Justin Mikulka – Page 2

Norway’s sovereign wealth fund — a state-owned investment fund worth approximately a trillion dollars — recently announced it was divesting from oil and gas exploration companies around the world. Not surprisingly, many oil and gas stocks declined following the announcement.

While this is good news for the climate, this was simply a smart business decision. Norway’s sovereign wealth fund, known as the Government Pension Fund Global (GPFG), primarily exists due to Norwegian oil production. And the fund will continue to be a major investor in companies like Exxon.

It appears it’s just cutting its losses on money-losing endeavors like fracking in America, tar sands oil production in Canada, and frontier exploration by UK companies in Africa and South-East Asia.

“The government is proposing to exclude companies classified as exploration and production (E&P) companies within the energy sector from the [fund] to reduce the aggregate oil price risk in the Norwegian economy,” the Finance Ministry explained in a statement announcing the move.

Dumping Losing Assets

What that translates to in America is essentially a divestment from the shale oil and gas producers like EOG Resources, Apache, Continental, Diamondback, and Chesapeake. Apparently, the fund managers are tired of losing money on fracked oil and gas.

The move certainly comes at a bad time for the American fracking industry. Their previously endless supply of loans from Wall Street has also started to dry up, leading to budget cuts, layoffs, and reduced oil production.

In Canada, among the companies targeted for divestment is Canadian Natural Resources, LTD — an Alberta tar sands oil producer. The Canadian tar sands oil industry has been losing money for several years and several major oil companies have sold tar sands assets, including Devon Energy’s recent announcement it was getting out of the tar sands production business.

…click on the above link to read the rest of the article…

Despite Risks, Canada’s Tar Sands Industry Is Betting Big on Oil Trains

March 17, 2019

Despite Risks, Canada’s Tar Sands Industry Is Betting Big on Oil Trains

Last year, Canada exported a record amount of tar sands oil to the U.S., despite low oil prices leading to major losses once again for the struggling tar sands industry. That achievement required a big bump in hauling oil by rail, with those daily volumes in late 2018 more than double the previous record in 2014 during the first oil-by-rail boom.

Canada’s oil industry essentially has reached its limit for exporting oil into the U.S. through pipelines. That’s why it’s turning to rail to export more and more oil, but as an ever-increasing number of oil trains hit the tracks of North America, expect more accidents and oil spills to follow.

If Canada can open up new pipeline capacity, this scenario may change. However, Enbridge recently announced its Line 3 pipeline replacement will be delayed until at least the second half of 2020. That means if Canadian tar sands companies want to increase exports, they will have to move that oil by rail. ConocoPhillips chief financial officer Don Wallette, Jr. recently confirmed this reliance on oil trains to the Wall Street Journal: “The intention is to bridge us over to the next major pipeline expansion, so a few years.”

This could result in a near doubling of the current record volumes of Canadian crude moving by rail. Trains potentially could haul over 600,000 barrels per day (bpd) in the next two years, an outcome I predicted four years ago when the Canadian industry was moving only 150,000 bpd of oil by rail.

To put these volumes in perspective, the Enbridge Line 3 pipeline will have a capacity of 760,000 bpd. Oil trains amount to a veritable pipeline on wheels.

…click on the above link to read the rest of the article…

Fracking 2.0 Was a Financial Disaster, Will Fracking 3.0 Be Different?

March 13, 2019

Fracking 2.0 Was a Financial Disaster, Will Fracking 3.0 Be Different?

Clippy paperclip art on fracking drill well pad

Two years ago, the U.S. fracking industry was trying to recover from the crash in the price of oil. Shale companies were promoting the idea that fracking was viable even at low oil prices (despite losing money when oil prices were high). At the time, no one was making money fracking with the business-as-usual approach, but then the Wall Street Journal published a story claiming all of this was about to change because the industry had a trump card — and that was technology.

Today, frackers are again relying on technology as a financial savior, but this time, they are looking to Microsoft.

As ExxonMobil embarks on an ambitious move into fracking in the Permian oil fields of West Texas, it has announced a partnership with Microsoft to use cloud technology to analyze oil field data and optimize operations. Exxon claims the move could generate “billions in net cash flow.”

Time will tell if the Microsoft cloud will make Exxon rain profits in the Permian.

Fracking 2.0

In March 2017, the Wall Street Journal ran an article with the headline, “Fracking 2.0: Shale Drillers Pioneer New Ways to Profit in Era of Cheap Oil,” which detailed the ways the shale industry expected technology could help it finally deliver profits. The article mentioned “longer, supersize wells” and said, “The promise of this new phase is potentially as significant as the original revolution.”

The article highlighted EOG Resources (as in, Enron Oil and Gas), a company often touted as the “Apple of oil,” and quoted the company’s chief information officer saying that technology advances allowed its employees to work at the “speed of thought.”

It also reported that Chesapeake Energy was betting on these new supersize wells as part of its “turnaround strategy.” Chesapeake needed to “turnaround” from losing money and move in the direction of profits.

…click on the above link to read the rest of the article…

Fracking the World: Despite Climate Risks, Fracking Is Going Global

March 5, 2019

Fracking the World: Despite Climate Risks, Fracking Is Going Global

'Fracking: it's happening' sign overlaid on a view of Earth from space

The U.S. exported a record 3.6 million barrels per day of oil in February. This oil is the result of the American fracking boom — and as a report from Oil Change International recently noted — its continued growth is undermining global efforts to limit climate change. The Energy Information Administration predicts U.S. oil production will increase again in 2019 to record levels, largely driven by fracking in the Permian shale in Texas and New Mexico.

And the U.S. is not alone in trying to maximize oil and gas production. Despite the financial failures of the U.S. fracking industry, international efforts to duplicate the American fracking story are ramping up across the globe.

The CEO of Saudi Arabian state oil company Aramco recently dismissed the idea that global demand for oil will decrease anytime soon and urged the oil industry to “push back on exaggerated theories like peak oil demand.”

But Saudi Aramco also is gearing up for a shopping spree of natural gas assets, including big investments in the U.S., and increasing gas production via fracking in its own shale fields. Aramco is deeply invested in keeping the world hungry for more oil and gas.

Khalid al Falih, Saudi Arabia’s energy minister, told the Financial Times, “Going forward the world is going to be Saudi Aramco’s playground.” But not if other countries frack there first.

China Expanding Fracking Efforts, Testing New Technology

As a major importer of oil and natural gas, it is no surprise that China is trying to exploit its own shale formations, which are rich with oil and gas. China is estimated to have the largest shale gas reserves of any country. However, China’s shale formations present different challenges than those in the U.S., including gas deposits at significantly greater depths.

…click on the above link to read the rest of the article…

Another Oil Train Crashes as Alberta Government Gets Into Oil-by-Rail Business

February 26, 2019

Another Oil Train Crashes as Alberta Government Gets Into Oil-by-Rail Business

Oil train derailment and spill in Manitoba

The government of Alberta, Canada, the heart of tar sands country, recently announced plans to get into the oil-by-rail business. Attempting to work around a lack of pipelines, the provincial government intends to spend $3.7 billion to lease 4,400 oil tank cars and locomotives to export more Canadian tar sands oil to the U.S. The announcement came just days after the latest oil train derailment and spill in Manitoba, Canada.

Alberta Premier Rachel Notley addressed concerns about safety regarding the oil trains.

“We are treating the safety of these rail cars as though they are traveling through our own backyards,” Notley said. “The cars we will be using will be the safest cars on the tracks. They include the safest technology and meet the highest standards including all recent changes to safety standards.”

New regulations enacted after the 2013 oil train disaster killed 47 in Lac-Mégantic, Quebec, require oil and rail companies to use newer rail cars to move oil. And while these new tank cars — known as DOT-117 and 117Rs — are more robust than the older tank cars involved in the deadly incident, they aren’t immune to the forces of a train derailment.

In the past year, two Canadian oil trains consisting of these “safest” tank cars have derailed and resulted in large oil spills. In June 2018, a train from Canada derailed and spilled 230,000 gallons of oil into floodwaters in Iowa.

The most recent oil train crash, which occurred on a ranch in Manitoba on February 16, involved 37 derailed tank cars. No details have been released on the amount of oil spilled, but aerial photos show streams of dark black oil leaking from the damaged tank cars.

…click on the above link to read the rest of the article…

Are Investors Finally Waking up to North America’s Fracked Gas Crisis?

February 8, 2019

Are Investors Finally Waking up to North America’s Fracked Gas Crisis?

The fracked gas industry’s long borrowing binge may finally be hitting a hard reality: paying back investors.

Enabled by rising debt, shale companies have been achieving record fracked oil and gas production, while promising investors a big future payoff. But over a decade into the “fracking miracle,” investors are showing signs they’re worried that payoff will never come — and as a result, loans are drying up.

Growth is apparently no longer the answer for the U.S. natural gas industry, as Matthew Portillo, director of exploration and production research at the investment bank Tudor, Pickering, Holt & Co., recently told The Wall Street Journal.

“Growth is a disease that has plagued the space,” Portillo said. “And it needs to be cured before the [natural gas] sector can garner long-term investor interest.”

Hints that gas investors are no longer happy with growth-at-any-cost abound. For starters, several major natural gas producers have announced spending cuts for 2019.

After announcing layoffs this January, EQT, the largest natural gas producer in the U.S., also promised to decrease spending by 20 percent in 2019.Embed from Getty Images

Such pledges of newfound fiscal restraint are most likely the result of natural gas producers’ inability to borrow more money at low rates.

As DeSmog has reported, the historically low interest rates following the 2008 housing crisis were a major enabler of the free-spending and money-losing attitudes in the shale industry. Wall Street has funded a decade of oil and gas production via fracking and incentivized production over profits. Those incentives have worked, with record production and large losses.

However, much like giving mortgages to people without jobs wasn’t a sustainable business model, loaning money to shale companies that spend it all without making a profit is not sustainable.

…click on the above link to read the rest of the article…

Pick Your Poison: The Fracking Industry’s Wastewater Injection Well Problem

November 20, 2018

Pick Your Poison: The Fracking Industry’s Wastewater Injection Well Problem

$Oklahoma fracking industry site$

The first known oil well in Oklahoma happened by accident. It was 1859 and Lewis Ross was actually drilling for saltwater(brine), not oil. Brine was highly valued at the time for the salt that could be used to preserve meat. As Ross drilled deeper for brine, he hit oil. And people have been drilling for oil in Oklahoma ever since.

Lewis Ross might find today’s drilling landscape in the Sooner State somewhat ironic. The oil and gas industry, which has surging production due to horizontal drilling and fracking, is pumping out huge volumes of oil but even more brine. So much brine, in fact, that the fracking industry needs a way to dispose of the brine, or “produced water,” that comes out of oil and gas wells because it isn’t suitable for curing meats. In addition to salts, these wastewaters can contain naturally occurring radioactive elements and heavy metals.

But the industry’s preferred approaches for disposing of fracking wastewater — pumping it underground in either deep or shallow injection wells for long-term storage — both come with serious risks for nearby communities.

In Oklahoma, drillers primarily use deep injection wells for storing their wastewater from fracked shale wells, and while the state was producing the same amount of oil in 1985 as in 2015, something else has changed. The rise of the fracking industry in the central U.S. has coincided with a rise in earthquake activity.

From 1975 to 2008, Oklahoma averaged from one to three earthquakes of magnitude 3 or greater a year. But by 2014, the state averaged 1.6 of these earthquakes a day. It now has a website that tracks them in real time.

…click on the above link to read the rest of the article…

Peak Shale: Is the US Fracking Industry Already in Decline?

November 7, 2018

Peak Shale: Is the US Fracking Industry Already in Decline?

Fracking well sites from the air, in Jonah, Wyoming

But the industry shouldn’t get complacent, warned Robert Clarke of energy industry research and consulting group Wood Mackenzie. Cracks already are starting to emerge in the optimistic forecasts of how much these shale formations can produce, which is a bad sign for turning around the industry’s struggling finances.

“It was only the best rigs, with the most experienced crews, drilling the best rock at the lowest service costs,” which were doing well in 2016, said Clarke at the 2018 Energy Information Administration (EIA) annual conference in June. “If you are a producer, it’s very dangerous to think that that is the new norm.”

But producers seemed to think it was the new normal and plowed ahead, going all in on fracking in the Permain Basin, currently seen as the best shale play in the country.

Granted, the results have been impressive from a production standpoint. The EIA expects “Permian regional production to average 3.3 million [barrels per day] in 2018 and 3.9 million [barrels per day] in 2019.” Those numbers may reach 5.4 million barrels a day by 2023, according to oil industry consultants IHS Markit.

While the Permian’s oil production has been prolific, it hasn’t translated into profits. “Why Aren’t Permian Oil Producers Profitable?” asked a headline on industry publication Oilprice.com this past May.

…click on the above link to read the rest of the article…

Why Canadian Tar Sands Oil May Be Doomed

October 26, 2018

Why Canadian Tar Sands Oil May Be Doomed

Fort McMurray, Alberta, Canada, tar sands oil operations

Producers are forced to keep cranking out product and selling it at a loss to cover the massive costs required to start one of these sprawling unconventional oil operations, a point made painfully clear when Alberta wildfires in 2016 forced some tar sands operators to shut down.

“I do think they’ll start up quickly once the danger from the fire is gone because there is a lot of motivation to do that,” Jackie Forrest, an energy economist for Arc Financial Corp, told The Globe and Mail. “They have a lot of fixed costs so they’re going to be motivated to get some revenue to pay for those costs that aren’t going away.”

In the face of such challenging economics, what are Canadian tar sands producers doing? Tapping more oil than ever.

In June 2018 Canada set a new record for exporting oil to the U.S., hitting well over three million barrels per day. This record coincided with another one for oil exported by rail from Canada to the U.S. The U.S. is currently the only major market for Canadian crude, with 99 percent of its exports going to either U.S. refineries or ports for export.

Source: U.S. Energy Information Administration

America Is Maxing out on Canadian Crude

American refineries certainly enjoy buying Canadian crude at such low prices. How low are the prices? As the Financial Post reported in mid-October, Western Canadian Select (WCS) was $19 a barrel — approximately $50 a barrel cheaper than a barrel of the American oil standard known as Western Texas Intermediate (WTI).

…click on the above link to read the rest of the article…

US Oil Exports Are Exceeding Almost All Predictions—Thanks to Fracking

October 16, 2018

US Oil Exports Are Exceeding Almost All Predictions—Thanks to Fracking

And crude oil exports are supposed to double by 2020, according to the San Antonio News-Express. That’s a lot of oil — and almost all of it is fracked.

That should come as no surprise. In August 2015, my story for DeSmog, “Lifting Ban On U.S. Crude Oil Export Would Enable Massive Fracking Expansion,” pretty much sums up what is happening now. However, that’s not what the industry experts at the time were predicting.

Last year I noted how quickly these experts, from energy consultants to academics, were proven wrong in their predictions about the effects of overturning the 40-year-old ban, which occurred in December 2015.

If exports double by 2020, those experts will be that much more wrong. Perhaps the best example of this phenomenon is from a December 2015 newsletter from CME Group — a commodities trading group that stood to profit greatly from trading U.S.exported oil. The newsletter, which takes a question-and-answer format, included the following:

Question #2: Will lifting the crude oil export ban result in greater U.S. production?

The answer: No.

Couldn’t get more wrong that, but CME now lists U.S. WTI crude on its website as one of the top commodities it trades. I guess there’s a lesson here about whether to trust a commodities trader.

…click on the above link to read the rest of the article…

The Fracking Industry’s Water Nightmare

September 18, 2018

The Fracking Industry’s Water Nightmare

The U.S. is setting new oil production records as horizontal drilling and fracking open up shale deposits in places like North Dakota and Texas.

Fracking is based on the “hydraulic” process of using pressurized liquid to shatter shale rock to let the oil and gas inside escape. And while that liquid is a mixture of many hazardous chemicals, it is mostly water. And acquiring that water and then properly disposing of the toxic wastewater produced by fracking is becoming a big and expensive problem for the industry.

Gabriel Collins is a fellow in energy and the environment at Rice University, and in August he gave a presentation at the Produced Water Society Permian Basin 2018 event in Midland, Texas. There, Collins presented a business case for starting a large water processing company to service the fracking industry.

One sign that the fracking industry is becoming concerned about water is that there are now societies and conferences dedicated to the topic of “produced water.” Produced water is the term for the toxic water that is “produced” over the life of a fracked oil or gas well.

In a story by Bloomberg News, Collins said he didn’t believe investors were aware of the risks that water poses to the fracking industry in the Permian Basin.

…click on the above link to read the rest of the article…

The Fracking Industry Is Cannibalizing Its Own Production, Increasing Spill Risks

August 14, 2018

The Fracking Industry Is Cannibalizing Its Own Production, Increasing Spill Risks

In the climactic final scene in There Will Be Blood — arguably the greatest movie about the oil industry — the main character played by Daniel Day Lewis explains how he sucked the oil from a neighbor’s land by using horizontal drilling. To help his neighbor understand what has happened, he explains it by saying he took a very long straw and “Drank your milkshake!”

Well guess what is happening with the fracking revolution that is built on the concept of horizontal drilling? Not only are oil producers drinking each other’s milkshakes, they are drinking their own, and in the process losing even more money and raising the odds of dangerous environmental risks.

And unlike in the movie where the main character knew what he was doing, the modern fracking industry really has no clue what to do about the problems caused by the combination of horizontal drilling and greed.

Frac Hits, aka Child Wells

The first thing to understand is that this is simply a problem of the industry being greedy. The oil producers are drilling too many wells in close proximity to one another, and when they frack the newer wells — known as child wells — those “bash” or “hit” the older wells and cause problems.

In a typical frack site, the production begins with a first test well, which is known as the parent well. The wells drilled in proximity to the parent well are called child wells.

What is happening is that not only are the child wells cannibalizing the production of the existing parent well, but when the child wells are fracked they can create “frac hits” that damage the parent well.

…click on the above link to read the rest of the article…

Portland, Oregon Wins Court Battle to Ban New Oil Infrastructure

August 5, 2018

Portland, Oregon Wins Court Battle to Ban New Oil Infrastructure

In a big win for the City of Portland, Oregon, the Oregon Court of Appeals issued a ruling that the city had not violated the U.S.Constitution’s Commerce Clause by voting to ban any new fossil fuel terminals within its borders.

“This is a major victory for the climate and our communities,” said Maura Fahey, staff attorney at Crag Law Center, which represented environmental groups intervening in the case, in a statement. “Industry couldn’t even get its foot in the door of the courtroom to try to overturn the City’s landmark law. This sends a powerful message to local communities that now is the time to take action to protect our future.”

This ruling could have important implications for other communities fighting fossil fuel projects because the court ruled that the city’s ban did not violate the Commerce Clause, which is the main argument the oil industry has used against bans like the ones in Portland, Oregon and other cities.

The Commerce Clause gives Congress the sole power to regulate interstate and foreign trade, and oil companies have argued that bans like the one in Portland are impacting interstate trade. With this ruling, the Oregon Court of Appeals has dealt a significant blow to that legal argument.

“This decision sends an important message at a time, when our federal government is dropping the ball on climate change, that cities can and will lead,” said Bob Sallinger, Conservation Director at Portland Audubon Society.

Port Cities Targeted by Industry for Exports

The Canadian tar sands industry has been looking for more ways to get its product to foreign markets, especially after the cancellation of TransCanada’s Energy East pipeline to Quebec and New Brunswick and the delays in the Trans Mountain pipeline expansion in British Columbia.

…click on the above link to read the rest of the article…

Derailed Oil Train Spills 230,000 Gallons of Tar Sands in Flooded Iowa River

June 26, 2018

Derailed Oil Train Spills 230,000 Gallons of Tar Sands in Flooded Iowa River

On June 22, a train carrying Canadian crude oil derailed in northwestern Iowa, releasing an estimated 230,000 gallons of oil into a flooded river. As a result of the derailment, over 30 rail tank cars ended up in the water, with 14 cars confirmed to have leaked oil.

To put the size of this spill in perspective, an Enbridge pipeline that leaked in Michigan in July 2010 released roughly 1,000,000 gallons of tar sands oil into the Kalamazoo River. Cleanup for this spill, one of the largest inland oil spills on record, took years and more than $1 billion.

Like the Kalamazoo River spill, the train that derailed in Iowa was carrying tar sands oil from Alberta, Canada.

This crash, near Doon, Iowa, also is the first one involving the new, safer DOT-117R tank cars that promised to make oil safer to transport by rail. The accident reveals that these tank cars are not foolproof, considering the nearly quarter million gallons of oil released from them into an Iowa river.

View image on Twitter

Workers have contained nearly half of the crude #oil spilled near Rock River in northwest #Iowa over the weekend following a freight train derailment on Friday: http://ow.ly/zPVy30kEj6S

9:15 AM – Jun 25, 2018

Oil Trains Likely to Spill Into Rivers and Lakes

The reality of rail transport is that train tracks generally follow rivers across North America. As a result, many oil train derailments also mean oil spills into rivers and other bodies of water.

The 2015 report “Runaway Risks” by the environmental nonprofit Center for Biological Diversity found that “within just a quarter-mile of existing and planned oil-train routes there are 3,600 stream miles and 73,468 square miles of lakes, reservoirs and wetlands, including iconic waterbodies such as the Puget Sound, Lake Michigan, Lake Erie, and the Columbia, Hudson and Mississippi rivers.”

…click on the above link to read the rest of the article…

Flip This Well: How Fracking Company CEOs Get Rich While Losing Billions

May 30, 2018

Flip This Well: How Fracking Company CEOs Get Rich While Losing Billions

Last year the fracking company Halcón Resources announced a new strategy that was sold as the path to profits for the previously troubled shale oil and gas firm. The company had sold its stake in the Bakken oil fields in order to double down on the Permian shale in Texas. At the time, Reuters touted the deal as a “stunning turnaround” for CEO Floyd Wilson, and the good news immediately drove up the Halcón stock price by 35 percent.

“The sale of our Williston Basin operated assets transforms Halcón into a single-basin company focused on the Delaware Basin where we have more than 41,000 net acres,” Wilson said in a statement. He was making his pitch and investors responded.

However, the move was part of a familiar formula for those in the shale industry, which uses horizontal drilling and hydraulic fracturing (fracking) to release oil and gas from shale formations: Borrow lots of money, drill lots of fossil fuels at a loss, flip the company for a profit.

As the Reuters article points out, Wilson’s ultimate goal is to create excitement about the potential of its Permian basin wells and then flip Halcón, just as he’s flipped other shale firms: “Focusing on the Permian could help Wilson achieve his long-held dream of selling Halcón to the highest bidder.”

…click on the above link to read the rest of the article…

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