the historical trend,” said Tyler Priest, an oil historian at the University of Houston.

Since 1991, oil production on U.S. land and in Alaska has dropped 40 percent, but it has nearly doubled in the Gulf of Mexico, according to federal statistics.

A 2008 International Energy Agency report estimates that reachable conventional oil located in water more than a quarter-mile deep is between 160 and 300 billion barrels, with more than two-thirds of that in Brazil, Angola, Nigeria and the United States.

“Our energy security is going to hang on whether we can drill offshore,” said Amy Myers Jaffe, an energy studies fellow at Rice University’s public policy institute.

So what are the costs?

It starts with the possibly devastating oil spill unfolding right now off the coast of Louisiana.

McKinney’s research institute in Corpus Christi estimated a worst-case scenario cost of the spill to the Gulf of Mexico: $1.6 billion.

About one-quarter of that is due to lost fishing and tourism. But the bulk of the cost is in the stuff that’s less easy to quantify: the general wetlands ecology. If half a million acres of wetlands are severely damaged, that drastically affects a fragile area that acts as a wastewater treatment plant for water flowing out of the Mississippi River — where 40 percent of America’s water flows into. And every acre of wetland means one less foot of storm surge from a hurricane, he said.

McKinney worries that this is “strike three” for the Gulf’s wetlands. First, they’ve been shrinking because of development and engineering changes to natural drainage in Louisiana. Then Hurricane Katrina damaged them. And now this.

“This one is getting all of us worried,” McKinney said.

But that’s not all, environmentalists point out. There are lives lost in getting oil and coal.

Another coal miner died in an accident Tuesday in West Virginia, that’s in addition to the 29 who died in a massive explosion April 5 in that state and an accident last week that killed two in Kentucky. Besides the accidents, more than 29,000 workers have died of coal mining-related lung diseases since 1968, according to the federal government.

The BP PLC oil rig explosion April 20 that caused the spill also claimed 11 lives. That came only weeks after an April 2 refinery fire in Washington state that killed seven workers. In 2008, work accidents killed 120 people in the oil and gas extraction industry, according to the U.S. Department of Labor.

Add to that global warming. Burning oil and coal produces carbon dioxide, which scientists say is changing the Earth’s climate and will eventually change the life of nearly everyone on the planet.

This year, after what seemed like a cool winter in some spots, the heat is back on. Already it’s shaping up to be one of the warmest on record, with a record-setting March, according to both government weather statistics and those kept by global warming skeptics at the University of Alabama Huntsville.

“What we’re seeing is proof positive of our dependence of oil and gas and we’ve ignored that in the past,” McKinney said. “Unfortunately it’s being rubbed in our face right now.”

Original Article

BATON ROUGE — Louisiana Attorney General James “Buddy” Caldwell joined attorneys general across the Gulf Coast on Wednesday seeking confirmation from parties involved in the Deepwater Horizon drilling disaster that they will stand by their pledge to pay all cleanup and recovery costs incurred by the states.

Each letter contains the signature and state seals of Caldwell, Bill McCollum of Florida, Troy King of Alabama, Jim Hood of Mississippi and Greg Abbott of Texas.

Asked why the attorneys general sent letters to the companies, Caldwell said they wanted “written confirmation with specificity from BP regarding expressed willingness to pay the cost associated with the oil spill and to encourage other responsible parties to do likewise.

“Additionally, we wanted to put BP and the other corporations on notice that they should preserve all documentation and evidence regarding the cause of the explosion and spill as well as the efforts to contain, clean and resolve the spill and the damages it caused and will cause,” he said.

King told The Associated Press that the attorneys general want more details about BP’s promise to “pay all necessary and appropriate cleanup costs.”

“We don’t know what is a legitimate claim,” he said. “That’s lawyer-speak at a time when we need straight talk and clear answers.”

All of the letters sent to British Petroleum, Transocean, Halliburton and Cameron International contain similar language about the need for funds to clean up any oil that hits the states, but each contains language specific to each company’s responsibilities.

For example, letters to Bert Cornelison, Halliburton Energy Services Inc. executive vice president and general counsel, and William C. Lemmer, senior vice president and general counsel for Cameron International Corp., indicate that the states could pursue action against them.

“Both of your organizations were involved in drilling operations at the Mississippi Canyon #252 and therefore may have some liability under the Oil Spill Act of 1990 or other applicable state and federal laws,” the letters say.

(2 of 2)

“Cameron appears to have manufactured and/or supplied the Deepwater Horizon’s blow-out-preventers, which failed to operate and thus did not prevent the flow of oil into the Gulf. Halliburton employees were reportedly engaged in cementing the well and the well cap as recently as 20 hours before the fatal explosion occurred that sunk the Deepwater Horizon.”

The letters caution that while all efforts currently are concentrated on the environmental impact of the disaster, states might conduct investigations in the future.

To preserve records, the letters direct company officials “and any of your affected employees or affiliated organizations preserve any documents, data compilations (including electronically recorded and stored data), tangible objects or other information relevant to the explosion of the Deepwater Horizon oil rig, the resulting oil spill or the clean-up effort in the form in which they currently exist until further notice. Regardless of (the company’s) current retention policy, please ensure that the appropriate person within each entity takes all necessary measures to avoid the destruction or modification of any such records.”

Letters also were sent to BP’s top attorneys, Rupert Bondy, group general counsel for BP P.L.L.C. International Headquarters in London, Stephen R. Winters, associate group general counsel for refining and marketing in Warrenville, Ill., and Doug Suttles, chief operating officer for BP Exploration & Production Inc. in Houston.

They contain language also in the other letters expressing the need for BP to pick up the tab.

“In the wake of the tragic loss of human life that has already occurred, our top concern now must be the well-being of the precious environmental and wildlife resources of our states,” the attorney generals wrote. “Protecting the fragile coastal ecologies and economies is critical to preserving the ongoing sustainability of our coastal communities.

“From the fisherman and shrimpers who rely directly upon the Gulf for their income, to the local businesses that are sustained by our fishing communities, and the small businesses that thrive on coastal tourism, this oil spill threatens the health and safety of our coastal communities. In addition, if the oil spill is not fully remediated, it could be an ecological and economic disaster for all of our states.”

The letters emphasize that states and local communities’ budgets are tight and that they cannot afford to pay up front and wait for reimbursement.

Original Article

The Caddo Commission may change a parish ordinance that requires its staff be notified in the event of fires and leaks from oil and gas drilling.

Commissioners on Monday moved the short proposal onto their agenda for Thursday, when they could make the wording law.

If approved, it would add events “requiring evacuation of residences or businesses, voluntary or mandatory.” That’s a reaction to the two weeks some 70 south Caddo residents have been prevented from going home because of rising pressure in a natural gas well off Norris-Ferry Road.

As written, the ordinance — which went on the books in September in response to Haynesville Shale activity — has no consequences for not calling parish offices. It says companies should immediately call 911 and then the parish administrator “as soon as practicable.”

But commissioners said they hope the language will drive home a point to drill site operators. It took nearly two days for most of them to find out about the April evacuation. Several said they read about it in The Times.

“I don’t think we ever did formally receive the notification,” said Commissioner Mike Thibodeaux, whose district includes evacuated residents.

Commissioner Doug Dominick, who pushed for parish ordinances to protect well operators that worked in Caddo for nearly 100 years before drilling started in the Haynesville Shale, said the parish must make sure companies know who they should notify.

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Grant Smith

Original Article

May 4 (Bloomberg) — Oil dropped below $85 a barrel, snapping a four-day rally, on forecasts that U.S. crude inventories increased last week and on signs that China is successfully cooling economic growth.

“U.S. inventories are certainly ample and the data will likely show them a touch higher yet again,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “With the fundamentals not giving any justification for gains, the market will track the dollar and equities.”

Crude oil for June delivery fell as much as 1.62 or 1.9 percent to 84.57 and traded for 84.76 as of 1:23 p.m. London time. Brent oil for June settlement fell $1.47 to $87.47 on the London-based ICE Futures Europe exchange.

Chinese manufacturing grew at a slower pace in April, based on a survey of more than 400 companies, indicating government efforts to prevent overheating in the economy may be starting to bite. A purchasing managers’ index released today by Markit Economics and HSBC Holdings Plc fell to a six-month low of 55.4.

‘Fair Value’

European Central Bank President Jean-Claude Trichet yesterday diluted rules for the second time in a month to guarantee the ECB will keep taking Greek government bonds as collateral for loans. The dollar was at $1.3127 per euro as of 11:16 a.m. London time, from $1.3194 in New York yesterday.

The ECB may have to extend that arrangement to other nations, and renew a program of lending unlimited cash to banks for a year if a 110 billion-euro ($146 billion) bailout plan for Greece fails to stem the euro’s slide, economists said.

The Stoxx Europe 600 Index slipped 1.1 percent to 257.74 at 11:32 a.m. in London.

“I don’t think this is a fair value for crude at the moment given the fundamentals,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “Crude stocks are very high.”

U.S. crude stockpiles probably grew by 1.7 million barrels in the seven days ended April 30 from 357.8 million the previous week, based on the median of estimates from nine analysts.

Stockpiles Growing

“Crude oil stocks have been gaining in the past weeks. It’s a result of imports,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The euro-zone debt issue will continue to drive volatility in oil.”

Refiners probably raised operating rates by 0.1 percentage point, according to the median of analyst responses. Processing runs were previously at 88.9 percent of capacity, the highest since July 2008.

The industry-funded American Petroleum Institute will release its own supply data at 4:30 p.m. local time in Washington D.C. today.