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The U.S. Shale Revolution Has Surrendered to Reality

Fracking companies aren’t drilling as investment continues to dry up.
Oil well.
Image: Fossil fuel oil well. Credit: CL Baker. CC BY 2.0

“Drill, baby, drill is gone forever.”

That was the recent assessment of Saudi Prince Abdulaziz bin Salman of the American oil industry’s future potential. As Saudi Arabia’s energy minister, Prince Abdulaziz is one of the most influential voices in the global oil markets. Fortune termed it a “bold taunt,” and a warning to U.S. frackers to not increase oil production.

The response by the U.S. producers — to shut up and take it — quietly confirms this reality. Shale oil’s era of growth appears to be over. The reason is that even as global oil demand and prices rise, the economics of the shale oil business model continue to not work. The U.S. shale industry has lost hundreds of billions of dollars in the past decade producing oil and selling it for less than it cost to produce.

This was possible because despite the losses, investors kept giving the industry money. But now investors appear to have grown tired of losing money on U.S. shale companies and new lending to the industry has dropped dramatically.

As reported this month by The Wall Street Journal, “capital markets showed little interest in funding expansive new drilling campaigns” for the U.S. shale industry. Shaia Hosseinzadeh, a partner at investment firm OnyxPoint Global Management LP,  told The Journal that the problem facing fracking companies is that “they can’t access cheap capital any longer.”

Without new infusions of money, the industry can’t drill for more oil, and that is why the Saudis feel confident taunting the U.S. oil industry. Prince Abdulaziz’s confidence is based in the financial realities of U.S. shale.

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

Change BC Fracking or Expect Damaging Earthquakes: Report

Change BC Fracking or Expect Damaging Earthquakes: Report

The new warning comes from a former senior scientist with the province’s oil and gas commission.

Since 2005, British Columbia’s experiment with hydraulic fracturing of gas wells has changed the geology of the province’s northeast. It is now home to some of the world’s largest fracking-induced earthquakes outside of China.

In 2018, one magnitude 4.6 tremor tied to fracking even rattled buildings in Fort St. John and stopped construction on the Site C dam. It was followed by two strong aftershocks.

Now, a comprehensive new scientific study warns that stress changes caused by the technology could trigger a magnitude 5 earthquake or greater in the region, resulting in significant damage to dams, bridges, pipelines and cities if major regulatory and policy reforms aren’t made soon.

Allan Chapman, the author of the paper served as a senior geoscientist for B.C.’s Oil and Gas Commission and as its first hydrologist from 2010 to 2017. Prior to working for the commission, he directed the Ministry of Environment’s River Forecast Centre, which forecast floods and droughts.

Chapman, now an independent geoscientist, said that he felt compelled to write the paper because researchers have concluded that fracking “induced earthquakes don’t have an upper limit” in terms of magnitude.

In addition, “there is a clear and present public safety and infrastructure risk that remains unaddressed by the regulator and the B.C. government.”

B.C.’s Oil and Gas Commission rejected Chapman’s conclusions in a statement to The Tyee, saying his study contained “speculation.”

Recent events in China’s Sichuan province prove that fracking can trigger large and destructive earthquakes.

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

The Brutal Legal Odyssey of Jessica Ernst Comes to an End

The Brutal Legal Odyssey of Jessica Ernst Comes to an End

The Alberta landowner fought an epic battle against fracking interests.

After 14 years of battling Alberta regulators and the fracking industry over a water well contaminated with methane and chemicals, Jessica Ernst says she feels incalculable grief and anger.

On April 1, 2021, her tortuous legal crusade — which included a controversial detour to the Supreme Court of Canada — came to an end with no resolution. What one Alberta lawyer dubbed “the legal saga of the decade” is over.

Court of Queen’s Bench Judge J.T. Eamon accepted applications from Encana and the Alberta government to dismiss the case due to inactivity on the file for three years.

“It was inevitable,” says Ernst who was informed three weeks after the dismissal. “The rules are the rules.”

After Toronto lawyers Murray Klippenstein and Cory Wanless quit the case in August 2018 without warning, Ernst was left hanging.

“My lawyers knew I couldn’t find a replacement lawyer in Alberta when they quit,” said Ernst. “They even wrote me that and added that I would fail as a self-represented litigant.”

She not only had no lawyer, but incomplete legal files to work with, Ernst says. Klippenstein told The Tyee in 2019 that he would return them to Ernst, but she maintains his firm only returned some correspondence but not the complete files. And so the lawsuit languished.

Although Ernst tried to find another lawyer, she says that she couldn’t find a suitable candidate for various reasons, including conflict of interest. Most big law firms do business in or with the oil patch.

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

Struggling to Make a Profit, Fracking Investors are Searching for the Exit

Banks and investors have given up on the U.S. fracking industry, which is bad news for current investors who waited too long to get out.
Derricks Credit: Pay No Mind (CC BY-SA 2.0) and Going out of business sign Credit: Michael Steeber (CC BY-SA 2.0) Photos adapted by: Justin Mikulka

The outlook is increasingly bleak for oil and gas companies. The beginning of this year has seen the highest number of companies announce bankruptcy during the first quarter in five years. Eight oil and gas companies announced they were filing for bankruptcy during the first quarter of 2021.

Meanwhile, earlier this month The Financial Times noted that of 500 privately owned oil and gas companies in the U.S., 400 are losing money and unlikely to ever pay back their large debts. According to the Financial Times, the remaining companies are focused on a “last gasp” effort to look profitable to potential buyers in order to “secure a profitable exit.”

If they can’t secure a “profitable exit” that will help them pay back their debts, the most likely outcome is bankruptcy.

As Adam Waterous, head of the private equity group Waterous Energy Fund, told the Financial Times: “This business is broken. The industry is going through a multiyear process of wringing capital out of the sector, not bringing new capital in.”

Investors appear to be done with the fracking industry as they realize that the only people making money are the Wall Street banks and shale company executives. With investors losing interest in the fracking industry — and banks no longer interested in loaning money to fracking companies  —  there is a lack of new money available to prop up the struggling fracking business model.

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

Exclusive: Whistleblower Accuses Exxon of ‘Fraudulent’ Behavior for Overvaluing Fracking Assets For Years

Exclusive: Whistleblower Accuses Exxon of ‘Fraudulent’ Behavior for Overvaluing Fracking Assets For Years

ExxonMobil
ExxonMobil announced a $19.3 billion write-down on Tuesday, a big hit to a company reeling from depressed oil and gas prices and a rapidly changing global energy market.

The write-down reduces the value of the assets on Exxon’s books. The announcement comes as part of the company’s fourth quarter earnings for 2020.

The fossil fuel giant, however, may be understating the financial damage to its assets, according to a former ExxonMobil employee turned whistleblower, Franklin Bennett. The oil major has overvalued its assets for years, according to Bennett and a team of advisors, a practice he describes as “fraudulent and defiant behavior” in a January 31 supplement to a whistleblower complaint he filed with the U.S. Securities and Exchange Commission (SEC).

Bennett and his team argue that instead, the company has been overvaluing its U.S. oil and gas assets by as much as $56 billion, as of year-end 2019.

At the root of the SEC complaint is ExxonMobil’s 2010 purchase of shale fracking company XTO Energy, which it acquired at the height of the natural gas boom for $46 billion. In the months and years following the acquisition, natural gas prices collapsed, and never returned to previous heights, rendering much of XTO’s assets uneconomic to produce.

Until now, ExxonMobil largely refused to take a meaningful write-down on those assets, despite several downturns in oil and gas market conditions. In particular, a deep natural gas price slide in 2015–2016, and another in 2019, hollowed out the valuation of many high-cost shale gas assets. Through it all, Exxon never took a significant write-down, which Bennett and his team argue is illegal.

In accounting terms, Exxon essentially told regulators that they could still get full value from the assets that they paid for in 2010, despite the deterioration in the natural gas market, claims the SEC complaint.

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

New Harvard Study Finds “Elevated Radiation” Levels Near Fracking Sites

Fracking has been one of the keys to helping the U.S. achieve its energy independence and become the world’s largest oil and gas producer over the last ten years. But now, it looks like it may be coming with some unintended consequences, according to Reuters.

Researchers have found elevated radiation levels near U.S. hydraulic fracking drilling sites, according to a newly released study by Harvard researchers this week. The study looked at the U.S. Environmental Protection Agency’s radiation monitor readings nationwide from 2011 to 2017.

The study was published in Nature and found that areas within 12 miles downwind of 100 fracking wells had radiation levels that were about 7% above normal background levels. Readings can go “much higher” as you move closer to drill sites, the study reported. Radioactive particles can be inhaled and “increase the risk of lung cancer,” Reuters noted.

Petros Koutrakis, who led the study, said: “The increases are not extremely dangerous, but could raise certain health risks to people living nearby.”

He also said that further study is needed: “Our hope is that once we understand the source more clearly, there will be engineering methods to control this.”

He attributes the radiation to “naturally-occurring radioactive material” rising to the surface as a result of the drilling.

The study also found that the largest increases occurred in places like Pennsylvania and Ohio, where naturally occurring radioactive material is found in higher concentrations than other states.

It’s unclear whether or not this could become an election talking point with less than 3 weeks until the Presidential race. We already know where President Trump stands on fracking. If only Joe Biden and Kamala Harris could remember what, exactly their position is…

The US Oil and Gas Industry’s Methane Problem Is Catching up With It

The US Oil and Gas Industry’s Methane Problem Is Catching up With It

A laid-off oilfield worker's vest and gloves hang on a fence post in front of an idled pump jack in Eddy County, New Mexico
For years, the oil and gas industry has been able to downplay, or outright ignore, the problem of methane. Methane is an invisible gas, and lax state and federal regulations in the U.S. have allowed oil and gas producers to self-report how much of this potent planet-warming gas leaks from its supply chain, which researchers have repeatedly found is a lot more than the industry was admitting to.

But improved technologies, particularly from satellites, have allowed the world to increasingly fact-check industry numbers, shining a light on the true climate impact of natural gas, which is primarily methane. These days, methane emissions have become an industry black eye, to the point that major players are now clamoring for regulations after the Trump administration recently finalized the rollback of Obama-era rules meant to reduce methane leaks from oil and gas.

On August 24, the Houston Chronicle published an op-ed arguing for the United States to regulate methane emissions for the oil and gas industry, and it was co-written by two influential voices in the industry, Antoine Halff and Andrew Gould. Halff was formerly the head of oil analysis at the International Energy Agency, an independent, intergovernmental organization focused on energy research and policy — and notorious for its overly optimistic (and inaccurate) outlooks for fossil fuels and overly pessimistic views on renewables. Gould is the former CEO of Schlumberger, the world’s largest oilfield services company. Gould also currently serves on the board of Occidental Petroleum Corporation — one of the largest fracking companies among the Permian oilfields of Texas.

Halff and Gould were writing in response to the Trump administration’s repeal of existing methane regulations. However, as a sign of the changing times, they argued that regulating the greenhouse gas is simply good business for the oil and gas industry.

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

How much oil left in America? Not much

How much oil left in America? Not much

Preface. If you think we have no worries because we can get arctic oil, think again. We can’t because icebergs mow drilling platforms down in the ocean. On land, massive amounts of expensive new drilling rigs, roads, rail lines, platforms, buildings and other infrastructure need to be built, and maintained every year as permafrost soil bucks and heaves like a bronco trying to shake infrastructure off.

In the first two oil shocks in the 1970s, many intelligent people proposed we should buy oil from other nations to keep ours in the ground for when foreign oil declined. But hell no, Texas, Oklahoma, and other oil states said that we need jobs and CEO/shareholder profits more than national security. Over half of all remaining oil is in the Middle East, which China, Russia, and Europe are much closer to than the U.S.

What saved the U.S. and the world, from conventional peak oil and natural gas decline since 2005 is fracking. But fracking began to decline as early as 2020 according the first report below. The second article is about oil discoveries in the U.S. declining.

This just in: John Hess, CEO of Hess Corporation, told his audience that “key U.S. shale fields are starting to plateau” and will not the next Saudi Arabia. U.S. shale oil production has been a major driver in the growth of world oil supplies. Last year the United States accounted for 98% of global growth in oil production. Since 2008 the number is 73%. so a slowdown or decline in U.S. oil production growth would mean trouble for the whole world. With 81 percent of global oil production now in decline, even a plateau in U.S. production would likely result in a worldwide decline (Kobb 2020).

Peak Fracking in the news:

2020 U.S. Shale Oil Production – All That’s Left Is The Permian And That Won’t Last Forever Either.

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

North Dakota blues: The legacy of fracking

North Dakota blues: The legacy of fracking

When oil drillers descended on North Dakota en masse a decade ago, state officials and residents generally welcomed them with open arms. A new form of hydraulic fracturing, or “fracking” for short, would allow an estimated 3 to 4 billion barrels of so-called shale oil to be extracted from the Bakken Formation, some 2 miles below the surface.

The boom that ensued has now turned to bust as oil prices sagged in 2019 and then went into free fall with the spread of the coronavirus pandemic. The financial fragility of the industry had long been hidden by the willingness of investors to hand over money to drillers in hopes of getting in on the next big energy play. Months before the coronavirus appeared, one former oil CEO calculated that the shale oil and gas industry has destroyed 80 percent of the capital entrusted to it since 2008. Not long after that the capital markets were almost entirely closed to the industry as investor sentiment finally shifted in the wake of financial realities.

The collapse of oil demand in 2020 due to a huge contraction in the world economy associated with the pandemic has increased the pace of bankruptcies. Oil output has also collapsed as the number of new wells needed to keep total production from these short-lived wells from shrinking has declined dramatically as well. Operating rotary rigs in North Dakota plummeted from an average of 48 in August 2019 to just 11 this month.

Oil production in the state has dropped from an all-time high of 1.46 million barrels per day in October 2019 to 850,000 as of June, the latest month for which figures are available. Even one of the most ardent oil industry promoters of shale oil and gas development said earlier this year that North Dakota’s most productive days are over. CEO John Hess of the eponymous Hess Corporation is taking cash flow from his wells in North Dakota and investing it elsewhere.

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

Why Fracking Activity Hasn’t Increased As Oil Prices Recovered

Why Fracking Activity Hasn’t Increased As Oil Prices Recovered

It’s been a long dry spell in the Permian. Shale drilling and completions activity has collapsed to levels not seen since before 2000 (as far back as records are kept). That was the year shale activity first began to pick up from essentially nil and hit all-time peaks in 2008. With occasional ebbs and flows, it had gradually drifted down to the start of the current calamity, where active rigs stood at a somewhat healthy 805 rigs turning to the right. 

Fracking has also taken a commensurate dive over the last eight months, defying the conventional wisdom that as prices began to improve, activity would increase. It hasn’t happened in either case. Why?

Driven by low prices not seen much in modern history, formerly high-flying shale drillers like Chesapeake Energy have gone bankrupt. The service providers who do the actual work like Halliburton, (NYSE:HAL), Schlumberger, (NYSE:SLB) have written off tens of billions worth of fracking-related equipment, closed facilities and laid off thousands of workers.

Much of the expansion from 2016 onward was fueled by growth at any cost mindset in the drillers, and aided by bankers willing to accept ever-increasing estimates for the value of reserves. In 2018 much of that laissez-faire mentality in the boardrooms of the drillers and in the vaults of the bankers came to an abrupt halt as profits and cash flow were demanded. That was the moment shale activity began to falter numerically, while at the same time, a miracle was taking place. Production grew from advances in technology and a deeper understanding of key reservoirs to record levels.

EIA-STEO

Peaking at nearly 13 mm BOE in March of this year, a failure of OPEC+ nations to agree on production cuts that same month, led oil to begin a precipitous decline in price.

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

Thousands of Quakes, Tied to Fracking, Keep Shaking the Site C Dam Region

Thousands of Quakes, Tied to Fracking, Keep Shaking the Site C Dam Region

Several recent reports on the tremors add to concerns about the mega-project’s stability.

Building the Site C dam in northeastern British Columbia is proving more difficult than officials predicted due to unstable ground on the northern bank. Adding to concerns: myriad earthquakes.

For nearly a decade, The Tyee has reported on a rising number of earthquakes caused by the hydraulic fracturing of shale formations in the region. Now, new studies put the number of such tremors in recent years in the many thousands, raising more worries about the future of the mega-project.

Researchers warn the shaking could become strong enough to crumble critical infrastructure such as roads, high-rise buildings — and dams.

B.C.’s regulatory practices try to limit fracking after small earthquakes have been triggered. But that’s “not sufficient to protect critical or vulnerable infrastructure that have unacceptable failure consequences,” noted seismic hazard expert Gail Atkinson in the May 7 issue of Nature Reviews.

No one can yet predict frack-triggered quakes before they happen, and “hazard forecasting” remains a “critical area of research.”

Another study, released this week by researcher Ben Parfitt at the Canadian Centre for Policy Alternatives, took data from federal earthquake catalogues to show how many tremors the fracking industry is producing near the Site C dam.

The numbers are staggering. Between 2017 and 2018 alone, the industry triggered 6,551 earthquakes greater than 0.8 magnitude in the region near the troubled mega-project with a price estimate of $12 billion and rising.

Drilling by Canadian Natural Resources Ltd., for example, triggered a magnitude 4.6 earthquake in November 2018 that forced the evacuation of the Site C Dam site. It was followed by magnitude 3.5 and 4 events after the fracking ceased.

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

Trump’s Golden Era of Energy Is Turning to Lead

Trump’s Golden Era of Energy Is Turning to Lead

 A drilling rig on a former ranch outside of Barstow, Texas, in the Permian Basin

It was just over a year ago that President Trump announced, “The golden era of American energy is now underway,” saying that his policies focused on exploiting oil, gas, and coal were “unleashing energy dominance.” 

What a difference a year makes. On July 10, the Financial Times ran an article with a headline that asked, “Is the party finally over for U.S. oil and gas?” And there is no doubt that it has been quite a party for the last decade. At least, for the fracking executives who have enriched themselves while losing hundreds of billions of dollars investors gave them to produce oil and gas. Meanwhile, profits never materialized.

Lately, prospects for the broader fossil fuel industry look more like lead than gold.

For starters, the oil and gas industry in America is facing an era of losses, bankruptcies, canceled projects, and declining demand. It is highly likely that history will show that this point in time was the beginning of the golden era of renewable energy and the decline of the fossil fuel industry. 

Fracked Shale Oil and Gas Industry Failing

President Trump’s 2016 campaign was backed heavily by the oil and gas industry, with strong support from fracking CEOs like Continental Resources’ Harold Hamm. The story of record American oil production due to fracking was even being touted by President Obama, who rightfully took credit for the fracking boom that occurred on his watch. That’s despite President Trump recently taking credit for it as well. 

But as we have documented over the last two years at DeSmog, the fracked oil industry has been a financial failure for more than the past decade. The industry produced record amounts of oil and gas but lost huge sums of money in the process. And now even industry leaders are admitting the U.S. oil industry has already peaked, a little more than a year after President Trump declared the beginning of the “golden era.” 

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

The Great American Shale Oil & Gas Massacre: Bankruptcies, Defaulted Debts, Worthless Shares, Collapsed Prices of Oil & Gas

The Great American Shale Oil & Gas Massacre: Bankruptcies, Defaulted Debts, Worthless Shares, Collapsed Prices of Oil & Gas

The bankruptcy epicenter is in Texas.

The Great American Oil Bust started in mid-2014, when the price of crude-oil benchmark WTI began its long decline from over $100 a barrel to, briefly, minus -$37 a barrel in April 2020. Bankruptcies of US companies in the oil and gas sector started piling up in 2015. In 2016, the total amount of debt listed in these filings hit $82 billion. Bankruptcy filings continued, with smaller dollar amounts of debt involved. In 2019, the shakeout got rougher.

And this year promises to be a banner year, as larger oil-and-gas companies with billions of dollars in debt collapsed, after having wobbled through the prior years of the oil bust.

The 44 bankruptcy filings in the first half of 2020 among US exploration and production companies (E&P), oilfield services companies (OFS), and “midstream” companies (gather, transport, process, and store oil and natural gas) involved $55 billion in debts, according to data compiled by law firm Haynes and Boone. This first-half total beat all prior full-year totals of the Great American Oil Bust except the full-year total of 2016:

The cumulative amount of secured and unsecured debts that the 446 US oil and gas companies disclosed in their bankruptcy filings from January 2015 through June 2020 jumped to $262 billion:

The three biggies: In the first half of 2020, nine of the 44 US oil and gas companies that filed for bankruptcy listed over $1 billion in debts, including the three biggies with debts ranging from $9 billion to nearly $12 billion, according to data by Haynes and Boone.

These three companies – oil-field services companies Diamond Offshore and McDermott and natural-gas fracking pioneer Chesapeake – are the biggest in terms of debts that have toppled in the Great American Oil Bust so far. Those three companies combined listed $31 billion in debts, accounting for 56% of the $55 billion in total debts listed by all 44 companies to file so far this year:

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New Satellite Data Reveals Dangerous Methane Emissions in Permian Region

New Satellite Data Reveals Dangerous Methane Emissions in Permian Region

New research based on satellite data confirms that the oil and gas industry in the Permian region of Texas and New Mexico is leaking record amounts of methane. The new research published in the journal Science Advances found that methane emissions in the Permian Basin were equivalent to 3.7 percent of the total methane produced by the oil and gas industry there.

In December DeSmog reported on the work of Robert Howarth, a biogeochemist at Cornell University, who has been studying the methane emissions of the oil and gas industry. Howarth’s latest research estimated that 3.4 percent of all natural gas produced from shale in the U.S. is leaked throughout the production cycle, which appears to be confirmed by this new research.

Methane is a powerful greenhouse gas and makes up approximately 90 percent of what is known as natural gas. It’s a major contributor to global warming.

The oil and gas industry has long tried to sell the idea of natural gas, which is, again, primarily methane, as a clean energyclimate solution. However, with a leakage rate of 3.7 percent, natural gas is actually worse for the climate than coal.

Advertisements for natural gas from the industry trade group the American Petroleum Institute have claimed, “Thanks to natural gas, the U.S. is leading the way in reducing emissions.”

This new satellite data confirms that simply isn’t the case. When the methane leaks from oil and gas production are taken into account, natural gas is unquestionably a dirty fossil fuel.

This new research also helps explain why methane emissions rose at such a high rate in 2019.

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

Transition Towns, Re-localisation, COVID-19 and the Fracking Industry.

Transition Towns, Re-localisation, COVID-19 and the Fracking Industry.

The vulnerabilities of the global village and its economy have been laid bare by the assault of the coronavirus (Sars-CoV-2), which has led to a pandemic of the infectious disease, COVID-19. The mobility chains that enable the flow of civilization are now substantially truncated, with collapsing demand for transportation fuels – and crude oil, from which they are refined – leading Russia, Saudi and other OPEC countries to agree on combined production cuts of 10 million barrels a day, even though demand might have fallen by 30 million barrels a day. It remains an open question how soon, or if at all, everything will get back to normal, when arguably, it is “normal” that has brought this current situation upon us, as yet another element of a changing climate. The broad reach of the expanding global mechanism both invades previously uncharted terrains and ecosystems, and provides vectors for the transmission of contagion. Thus, the relentless rise of a resource-intensive civilization and its highly mobile population carries many potential dangers. 

The need for re-localisation, in the anticipation of Peak Oil, leading to waning supplies of cheap transportation fuel, was a founding tenet of the Transition Towns (TT) movement. However, this motivation appeared to lose some of its urgency, once a flood of oil entered the market, largely as exhumed from shale by the procedure of hydraulic fracturing (“fracking”). Indeed, a few years ago, TT-HQ asked itself the question, “Does so much cheap oil mean peak oil as an argument is now over?” In fact, the production of conventional crude oil has remained on a plateau since 2005, while 71% of subsequent growth in the production of “oil” has been provided by shale hydrocarbons; hence, we may anticipate that any stalling of the fracking industry will begin to restrict the overall global oil supply. 

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

Olduvai IV: Courage
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Olduvai II: Exodus
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