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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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The Barnett remains a shale star in Texas


In the past few years, there has been a lot of talk – and rightly so – about how the Eagle Ford Shale in South Texas and the Permian Basin in West Texas are fueling the new American energy revolution.


But last week, we got a fresh reminder that the Barnett Shale in North Texas still has a place in that conversation.


A study from the Waco-based Perryman Group finds that the field contributes $11.8 billion annually to the North Texas economy. It is responsible for 107,650 jobs and generates tax revenues of $644.7 million for state government and $480.6 million for local governments.


And what about all those people who have been predicting the demise of the Barnett? Well, it looks like their reports of the play’s death have been greatly exaggerated.


Consider these facts: The Barnett’s annual economic impact is actually $700 million more than it was in 2011, according to Perryman. Moreover, it has produced 6 trillion cubic feet of natural gas from 2011 to 2014, and average production this year is more than 4.75 million cubic feet per day.


Those numbers hardly paint a picture of a formation in decline.


Now there are still people – most of whom, frankly, are no fans of drilling – who point at the falling rig counts in the Barnett to make the case that the play’s best days are behind it. Perryman shoots down those arguments, too.


He acknowledges that rig counts are down. But he also notes that recent activity has remained pretty steady over the years, and that more than 900 permits were issued in 2013. The reason? More efficient operations brought on by technological advances.


“Because of improvements in technology now, when they hit a well it tends to be a bigger well,” he says. “One well today may produce a lot more than one well did ten years ago.”


The report is optimistic about the Barnett’s future as well.


It says a number of factors could increase demand for drilling, including natural gas exports, infrastructure improvements, rising worldwide demand, and volatile political situations overseas. All of these, it concludes, could change pricing and global market conditions, resulting in increased exploration.


The Barnett is the oldest shale play in the country, that’s true. But as the Perryman report clearly shows, age hasn’t dimmed its luster one bit.

 

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Compromise aside, the Colorado fracking may be far from over


When Colorado Gov. John Hickenlooper and U.S. Rep. Jared Polis struck a deal to keep two anti-fracking initiatives off the November ballot, there was hope that maybe the issue was on a path toward rational resolution.


I’m starting to wonder, though, if that optimism may be short-lived.


It was recently reported that activists opposed to hydraulic fracturing are pushing hard to be represented on the 18-member task force Hickenlooper will name to study oil and gas development in the state. That panel was created as part of the last-minute compromise that avoided a costly, ugly battle over the ballot measures.


Now, I have no problem with opposition views being heard in the energy debate. As I’ve written before, I may not agree with everything the Environmental Defense Fund says and does, but the group at least takes a pragmatic, real-world approach to industry issues.


In Colorado, however, some of the people who have submitted applications to be members of the task force are not being completely up-front about who they are. I do have a problem with that.


As Energy-in-Depth noted, one of them is Anthony Ingraffea, who has been described as an “implacable fracking opponent.” He never states in his application that he appeared in Gasland Part II, saying that “fracking can never be done safely.” Nor does he disclose that he helped Yoko Ono create Artists Against Fracking, which later went on to set up Frack Free Colorado.


Then there’s Jim Ramey, head of Citizens for a Healthy Community. In his application, he wrote, “If given the opportunity to serve on this panel, I will work hard with diverse stakeholders to reach consensus on this difficult issue.” All of which sounds good until you see that Citizens for a Healthy Community calls fracking “dangerous and life-threatening” and wants to ban it altogether.


This tells me that the environmentalists in Colorado aren’t going to let go, the Hickenlooper-Polis deal notwithstanding.


In fact, on Aug. 18, two activists filed a petition with the state to put on the 2015 or 2016 ballot a measure that would create a constitutional amendment making clean air, water, and natural resources public commodities. But here’s the kicker: It says that energy companies would be liable for damages if an “action or policy has a suspected risk” of impairing those commodities and would force them to prove that energy development is safe even “in the absence of scientific consensus.”


(Of course, it’s probably also not a stretch to say that if the activists don’t get places on Hickenlooper’s task force – and, frankly, they shouldn’t, because they want to ban and not regulate the process – then they’ll just howl about “unfairness” and dial up the heat on their rhetoric.)


In the middle of all this, I have to wonder what’s going on with Polis.


The millionaire congressman caught a lot of criticism for withdrawing the two anti-fracking measures he said he’d bankroll. Then late last month, speaking to a newspaper editorial board, he said that if the state legislature did not act on whatever recommendations emerge from the task force, the fracking bans could be back on the ballot. “I think that’s likely,” he said.


Additionally, a member of an anti-fracking group from Weld County said Polis told them the compromise “does not mean there won’t be a ballot fight in 2016, a more favorable time.”


Hickenlooper’s office has said he wants to populate the task force with members “with the attitude to get to yes.” I wish him luck. Because it sounds as if the activists, perhaps emboldened in part by Polis’ seeming retreat from the compromise, will stop at nothing to keep that from happening – and to get bans back on the ballot.


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Ohio DMA Decision: The Court May Have Just Invalidated Your Lease


The Ohio Seventh District Court of Appeals issued a decision Aug. 28, 2014, that changes the way operators will have to analyze the 1989 Dormant Mineral Act (DMA). In a significant departure from lower courts in various counties (other than Monroe), the court in Eisenbarth v. Reusser held that the 1989 DMA’s 20-year look-back period is not rolling but is fixed. 


Why does this matter?  Let’s take an example:


Based on application of the 1989 act, E&P Inc. takes a lease from a surface owner of land subject to a reservation, believing that the reservation from 1974 lapsed because there were no savings events in the subsequent 20-year period that ended in 1994.  As such, E&P Inc. thinks that the minerals re-vested in the surface owner.


Did you hear that grinding sound? It’s the Seventh District launching a wrench into the wheel.


Applying the Eisenbarth decision to our example, the 1974 reservation didn’t automatically lapse under the 1989 DMA. Instead, to acquire the severed minerals, the surface owner had to follow the procedures set forth in the 2006 DMA; if they didn’t, the surface owner didn’t own anything to lease.


This decision significantly changes the leasing landscape.  Instead of taking a big win based on automatic vesting under the 1989 DMA, the surface owner is going to have to take additional steps to get those minerals back if they were severed after March 22, 1969. The 2006 DMA has to be analyzed now. 


How does this make sense? Single-use statutes.


You see, the court concludes that the 1989 DMA was a onetime use statute, meaning that it was only intended to re-vest severed minerals as of March 22, 1992. The court believes that if the legislature wanted to continue this automatic mineral vesting idea, it would have enacted further legislation to do so. 


We have single-serving utensils, single-use cameras, and disposable razors. The Seventh District just added to that list, giving Ohioans single serving statutes. 


Oh, and the court said that an oil and gas lease is a savings event under the 1989 DMA.  At least some things haven’t changed…

 

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