Mar 16 2014, 12:58pm CDT | by Forbes
We begin this week’s Follies with News the Peak Oil Cult Will Hate : Fracking efficiently: Government changes how it calculates future oil and gas production because wells are producing more than before – Companies drilling in the Marcellus and other shale formations across the country are getting better at what they do, according to a report released today by the federal Energy Information Administration. “Increasing precision and efficiency of horizontal drilling and hydraulic fracturing” has resulted in each well producing more natural gas, on average, than seven years ago, according to the report. And that is changing the way production estimates for the United States are being calculated. According to the government data, the report says: “a Marcellus Shale well completed by a rig in April 2014 can be expected to yield over 6 million cubic feet of natural gas per day more than a well completed by that rig in that formation in 2007.”
The Original Humble Oil Building, Main St, Houston, 1936
Speaking of which, this analysis discusses what this all means in terms of global opportunity, not just in the U.S., but in Canada as well: The North American Energy Renaissance and Global Opportunity – The Energy Information Administration (EIA) notes that, as of October 2013, the production from new U.S. gas wells has been outpacing declines in existing wells, suggesting that there is still plenty of shale to exploit. Meanwhile, Canada is experiencing its own renaissance in the form of not only its shale resources, but the ongoing development of its oil sands. Oil from the oil sands, obtained through surface mining and in-situ techniques, accounted for more than half of Canada’s oil production in 2012, and that proportion only continues to grow. With oil production exploding and Canada seeking new ways to bring its oil to market, it also has begun work on the Keystone XL pipeline which, once completed, will pump Canadian crude to U.S. refineries and broaden Canada’s access to global oil markets. Canada, like the United States, is set to become a net energy exporter: though U.S. imports of foreign crude overall dropped 16 percent since 2005, its imports of Canadian crude grew by nearly 50 percent, according to the EIA.
Despite all of this, the editors at The Nation have apparently begun letting Eeyore become a contributor on energy issues now: How the U.S. Energy Boom is Harming Foreign Policy – Because tar sands oil is so much richer in carbon than conventional petroleum and requires more energy to extract (thereby producing additional emissions), environmental groups like 350.org and Friends of the Earth are trying to block construction of pipelines like Keystone XL that would carry this dirty fuel into and across the United States. Also, the current boom in shale oil output could fade as the richest “plays” in Texas and North Dakota are exhausted. But all this is less important than the political implications of the boom—in particular, the emergence of a national discourse about the energy-fueled “revitalization” of America.
In Texas, Railroad Commission Chairman Barry Smitherman is bullish on the Shale Revolution’s implications for the future: Smitherman: Texas Could Break Oil Production Record by 2020 - Oil production in Texas is now close to 2 million barrels a day. And Smitherman, speaking at the IHS CERAweek energy conference in Houston, said the state could be at 3 million barrels by 2017 and 4 million barrels by 2020. In 1972 Texas produced 3.5 million barrels a day, according to Railroad Commission data. “It could easily go to 5 million by 2023,” Smitherman said. “I don’t know where the end is because it’s a technological revolution.”
But in California, irrational environmental policies limit the opportunity, not just for development of the state’s massive oil and gas resource, but for farmers in the San Joaquin Valley as well: How the Other California Lives – Liberals blame the water shortage on record dry weather and climate change. (Climate models predict that California will get wetter if the world is warming, but never mind.) Those explanations ignore that San Joaquin farmers haven’t received 100% of their contractual water allocations from the federal Central Valley Project since 2006, even in years of heavy rain or snow. Farmers got only 45% of the water they were due in 2010, when precipitation was 110% of the norm. Regulations ostensibly intended to protect fish like the three-inch delta smelt, steelhead and chinook salmon, Mr. Watte says, are to blame… [when] northern California was hit by a deluge. Government responded quickly: To protect the three-inch smelt from the delta pumps that would have directed the rainfall to Central Valley farmers desperate to irrigate their land, regulators flushed 95,000 acre-feet of water into the ocean.
And now for our Totally, Completely, 100% Shamelessly Self-Serving Link of the Week!: Harvey Weinstein, ‘Big Oil’, and Rational Tax Policy – But another point we should take away is this: when a fabulously wealthy movie producer like Harvey Weinstein goes public with requests for new or expanded government tax incentives, no one in Hollywood criticizes him. No one in the national news media accuses him of asking for undeserved “subsidies” from taxpayers. There is no organized “anti-Hollywood” protest movement to take to the streets waving placards accusing Harvey Weinstein of engaging in “corporate welfare”.
Thanks, Shale, and Fracking: U.S Chemical Industry Booms With Competitive Advantages – The US has gone from a net chemical importer in 2011 to an exporter with anticipated export revenue of almost $30 billion by 2018, thanks in large part to comparatively cheap natural gas and power prices. “US groups such as ExxonMobil, Dow Chemical, Chevron and Phillips 66 are among the leaders in investing in new capacity, but even producers from Asia and the Middle East such as Formosa Plastics of Taiwan, and Sabic of Saudi Arabia, have been looking at projects in the US.”
Roger Pielke, Jr. at the Breakthrough Institute gives us our Must Read Piece of the Week: Anti-Growth Environmentalism – Keeping the Poor Poor – It has become fashionable in some circles to come out against economic growth. Bill McKibben, the author and climate change activist, asserts that “growth may be the one big habit we finally must break.” He adds that this is “a dark thing to say, and un-American.” Such calls for an end to growth are typically advanced in environmental debates and those about economic globalization. But what does it actually mean to be against economic growth? I argue that to be anti-growth actually implies keeping poor people poor.
Meanwhile, the reliable New York Times contributes our Load of Smelly Horse Manure Piece of the Week: Exporting Natural Gas – Yet the editorial doesn’t mention the devastating economic impact from exporting American gas. We have already approved five export terminals. The Energy Department has warned that if we approve one more, United States prices could increase by 54 percent, potentially translating into a de facto tax of $62 billion a year. That export tax would cripple America’s manufacturing renaissance, crush consumers and destroy millions of potential jobs. We should resist the calls to rush more exports as an ineffective foreign policy tool that would severely damage the American economy.
I’ll take Very Efficiently and Effectively for $1000, Alex: How Texas Extracts Revenue From the Oil & Gas Industry – Every business sector has a complex set of tax laws that are industry specific, and with the large numbers produced by the oil and gas industry, a misunderstanding of tax codes can lead to big penalties in short order. To help give their members a better understanding of taxes unique to the petroleum industry, the Desk and Derrick Club of San Angelo invited three enforcement officers from the State of Texas Comptroller’s Abilene field office to address the attendees at their luncheon held at the San Angelo Country Club on Wednesday. Their presentation was titled “Taxability in the Oilfield and Related Industries.”
Some Quick Hits:
Cool Photo Gallery Here: Exxon Finds Dinosaur Bones at Drill Site
What Could Possibly Go Wrong?: U.S. To Give up Control of Internet
OK, I’m out of space here – see you next week!
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Source: Forbes Business
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