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My message to drilling contractors: When it comes to fracking, truth and facts are on our side


Last week, I had the honor of serving as keynote speaker for a meeting of the International Association of Drilling Contractors. It was a great opportunity to spend some time with folks who have had a big rule in America’s surge in domestic energy production.


The topic was hydraulic fracturing; more specifically, the risks involved in fracking. But I took a bit of a different approach. My remarks focused on looking at the so-called “risks” that drilling opponents keep talking about – but then offering some facts and figures (a lot of them, actually) to point out just how overblown and unfounded those criticisms are.


The bottom line was this:


Despite all the rhetoric and fear-mongering coming from the environmental movement over fracking, the industry has the facts, data, and truth on its side. We’ve done a good job – a great job, actually – of reducing methane emissions, for example, and have shown steady progress recycling wastewater. It’s just a matter of telling our story better.


You can read a full text of my prepared remarks (from which, like most speakers, I deviated on occasion) by clicking here. And if you have any information that I may have missed, I’d love to hear from you.

 

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For the Texas energy economy, good news - and a warning


The good news about the oil and gas industry’s economic impact on Texas rolled in again last week, but this time it came with something of a caveat.


A report by the Texas Independent Producers and Royalty Owners Association, or TIPRO, found that the Lone Star State employed 411,600 oil and gas workers in 2013 That was up 23,100 from the year before, an increase that amounted to three-fourths of all new jobs in the sector nationally. The state now employs 40 percent of U.S. oil and gas workers, the most in the country.


Those jobs come with a hefty annual salary, too – $118,900. That’s about 1.3 percent higher than what the average private sector employee makes and is $15,000 more than the average for the industry’s workers in general.


Beyond that, Texas oil and gas companies paid $13.6 billion in oil and gas taxes and state royalties – a record high and an increase of $1.2 billion from 2012.


That’s the good news. Here’s the caveat: What the Houston Chronicle called the Texas “juggernaut” faces threats from two quarters, TIPRO said.


The first comes from unnecessary regulations from the Environmental Protection Agency, which is currently considering rules that could impact hydraulic fracturing and, potentially, cripple the growth in domestic energy production. The second is from environmentalists, who are committed to pushing the government further to the left nationally, while in the state they’re waging a fight in Denton to ban fracking.


I can't speak to the Denton vote, other than to repeat that a ban would be a massive mistake that would cost the city and its taxpayers millions. I’ve said before that it’s a bad move, it’s an illegal move, and it’s a purely political response to a policy issue that, if saner heads prevailed among the activists, could probably be managed reasonably.


But as to new regs from EPA, there is a simple solution: Stay out of our energy business and leave rule-making to the Texas Railroad Commission.


The idea of federal rules on fracking, for example, completely ignores the fact that the commission knows the state better than the feds do. It knows our issues and concerns better than the feds do. It knows our geology better than the feds do. It knows our people better than the feds do.


In other words, our regulators know what’s better for Texas than Washington does. And, as TIPRO pointed out, overregulation – a specialty of the federal government and, unfortunately, one of the few things it does well – is only going to hurt a state economy that is the envy of the nation and world.


This isn’t an argument for less regulation or no regulation. It’s an argument for smart regulation. And if recent history has taught us nothing else, it’s that “smart” isn’t a trait easily attached to bureaucrats in Washington.

 

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A 73 Percent Drop in Methane Emissions from Fracking Speaks for Itself


Critics of drilling tend to be all over the place when it comes to their unfounded attacks on the industry. One day they’re talking about water usage, the next day it’s air issues. Lately, though, their villain of choice has been methane emissions. My guess is they won’t have much to say about a recent report from the Environmental Protection Agency.


In its annual Greenhouse Gas Reporting Program, EPA said:


(Last year) reported methane emissions from petroleum and natural gas systems sector have decreased by 12 percent since 2011, with the largest reductions coming from hydraulically fractured natural gas wells, which have decreased by 73 percentduring that period. EPA expects to see further emission reductions as the agency’s 2012 standards for the oil and gas industry become fully implemented.


The agency’s data also shows that while overall greenhouse gas emissions from all large industrial facilities rose 0.6 percent in 2013, they actually declined 1 percent in the oil and gas sector.


While the EPA conclusions need no embellishment, I want to make three points.


First, the decline in emissions is coming during a period when domestic energy development – driven largely by the shale boom and hydraulic fracturing – has been increasing. In other words, as shale gas production has gone up, methane and other greenhouse gas emissions have gone down.


Second the reduction in methane emissions came despite the fact the number of sources reporting to the government increased by 13 percent. In other words, while the number of emissions sources went up, the amount of emissions went down.


Third, this decline in methane and other emissions is due largely to voluntary efforts by oil and gas companies and the use of sophisticated technologies in both monitoring and drilling. In other words, as companies’ commitment to environmental responsibility has continued to go up, the need for the feds to come in and further regulate the industry – which, inexplicably, is still on the table – continues to go down.


This is a good news story that, of course, is being largely ignored by the media and has pretty much generated nothing but silence from the activist community. That probably says a lot about a lot of things, most of which are better left unsaid. But what I will say is this:


The industry will just have to be content to let its actions speak louder than words, and that’s okay. Because when you look at EPA’s data, it says unmistakably that oil and gas companies are committed to doing what’s right for the environment.

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As the U.S. job climate is stuck just ahead of neutral, the energy industry is in overdrive


No one can deny that the domestic energy boom has had a profound affect on state, local, and the U.S. economies. And in the past couple of weeks, we’ve seen some data about its continuing role in job creation and job support – in and out of the industry – that really drives the point home.


To start with, a report prepared for the Energy Equipment & Infrastructure Alliance concluded that companies supplying goods and service to shale oil and gas producers will create over 233,000 new jobs in the next decade on top of the 524,000 jobs that already exist in the energy supply chain. That’s a 44 percent growth in the workforce.


Interestingly, the jobs are not located solely in the shale regions, but are spread all over the country. They pay well, too, averaging $79,000 per year – well above the average of $68,000 for all U.S. workers.


This follows a couple of reports out of Texas that further underscore the staggering job growth that’s being fueled by surging domestic development.


Last week, the University of Texas at San Antonio released a study showing that oil and gas production in the Eagle Ford Shale supported nearly 155,000 fulltime jobs in 2013. The number is expected to grow by almost 30 percent, to 196,000 jobs, by 2023.


And the Texas Petro Index – which compiles data primarily in the upstream sector – reported that at the end of July, 302,700 workers were employed in the exploration and production and energy services segments. That’s the first time the total exceeded 300,000 since the index began tracking jobs in 1995.


Finally, there was a study from the American Petroleum Institute earlier in the month that found small and mid-sized businesses are a big contributor to the energy revolution. It lists a diverse range of nearly 30,000 businesses that support the industry, including real estate companies, uniform providers, equipment suppliers, warehousers, and the like.


These don’t represent Big Oil. On the contrary, they are smaller, often locally owned businesses that are creating jobs in their communities and driving economic growth across the energy supply chain nationwide.


I’ve said it before, but in the context of all these reports, it bears repeating:


In a overall job climate that one analyst has said is stuck “slightly ahead of neutral,” the energy industry is in overdrive. Were it not for oil and gas jobs, my guess is that the economy wouldn’t be idling in neutral. It would probably be in reverse.

 

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Study linking methane leaks to well integrity misses one key point: context

A study released last week linking methane releases from drilling to well-integrity issues has generated a lot of headlines, questions, and glee (from environmentalists). But what it hasn’t done is put the findings in any sort of context. And the fact is, there is a competing narrative – backed by hard data – that makes the report’s conclusions far less dire than industry critics would have you believe.

First, we have the major conclusion that will drive activists crazy: The researchers could not find any evidence that connected hydraulic fracturing to groundwater contamination. “(The) results appear to rule out the possibility that methane has migrated up into drinking waters because of horizontal drilling or hydraulic fracturing,” said one of them. He added that was “good news” for the industry.

Second, as critics of the research have rightly noted, the study also found no evidence that there were any well-integrity failures. It doesn’t include any reference to violations or proof that methane leaks actually occurred. The scientists involved even admit that the sample may have been biased and the methane-well integrity link uncertain. According to an Associated Press report:

(Study co-author Rob) Jackson and colleagues have been studying water contamination around natural gas wells for years and for this study they didn’t choose a random sample, but aimed at areas that seemed to have most complaints of contamination. And even in those areas, it was only in a minority of dozens of sites that they could they connect the contamination to the natural gas wells, he said. In some cases, the contamination was natural and had no connection to gas wells, Jackson said.
 
Yet the researchers simply link the two as if it were a fact. Well, they’re entitled to their own opinions. But they’re not entitled to their own facts.

Finally, and this is critical, the report ignores existing data that – had it been considered – would have significantly undermined the researchers’ case:
  • According to the Pennsylvania Department of Environmental Protection, less than 1 percent of all the wells drilled since 2006 have had any issues. Beyond that, the well-failure rate is just 0.33 percent of all wells drilled since 2005.
  • The Ground Water Protection Council examined over 34,000 wells drilled in Ohio between 1983 and 2007, and found a failure rate of 0.03 percent.
  • The council also looked at more than 187,000 wells drilled in Texas between 1993 and 2008, and found a failure rate of only 0.01 percent.
  • Despite more than 2,000 complaints in Texas, state regulators have not found a single instance in which drilling-related activities contaminated groundwater.

None of this is to suggest that the oil and gas industry is perfect. No industry is. But to disregard the facts and replace them with supposition sheds more heat than light on an issue that – thanks to those who want to stop drilling at any cost – is becoming more overheated by the day.

I have a sense that studies like this are ultimately designed to force states into tougher rules. But that ignores the strong regulations Texas and Pennsylvania have in place, to say nothing of what may come out of Gov. John Hickenlooper’s task force on drilling in Colorado.

The states are doing their job. Oil and gas companies are doing theirs. The research community has an obligation to public policy to consider that, and everything it implies, before fostering a debate that is unencumbered by the facts.
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