West Virginia and the Environment

That Marcellus Shale ain't all it's cut out to be (4.00 / 1)

Warning: the Marcellus Shale gas play is another bubble waiting to pop. Without a financial accounting rules mirage, the Marcellus Shale gas field will only be profitable at natural gas prices so high as to make all but the most easily accessible pockets of the field economically nonviable.

First, news from RigZone, an industry press mag. Natural-Gas Growth Seen Slowing As Hedges Expire:

The natural-gas industry is growing on borrowed time. A surge in new natural-gas supplies available through shale-gas drilling has caused sustained downward pressure on prices in North America over the last two years. Producers have continued to increase production despite falling prices in large part because of financial hedges put in place when the market was stronger. But those hedges will start running out next year, setting up a potential rebalancing of an oversupplied market.

Now that those long-term contracts are coming to an end, lots of drilling will, too. (Conventional and shale.)

More specifically on Marcellus Shale from Arthur Berman at The Oil Drum, Shale Gas-Abundance or Mirage? Why The Marcellus Shale Will Disappoint Expectations

Shale gas plays in the United States are commercial failures and shareholders in public exploration and production (E&P) companies are the losers. This conclusion falls out of a detailed evaluation of shale-dominated company financial statements and individual well decline curve analyses. Operators have maintained the illusion of success through production and reserve growth subsidized by debt with a corresponding destruction of shareholder equity. Many believe that the high initial rates and cumulative production of shale plays prove their success. What they miss is that production decline rates are so high that, without continuous drilling, overall production would plummet. There is no doubt that the shale gas resource is very large. The concern is that much of it is non-commercial even at price levels that are considerably higher than they are today.

Recent revisions to SEC rules have allowed producers to book undeveloped reserves that questionably justify development costs based on their own projections in public filings. New reserves are being booked at the same time that billions of dollars in existing shale gas development costs are being written down because the projects are not commercial. Concerns about the logic of ongoing gas-directed drilling while prices collapse have been partly diffused by a shift to liquids-rich plays like the Eagle Ford Shale in Texas. These new ventures, however, produce significant volumes of gas which is partly why gas prices continue to fall.

The entire post is worth a read.

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by: Clem Guttata @ Mon Nov 15, 2010 at 10:55:58 AM UTC

Interesting (4.00 / 2)

The less a community benefits economically in resource extraction I think the more likely they are to oppose it on quality of life grounds.

I remember when most environmental activists in WV were by and large out of state folks who moved here. Now where the drive for profit has upped output and decreased employment we see a lot of HOME GROWN WV'ians opposing the exploitation of their homeland.

We used to live on a place, rented, where the owner had had gas wells drilled all over the place. The well water smelled like gas and it was nearly impossible to keep the mineral deposits off the tubs and sinks.

It was so strong and we were afraid of ingesting so many minerals we would be pissing ball bearings we only used the water to bathe, brush our teeth and make coffee since the coffee covered the taste and the brewing seemed to drive off the gas taste.

Then one day I looked in the mirror and realized I was getting black mineral deposits between my teeth just from the coffee!! Wicked stuff!!

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by: Hollowdweller @ Mon Nov 15, 2010 at 16:05:54 PM UTC

Community Benefit (0.00 / 0)

Our community here in Harrison/Marion county has benefitted quite well with this Marcellus boom.  XTO energy purchased access from me for a pump location on the West Fork River.  They are currently horizontal drilling from my back yard under RT. 19,then up the mountain, to another pump location.  The series of pumps will provide water for fracking to a cluster of 40 wells over the next 10 years.  All parties involved were paid premium right of way fees.  My pump location and the others were very well compensated and the local barber owns the land where the water will be stored. In return, he'll be paid $4000 per month until the project ends.  This project will eliminate 650,000 tanker truck runs over the next ten years, easing the minds of those annoyed by the big trucks, and saving about $80 per load, which adds up to quite a chunk of change (such a sizeable chunk that Exxon Mobil may buy XTO for $30 billion).  They are also building a network of pipelines to connect all the wells so the product will be available at a central location, and I've noticed one new pipeline project aimed straight for the Harrison Power Station.  There are very many local property owners in my area receiving negotiated compensation packages for right of ways, temporary and permanent.

It's amazing seeing a drilling operation up close every day, and almost every drop of the proprietary goop has been ejected from the big goop machine right into a bright red enviro-dumpster and then hauled away by a local environmental company every day.

I do still use a filter on the ole' water spicket, though.

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by: camwv @ Tue Nov 16, 2010 at 05:38:36 AM UTC

[ Parent ]

Which is why Wheeling, Moundsville, etc. (0.00 / 0)

are putting weight limits on city streets to keep the trucks from running through town?

Which is why the Pittsburgh, Penn., council voted this week 9-0 to ban drilling under the city, slant or not?

Erin Brockovich. That case was in the neighborhood of my CA roots. County where they first discovered oil and where Reagan's Twenty Mule Team Borax comes from a strip mine.

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It's never enough money. We have to stop be such energy hogs as a nation.

If you think they are removing "almost every drop of the proprietary goop has been ejected from the big goop machine", I have a bridge to sell you. What about the stuff that goes into the cracks? And what is done with the "goop" then? Dick Cheney made sure that fracking is not regulated by the EPA. Dick.

Many of the chemicals, including hydrochloric acid, methanol and acetic acid, are toxic in high enough doses, and appear in everyday household and industrial solvents, cleaners and adhesives. One chemical, formaldehyde, is classified by the federal government as "reasonably anticipated to be a human carcinogen."

Nothing else matters if there is no clean water to drink.

NFTT: Support My Team or I Will Dance

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by: CA Berkeley WV @ Thu Nov 18, 2010 at 18:04:13 PM UTC

[ Parent ]

I agree (0.00 / 0)

The people definately consume way too much energy and would serve us all well to slow down a bit on the consumption of it.  But if they continue to demand it, it will be provided.  

My main point was only to mention that there is community benefit to the Marcellus boom, and that there are ways of dealing with some of the annoyances.  

I personally don't trust the EPA to protect my water, so whether or not they regulate fracking doesn't matter to me. I'll make sure my water is clean myself before I let my kids drink it.

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by: camwv @ Thu Nov 18, 2010 at 18:30:06 PM UTC

[ Parent ]