The Environmental Protection Agency asked nine natural gas companies Thursday to voluntarily disclose the chemical components used in a drilling technique called hydraulic fracturing.

The EPA said the information is important to its study of the controversial drilling practice, also known as “fracking.”

Crews inject vast quantities of water, sand and chemicals underground to force open channels in sand and rock formations so oil and natural gas will flow.

The EPA is studying whether the practice affects drinking water and the public health.

Drilling companies have largely sought to protect their chemical formulas, calling them proprietary. Environmentalists are concerned that the chemicals, some of them carcinogens, will taint underground water supplies.

The EPA is taking a new look at fracking as gas drillers swarm to the lucrative Marcellus Shale region in the northeastern United States and blast into other shale formations around the country.

Fracking is exempt from federal regulation. The process is touted as the key to unlocking huge reserves of clean-burning natural gas.

Supporters say the practice is safe, noting that it is done thousands of feet below ground, much deeper than most water sources. They also point out that authorities have yet to link fracking to contaminated drinking water.

Arash Dahi, an LSU assistant professor of petroleum engineering, said he doesn’t think fracking is going to be a problem in north Louisiana’s Haynesville Shale, where the wells are drilled thousands of feet below the aquifers.

There is some risk that the fractures could extend vertically and travel upward through the rock to an aquifer, Dahi said.

But the Marcellus Shale in Pennsylvania is a very shallow-depth formation, and there are some aquifers at the same depth, Dahi said. Some of the fracturing fluids contain heavy metals that could cause a problem if they get into the aquifer, he said. There have been some problems reported in the Marcellus although the cause remains unclear, he said.

The EPA said in March that it will study potential human health and water quality threats from fracking.

“By sharing information about the chemicals and methods they are using, these companies will help us make a thorough and efficient review of hydraulic fracturing and determine the best path forward,” said EPA Administrator Lisa Jackson. “Natural gas is an important part of our nation’s energy future, and it’s critical that the extraction of this valuable natural resource does not come at the expense of safe water and healthy communities.”

John Smith, an associate professor of petroleum engineering at LSU, said the fracking fluid contains mostly fresh water, and the big concern is about drilling companies using a resource that has value for drinking, irrigation or livestock.

The other ingredients are propping agents, or proppants, that keep cracks in the rock open after the drilling fluid is pumped out, Smith said. Those materials are largely inert; sand is the simplest form of a propping agent although there are other more exotic materials used, he said.

The fluid also contains polymers that make the water do a better job of carrying the proppants and that make it easier for the fluid to flow through the rock once it has been broken, Smith said. Those materials are really proprietary, and vendors don’t want to give up those secrets because they can charge more and generate a higher profit margin.

“My impression is that’s where the controversy occurs. You’ve got people pumping stuff into the subsurface and not wanting to tell you what it is,” Smith said. “And people that are sitting on the top are saying, ‘Well, gee, you’re pumping this stuff under the ground beneath me … convince me this is a good idea.’ ”

In Pennsylvania, where the Marcellus Shale is being pursued in a modern-day gas rush, state legislators and environmental regulators are pushing for a law to require drilling companies to disclose what’s used at the well sites.

“We have a broad right to know about the use of chemicals and discharges of any sort into the environment,” said John Hanger, Pennsylvania’s environmental protection secretary.

LSU’s Smith said the oil and gas industry’s position is that it has been doing fracturing for more than 50 years and, in general, that has not been an environmental catastrophe.

“You don’t have 50 years’ history of people complaining about fracture stimulations affecting their water supplies and so forth,” Smith said.

In south Louisiana, fracking isn’t done or needed in general, Smith said. Reserves are typically found in formations where the oil and gas flow as easily as water through sand on the beach.

The rock is different in the shales, Smith said, and there is concern in the Barnett Shale, which is around Fort Worth, Texas, about aquifers.

“How much of this is politics, and ill-informed politics, and how much is realistic concern I don’t have a good feel for,” Smith said.

The EPA sent letters to nine leading national and regional hydraulic fracturing service providers, including Halliburton, Schlumberger and Key Energy Services.

Advocate business writer Ted Griggs and Associated Press writer Matthew Daly contributed to this report.

Original Article

The Environmental Protection Agency on Thursday said it would ask nine big natural-gas production companies to volunteer what the industry has staunchly resisted: details about what hydraulic fracturing or “fracking” chemicals they inject into the ground.

Fracking for natural gas involves pumping a slurry of sand, water, and chemicals deep underground at high pressure – cracking open natural-gas-bearing shale deposits and allowing the gas embedded there to emerge. The process has been hailed as a boon for US energy supplies and has single-handedly boosted US natural-gas reserves in recent years.

But a growing number of residents in Texas, Pennsylvania, Colorado, and other states say the technique has fouled their drinking-water wells and even caused the tap water coming out of their faucets to smell like industrial chemicals.

In March, the EPA announced it would study the “potential adverse impact” that hydraulic fracturing might have on drinking water. The agency is holding public meetings in major oil and gas production regions to get citizen, industry, and expert input. First results of the study are expected in late 2012.

Remarkably little is known about the composition of fracking fluids. While a public-relations campaign by the natural-gas industry indicated that many of the chemicals used can be found under a kitchen sink, the industry has long resisted efforts to identify those chemicals. Some lists have emerged, but without crucial details needed to determine impacts on health and the environment, experts say. No comprehensive national study of the practice has been conducted.

“Natural gas is an important part of our nation’s energy future, and it’s critical that the extraction of this valuable natural resource does not come at the expense of safe water and healthy communities,” EPA Administrator Lisa Jackson said in a statement. “EPA will do everything in its power, as it is obligated to do, to protect the health of the American people and will respond to demonstrated threats while the study is underway.”

The EPA says its study will focus on the impacts of the chemicals on human health and the environment, as well as on the operating procedures at hydraulic fracturing sites and the sites where fracturing has been conducted.

If the agency does get the information, it would be a major step, citizen activists and environmentalists say. At present, hydraulic fracturing is exempted from federal regulation. But political pressure to reveal what’s being pumped underground has produced congressional legislation not only to disclose data, but also to repeal the industry’s exemption.

In a scramble to prevent repeal of its exemption, the industry now nominally supports the EPA study, several observers say. Industry spokesmen were circumspect.

“We believe the EPA study presents an important opportunity to demonstrate once again that fracturing technology is safely managed, efficiently used, and well regulated by the states,” Chris Tucker, a spokesman for Energy in Depth, an industry public-relations group, said in a statement. “If EPA believes it needs specific information to ensure its study draws on the best science and data available, we’re hopeful the agency can coordinate with our members to ensure it has everything it needs, and uses that information in an appropriate way.”

The names that the EPA is sending letters to include a who’s who list of gas-drilling companies: BJ Services, Complete Production Services, Halliburton, Key Energy Services, Patterson-UTI, PRC Inc., Schlumberger, Superior Well Services, and Weatherford.

Hydraulic-fracturing opponents in Texas and Pennsylvania, who say the process fouls the air (through diesel exhaust) as well as the ground water, were buoyed by the announcement but remain wary.

“At least the EPA is paying attention,” says Don Young, founder of Fort Worth Citizens Against Neighborhood Drilling Operations. “Before they weren’t even asking, and industry had carte blanche doing whatever they wanted. What the EPA is doing is good – but only if they take that information and use it to demand the industry stop pumping these chemicals underground.”

Barbara Arrindell at Damascus Citizens, a group opposed to hydraulic fracturing in Damascus, Pa., agreed that it was “a good step” but that success could come only if the EPA can extract more specific information.

“The industry likes to say that the chemicals it uses can be found under the kitchen sinks of people’s homes,” she says. “Well, I don’t have sulfuric acid or benzene or glutaraldehyde or methanol under there. We need to know what they’re putting into the ground at specific sites.”

Specificity is crucial, agrees Scott Anderson, a senior policy adviser at the Environmental Defense Fund in Austin, Texas. And this time, he says, it may actually happen. The industry has at times listed chemicals it has used – but not at specific sites or with formulations or quantities, he says.

In its letter, EPA requests the companies to provide all that, as well as the Chemical Abstracts Service number for each chemical – a vital number that allows for analysis for health and environmental effects.

While Mr. Young worries whether EPA will really get the information voluntarily, the agency says in its statement that it “expects the companies to cooperate with these voluntary requests.” It continues, “If not, EPA is prepared to use its authorities to require the information needed to carry out its study.”

“The industry has pitched such fierce resistance to the idea of disclosing these chemicals,” Mr. Anderson says. “Now, we may finally get to see specifically what’s been put into the ground.”

Original Article

“The report is what I was looking for: It is honest; it doesn’t sugarcoat challenges we know are there; it provides a blueprint for solving them; and it shows that we are on precisely the right track with our reform agenda,” said Salazar, who said the administration is seeking additional funding to hire new inspectors..

Even long-standing critics of MMS, which has since been reorganized and its regulatory functions given to a new Bureau of Ocean Energy Management, Regulation and Enforcement, said that breadth and depth of the 37-page report, which was based in part on a survey of the federal inspectors themselves, was breathtaking.

“I think in detail it goes beyond anything we had seen before,” said Elgie Holstein, senior director for strategic planning at the Environmental Defense Fund. He said his first reading of the report offered “multiple cause for forehead slapping” beginning with “the lack of a consistent and thorough training program, the steady decline in available resources for inspections, notwithstanding a steady increase in the workload, the fact that there was no consistent protocol for unannounced offshore visits, and in some cases, in some offices, virtually no truly unannounced offshore visits.”

“The report shows that his has been a thoroughly rotten agency,” said Mandy Smithberger, an investigator with the Project on Government Oversight, which has been at the forefront of criticism of MMS.

The report found that the Gulf of Mexico district offices don’t have the number of engineers needed to conduct effective permit reviews, that the inspectors lacked formal training and certification, and nearly half, by their own admission, felt ill-trained.

The report found that there was little sharing of information among inspectors and between offices — the Gulf inspectors even lacked laptop computers. While 90 percent of the inspectors saw the need for more unannounced inspections, they were a rarity, and while most inspectors thought two-person teams were far more effective, 41 percent of inspections were conducted by single inspectors.

As the numbers of drilling operations soared, staffing was cut. In the Gulf, 55 inspectors were responsible for inspecting 3,000 production facilities, one for every 54 facilities, compared to five inspectors for 23 facilities in the Pacific region.

In one of the most vivid accounts, the report noted that most inspectors reported that the industry “often exerted pressure on them to minimize reporting violations during inspections. For example, personnel on a facility may make comments such as ‘there goes my bonus,’ or ‘my wife is sick and I’ll lose my job,’” if the inspector reported an infraction.

And, when they did report problems, many inspectors said the operators would complain to their bosses, who, the inspectors sometimes felt, didn’t back them up.

The report also faulted the regulators for doing a sloppy job of reviewing oil spill response plans, and concluded that the civil fines available to the regulators to force compliance were too puny to have much effect

The report was released along with a 16-page plan to implement their recommendations from Michael Bromwich, who has been charged with reforming and directing the new oversight agency.

“Many of the Board’s recommendations will be addressed through initiatives and programs that are already in process and are central to our reform agenda,” said Bromwich.

Deepwater drilling is currently under a six-month moratorium that is slated to end Nov. 30.

Bromwich is due to report to Salazar by the end of October — and he said he hopes well before that — about whether the moratorium can be lifted sooner than that. He said the safety board’s recommendations were part of a “cascading series of reforms under way to raise the bar to be met by industry to make deepwater drilling ever more safe,” but that they need not all be implemented before the moratorium can end.

Erik Milito, upstream director for the American Petroleum Institute, said, “while we haven’t had a chance to fully review the OCS Safety Board’s report, our industry supports an effective regulatory system that balances the need for domestic production of oil and natural gas with safety and environmental protection.”

Original Article

NEW YORK (Dow Jones)–Crude futures moved higher Friday after a pipeline leak in Illinois rattled traders worried about its effect on supplies.

Light, sweet crude for October delivery recently traded $1.17, or 1.6%, higher at $75.42 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 6 cents lower at $77.41 a barrel.

Late Thursday Enbridge Energy Partners L.P. (EEP) reported the shutdown of its Enbridge 6a pipeline, which carries around 670,000 barrels of crude from Canada to the U.S. midwest.

The company said oil was released onto a roadway and into a retention pond in Romeoville, Ill. Crews are working on the clean-up, and there is no current estimate of the size of the leak.

Traders moved quickly to hedge bets that oil prices would fall, sending front-month crude futures up overnight on worries that a short-term stop in the massive pipeline could cut into the high inventory levels in the U.S., particularly at the main delivery point for benchmark West Texas Intermediate in Cushing, Okla.

“The market is just showing it has an inclination to play it safe,” said Gene McGillian, a broker with Tradition Energy. “The danger of course when you trade on things like that is it can be up and running by the end of the weekend.”

The rally narrowed the price spread between October and November futures. November futures are trading at a $1.05 premium to October contracts, up from a $1.70 premium Wednesday. The premium is still high, however, compared to the spread between October and November Brent futures.

The supply interruption, however, comes amid a glut of U.S. inventories. Commercial stocks of oil and fuel products hit new 27-year highs in data reported Thursday from the U.S. Department of Energy.

Stubbornly high supplies have plagued the market in recent weeks, helping keep prices in a narrow range between roughly $70 and $80 a barrel. The range has held crude for several months, as mixed economic data leave investors to question future oil demand.

Front-month October reformulated gasoline blendstock, or RBOB, recently traded 1.76 cents, or 0.9%, higher at $1.9530 a gallon. October heating oil recently traded 0.7 higher at $2.0754 a gallon.

Original Article

Economic development organizations and landowner groups in Wayne County issued a stinging criticism Thursday against the Delaware River Basin Commission for enacting a moratorium on natural gas drilling and causing a deep negative economic impact by effectively halting development.

The pro-drilling groups, including landowners’ alliances that have secured more than 100,000 acres in Wayne County for gas development and the Wayne County Chamber of Commerce, also warned the commission not to develop stringent regulations that would exceed current state environmental regulations because it could deter companies from operating there.

“We want to get the debate started and put our position out,” said Peter Wynne, spokesman, Northern Wayne Property Owners Alliance. “We expect there is going to be a degree of severity that exceeds” the state Department of Environmental Protection.

The commission, which has regulated water resources in the four-state area that drains into the Delaware River since 1961, including a large swath of eastern Pennsylvania, has been developing its own environmental regulations over the industry in light of an increased interest in drilling for natural gas in the watershed.

While Marcellus Shale drilling is accelerating throughout the state and regionally in Susquehanna and Bradford counties, there are no producing wells in out the 13,539-square-mile Delaware River Basin, though Wayne County has lured multimillion-dollar land-leasing investments from several natural gas companies since 2007. The Northern Wayne Property Owners Alliance, encompassing 100,000 acres mostly north of Honesdale, finalized a land-lease agreement valued at a more than $100 million with New York City-based Hess Corp. and Houston-based Newfield Exploration Co. in late 2009.

Meanwhile, the commission enacted a drilling moratorium in May, in particular on production wells, but is allowing 10 exploratory wells to go forward in Wayne County while the regulations are developed.

The moratorium caused Newfield Exploration Co. and Hess Corp. to halt land-lease payments until the drilling ban is lifted. This could amount to the loss of $220 million in payments to leaseholders – not including royalties on producing natural gas wells – if Newfield and Hess Corp. decided to pull out of Wayne County, Mr. Wynne has said.

The pro-drilling groups’ 10-page letter, which was widely distributed to federal, state and local government officials Thursday and to the five-member commission board, urges the commission to consider the “unparalleled economic opportunities” gas drilling could yield while urging them to avoid the “infinite costs” associated with stiff environmental regulations. It also cites the poor state of the economy in Wayne County, a largely rural area with little to no economic growth in recent years, and how gas drilling could solve these “severe” challenges.

The letter also includes a series of recommendations the commission should take in its effort to regulate the industry. Efforts to reach Wayne County economic development officials were unsuccessful.

Nevertheless, the river basin commission believes it must protect the integrity of the Delaware River watershed – home to the Delaware Water Gap National Recreation Area and part of the National Wild and Scenic Rivers System – while allowing natural gas drilling to occur.

Commission spokesman Clarke Rupert said the agency is trying to ensure that water used by an estimated 15 million people in four states is not negatively impacted by the industry, and criticism of their efforts to ensure that is unfair.

“Do you want to do it quickly … or to get it right? Our approach is to get it right,” Mr. Rupert said. Mr. Rupert said that he does not know what the makeup of the regulations will be, in part because once draft regulations are published it will undergo a series of public comment and public hearing periods that may tweak its final form.

The commission hopes to adopt final regulations by the end of this year, although that is subject to change.

Original Article

WASHINGTON, DC, Sept. 9 — A board of senior US Department of the Interior officials asked by Interior Sec. Ken Salazar to propose changes in federal offshore energy safety oversight recommended stronger penalties, more inspectors with better training, and improved communication of policies and regulations.

Salazar created the board on Apr. 30, 10 days after BP PLC’s Macondo well blew out in the Gulf of Mexico and Transocean Ltd.’s Deepwater Horizon semisubmersible drilling rig exploded, killing 11 workers. Salazar appointed Wilma A. Lewis, assistant Interior secretary for land and minerals manager, as its chairwoman, and Mary L, Kendall, DOI’s acting inspector general, and Rhea S. Suh, assistant secretary for policy, management, and budget, as its members.

“The report is what I was looking for: It is honest; it doesn’t sugarcoat challenges we know are there; it provides a blueprint for solving them; and it shows that we are on precisely the right track with our reform agenda,” he said on Sept. 8 as he released its findings. “We are absolutely committed to building a regulatory agency that has the authorities, resources, and support to provide strong and effective regulation and oversight—and we are on our way to accomplishing that goal.”

Salazar said the recommendations reinforce reforms already being carried out by Michael R. Bromwich, director of the US Bureau of Ocean Energy Management, Regulation, and Enforcement (BOE). Bromwich said the agency has already started to act on several of the recommendations and has developed a plan to implement the rest.

One of the report’s major themes is providing more support for BOE employees with more training and education, management commitment, and opportunities for professional growth and development. The agency’s responsibilities have expanded in scope and complexity to a point that BOE must increase and develop its staff to meet new challenges, it said.

Inadequate workforce

While the volume of production activity in the gulf has increased in the last several years, the workforce associated with regulating day-to-day oil and gas activities has not, it said. This is particularly true when it comes to review applications for permits to modify exploration and production plans, according to the report. “In addition, the sheer volume of requests creates a high-pressure work environment that can lead to challenges in balancing the need to conduct an adequate analysis for each modification decision or permit with the need to be responsive to requests from industry,” it said.

Operating policies should be more consistent and communicated more effectively, it recommended. “Inspections and enforcement—from personnel training to the deterrent effect of fines and civil penalties—also need attention,” it said. “In addition, BOE must be diligent to achieve the stewardship balance between development and environmental responsibilities envisioned in its statutes.”

The report said a single theme runs through each of its recommendations: BOE must pursue, and the oil and gas industry must engage in, a new culture of safety in which protecting human life and preventing environmental disasters are the highest priority.

“The purpose of a broad safety culture program is to create and maintain industry, worker, and regulator awareness of, and commitment to, measures that will achieve human safety and environmental protection, and to make sure that where industry fails, BOE will respond with strong enforcement authorities,” the report said.

The oil and gas industry also must play an active part, it continued. “Indeed, industry must make a widespread, forceful and long-term commitment to cultivating a serious approach to safety that sets the highest safety standards and consistently meets them,” the report said. “Ultimately, for a new and robust safety culture to take root, industry must not only follow rules, it must assume a meaningful leadership role.”

Original Article

NEW ORLEANS — A small fire on a petroleum platform owned by Mariner Energy Inc. has been put out with a water hose and a hand-held fire extinguisher.

Thursday’s fire was the second reported in a week aboard a Mariner platform in the Gulf of Mexico.

Patrick Cassidy, spokesman for Houston-based Mariner, said the fire occurred while a maintenance crew was using a sawing device. He said the crew extinguished the fire and returned to work. There were no injuries.

Cassidy said the platform, 109 miles south of Lafayette, has been out of production since about 2006.

On Sept. 2, a fire raged on another Mariner platform off the Louisiana coast. No one was injured in that fire, and the cause remains under investigation.

Original Article

After years of peak oil scare stories, could the world soon be drowning in oil?

OPEC has just cut its oil demand forecast for OPEC-produced oil, citing a slow-down in the global economy as the supportive effects of government stimulus wear off and increased non-OPEC oil supply. The organization noted that, “the impact of the slowing economic recovery on oil demand is already evident as growth in oil consumption is slowing down and has even turned negative in some parts of the world,” according to Fox Business,

Their latest move highlights the twin drivers of any potential oil glut scenario:

* The stagnation of demand growth from major developed economies such as the U.S. and Europe

* The growth of non-OPEC oil supply.

Already, the U.S. is sitting on more oil than it has in decades:

Fortune:

Despite the Iraq War and the resulting production disruptions, despite the moratorium on drilling in the Gulf, despite turmoil in Nigeria and ongoing cross-border transshipment quarrels in Central Asia and the multiple, repeated declarations that “peak oil” has arrived and supplies will inevitably dwindle, the United States has more petroleum on hand today than it has had since at least the beginning of the first Gulf War.

…

At the same time, consumers have finally responded to higher gas prices and, perhaps, concern over the environmental impacts of burning fossil fuels. Miles driven by U.S. motorists have fallen over the last couple of years for the first time since such statistics have been collected, indicating that the American love affair with the automobile could be waning. And gasoline demand in China, the world’s largest automotive market, may not skyrocket after all, as the government ramps up its drive to replace internal combustion engines with electric vehicles.

Global demand forecasts are coming down as well:

“In the last 18 months we’ve seen this big trend emerge,” says David Kirsch, research director at PFC Energy in Washington, D.C. “We spent five to 10 years in a supply-constrained market, characterized by the growth of the BRIC countries [Brazil, Russia, India and China] and concerns over the security of supplies.”

Now, Kirsch remarks, because of the financial crisis and the time it will take to pare down the debt of the major OECD nations, demand growth over the next decade is likely to be lower than previously forecast.

Oil itself seems to have been stuck in a trading range over the last year as shown by the chart from Finviz below, so far either undecided or oblivious to the potential for a glut.

Problem is, in the end, forecasting oil demand has been a fool’s errand historically, so the oil glut theorists have as much visibility as yesterday’s peak oil proponents.

Adam Brandt, a professor at Stanford’s Department of Energy Resources Engineering, released a study last month examining the various models that have been used to predict the future of world oil supplies. “Data do not support assertions that any one model type is most useful for forecasting future oil production,” Brandt concludes. “In fact, evidence suggests that existing models have fared poorly in predicting global oil production.”

We’ve republished a telling chart from a previous post below, showing just how wrong oil forecasts can be. Previously, they were too bearish, so perhaps they’ve now become too bullish?

Whatever happens, should a substantial oversupply of oil appear (relative to where oil is now), then expect a sharp and sudden drop in the price of black gold. Why? Because its price activity has become highly correlated with financial speculators’ activity. Which means, if speculators flee en masse, look out below. (Personally, we happen to be bearish on oil for the remainder of 2010, while still bullish on the long-term however)

Original Article