Category Archives: Energy
At a time when much of the world is looking with a mix of envy and excitement at the recent boom in USA unconventional gas from shale rock, when countries from China to Poland to France to the UK are beginning to launch their own ventures into unconventional shale gas extraction, hoping it is the cure for their energy woes, the US shale boom is revealing itself to have been a gigantic hyped confidence bubble that is already beginning to deflate. Carpe diem!
America: The New Saudi Arabia?
If we’re to believe the current media reports out of Washington and the US oil and gas industry, the United States is about to become the “new Saudi Arabia.” We are told she is suddenly and miraculously on the track to energy self-sufficiency. No longer need the US economy depend on high-risk oil or gas from the politically unstable Middle East or African countries. The Obama White House energy adviser, Heather Zichal, has even shifted her focus from pushing carbon cap ‘n trade schemes to promoting America’s “shale revolution.”
In his January 2012 State of the Union Address to Congress, President Obama claimed that, largely owing to the shale gas revolution, “We have a supply of natural gas that can last America nearly 100 years.” 
Renowned energy experts like Cambridge Energy Research’s Daniel Yergin in recent Congressional testimony waxed almost poetic about the purported benefits of the recent US shale oil and gas exploitation: “The United States is in the midst of the ‘unconventional revolution in oil and gas’ that, it becomes increasingly apparent, goes beyond energy itself.” He didn’t explain what exactly energy going beyond energy itself means. He also claimed that “the industry supports 1.7 million jobs – a considerable accomplishment given the relative newness of the technology. That number could rise to 3 million by 2020.” Very impressive numbers.
Mr Yergin went on to suggest a major geopolitical dimension of America’s shale oil and gas industry, saying “expansion of US energy exports will add an additional dimension to US influence in the world…Shale gas has risen from two percent of domestic production a decade ago to 37 percent of supply, and prices have dropped dramatically. US oil output, instead of continuing its long decline, has increased dramatically – by about 38 percent since 2008. Just the increase since 2008 is equivalent to the entire output of Nigeria, the seventh-largest producing country in OPEC…People talk about the potential geopolitical impact of the shale gas and tight oil. That impact is already here…”
In their Energy Outlook to 2030, published in 2012, BP’s CEO Bob Dudley sounded a similar upbeat projection of the role of shale gas and oil in making North America energy independent of the Middle East. BP predicted that growth in shale oil and gas supplies—“along with other fuel sources”—will make the western hemisphere virtually self-sufficient in energy by 2030. In a development with enormous geopolitical implications, a large swath of the world including North and South America would see its dependence on oil imports from potentially volatile countries in the Middle East and elsewhere disappear, BP added.
There’s only one thing wrong with all the predictions of a revitalized United States energy superpower flooding the world with its shale oil and shale gas. It’s based on a bubble, on hype from the usual Wall Street spin doctors. In reality it is becoming increasingly clear that the shale revolution is a short-term flash in the energy pan, a new Ponzi fraud, carefully built with the aid of the same Wall Street banks and their “market analyst” friends, many of whom brought us the 2000 “dot.com” bubble and, more spectacularly, the 2002-2007 US real estate securitization bubble. A more careful look at the actual performance of the shale revolution and its true costs is instructive.
One reason we hear little about the declining fortunes of shale gas and oil is that the boom is so recent, reaching significant proportions only in 2009-2010. Long-term field extraction data for a significant number of shale gas wells only recently is coming to light. Another reason is that there have grown up huge vested corporate interests from Wall Street to the oil industry who are trying everything possible to keep the shale revolution myth alive. Despite all their efforts however, data coming to light, mostly for the review of industry professionals, is alarming.
Shale gas has recently come onto the gas market in the US via use of several combined techniques developed among others by Dick Cheney’s old company, Halliburton Inc. Halliburton several years ago combined new methods for drilling in a horizontal direction with injection of chemicals and “fracking,” or hydraulic fracturing of the shale rock formations that often trap volumes of natural gas. Until certain changes in the last few years, shale gas was considered uneconomical. Because of the extraction method, shale gas is dubbed unconventional and is extracted in far different ways from conventional gas.
The US Department of Energy’ EIA defines conventional oil and gas as oil and gas “produced by a well drilled into a geologic formation in which the reservoir and fluid characteristics permit
the oil and natural gas to readily flow to the wellbore.” Conversely, unconventional hydrocarbon production doesn’t meet these criteria, either because geological formations present a very low level of porosity and permeability, or because the fluids have a density approaching or even exceeding that of water, so that they cannot be produced, transported, and refined by conventional methods. By definition then, unconventional oil and gas are far more costly and difficult to extract than conventional, one reason they only became attractive when oil prices soared above $100 a barrel in early 2008 and more or less remained there.
To extract the unconventional shale gas, a hydraulic fracture is formed by pumping a fracturing fluid into the wellbore at sufficient pressure causing the porous shale rock strata to crack. The fracture fluid, whose precise contents are usually company secret and extremely toxic, continues further into the rock, extending the crack. The trick is to then prevent the fracture from closing and ending the supply of gas or oil to the well. Because in a typical fracked well fluid volumes number in millions of gallons of water, water mixed with toxic chemicals, fluid leak-off or loss of fracturing fluid from the fracture channel into the surrounding permeable rock takes place. If not controlled properly, that fluid leak-off can exceed 70% of the injected volume resulting in formation matrix damage, adverse formation fluid interactions, or altered fracture geometry and thereby decreased production efficiency.
Hydraulic fracturing has recently become the preferred US method of extracting unconventional oil and gas resources. In North America, some estimate that hydraulic fracturing will account for nearly 70% of natural gas development in the future.
Why have we just now seen the boom in fracking shale rock to get gas and oil? Thank then-Vice president Dick Cheney and friends. The real reason for the recent explosion of fracking in the United States was passage of legislation in 2005 by the US Congress that exempted the oil industry’s hydraulic fracking, astonishing as it sounds, from any regulatory supervision by the US Environmental Protection Agency (EPA) under the Safe Drinking Water Act. The oil and gas industry is the only industry in America that is allowed by EPA to inject known hazardous materials – unchecked – directly into or adjacent to underground drinking water supplies.
The 2005 law is known as the “Halliburton Loophole.” That’s because it was introduced on massive lobbying pressure from the company that produces the lion’s share of chemical hydraulic fracking fluids – Dick Cheney’s old company, Halliburton. When he became Vice President under George W. Bush in early 2001, Cheney immediately got Presidential responsibility for a major Energy Task Force to make a comprehensive national energy strategy. Aside from looking at Iraq oil potentials as documents later revealed, the energy task force used Cheney’s considerable political muscle and industry lobbying money to win exemption from the Safe Drinking Water Act. 
During Cheney’s term as vice president he moved to make sure the Government’s Environmental Protection Agency (EPA) would give a green light to a major expansion of shale gas drilling in the US.
In 2004 the EPA issued a study of the environmental effects of fracking. That study has been called “scientifically unsound” by EPA whistleblower Weston Wilson. In March of 2005, EPA Inspector General Nikki Tinsley found enough evidence of potential mishandling of the EPA hydraulic fracturing study to justify a review of Wilson’s complaints. The Oil and Gas Accountability Project conducted a review of the EPA study which found that EPA removed information from earlier drafts that suggested unregulated fracturing poses a threat to human health, and that the Agency did not include information that suggests “fracturing fluids may pose a threat to drinking water long after drilling operations are completed.” Under political pressure the report was ignored. Fracking went full-speed ahead.
© n/a Fracking toxic waste. This diagram depicts methane gas and toxic water contaminating the drinking water as the fracturing cracks penetrate the water table.
The Halliburton Loophole is no minor affair. The process of hydraulic fracking to extract gas involves staggering volumes of water and of some of the most toxic chemicals known. Water is essential to shale gas fracking. Hydraulic fracturing uses between 1.2 and 3.5 million US gallons (4.5 and 13 million liters) of water per well, with large projects using up to 5 million US gallons (19 Million liters). Additional water is used when wells are refractured; this may be done several times. An average well requires 3 to 8 million US gallons of water over its lifetime. Entire farm regions of Pennsylvania and other states with widespread hydraulic fracking report their well water sources have become so toxic as to make the water undrinkable. In some cases fracked gas seeps into the home via the normal water faucet.
© Screenshot from HBO film Gasland – Rural resident flicking on cigarette lighter next to his kitchen faucet and watching his drinking water, infused with gas and chemicals, ignite in flames as high as 3 feet.
During the uproar over the BP Deepwater Horizon Gulf of Mexico oil spill, the Obama Administration and the Energy Department formed an Advisory Commission on Shale Gas, ostensibly to examine the growing charges of environmental hazards from shale gas practices.
Their report was released in November 2011. It was what could only be called a “whitewash” of the dangers and benefits of shale gas.
The commission was headed by former CIA director John M. Deutch. Deutch himself is not neutral. He sits on the board of the LNG gas company Cheniere Energy. Deutch’s Cheniere Energy’s Sabine Pass project is one of only two current US projects to create an LNG terminal to export US shale gas to foreign markets.
Deutch is also on the board of Citigroup, one of the world’s most active energy industry banks, tied to the Rockefeller family. He also sits on the board of Schlumberger, which along with Halliburton, is one of the leading companies doing hydraulic fracking. In fact, of the seven panel members, six had ties to the energy industry, including fellow Deutch panel member and shale fracking booster, Daniel Yergin, himself a member of the National Petroleum Council. Little surprise that the Deutch report called shale gas, “the best piece of news about energy in the last 50 years.” Deutch added, “Over the long term it has the potential to displace liquid fuels in the United States.” 
Shale gas: Racing against the Clock
With regulatory free-rein, now also backed by the Obama Administration, the US oil and gas industry went full-power into shale gas extraction, taking advantage of high oil and natural gas prices to reap billions in quick gains.
According to official US Department of Energy Energy Information Administration data, shale gas extraction ballooned from just under 2 million MCF in 2007, the first year data was tracked, to more than 8,500,000 Mcf by 2011, a fourfold rise to comprise almost 40% of total dry natural gas extraction in the USA that year. In 2002 shale gas was a mere 3% of total gas.
Here enters the paradox of the US “shale gas revolution.” Since the days of oil production wars more than a century ago, various industry initiatives had been created to prevent oil and later gas price collapse due to over-production. During the 1930’s there was discovery of the huge East Texas oilfields, and a collapse of oil prices. The State of Texas, whose Railroad Commission (TRC) had been given regulatory powers not only over railroads but also over oil and gas production in what then was the world’s most important oil producing region, was called in to arbitrate the oil wars. That resulted in daily statewide production quotas so successful that OPEC later modeled itself on the TRC experience.
Today, with federal deregulation of the oil and gas industry, such extraction controls are absent as every shale gas producer from BP to Chesapeake Energy, Anadarko Petroleum, Chevron, Encana and others all raced full-tilt to extract the maximum shale gas from their properties.
The reason for the full-throttle extraction is telling. Shale Gas, unlike conventional gas, depletes dramatically faster owing to its specific geological location. It diffuses and becomes impossible to extract without the drilling of costly new wells.
The result of the rapidly rising volumes of shale gas suddenly on the market was a devastating collapse in the market price of that same gas. In 2005 when Cheney got the EPA exemption that began the shale boom, the marker US gas price measured at Henry Hub in Louisiana, at the intersection of nine interstate pipelines, was some $14 per thousand cubic feet. By February 2011 it had plunged amid a gas glut to $3.88. Currently prices hover around $3.50 per tcf.
In a sobering report, Arthur Berman, a veteran petroleum geologist specialized in well assessment, using existing well extraction data for major shale gas regions in the US since the boom started, reached sobering conclusions. His findings point to a new Ponzi scheme which well might play out in a colossal gas bust over the next months or at best, the next two or three years. Shale gas is anything but the “energy revolution” that will give US consumers or the world gas for 100 years as President Obama was told.
Berman wrote already in 2011, “Facts indicate that most wells are not commercial at current gas prices and require prices at least in the range of $8.00 to $9.00/mcf to break even on full-cycle prices, and $5.00 to $6.00/mcf on point-forward prices. Our price forecasts ($4.00-4.55/mcf average through 2012) are below $8.00/mcf for the next 18 months. It is, therefore, possible that some producers will be unable to maintain present drilling levels from cash flow, joint ventures, asset sales and stock offerings.” 
Berman continued, “Decline rates indicate that a decrease in drilling by any of the major producers in the shale gas plays would reveal the insecurity of supply. This is especially true in the case of the Haynesville Shale play where initial rates are about three times higher than in the Barnett or Fayetteville. Already, rig rates are dropping in the Haynesville as operators shift emphasis to more liquid-prone objectives that have even lower gas rates. This might create doubt about the paradigm of cheap and abundant shale gas supply and have a cascading effect on confidence and capital availability.” 
What Berman and others have also concluded is that the gas industry key players and their Wall Street bankers backing the shale boom have grossly inflated the volumes of recoverable shale gas reserves and hence its expected supply duration. He notes, “Reserves and economics depend on estimated ultimate recoveries (EUR) based on hyperbolic, or increasingly flattening, decline profiles that predict decades of commercial production. With only a few years of production history in most of these plays, this model has not been shown to be correct, and may be overly optimistic….Our analysis of shale gas well decline trends indicates that the Estimated Ultimate Recovery per well is approximately one-half the values commonly presented by operators.” In brief, the gas producers have built the illusion that their unconventional and increasingly costly shale gas will last for decades.
Basing his analysis on actual well data from major shale gas regions in the US, Berman concludes however, that the shale gas wells decline in production volumes at an exponential rate and are liable to run out far faster than being hyped to the market. Could this be the reason financially exposed US shale gas producers, loaded with billions of dollars in potential lease properties bought during the peak of prices, have recently been desperately trying to sell off their shale properties to naïve foreign or other investors?
Three decades of natural gas extraction from tight sandstone and coal-bed methane show that profits are marginal in low permeability reservoirs. Shale reservoirs have orders of magnitude lower reservoir permeability than tight sandstone and coal-bed methane. So why do smart analysts blindly accept that commercial results in shale plays should be different? The simple answer is found in high initial production rates. Unfortunately, these high initial rates are made up for by shorter lifespan wells and additional costs associated with well re-stimulation. Those who expect the long-term unit cost of shale gas to be less than that of other unconventional gas resources will be disappointed…the true structural cost of shale gas production is higher than present prices can support ($4.15/mcf average price for the year ending July 30, 2011), and that per-well reserves are about one-half of the volumes claimed by operators. 
Therein lies the explanation for why a sophisticated oil industry in the United States has desperately been producing full-throttle, in a high-stakes game laying the seeds of their own bankruptcy in the process—They are racing to offload the increasingly unprofitable shale assets before the bubble finally bursts. Wall Street financial backers are in on the Ponzi game with billions at stake, much as in the recent real estate securitization fraud.
One Hundred Years of Gas?
Where then did someone get the number to tell the US President that America had 100 years of gas supply? Here is where lies, damn lies and statistics play a crucial role. The US does not have 100 years of natural gas supply from shale or unconventional sources. That number came from a deliberate blurring by someone of the fundamental difference between what in oil and gas is termed resources and what is called reserves.
A gas or oil resource is the totality of the gas or oil originally existing on or within the earth’s crust in naturally occurring accumulations, including discovered and undiscovered, recoverable and unrecoverable. It is the total estimate, irrespective of whether the gas or oil is commercially recoverable. It’s also the least interesting number for extraction.
On the other hand “recoverable” oil or gas refers to the estimated volume commercially extractable with a specific technically feasible recovery project, a drilling plan, fracking program and the like. The industry breaks the resources into three categories: reserves, which are discovered and commercially recoverable; contingent resources, which are discovered and potentially recoverable but sub-commercial or non-economic in today’s cost-benefit regime; and prospective resources, which are undiscovered and only potentially recoverable.
The Potential Gas Committee (PGC), the standard for US gas resource assessments, uses three categories of technically recoverable gas resources, including shale gas: probable, possible and speculative.
According to careful examination of the numbers it is clear that the President, his advisers and others have taken the PGC’s latest total of all three categories, or 2,170 trillion cubic feet (Tcf) of gas—probable, possible and purely speculative—and divided by the 2010 annual consumption of 24 Tcf. To get a number between 90 and 100 years of gas. What is conveniently left unsaid is that most of that total resource is in accumulations too small to be produced at any price, inaccessible to drilling, or is too deep to recover economically.
Arthur Berman in another analysis points out that if we use more conservative and realistic assumptions such as the PGC does in its detailed assessment, more relevant is the Committee’s probable mean resources value of 550 (Tcf) of gas. In turn, if we estimate, also conservatively and realistically based on experience, that about half of this resource actually becomes a reserve (225 Tcf), then the US has approximately 11.5 years of potential future gas supply at present consumption rates.
If we include proved reserves of 273 Tcf, there is an additional 11.5 years of supply for a total of almost 23 years. It is worth noting that proved reserves include proved undeveloped reserves which may or may not be produced depending on economics, so even 23 years of supply is tenuous. If consumption increases, this supply will be exhausted in less than 23 years.
There are also widely differing estimates within the US Government over shale gas recoverable resources. The US Department of Energy EIA uses a very generous calculation for shale gas average recovery efficiency of 13% versus other conservative estimates of about half that or 7% in contrast to recovery efficiencies of 75-80% for conventional gas fields. The generously high recovery efficiency values used for EIA calculations allows the EIA to project an estimate of 482 tcf of recoverable gas for the US. In August 2011, the Interior Department’s US Geological Survey (USGS) released a far more sober estimate for the large shale plays in Pennsylvania and New York called Marcellus Shale. The USGS estimated there are about 84 trillion cubic feet of technically-recoverable natural gas under the Marcellus Shale. Previous estimates from the Energy Information Administration put the figures at 410 trillion cubic feet.
Shale gas plays show unusually high field decline rates with very steep trends, a combination giving low recovery efficiencies. 
Huge shale gas losses
Given the abnormally rapid well decline rates and low recovery efficiencies, it is little wonder that once the euphoria subsided, shale gas producers found themselves sitting on a financial time-bomb and began selling assets to unwary investors as fast as possible.
In a very recent analysis of the actual results of several years of shale gas extraction in the USA as well as the huge and high-cost Canadian Tar Sands oil, David Hughes notes, “Shale gas production has grown explosively to account for nearly 40 percent of US natural gas production. Nevertheless, production has been on a plateau since December 2011; 80 percent of shale gas production comes from five plays, several of which are in decline. The very high decline rates of shale gas wells require continuous inputs of capital—estimated at $42 billion per year to drill more than 7,000 wells—in order to maintain production. In comparison, the value of shale gas produced in 2012 was just $32.5 billion.”
He adds, “The best shale plays, like the Haynesville (which is already in decline) are relatively rare, and the number of wells and capital input required to maintain production will increase going forward as the best areas within these plays are depleted. High collateral environmental impacts have been followed by pushback from citizens, resulting in moratoriums in New York State and Maryland and protests in other states. Shale gas production growth has been offset by declines in conventional gas production, resulting in only modest gas production growth overall. Moreover, the basic economic viability of many shale gas plays is questionable in the current gas price environment.”
If these various estimates are anywhere near accurate, the USA has a resource in unconventional shale gas of anywhere between 11 years and 23 years duration and unconventional oil of perhaps a decade before entering steep decline. The recent rhetoric about US “energy independence” at the current technological state is utter nonsense.
The drilling boom which resulted in this recent glut of shale gas was in part motivated by “held-by-production” shale lease deals with landowners. In such deals the gas company is required to begin drilling in a lease running typically 3-5 years, or forfeit. In the US landowners such as farmers or ranchers typically hold subsurface mineral rights and can lease them out to oil companies. The gas (or oil) company then is under enormous pressure to book gas reserves on the new leases to support company stock prices on the stock market against which it has borrowed heavily to drill.
This “drill or lose it” pressure typically has led companies to seek the juiciest “sweet spots” for fast spectacular gas flows. These are then typically promoted as “typical” of the entire play.
However, as Hughes points out, “High productivity shale plays are not ubiquitous, and relatively small sweet spots within plays offer the most potential. Six of thirty shale plays provide 88 percent of production. Individual well decline rates are high, ranging from 79 to 95 percent after 36 months. Although some wells can be extremely productive, they are typically a small percentage of the total and are concentrated in sweet spots.” 
One estimate of projected shale gas decline suggests the peak will pass well before the end of the decade, perhaps in four years, followed with a rapid decline in volume
The extremely rapid overall gas field declines require from 30 to 50 percent of production to be replaced annually with more drilling, a classic “tiger chasing its tail around the tree” syndrome. This translates to $42 billion of annual capital investment just to maintain current production. By comparison, all USA shale gas produced in 2012 was worth about $32.5 billion at a gas price of $3.40/mcf (which is higher than actual well head prices for most of 2012). That means about a net $10 billion loss on their shale gambles last year for all US shale gas producers.
Even worse, Hughes points out that capital inputs to offset field decline will necessarily increase going forward as the sweet spots within plays are drilled off and drilling moves to lower quality areas. Average well quality (as measured by initial productivity) has fallen nearly 20 percent in the Haynesville, the most productive shale gas play in the US. And it is falling or flat in eight of the top ten plays. Overall well quality is declining for 36 percent of US shale gas production and is flat for 34 percent.
Not surprising in this context, the major shale gas players have been making massive write-downs of their assets to reflect the new reality. Companies began in 2012 reassessing their reserves and, in the face of a gas spot price that was cut in half between July 2011 and July 2012, are being forced to admit that the long-term outlook for natural-gas prices is not positive. The write-downs have a domino effect as bank lending is typically tied to a company’s reserves meaning many companies are being forced to renegotiate credit lines or make distress asset sales to raise cash.
Beginning August 2012, many large shale gas producers in the US were forced to announce major write-downs of the value of their shale gas assets. BP announced write-downs of $4.8 billion, including a $1 billion-plus reduction in the value of its American shale gas assets. England’s BG Group made a $1.3 billion write-down of its US shale gas interests, and Encana, a large Canadian shale gas operator made a $1.7 billion write-down on shale assets in the US and Canada, accompanied by a warning that more were likely if gas prices did not recover. 
The Australian mining giant BHP Billiton is one of the worst hit in the US shale gas bubble as it came in late and big-time. In May, 2012 it announced it was considering taking impairments on the value its US shale-gas assets which it had bought at the peak of the shale gas boom in 2011, when the company paid $4.75 billion to buy shale projects from Chesapeake Energy and acquiring Petrohawk Energy for $15.1 billion.
But by far the worst hit is the once-superstar of shale gas, Oklahoma-based Chesapeake Energy.
Part VI: Chesapeake Energy: The Next Enron?
The company by most accounts that typifies this shale gas boom-bust bubble is the much-hailed leading player in shale, Chesapeake Energy. In August 2012 there were widespread rumors that the company would declare bankruptcy. That would have been embarrassing for the company that was the nation’s second largest gas producer. It would also have signaled to the world the hype that was behind promotion of a “shale energy revolution” from the likes of Yergin and the Wall Street energy promoters looking to earn billions on M&A and other deals in the sector to replace their dismal real estate experiences.
In May 2012, Bill Powers of the Powers Energy Investor, wrote of Chesapeake (CHK by its stock symbl): “Over the past year, however, CHK’s business model has broken down. The company’s shares continue to break to 52-week lows and the company has a funding issue—financial speak for the company is running out of money. While it was able to farm-out a portion of its Utica Shale assets in Ohio to France’s Total last year—this is remarkable given the accounting errors that resulted in Total receiving significantly less revenue from their Barnett Shale joint-venture—CHK has largely run out of prospective acreage to farm-out.” Powers estimated a $3 billion cash shortfall in 2012 for the company. That comes atop already huge corporate debt of $11.1 billion of which $1.7 billion was a revolving line of credit. 
Powers adds, “When the off-balance sheet debt and preferred issues are added to the company’s existing $11.1 billion of on-balance sheet debt, CHK’s has a whopping $20.5 billion of financial obligations. Given such a high level of indebtedness, CHK debt is rated junk and will be for the foreseeable future. “ He concludes, “Having America’s second largest natural gas producer as well as its most reckless destroyer of shareholder capital almost completely walk away from the shale gas business is a great indication that today’s natural gas price bubble is on the verge of popping. CHK has not made any money by drilling shale wells—and neither have virtually any of its peers—and now the dumb money has run out.” 
Angry shareholders forced a major shakeup of the Chesapeake board last September after a Reuters report that CEO Aubrey McClendon had been taking out large loans not fully disclosed to the company’s board or investors. McClendon was forced to resign as Chairman of the company he founded after details leaked out that McClendon has borrowed as much as $1.1 billion in the last three years by pledging his stake in the company’s oil and natural gas wells as collateral. In March 2013 the US Government Securities and Exchange Commission (SEC) announced that it was investigating the company and Chief Executive Aubrey McClendon and had issued subpoenas for information and testimony, among other items looking into a controversial program that grants McClendon a share in every well that Chesapeake drills.
The company is in the midst of a major asset sale of an estimated $6.9 billion to lower debt, including oil and gasfields covering roughly 2.4 million acres. It must invest heavily in drilling new wells to deliver the increased production of more lucrative oil and natural gas liquids, if it is to avoid bankruptcy. As one critical analyst of Chesapeake put it, “the company’s complex accounting methods make it almost impossible for analysts and stockholders to determine what the risks really are. The fact that the CEO is taking out billion-dollar loans and not openly disclosing them only furthers the perception that everything is not as it appears at Chesapeake – that the company is Enron with drilling rigs.” 
The much-touted shale gas revolution in the USA is collapsing along with the stock shares of Chesapeake and other key players.
F. William Engdahl is author of Myths, Lies and Oil Wars. He can be contacted via his website atwww.williamengdahl.com
 Roberta Rampton, Energy Policy Shifting as abundance replaces scarcity: Obama adviser, Reuters, February 25, 2013.
 President Barack Obama, President Obama’s State of the Union Address , January 25, 2012, The New York Times, January 24, 2012, accessed in http://www.nytimes.com/interactive/2012/01/24/us/politics/state-of-the-union-2012-video-transcript.html.
 Daniel Yergin, Subcommittee on Energy and Power of the House Energy and Commerce Committee
Testimony submitted for Hearings on ‘America’s Energy Security and Innovation,’ Washington D.C., February 5, 2013, accessed in http://energycommerce.house.gov/hearing/AESI-assessment-north-americas-energy-resources.
 BP, BP Energy Outlook 2030, London, January 2012.
 Glenn S. Penny, et al, Control and Modeling of Fluid Leakoff During Hydraulic Fracturing, Journal of Petroleum Technology, Vol. 37, no. 6, pp. 1071-1081.
 F. William Engdahl, Shale Gas: Halliburton’s Weapon of Mass Devastation, VoltaireNet.org, 17 May 2012, accessed in http://www.sott.net/article/245733-Shale-Gas-Halliburtons-Weapon-of-Mass-Devastation.
 Anthony Andrews, et al, Unconventional Gas Shales: Development, Technology and Policy Issues, Congressional Research Service, Washington D.C., October 30, 2009, p.7.
 John Deutsch, Robin West, The North American Oil and Gas Renaissance and its Implications, The Aspen Institute, 2012, Washington DC, accessed inhttp://www.aspeninstitute.org/sites/default/files/content/docs/pubs/2012GlobalForumRepFINALPDF_0.pdf.
 EIA, Natural Gas Gross Withdrawals and Production, US Department of Energy, Washington DC, accessed in http://www.eia.gov/dnav/ng/ng_prod_sum_dcu_NUS_a.htm
 Malcolm Maiden, Burnt Fingers all round in US shale gas boom, The Sydney Morning Herald, August 2, 2012, accessed in http://www.smh.com.au/business/burnt-fingers-all-round-in-us-shale-gas-boom-20120801-23g03.html
 SPEE, Canadian Oil and Gas Evaluation Handbook, Volume 1 — Reserves Definitions and Evaluation Practices and Procedures, SECTION 5: DEFINITIONS OF RESOURCES AND RESERVES, Petroleum Society of the Canadian Institute of Mining, Metallurgy and Petroleum, Calgary Chapter, accessed in www.petsoc.org.
 Stephen Lacey, After USGS Analysis, EIA Cuts Estimates of Marcellus Shale Gas Reserves by 80% ,August 26, 2011
 Rafael Sandrea, Evaluating production potential of mature US oil, gas shale plays, The Oil and Gas Journal, December 3, 2012, accessed in http://www.ogj.com/articles/print/vol-110/issue-12/exploration-development/evaluating-production-potential-of-mature-us-oil.html.
 Arthur E. Berman, After the Gold…
 Ed Crooks, Gas groups headed for large write-downs, Financial Times, August 31, 2012, accessed inhttp://www.ft.com/intl/cms/s/0/a0fd134e-f38d-11e1-b3a2-00144feabdc0.html#axzz2MehR4I7i.
 Marin Katusa, Does a Long-Term Natural-Gas Downturn Signal that Investors Should Exit?,http://www.caseyresearch.com/cdd/does-long-term-natural-gas-downturn-signal-investors-should-exit.
 Jeff Goodell, ‘World’s Biggest Fracker’ Pockets $1 Billion in Shady Deal, Rolling Stone, April 18, 2012, accessed in http://www.rollingstone.com/politics/blogs/national-affairs/worlds-biggest-fracker-pockets-1-billion-in-shady-deal-20120418#ixzz2N3vXTPH9.
 Reuters, SEC Investigating Chesapeake Energy, CEO, March 01, 2013, accessed inhttp://www.foxbusiness.com/business-leaders/2013/03/01/sec-investigating-chesapeake-energy-ceo/#ixzz2N40Rnm4d.
 Ed Crooks, Two directors forced out of Chesapeake, Financial Times, June 8, 2012, accessed inhttp://www.ft.com/intl/cms/s/0/7fbbd6a4-b182-11e1-bbf9-00144feabdc0.html#axzz2N3lAsPdW.
 Jeff Goodell, Op. Cit.
Federal officials said that a criminal information charging Halliburton with one count of destruction of evidence was filed in federal court.
Halliburton has agreed to pay the maximum fine, be on probation for three years and continue to co-operate with the government’s criminal investigation, said the news release, which did not specify the fine amount. The Texas-based company has also made a voluntary 55 million dollar (£35 million) contribution to the National Fish and Wildlife Foundation.
Halliburton was oil giant BP’s cement contractor on the drilling rig that exploded after a well blow-out, killing 11 workers and spilling millions of gallons of oil into the Gulf.
Around May 2010, the company directed a programme manager “to run two computer simulations of the Macondo well final cementing job using Halliburton’s Displace 3D simulation programme to compare the impact of using six versus 21 centralisers”, the news release said.
Halliburton recommended to BP the use of 21 centralisers in the well, but BP decided to use six instead, said the news release. The simulations indicated there was little difference between using six and 21 centralisers, but the programme manager “was directed to, and did, destroy these results”, federal officials say.
Similar evidence was destroyed in a subsequent incident in June 2010, said the Justice Department.
The news release said: “Efforts to forensically recover the original destroyed Displace 3D computer simulations during ensuing civil litigation and federal criminal investigation by the Deepwater Horizon Task Force were unsuccessful. In agreeing to plead guilty, Halliburton has accepted criminal responsibility for destroying the aforementioned evidence.”
The plea agreement and criminal charge both arise from a criminal investigation by the Deepwater Horizon Task Force. Halliburton and BP have blamed each other for the failure of the cement job to seal the Macondo well.
During a trial, BP asked a federal judge to sanction Halliburton for allegedly destroying evidence about the role that its cement slurry design could have played in the blow-out. The company announced in April it was trying to negotiate a settlement over its role in the disaster.
Clean-tech discovery: Irish researchers split water into hydrogen and oxygen via new method
CRANN photo depicting the splitting of water via a new method developed by a research team at the institute
Hydrogen gas is being heralded as the next big thing in the race to come up with new greener energy sources. Now, researchers at the Irish nanoscience institute CRANN say they have developed a new method of splitting water into hydrogen and oxygen more sustainably via water electrolysis.
The researchers, who are based at the Science Foundation Ireland-funded nanoscience institute CRANN, which is situated on the Trinity College Dublin (TCD) campus, are claiming their discovery will have a “significant” impact in the worldwide race to cheaply and efficiently produce hydrogen gas.
In scientific and clean-tech circles, hydrogen gas has been hailed as one of the main clean-energy sources of the future.
Prof Mike Lyons, a principal investigator at CRANN and TCD’s School of Chemistry, has worked with his research team to develop what they are calling new inexpensive materials based on iron and nickel oxide to split water into its components hydrogen and oxygen – a method known as water electrolysis.
Apparently, these materials from iron and nickel oxide are much cheaper, more readily available and more efficient than those used in current electrolysis methods.
Hydrogen gas has been pinpointed as one of the most innovative and greener alternative energy sources of the future. Its production using steam reforming of natural gas is still relatively difficult and unsustainable, however.
In contrast, hydrogen generation by water electrolysis could pave the way for a reliable, environmentally friendly method of large-scale production.
Prof Mike Lyons, principal investigator, CRANN, where he is leading a research team to come up with a more sustainable method for water electrolysis
The researchers at CRANN involved in the water-splitting project believe their methods are the first inexpensive and efficient methods of water electrolysis to be identified worldwide.
Their research has already triggered international interest and recently received ‘Hot Article Status’ in the chemistry journal Physical Chemistry Chemical Physics (PCCP). Hot Article Status, it seems, is given to articles of high impact and high quality.
Prof John Boland, director of CRANN, said the results of nanoscience research is paving the way for revamping a range of industries – from medicine, to technology to energy production.
“Whether it is in lightweight coatings for wind turbines, or new sensors for solar panels, our methods continue to assist in the move to sustainable, alternative and clean energy supply,” he said.
A world first?
Boland believes Lyons and his research team’s method of splitting water is a “world first”.
“It truly has the potential to revolutionise the production of hydrogen gas and bring it one step closer as a realistic energy alternative,” he said.
Lyons has received funding to the value of almost €800,000 from SFI for this research.
“With my team of researchers, we are consistently striving to use well-known research methods to deliver unprecedented results,” he said today.
This method of water electrolysis, explained Lyons, takes the simplest of materials – nickel and iron – and uses them to “ground-breaking” effect.
“Hydrogen is the next clean-energy source and CRANN is leading the international race to find its best method of production,” added Lyons.
As well as his work at CRANN, Lyons also leads the Trinity Electrochemical Energy Conversion and Electrocatalysis Group. He has published two books and more than 110 papers, and has a h-index of 25, which demonstrates the worldwide impact of his research.
The Department of Energy has confirmed that it has been investigating reports of “sinkholes” or “depressions” on a north Mayo tidal estuary where the final section of the Corrib gas pipeline is being laid.
The company says they are “not sinkholes” but are “shallow temporary depressions of approximately one to two feet in depth”.
However, residents living along the pipeline tunnel route through Sruwaddacon estuary – a special area of conservation (SAC) – say that some of the holes are up to three metres deep and three metres wide.
Terence Conway of Inver and Shell to Sea said that when the hole occurs, the surrounding sand bears a “blue tinge” and is unstable.
Mr Conway noticed the first in a series of holes on May 20th, again on June 14th, and each day during this first week of July, at Aughoose.
The areas lies above where the 500 tonne boring machine – named Fionnuala by Shell after one of the Children of Lir – has been deployed to dig a 4.9km sub-sea tunnel.
“The contractors for Shell have staff out at 5am on the strand, raking over these holes, but no caution signs have been erected in spite of our requests,” he said.
“This is a public strand, and so at one point we put up our own fence to warn people, but it was taken down,” Mr Conway said.
“Adults might be ok, but these are a risk to children. We were told we wouldn’t feel or see this work on the surface at the Bord Pleanála oral hearing nearly three years ago.
“We argued at the hearing that it was not suitable to try to dig a tunnel through an SAC, and one with the particular fluid subsoil here known as dóib.”
The Department of Energy said that the developer had notified it about “depressions in Sruwaddacon.
The department’s consultant tunnelling expert undertook a site review earlier this week, and the “depressions” were being “considered” in this context, it said.
Shell E&P Ireland said that regular “interventions” for maintenance and inspection of the tunnel-boring machine included changing cutter heads.
“This involves the use of compressed air at the front of the machine to protect the workers and to maintain stability at the tunnel face,” it said in a statement to The Irish Times.
“U.S. state on alert after nuclear waste leak” — Governor: “This is most disturbing news”… No ‘immediate’ public health threat #Hanford
US state on alert after nuclear waste leak […] HEIGHTENED radioactivity levels have been found outside a nuclear waste tank in the US state of Washington, officials say, in a new alert about a site used to make Cold War-era bombs. Governor Jay Inslee said there was no immediate public health threat […] A spokeswoman for Washington state’s Ecology Department explained why the new finding was so disturbing. “Until last night, it was thought the leak was contained in the outer shell, but workers detected elevated radioactivity levels within the leak detection pit,” Erica Holmes said.
The elevated reading, however, doesn’t pose an immediate public health threat, [Washington Gov. Jay Inslee] said. “This is most disturbing news for Washington,” the governor said in a statement. […]
KING 5 News
[…] It appears the most dangerous material on earth is out of its tank and out of their control, and there’s no immediate plan on how to solve the problem. […]
Now it appears the worst case scenario has happened, the waste has eaten through the outer tank wall. […]
But no one expected this […]
A crew working on the leak detection pit pulled a piece of equipment from it and measured a whopping contamination reading — 800,000 dpm,or disintegrations per minute. […]
For a century, Shell has explored the Earth to make our lives more comfortable. But in its wake, says Andrew Rowell, lies corruption, despoliation and death
The Queen and the Duke of Edinburgh went to the Shell Centre on the Thames riverside near Waterloo last Tuesday, to crown the company’s centenary celebrations. Critics claim the timing of the Queen’s visit was slightly unfortunate: it came just one day after the second anniversary of Ken Saro-Wiwa’s death in Nigeria: he was campaigning against Shell’s oil exploitation in the region.
The Shell Transport and Trading Company (STTC) has risen from its humble roots in a cramped office in the East End to become one of the most successful corporations of the century. What we collectively know as “Shell” is in fact more than 2,000 companies. Last year, the Shell Group’s profit was a record pounds 5.7 billion, the proceeds from sales of pounds 110 billion. “Were our founder, Marcus Samuel, to reappear today, I do not think he would be displeased with what has grown from his efforts,” says Mark Moody-Stuart, STTC’s chairman.
As part of the centenary celebrations, the cream of the City were invited to a reception at the Guildhall. There is also to be a commemorative book. Whilst it may mention the Shell Better Britain Campaign, and even the controversy over Brent Spar, not everyone will agree with the authorised biography’s version of Shell’s history. Here is a less authorised approach.
After it merged in 1907 with its rival Royal Dutch, the Royal Dutch Shell company was formed; its first chairman was the Dutchman Henri Deterding. By the 1930s, Deterding had become infatuated with Adolf Hitler, and began secret negotiations with the German military to provide a year’s supply of oil on credit. In 1936, he was forced to resign over his Nazi sympathies.
During the early 1940s, as the world waged war, Peru and Ecuador had their own armed border-dispute – over oil. Legend in Latin America says that it was really a power struggle between Shell, based in Ecuador, and Standard Oil in Peru. The company left a lasting reminder of its presence in the country: a town called Shell. Activists in Ecuador are seeking to get the town renamed Saro-Wiwa.
In the post-war years, Shell manufactured pesticides and herbicides on a site previously used by the US military to make nerve gas at Rocky Mountain near Denver. By 1960 a game warden from the Colorado Department of Fish and Game had documented abnormal behaviour in the local wildlife, and took his concerns to Shell, who replied: “That’s just the cost of doing business if we are killing a few birds out there. As far as we are concerned, this situation is all right.”
But the truth was different. “By 1956 Shell knew it had a major problem on its hands,” recalled Adam Raphael in the Observer in 1993. “It was the company’s policy to collect all duck and animal carcasses in order to hide them before scheduled visits by inspectors from the Colorado Department of Fish and Game.” After operations ceased in 1982, the site was among the most contaminated places on the planet, although Shell is now trying to make it into a nature reserve.
At Rocky Mountain, Shell produced three highly toxic and persistent pesticides called the “drins”: aldrin, dieldrin and endrin. Despite four decades of warning over their use, starting in the 1950s, Shell only stopped production of endrin in 1982, of dieldrin in 1987 and aldrin in 1990, and only ceased sales of the three in 1991. Even after production was stopped, stocks of drins were shipped to the Third World.
Another chemical Shell began manufacturing in the 1950s was DBCP, or 1,2 -Dibromo-3-Chloropropane, which was used to spray bananas. This was banned by the US Environmental Protection Agency in 1977 for causing sterility in workers. In 1990, Costa Rican workers who had become sterile from working with the chemical sued Shell and two other companies in the Texan Courts. Shell denied that it ever exported the chemical to Costa Rica and denied that it exported it to any other country after the ban in 1977. The case was settled out of court.
Just as people had begun to question Shell’s products, so they began to challenge its practices. In the 1970s and 1980s, Shell was accused of breaking the UN oil boycott of Rhodesia (now Zimbabwe) by using its South African subsidiary and other companies in which it had interests. Shell, singled out by anti-apartheid campaigners for providing fuel to the notoriously brutal South African army and police, responded by hiring a PR firm to run an anti-boycott campaign.
By the 1980s criticism of Shell’s operations was spreading. From Inuit in Canada and Alaska, to Aborigines in Australia and Indians in Brazil, indigenous communities were affected by Shell’s operations.
In the Peruvian rainforest, where Shell conducted exploration activities, an estimated 100 hitherto uncontacted Nahua Indians died after catching diseases to which they had no immunity. Shell denies responsibility, and says that it was loggers who contacted the Nahua. By the end of the decade, the company’s image was suffering in the US and UK, too.
In April 1988, 440,000 gallons of oil was discharged into San Francisco Bay from the company’s Martinez refinery, killing hundreds of birds. The following year, Shell spilt 150 tons of thick crude into the River Mersey, and was fined a record pounds 1 million.
But by now, the company was responding to growing international environmental awareness. “The biggest challenge facing the energy industry is the global environment and global warming,” said Sir John Collins, head of Shell UK, in 1990. “The possible consequences of man-made global warming are so worrying that concerted international action is clearly called for.”
Shell joined the Global Climate Coalition, which has spent tens of millions of dollars trying to influence the UN climate negotiations that culminate in Kyoto next month. “There is no clear scientific consensus that man-induced climate change is happening now,” the lobbyists maintain, two years after the world’s leading scientists agreed that there was.
At the same time, the company has taken its own preventive action on climate change and possible sea-level rise by increasing the height of its Troll platform in the North Sea by one metre. By 1993, as Shell’s spin-doctors were teaching budding executives that “ignorance gets corporations into trouble, arrogance keeps them there”, 300,000 Ogoni peacefully protested against Shell’s operations in Nigeria. Since then 2,000 have been butchered, and countless others raped and tortured by the Nigerian military.
In the summer of 1995 there was the outcry over the planned deep-sea sinking of the redundant oil platform Brent Spar, and in November Ogoni leader Ken Saro-Wiwa was executed, having been framed by the Nigerian authorities. At the time Shell denied any financial relationship with the Nigerian military, but has since admitted paying them “field allowances” on occasion. This year in Nigeria, the three-million-strong Ijaw community started campaigning against Shell, leading to another military crackdown.
“The military governor says it is for the purpose of protecting the oil companies. The authorities can no longer afford to sit by and have the communities mobilise against the companies. It is Ogoni revisited,” says Uche Onyeagucha, representing the opposition Democratic Alternative. In Peru, Shell has returned to the rainforest. It acknowledges “the need to consider environmental sustainability and responsibility to the people involved”, but the move is still criticised by more than 60 international and local environmental, human-rights and indigenous groups.
“Shell has not learnt from its tragic mistakes,” says Shannon Wright from the Rainforest Action Network, which believes there should be no new fossil-fuel exploration in the rainforest: “They continue to go into areas where there are indigenous people who are susceptible to outside diseases.” Meanwhile, Shell publicly talks of engaging “stakeholders”.
It hopes that we, as consumers, will continue to give it a licence to operate. However, for each barrel produced, the ecological and cultural price increases exponentially. Everyone knows we need to reduce our consumption of oil: but Shell’s very existence depends on selling more of it. Senior executives are said to be “girding our loins for our second century” because “the importance of oil and gas is likely to increase rather than diminish as we enter the 21st century”. Can we let that happen?
Since the Gulf oil disaster in 2010, BP has spent hundreds of millions of ad dollars to cleanse its image as a dirty-energy giant. In the company’s latest TV ad, wind turbines whirl in the sun as a voiceover touts the number of American jobs created by BP and promises, “We’re working to fuel America for generations to come.” There’s just one problem: BP’s commitment to wind energy is virtually nonexistent.
In April, BP announced that it is selling off its entire $3.1 billion U.S. wind energy business – including 16 farms spread across nine states – as “part of a continuing effort to become a more focused oil and gas company,” according to a company spokesperson. Indeed, though it famously rebranded itself “Beyond Petroleum” in 2000, BP also exited the solar energy business back in 2011. Today, its alternative energy investments are limited to biofuels and a lone wind farm in the Netherlands.
And BP is far from alone. You wouldn’t know it from their advertising, but the world’s major oil companies have either entirely divested from alternative energy or significantly reduced their investments in favor of doubling down on ever-more risky and destructive sources of oil and natural gas.
Not that those commitments to alternatives were ever particularly grand. Using very generous estimates, BP holds the oil industry record for the highest percentage of expenditures committed to alternatives, with just 6 percent of its overall expenditures in 2011, right before it started selling off its solar operations. Chevron and Shell run a distant second with highs of 2.5 percent; none of the others have ever even cracked 1 percent.
“The bottom line is that oil companies only invested a drop in the bucket [in alternatives] even in the ‘heyday’ of the early 1980s,” says Douglas Cogan, vice president of investment firm MSCI ESG Research. “Most of the largest [oil company] investors have dropped out in recent years, following the precedent that Exxon set 30 years ago.”
Take ConocoPhillips, which highlights its “emerging technologies and alternative energy sources” activities on its website – but fails to mention that in April 2012 it divested all of these activities to focus exclusively on its “core business” of exploring for and producing oil and natural gas, and specifically to take advantage of the North American “shale revolution” and tar sands production in Canada. “ConocoPhillips is an independent oil and gas company,” says a spokesperson. “We do not have an active renewable energy segment within our portfolio.”
The newly created Phillips 66 (already the third-largest U.S. oil company) took over ConocoPhillips’ “downstream” activities – meaning everything after exploration and production. Other than limited investment in second-generation biofuel research, Phillips 66, too, has abandoned alternatives.
How about Shell – the world’s largest corporation, according to Fortune? In 2010, the company launched an ad campaign called “Let’s Go,” hyping its efforts to “broaden the world’s energy mix.” The ads are still running today. But the numbers tell a different story. Shell reports spending about $400 million a year on alternatives, out of the $23 billion it spent on all expenditures in 2012. At its peak in 2007, Shell was spending just 2.5 percent of its total capital expenditures on alternatives. Today it’s down to 1.5 percent.
Shell abandoned solar in 2006 and maintains only minor investments in wind and some hydrogen research today. The bulk of Shell’s alternative investments today are in biofuels. Meanwhile, it presses ahead with the world’s deepest offshore oil well in the Gulf of Mexico and refuses to do more than “pause” plans for drilling in the U.S. Arctic – even after one of its drilling rigs ran aground in Kodiak, Alaska in January.
As with all these companies, the expenditures that Shell reports publicly on alternatives are difficult to pin down or verify. Shell includes the money it spends on carbon capture initiatives and “other CO2 related work”; both are commendable, but neither one is an alternative energy source. BP, similarly, uses the mysterious phrase “lower-carbon businesses.” In fact, no major oil company has ever spent enough on alternatives for it to amount to even 10 percent of its revenues or assets – the Security and Exchange Commission‘s threshold for public reporting requirements on financial expenditures.
In 2010, Chevron launched its “We Agree” public relations campaign, with ads announcing “It’s time oil companies get behind the development of renewable energy,” that still run today. Yet Chevron’s alternative investments have been falling as a proportion of its total expenditures, not rising, for years: From 2.5 percent of overall expenditures in 2008, alternative energy dropped to 2.3 percent in 2010 and 1.5 percent in 2012.
In 2011, Chevron’s Corporate Responsibility report – which for years had been an alternatives showcase – announced that the company would take “a pragmatic approach” to these investments, focusing on geothermal energy, next-generation biofuels and efficiency solutions. Yet wind and biofuels are conspicuously absent from the 2012 report; the words “alternative energy” and “renewable energy” do not appear anywhere in its pages. “Chevron spent $5.4 billion from 2002 to 2012 on alternative energy,” says company spokesperson Morgan Crinklaw. That’s about $500 million a year, out of $34 billion total expenditures in 2012 alone. (This figure includes the work of its private subsidiary, Chevron Energy Solutions, which does work on solar, but does not have to provide public disclosure of its finances.) Meanwhile, Chevron remains one of the world’s oiliest oil companies, with one of the highest percentages of oil assets among the majors.
Like ConocoPhillips, Marathon, the nation’s fifth largest oil company, divested all its downstream activities in 2011, for similar reasons – in order to expand its U.S. shale and Canadian tar sand operations. Today, it maintains partial ownership of a methanol plant that converts natural gas into motor fuel, while the newly spun-off MPC includes ethanol in its portfolio.
Of course, some companies were never into alternatives. Since 2002, Exxon Mobil, which took in $45 billion in profit last year alone, put a grand total of $188 million into its alternative investments, compared to the $250 million it dedicated to U.S. advertising in the last two years alone. (This figure and previously cited advertising data were provided by Kantar Media.)
It’s worth mentioning one slight exception to the trend: France’s Total, the world’s 9th-largest oil company, which greatly increased its solar operations in the last year. But Total, too, had a long way to improve. The latest available figures from MSCI ESG Research put its alternative investments at just about $84 million a year from 2005 through 2010, or, at best, less than 0.6 percent of total expenditures. Moreover, the company’s fairly extensive coal operations stand in contrast to the good it’s doing in alternatives.
There are clear reasons why some biofuel investments remain while wind and solar have all but disappeared. Since 2009, both the U.S. and the European Union have had policies in place requiring biofuels in motor fuel, compared to on-again, off-again tax credits for wind and solar energy. And why bother putting real investments in alternatives at all, when polished ad campaigns have already convinced the public that the companies are still “green”?
In reality, all of the companies are putting more and more resources toward dirty energy sources that were never before accessible – or never before considered acceptable. With limited regulation and oversight, and with plenty of subsidies and tax breaks, all of the companies discussed here are upping their oil and natural gas antes by drilling deeper than ever into the oceans (including Exxon in the Russian Arctic), increasing operations in the Canadian tar sands, dramatically expanding hydraulic fracking in ever-more parts of the U.S. and the world, and drilling for oil in Iraq and Kurdistan. It all makes perfect sense, if you go by what Exxon vice president J.S. Simon told Congress in 2008: “[T]he pursuit of alternative fuels must not detract from the development of oil and gas.”
The [uranium] tailings made Moab [Utah] glow — and not in a good way. For nearly 30 years, the various companies that operated the facility dumped ton after ton of the radioactive sandy byproduct into an unlined impoundment area located 750 feet from the river. Over the decades, this Geiger-hot waste, which ultimately totaled 12 million cubic yards, was spread over 130 acres at a depth of more than 80 feet. According to the Department of Energy (DOE), which took over remediation of the site, the tailings “have an average radioactivity of 665 picocuries per gram of radium-226,” and because the center of the monstrous pile has a “high water content…excess water in the pile drains into underlying soils, contaminating the ground water.”
Some the deleterious consequences are revealed in “The American West at Risk,” an illuminating book whose authors pay special attention to the Moab mill. It’s hard to dispute their claim that it ranks “high in the annals of indiscriminate disposal,” for the tailings each day continue to release “an estimated 28,000 gallons of radioactive pollutants and toxic chemicals into the only major river draining the southwestern United States.” […]
Fracking–the process the oil and gas industry uses to extract fossil fuel as much as two miles below the ground–may directly impact the nation’s water supply, reduce water-based recreational and sports activity, and lead to an increase in the cost of food.
The cocktail soup required for each well requires about two million pounds of silica sand, as much as 100,000 gallons of toxic chemicals, and three to nine million gallons of fresh water. There are more than 500,000 active wells in the country.
In 2011, the last year for which data is available, Texas energy companies used about 26.5 billion gallons of water. Energy companies drilling Pennsylvania used the second greatest amount of water, followed by Colorado and Arkansas. Nuclear plants, which use more water, can recycle most of it. Because frack wastewater is toxic, oil and gas companies can’t recycle the contaminated water.
The water is provided by companies that draw up to three million gallons a day from rivers and lakes, by individuals who sell water from their ponds, and by municipalities. Steubenville, Ohio, is tapping one of its reservoirs to sell up to 700,000 gallons of water every day for five years to Chesapeake Energy, one of the largest players in the fracking industry.
Big EnergyHowever, fresh water is not unlimited.
Beginning about five years ago, the water in the nation’s aquifers has been decreasing significantly. The depletion since 2008, according to Leonard Konikow, a research hydrologist at the U.S. Geological Survey. is about three times the rate as between 1900 through 2008.
Significant reductions in water availability are now common for the 1,450 mile long Colorado River, which provides water to about 40 million people in California and the southwest, including the agriculture-rich Imperial Desert of southeastern California. Lake Mead, a part of the Colorado system, provides water to Las Vegas and the Nevada desert communities; its water level is close to the point where the Department of the Interior will declare a water shortage and impose strict water-use regulation.
The depletion of the rivers, lakes, and aquifers is because of population growth, higher usage, climate change, and a severe drought that has spread throughout the Midwest and southwest for the past three years.
The C oalition for Environmentally Responsible Economies (CERES), basing its analysis upon more than 25,000 wells, reports almost 47 percent of wells that use fracking were developed in areas with high or extremely high water stress levels; 92 percent of all gas wells in Colorado are in extremely high-stressed regions; In Texas, 51 percent are in high or extremely high stress water regions.
Water is so critical to fracking that oil and gas companies have been paying premium prices, as much as $1,000–$2,000 for about 326,000 gallons (an acre foot) and outbidding farmers in the drought-ravaged parts of the country for the water; the normal price is about $30–$100 for the same amount. Oil and gas drillers have also been trucking in water to the Midwest and southwest from as far away as Ohio and Pennsylvania. The companies are “going to pay what they need to pay,” said Dr. Reagan Waskom, director of the Colorado Water Institute at Colorado State University.
If farmers have to pay more for water, they will raise the prices of their product. If they can’t get enough water, because the energy companies are taking as much as they can get, they grow fewer crops and reduce the size of their livestock herds; this, also, will force food prices up. It’s a simple case of supply and demand.
But, there are other problems. Some farmers and owners of corporate farms who have large water resources often sell that water to the energy companies; they can get more money for the water and leave their fields barren than they can get for growing crops and selling them to wholesalers and distributors.
Another reality may be driving food prices higher.
Fossil fuel mining and agriculture have always co-existed. But, that is changing.
Beneath about 200,000 square miles of North Dakota, Montana, and Saskatchewan, lying between 4,500 and 7,500 feet below the surface of the earth, is the Bakken Shale. Oil in the shale was discovered in 1953; however, because the shale is only 13 to 140 feet thick, using conventional drilling methods were marginally profitable until five years ago with the development of horizontal fracking.
The Bakken Shale lies directly below one of the most fertile wheat fields in the United States. North Dakota farmers produce almost three-fourths of all amber durum harvested in the United States. High in protein and one of the strongest of all wheat, amber durum is a base for most of the world’s food production. It is used for all pastas, pizza crusts, couscous, and numerous kinds of breads. Red durum, a variety, is used to feed cattle. North Dakota farmers in late Summer harvest about 50 million bushels (about 1.4 million tons) of amber durum, almost three-fourths of all amber durum produced in the United States. About one-third of the production is exported, primarily to Europe, Africa, and the Middle East. Destruction of the wheat fields, from a combination of global warming and fracking, will cause production to decline, prices to rise, and famine to increase.
Energy company landmen, buying land and negotiating min eral rights leases, became as pesky as aphids in the wheat fields. However, the landmen didn’t have to do much sweet talking with the farmers, many of whom were hugging bankruptcy during the Great Recession. The farmers yielded parts of their land to the energy companies in exchange for immediate income and the promise of future royalties. By November 2012 there were 7,791 wells in North Dakota .
In 2006, oil production in the North Dakota fields was about 92 million gallons. Energy companies are expected to mine more than 15.2 billion gallons this year. Drilling for oil also yields natural gas; there are about two trillion barrels of natural gas in the shale.
In Pennsylvania, 17,000 acres have already been lost to the development of natural gas fracking. That land is not likely to be productive for several years because of “compaction and landscape reshaping,” according to a study by the Penn State Extension Office. U.S. Geological Survey scientists conclude there is a “low probability that the disturbed land will revert back to a natural state in the near future.”
The presence of natural gas drilling companies has also led to decreased milk and cheese production. Penn State researchers Riley Adams and Dr. Timothy Kelsey concluded: ” Changes in dairy cow numbers also seem to be associated with the level of Marcellus shale drilling activity.” Counties with 150 or more Marcellus shale wells on average experi enced an 18.7 percent decrease in dairy cows, compared to only a 1.2 percent average decrease in counties with no Marcellus wells.”
Beneath some of the nation’s richest agricultural land in drought-ravaged central California lies the Monterrey Shale, a 1,750 square mile formation that holds about two-thirds of the country’s estimated shale oil reserves, about 15.4 billion barrels (647 trillion gallons). The landmen have already arrived to buy leases and set up what is likely to be the biggest oil and gas boom in the country.
More than 200 different crops are grown in the central valley, including about 70 percent of the world’s supply of almonds, most of the grape production and 90 percent of all domestic wine sold in the United States. The Sun-Maid farm cooperative, headquartered in the Central Valley, is one of the world’s largest producers of raisins and dried fruits.
When the politicians unleashed Big Energy to frack the nation and extract gas, they parroted industry claims that extensive drilling would improve the economy, lower natural gas prices, and help make the United States energy independent from having to import foreign oil. What is happening is that the companies have purchased far too much land, are in heavy debt with the banks, and have a glut of natural gas that has forced the prices to the lowest level in almost 10 years.
The solution is that these patriotic corporations, to reduce the glut and force domestic residential prices back up as the mined gas becomes less available, are developing extensive plans to export natural gas to countries that will pay significantly higher prices than what is currently charged in the American market.
There is one problem. The United States can’t import water.