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By Tom Doggett

 

WASHINGTON | Thu Jun 30, 2011 8:40pm EDT

 

WASHINGTON (Reuters) – The government expects it will have no problems finding buyers for all 30 million barrels of oil it auctioned as part of a global effort to address high oil prices, an Obama administration official said on Thursday.

 

Oil buyers have expressed strong interest in the crude that the United States is selling from its emergency reserves, the U.S. Energy Department said, calling the oil sale “substantially oversubscribed.”

 

The sale represents half of the 60 million barrels that industrialized nations are releasing jointly to fill a gap in supply caused by political strife in Libya.

 

Analysts have said the global release has been disorganized and has the potential to backfire.

 

The Obama administration was slammed for its decision last week to tap the Strategic Petroleum Reserve (SPR) by the oil industry lobby and other critics, who said there was already plenty of oil supplies in the United States and cast the move as a political tactic.

 

“The oversubscription of the (U.S.) SPR auction indicates both that supply disruption is a factor and that we will be able to place all 30 million barrels into the market,” an administration official said.

 

Almost a dozen oil companies and trading firms sought more information about the opportunity on a conference call earlier this week, and the Energy Department said it received more than 90 offers for its 30.2 million barrels of SPR crude.

 

PREPARED TO DO MORE

 

The administration also expects help from Saudi Arabia, the world’s largest oil producer, which has committed to produce more oil to address the supply shortage, the official said.

 

“We will continue to monitor the adequacy of oil supply and are prepared to act further if necessary,” the official said.

 

But the U.S. also needs to invest in long-term fixes to high energy prices, like cars that use less fossil fuel, Energy Secretary Steven Chu said on Thursday.

 

“The price of oil goes up, the price of oil goes down, 20 years in the future it’s more likely to go up than down. Let’s do something about it. We’ve got to do something about it,” Chu said during a news conference on the sidelines of the Clinton Global Initiative meeting in Chicago.

 

Chu did not indicate what the criteria would be for deciding whether to dip into the reserve again.

 

The Energy Department is pleased with the prices offered by companies, which reflect the strong interest in the oil, a DOE official said.

 

The government will provide an initial list of buyers on July 5, the official said, and final contracts with the prices paid for the oil will be announced by July 11.

 

PAVES WAY FOR ANOTHER RELEASE?

 

The strong interest in the U.S. sale could bode well if the government decides it needs to release more oil from the reserves, said Phil Flynn, an energy analyst with PFGBest Research in Chicago.

 

“If you can get enough people who want to get new oil, resell the oil, that’s going to put more oil into the market quickly,” Flynn said.

 

“If we’re importing less sweet crude or keeping more at home, that should free up supply on the other side of the globe,” he said, noting European buyers have been most affected by the Libyan supply disruption.

Original Article

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Oil prices dipped right after the Obama administration announced it would tap reserves, but the price has rebounded. Gas prices, meanwhile, fell 7 cents a gallon in the past week, averaging about $3.54 a gallon.

 

By Ron Scherer, Staff writer / June 30, 2011

New York

 

Only a week ago, the Obama administration surprised the oil markets by announcing the release of oil from the Strategic Petroleum Reserve.

 

Initially, the price of oil fell by almost $4 a barrel. But since then, oil prices have rebounded back to their pre-announcement levels – about $95 a barrel.

 

What’s happened?

 

RECOMMENDED: Gas prices – 10 ways you can save at the pump

 

The oil markets, energy analysts say, are beginning to reflect some broader economic shifts taking place in the world economy – ranging from some indications of economic vitality in Japan to some predictions that the US economy will pick up in the second half of the year. In addition, the apparent resolution of the Greek debt crisis, even if only in a temporary measure, has ameliorated some concerns about another credit-led recession.

 

“Any event except a double-dip recession has a bullish cast to it,” says Sarah Emerson, president of Energy Security Analysis Inc. in Wakefield, Mass.

 

One clear indication of the strength of the oil market should come shortly when the Department of Energy announces which bids it will accept, at what price, for 30 million barrels of oil – the US share of the petroleum-reserve release. (The International Energy Agency is also releasing 30 million barrels.)

 

After hurricane Katrina disrupted oil in the Gulf of Mexico in 2005, Ms. Emerson recalls, President Bush released 30 million barrels of oil from the Strategic Petroleum Reserve. But the oil industry chose to bid on only 11 million barrels, indicating that demand wasn’t high.

 

“We may not need the oil now,” she says. “If the auction is underperforming, do they ask for more bids in July?”

 

On Wednesday, the Department of Energy released data that showed a decline in US inventories of crude oil and gasoline. “We had imports down a little; refinery runs were down a little bit,” says John Kilduff, founding partner of Again Capital, which trades commodities in New York. “It does not necessarily mean there was stronger demand for oil.”

 

While the price of oil has moved back up, the price of gasoline has continued to drop. In the past week, the price at the pump has gone down another 7 cents a gallon, with the national average now about $3.54 a gallon, according to AAA, the motorists’ club. The price of gas is now about 44 cents a gallon lower than its peak in May, but it’s still about 80 cents a gallon more expensive than last year.

 

AAA is projecting a 2.5 percent decline in Fourth of July travel compared with last year as a result of the higher fuel prices. “Increased fuel prices are also responsible for a shift in the demographics of the typical Independence Day traveler, as higher prices impact lower-income households more significantly,” says Glen MacDonell, director of AAA Travel Services.

 

Then again, gasoline prices have almost bottomed out for the summer, Mr. Kilduff says. “We need crude oil below $90 a barrel to sustain these levels,” he says. On Thursday, the price of crude was about $95.65 a barrel on the futures market. “The daily price declines at the pump will come to a screeching halt,” he says.

 

However, Emerson says, some other dynamics might keep oil prices in check in the second half. “What if Libya comes back?” she asks. “What if [Muammar] Qaddafi loses power? The opposition can get oil up and running pretty quickly.”

 

Once Qaddafi is gone, Kilduff says, the price of oil will fall between $3 and $5 a barrel. “I think we’ll see a resolution in Libya in the next 30 to 60 days,” he says.

Original Article

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By Paul Burkhardt – Jun 30, 2011 3:08 PM CT

 

Gulf crude oil grades weakened as the gap between West Texas Intermediate and Brent narrowed a day after the Energy Department closed the auction for bids on emergency oil stockpiles it plans to release.

 

The gap between WTI and its European counterpart decreased 57 cents to $17.06 a barrel as of 4 p.m. in New York. When Brent gains versus WTI, it strengthens the value of low-sulfur U.S. grades that compete with West African oil priced against the European benchmark.

 

The department closed bids yesterday on 30 million barrels of mostly light, sweet, crude from storage facilities along the Gulf of Mexico, half of a planned 60 million-barrel release coordinated by the International Energy Agency.

 

Light Louisiana Sweet’s premium fell 20 cents to $13.60 a barrel over West Texas Intermediate as of 3:51 p.m. in New York, according to data compiled by Bloomberg. Heavy Louisiana Sweet lost 30 cents to $13.60 over the benchmark.

 

Among sour, or high-sulfur, grades, the premium for Mars Blend narrowed 80 cents to $8.60 a barrel, while Poseidon lost 40 cents to $8.10 over WTI.

 

Southern Green Canyon’s premium held at $7.25 a barrel over WTI. West Texas Sour’s discount was unchanged at $1.40.

 

The discount for Western Canada Select was unchanged at $20.50 a barrel, and Syncrude’s premium was unchanged at $7.75.

Original Article

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First, hydraulic fracturing gave the United States a boom in shale gas that lowered natural gas prices by 54 percent between 2008 and 2009. Now, shale oil discoveries are being made that can substantially increase onshore oil production. The Bakken oil field located in western North Dakota, northeast Montana, and Canada’s Saskatchewan Province is pumping 225,000 barrels of oil a day today that started at just 3,000 barrels per day in 2005, with estimates of a million barrels of oil production per day by 2020.(i)

 

A newer shale oil field, Eagle Ford in Texas,  is one of about 20 new onshore oil fields so far that combined could increase the oil output of the United States by 25 percent within 10 years.  Those statistics, of course, assume that the U.S. government does not intervene in state regulation of hydraulic fracturing, and that it can continue to be used to stimulate the wells. Hydraulic fracturing requires water, sand, and a small amount of chemicals to break up the shale deposits to allow oil or natural gas to flow through horizontal drilling. But, while the government gave hydraulic fracturing a clean bill of health in 2004 and there has never been a documented case of ground water contamination owing to hydraulic fracturing, the Environmental Protection Agency, the Department of Interior and the Department of Energy—at the direction of President Obama—are all conducting studies on the issue.

 

The Bakkan Shale Oil Field

 

The U.S. Geological Survey estimated the mean undiscovered volumes of oil in Bakken Shale Formation of the Williston Basin Province in Montana and North Dakota at 3.65 billion barrels .[ii] Due to the Bakken oil field, proved reserves in North Dakota almost doubled from 573 million barrels in 2008 to 1,046 million barrels in 2009 according to the Energy Information Administration.[iii]

 

North Dakota State University estimates that the shale oil workforce in the state jumped from just over 5,000 in 2005 to over 18,000 in 2009 and estimates now have it at 30,000. If oil production reaches a million barrels a day, it could employ over 100,000 people. Due to this oil boom,  unemployment in North Dakota fell to 3.8 percent—less than half the national rate of 9 percent- and the lowest unemployment rate in the United States.

Other Shale oil Fields

 

A Texas field, known as the Eagle Ford, is one of about 20 onshore oil fields that could together increase the nation’s oil output by 25 percent within a decade. The Eagle Ford field is producing more than 100,000 barrels a day and could reach 420,000 by 2015, according to Bentek Energy. In Dimmit County, Texas, the unemployment rate has fallen to half, and sales tax receipts are up 70 percent.

 

It is estimated that these shale oil fields could create more than two million new jobs and that tens of billions of dollars could line the coffers of states where shale oil fields are located, including Texas, Oklahoma, Colorado, California, Ohio, Michigan and Kansas. According to IHS CERA, an energy research firm, shale and other “tight rock” fields currently producing about half a million barrels of oil a day could produce up to three million barrels a day by 2020. In 2011 alone, oil companies are investing an estimated $25 billion to drill 5,000 new oil wells in tight rock fields.[iv]

 

According to oil companies, oil shale is economic as long as oil prices remain above $60 a barrel. At oil prices around $100 a barrel, shale oil wells can generally return a profit within eight months—three times faster than many conventional oil wells.

 

Some analysts predict that within 10 years, shale oil production could help reduce oil imports by more than half as long as other actions are also realized in increasing oil production in the Gulf of Mexico and in reducing oil demand. Significant finds in Alaska could accelerate this reduction in imports, as could unconventional sources of oil and byproducts of natural gas production.  At oil prices around $90 per barrel, reducing imports could save the United States as much as $175 billion a year. Last year, when oil averaged $78 per barrel, the United States spent $260 billion for imported crude, more than half the country’s $500 billion trade deficit.[v]

Obstacles to Hydraulic Fracturing

 

A national campaign against hydraulic fracturing has been announced by some groups, and it has come under attack by certain journalists, including one with the New York Times, which prompted the non-partisan Energy Information Administration to issue an extremely rare rebuttal to a story which mischaracterized their analysis of natural gas resources in the United States.  Clearly, hydraulic fracturing, which is increasing our domestic oil and natural gas production, is under political attack.

 

Some environmentalists claim hydro fracturing pollutes drinking water even though industry experts say that it is unlikely because hydro fracturing is performed thousands of feet below the water table.  Environmental Protection Agency administrator Lisa Jackson recently told Congress she knows of no proven examples of such water pollution.[vi] But, the EPA has launched “a comprehensive research study” on the possible “adverse impact that hydraulic fracturing may have on water quality and public health” nationwide.[vii]

 

Additionally, environmentalists are questioning the chemicals injected in the water during hydro fracturing, believing that they may be harmful. A bill introduced in the Texas legislature is requiring drillers to disclose the chemicals they consume in the hydro fracturing process. Similarly, thoughts of such disclosure have occurred at the federal level and in other states. For example, New York, which has huge shale gas deposits, has a moratorium on hydraulic fracturing.

 

And, in Texas, the dunes sagebrush lizard may be named a new endangered species making some oil drillers fear that it could slow down or halt drilling in West Texas.

Conclusion

 

Shale oil may be following in the footsteps of shale gas now that hydro fracturing is being used to produce shale oil, bringing jobs and money to states with those resources. And those job figures are large, not the small numbers that the Obama Administration has garnered from the green technology movement that has done little to change the unemployment rate in this country despite the Administration’s stimulus spending.[viii]

 

As Robert Bryce stated in his Wall Street Journal editorial, “A vibrant industrial base requires cheap, abundant and reliable sources of energy. The shale revolution now underway is the best news for North American energy since the discovery of the East Texas Field in 1930. We can’t afford to let fear of a proven technology stop the much-needed resurgence of American industry.”[ix]

 

And, as Michael Lind stated, “If gas hydrates as well as shale gas, tight oil, oil sands and other unconventional sources can be tapped at reasonable cost, then the global energy picture looks radically different than it did only a few years ago. Suddenly it appears that there may be enough accessible hydrocarbons to power industrial civilization for centuries, if not millennia, to come.”[x]

Original Article

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By JEFF MCMAHON

 

Aging coal-fired power plants cannot compete with plants burning the cheap, abundant natural gas now emerging from American shale formations, the EPA’s chief air pollution official told senators this morning.

 

“What we are seeing now, with the change in the market that inexpensive natural gas has brought to the table, is a change in the marketability of those [coal] units and the electricity they generate,” said Gina McCarthy, the Environmental Protection Agency’s assistant administrator for air and radiation.

 

“So many retirements are expected just simply as a result of inexpensive natural gas.”

 

The natural gas is being developed through fracking, a combination of horizontal drilling and pressured shattering of deep shale formations to free gas and oil trapped within them.

 

More coal plants will retire—federalspeak for “go out of business”—as a result of competition with natural gas than as a result of new air pollution control regulations proposed by the EPA, McCarthy said in testimony before the Senate Environment and Public Works Committee.

 

The proposed regulations, designed to reduce mercury, acid gases, organics, dioxin/furans and particulate matter, will shutter coal plants that generate about 1o gigawatts of electricity, McCarthy said, out of a total of 300 gigawatts that America derives from coal.

 

McCarthy did not hazard a comparable estimate for closures caused by competition with natural gas, but she said younger coal plants can compete because of increased efficiency, and equipment is available to upgrade older plants to meet the standard.

 

She disputed a claim by American Electric Power, the nation’s largest coal-burning utility, that it would have to retire more than a quarter of its 25,000 MW capacity to comply with the proposed rule.

 

AEP Chairman and CEO Michael Morris said the retirements would “abruptly cut generation capacity in the Midwest.”

 

AEP still has not come into compliance with existing regulations, McCarthy countered, and she accused the utility of misleading people by blaming proposed EPA regulations for existing market conditions.

 

“What AEP was doing was confusing information and attributing market conditions—and their failure to comply with earlier required reductions—with the impacts of these rules.”

Original Article

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By Jon Entine

 

The New York Times rattled energy markets this week with a Sunday front page story asserting that many “insiders” in the natural gas industry harbor serious doubts about the long-term viability of the natural gas market. They are keeping mum, determined to cash in on the short-term exuberance over recent reports of sizable shale gas reserves, reporter Ian Urbina wrote.

 

“[W]e have a big problem,” he quoted Deborah Rogers — portrayed in the story as a “member of the advisory committee of the Federal Reserve Bank of Dallas” — as saying.

 

It’s one of 10 quotes deployed by the Times sharply criticizing the prospects for natural gas production from shale. Eight of them are from anonymous sources. The only other critic who is named, Houston geologist Art Berman, said the energy data suggests that gas fields contain far less reserves than claimed. It’s “harder and harder to deny that the shale gas revolution is being oversold,” he told Urbina.

 

The explosive article was re-posted literally thousands of times. It was echoed on TV and radio reports earlier this week and was the talk of the markets in the United States and Canada, where natural gas competes with oil, tar oil and coal investments. “Times’ Nat Gas Slam Affects Markets,” opined The Street.com. “Natural Gas Stocks Fall,” headlined Bloomberg BusinessWeek. (Stories on RealClearMarkets and RealClearEnergy, however, subsequently questioned the Times’ reporting in the article.)

 

Just as importantly, the sharply critical narrative has emboldened a faction of the environmental movement that is campaigning against fracking, the technique used to extract shale gas that some environmentalists claim makes this form of natural gas dirtier than coal.

 

Anti-natural gas members of Congress jumped on the bandwagon. “I urge the S.E.C. to quickly investigate whether investors have been intentionally misled,” wrote Rep. Maurice Hinchey, D-N.Y., in one of three letters sent to the commission by four federal lawmakers, all Democrats. Indeed, Hinchey might be on to something. But in a twist, investigators might end up targeting the New York Times and the key sources for its report.

 

From the Fringe to the Mainstream

 

The Times has a venerable history of taking stories that other news outlets have ignored or under-appreciated and, with enterprising reporting, turning them into causes célèbre. Perhaps that was the case here; otherwise this topic choice is puzzling. After all, the “shale gas is a bubble” story has been knocking around the fringes of cyberspace for years.

 

Almost two years ago, the AP headlined its story on the phenomenon “Analyst: Gas shale may be the next bubble to burst,” quoting Berman, who laid out the issues in a way that Urbina would later mimic almost point for point.

 

The two major promoters of the sky-is-falling thesis are Berman, who runs Labyrinth Consulting Services, and Henry Groppe, an octogenarian patriarch of Texas petroleum industry analysts Groppe, Long & Little. They have been pushing this view for years to wide skepticism and even ridicule from mainstream analysts.

 

For reasons never explained, the Times determined that Berman and Groppe were less Chicken Little and more banking analyst Meredith Whitney, for their fingerprints are all over its story. But even a cursory background check of the cited sources raises serious ethical issues, some of which may have resulted in market manipulations that could yet raise the ire of regulators in Canada and the U.S.

 

Financial Conflicts of Interest

 

Times’ editors present this story as an independent investigation, as blowing the top off a conspiracy of silence from natural gas “insiders.” It brags in a special section headlined “Industry Privately Skeptical of Shale Gas” of reviewing, over six months, “thousands of pages of documents related to shale gas, including hundreds of industry e-mails, internal agency documents and reports by analysts.”

 

The Times posted some of the emails, although they are heavily redacted “to protect the confidentiality of sources.” Readers are left with hyperbolic but anonymous fragments of criticism, many years out of date, sprinkled with derisive comments from Berman and Rogers.

 

Berman is described as a “geologist who worked two decades at Amoco and has been one of the most vocal skeptics of shale gas economics.” There is no reason to begrudge Berman (or Groppe) from holding strong beliefs and trying to profit from them by selling their investment advice to hedge funds or other investors. But the responsibility of the Times is different. Context is the difference between truth and manipulation. Disclosure is a central canon of journalism ethics.

 

What didn’t the Times disclose? Berman has direct and indirect financial ties to a range of critics of shale gas. For example, In January, Berman testified as a paid expert witness before the Indiana Utility Regulatory Commission in support of Indiana Gasification, a unit of Leucadia National Corp., detailing the benefits of buying natural gas made from coal instead of hydraulic fracturing. The coal industry fears getting crushed by the cleaner, natural gas movement, and Berman backed coal.

 

Berman not only has an indirect financial interest playing the role of shale gas skeptic, he has a direct conflict of interest: He (and Groppe) are “strategic partners” and “consultants” to Middlefield Capital in Toronto, according to Dean Orico, its president. They are both on retainer and are prominently featured on the company’s website.  Middlefield offers more than 30 funds and limited partnerships, including the Groppe Tactical Energy fund, which follow the two advisers’ anti-shale gas investment outlook. It has sizable investments in key competitors to shale gas drillers, most prominently Canadian tar oil producers, an industry with far more environmental questions than the natural gas industry.

 

Berman is reportedly also a consultant and paid speaker with the Canadian Imperial Bank of Commerce. Both Middlefield and CIBC World Markets have clients who would profit from Berman taking an aggressive public stance. Moreover, if any of their clients, or indeed the fund managers at Middlefield, knew that the Times story was coming out, they could face charges of market manipulation under Canadian and U.S. securities law. (Orico said that Middlefield was never contacted by the Times and only found out about the story after it appeared. CIBC said it was looking into its relationship with Berman but has not yet responded to requests for a comment.)

 

Did Berman tell his strategic partners and clients, and directly profit from the Times story? Did Middlefield’s funds or clients or CIBC’s clients with knowledge of the Times’ piece hold short interest in shale stocks or long interest in competitors’ stocks? Did the Canadian oil sands industry, which includes Middlefield Capital, seek to influence the U.S. fracking debate, which could be a potential violation of the Foreign Agents Registration Act? Did Middlefield’s funds or clients or CIBC’s clients have short interest in shale stocks ahead of the Times report? Is the Times’ key source dealing in inside information? Recall that Martha Stewart went to jail after being accused by the government of conspiracy, obstruction of justice, securities fraud and insider trading for getting advance word on market-moving news.

 

One also wonders whether Berman disclosed his relationships to the New York Times. Only Urbina and his editors know for sure. I attempted to contact the reporter, the Times’ executive editor, managing editor, business desk, news desk and public editor by phone and email for comment on the issues raised by the story. Eileen Murphy of paper’s corporate communications office responded, writing that “the facts of the story are not in question and we fully stand by it,” refusing to address the ethical issues raised by Urbina’s reporting.

 

 

The Curious Case of the Federal Reserve “Adviser”

 

The Times’ story rehashes criticism of the shale gas industry that has been rattling around the Internet for years. The only new identifiable voice is that of Deborah Rogers. She is described by Urbina as “a member of the advisory committee of the Federal Reserve Bank of Dallas” and later as a “commissioner” at the bank. She portrays herself as having begun her “financial career in Europe where she worked in Corporate Finance in London, specifically venture capital.”

 

That sounds like someone with genuine credibility. And that’s how she was treated on Monday, when she made the media rounds. CNBC, for example, featured her in an interview as a “retired financial consultant” now with the Federal Reserve.

 

In a telephone interview, Rogers said that she was once a model with the Ford agency, and left the job to join a one-person firm in London as an assistant. She returned to the U.S. and was briefly a stockbroker for Merrill Lynch. Now she’s raises goats and is the founder of Farmstead, a dairy that makes artisanal cheeses.

 

Urbina also did not disclose that Rogers has been fighting the natural gas industry — and Chesapeake Energy in particular — tooth and nail for years. She is on the steering committee of the Oil and Gas Accountability Project at Earthworks, an anti-shale-gas advocacy group, and lectures around the country. In Urbina’s story, in her public appearances, including on CNBC, and in her interview with me, she indicated she became an activist by accident. Urbina quoted her as “studying well data from shale companies in October 2009 after attending a speech by the chief executive of Chesapeake [Energy],” the central target of the Times’ piece.

 

What’s not reported is that this was hardly a serendipitous event. Throughout 2009, Rogers had tangled with Chesapeake, which has a well near her Texas farm. That spring, she commissioned a study by Wolf Eagle Environmental Engineers and Consultants that tried to prove that gas production was causing air pollution, endangering her farm.

 

In response to the complaint, the city of Fort Worth commissioned its own study, released that August. It dismissed her allegations, saying Wolf’s study was “rudimentary in scope and design,” adding, “Discussions of chemical hazards in the documents reviewed were generally exaggerated and speculative, not representative of the hazards posed by the actual concentrations of compounds detected.” Ironically, a year later Rogers was cited for failing to conduct bacterial testing of well water at her farm, paid a fine and received 12 months’ probation.

 

When I emailed the Federal Reserve Bank in Dallas about the Times’ representation that she was on an “advisory committee” and was a “commissioner,” spokesperson James Hoard corrected the record: She is an unpaid volunteer member of the “small business and agriculture advisory council (not ‘committee’), which is composed of professionals primarily representing small business and agriculture . . . local citizens who provide input into regional business conditions. (Ms. Rogers is a cheese producer.),” he wrote. Hoard added that she has no “governance or policy responsibilities.” The two former chairs instrumental in appointing her are executives in the oil industry: Jim Hackett at Anadarko Petroleum and Ray Hunt at Hunt Consolidated.

 

I asked Rogers whether she had discussed her ongoing battle with Chesapeake with the Times. She paused. “Call Urbina, call the New York Times.” When pressed, she went silent. “Thanks,” she said, and hung up.

 

Where were the Times’ fact-checkers? Imagine how the reader of the Times’ “investigation” would have assessed Rogers’ credibility if Urbina had revealed key contextual details. Would she have been seen as credible, or even featured in the piece, if she had been introduced as “Deborah Rogers, a goat farmer, cheesemaker and activist who has tangled repeatedly with Chesapeake Energy and lectures for anti-fracking NGOs”? That would have been a one-sided caricature — but no less deceptive than the résumé details cherry-picked by Urbina.

 

I spoke with representatives of two companies that are portrayed in the Times’ piece as peddling to their customers the “bubble lie” that shale gas has a rosy future. PNC Wealth Management said it was not contacted by the reporter. IHS Drilling Data spokesperson David Pendery, quoted in the Times story, was irked at the paper. “I got a bizarre call from the New York Times reporter, who wanted me to respond to sections of an email that he read to me, but he wouldn’t supply us with the actual email so we could read it in context,” he said. “He wasn’t very professional.”

 

The Times’ readers were never informed that the key named sources in a market-shaking investigative report are activists with personal stakes in the debate or with direct financial conflicts. By running this piece, the Times chose to endow with credibility what other responsible news outlets had determined was less than newsworthy. Issues large and small have been raised by the newspaper’s reporting. Hopefully, the paper’s editors or its public editor, Arthur Brisbane, will address the matter.

Original Article

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By Vickie Welborn

 

The 2nd Circuit Court of Appeal has reversed a DeSoto district judge’s ruling that partially canceled the mineral lease of a DeSoto Parish landowner who sued Questar Exploration and Production Co., for failing to develop lower producing levels, including the Haynesville Shale.

 

In the 19-page ruling released Wednesday, the appellate court rejected District Judge Charles B. Adams’ finding that Questar never intended to develop the Annie and Santo Ferraras’ deep rights.

 

“The record does not support a finding that Questar failed to act as a reasonably prudent operator for the mutual benefit of itself and its lessor” as required by state law, the court states.

 

It further notes: “We certainly understand the district court’s sense of awe at the potential of the Haynesville Shale, but there is inadequate support for a blanket finding of ‘plans to drill wells in every section or every square mile.’ More importantly, there was no evidence that a prudent operator utilizing geological data would have drilled on the Ferraras’ property to the Haynesville Shale depth by the date of trial.”

 

It’s unknown if the Ferraras will appeal. Their attorney, Randall Davidson, did not return a phone call seeking comment Wednesday.

 

The Ferraras own 47 acres in DeSoto Parish. The land was first leased in 1988. In 2001, Questar drilled a well in the Hosston unit. Santo Ferrara made a demand on Questar in August 2008 to further develop the deep rights.

 

He filed suit in 2008 seeking dissolution of the lease based on Questar’s failure to develop the Haynesville Shale, which gained the public’s attention in March 2008.

 

Questar did not respond to the demand letter or lawsuit. And during a two-day trial in May 2010, the company did not present any evidence on its behalf.

 

Adams cited the company’s lack of communication in his June 2010 judgment. Adams said it was clear Questar did not intend to develop Ferrara’s deep rights.

 

The panel of 2nd Circuit judges said it completely understood the Ferraras’ and district court’s “impatience and indignation at Questar’s inexplicable failure even to acknowledge the demand letter, its dilatory conduct after suit was filed and its unhelpful strategy of putting on no evidence. However, the Ferraras received royalties from shallow strata continuously since 1988 and made no demand for further exploration or development since 1994. The instant demand came a mere one week after the commissioner recognized the potential of the Haynesville Shale by dispensing with test wells; suit was filed only 46 days after the unanswered demand letter. The record is utterly devoid of evidence that any reasonably prudent operator could have begun exploration, much less drilled a well to the deep Haynesville Shale stratum, within this remarkably short time.”

 

Questar also objected to Adams’ use of an expert witness and his reliance of evidence of post-suit activity in the Haynesville Shale play to determine of the company breached its obligation. The appellate court, however, rejected those arguments and found no error in Adams’ actions.

Original Article

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Washington (Platts)–29Jun2011/512 pm EDT/2112 GMT

 

The head of the US Department of Energy’s data and analysis arm on Wednesday defended the way his agency assesses natural gas plays in the US, in the wake of New York Times news stories earlier in the week that questioned the economic viability of the US shale gas development.

 

“I think EIA has done an outstanding job of keeping track of something that is a rapidly emerging change in the [US energy] system,” Richard Newell, the administrator of DOE’s Energy Information Administration, told Platts.

 

“It is something that a government agency could easily not be on top of, and it is a part of the system that in a year things change so much that you can be out of touch,” he said. “So, to stay in touch you get access to the best information, and you incorporate that into your outlook, and I think that is exactly what we have done.”

 

Two stories in the New York Times on Sunday and Monday quoted internal EIA emails from officials there who were skeptical that US shale gas resources would live up to the rosy production outlook from industry and the EIA.

 

The stories also led Representative Ed Markey, a Massachusetts Democrat and critic of the controversial techniques used in accessing shale gas, to question whether the estimates reflected reality or a “speculative bubble hyped by the oil and gas industry.” Markey requested that Newell outline the methodology it uses to make estimates on shale gas production.

 

But Newell defended the work of his agency, and emphasized that US gas production was increasing.

 

“This isn’t just perception. Natural gas is being produced, it is being measured, and it is being produced from shale gas reserves,” he said.

 

The development of hydraulic fracturing and horizontal drilling has led to massive increase in the amount of natural gas produced in the US over the past several years. The new techniques also led to independent estimates of gas reserves almost doubling in 2009, from 1,000 Tcf to 1,836 Tcf, with the increase influenced by shale gas activity. The NYMEX natural gas futures contract price also dropped dramatically in the past three years, from above $12/MMBtu in June 2008 to around $4.30/MMBtu this week.

 

That development has its critics however, with many environmental groups and state government’s voicing concerns over the undisclosed chemical materials pumped into the ground by gas companies to retrieve oil from shale.

 

Since the New York Times stories, analysts and others within the natural gas industry have also defended estimates that natural gas production has increased and will continue to increase.

Original Article