NPR: The Shale Series
Water Contamination Concerns Linger For Shale Gas Sep. 23, 2009
Who’s Looking At Natural Gas Now? Big Oil Sep. 23, 2009
Rediscovering Natural Gas By Hitting Rock Bottom Sep. 22, 2009
With Little Clout, Natural Gas Lobby Strikes Out
by Peter Overby
September 24, 2009
http://www.npr.org/templates/story/story.php?storyId=113138252
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Natural Gas: Conventional Drilling Areas And Shale Basins
Map
For many years, natural gas companies have been producing the fuel from “conventional” gas reservoirs, relatively close to the surface and easily accessible. New shale gas production techniques have opened much wider areas for exploration, including the Marcellus area in Pennsylvania and the Barnett and Haynesville areas in Texas.
Notes
1. Conventional natural gas drilling areas are sized by 2008 natural gas production.
2. The Marcellus shale drilling area overlaps with the Devorian and Utica formations.
Source: Energy Information Administration, U.S. Department of Energy
Credit: Tom Gjelten, Alyson Hurt and Avie Schneider / NPR
Natural Gas: Traditional Drilling Areas And Shale Basins
September 24, 2009
Last in a series
There is almost a century’s worth of natural gas in shale rock formations all over the country, enough to make a significant change in the debate about America’s energy future. But as Congress moves toward writing a new national energy policy, natural-gas lobbyists have been mostly missing in action.
“Natural gas is the cleanest of the fossil fuels,” says Christopher Flavin, president of the Worldwatch Institute, a think tank that does environmental research. “I think nobody’s ever argued that. The big thing, of course, that’s changed is that shale gas has now opened up as this enormous resource.”
Natural gas emits half the carbon of coal. Flavin and some other top environmentalists want Congress to embrace natural gas as a transition fuel, to move the country away from coal and toward clean fuels that haven’t yet come on the market.
A Changing Landscape?
“I’m actually hopeful that we will see a change in the whole landscape of the politics around natural gas as a result,” Flavin says.
But the change hasn’t come yet on Capitol Hill. When the House passed its climate-change bill in June, the big winner was coal. The measure — called Waxman-Markey for its two lead sponsors, Reps. Henry Waxman (D-CA) and Edward Markey (D-MA) — would give electric utilities longer deadlines to keep burning coal, and would commit millions of federal dollars to research new technologies that would reduce coal’s carbon emissions.
U.S. Energy Consumption, By Fuel Type
Natural gas accounts for just 22 percent of the nation’s energy consumption. Natural gas advocates say that increased use would mean a cleaner environment and less dependence on foreign oil.
Waxman-Markey had no such incentives for natural gas, and those in the industry are frustrated. That’s because about a century’s worth of natural gas is available in shale formations all over the country.
“I know I had many conversations with representatives, trying to tell the natural gas story,” says Steven Malcolm, CEO of Williams Companies, a big independent producer of natural gas. “I don’t know why we didn’t fare better. I heard one representative say there wasn’t a critical mass of natural gas represented.”
Soon after Waxman-Markey passed, leaders of the natural gas industry met at an annual conference in Denver — where former Sen. Tim Wirth chewed them out.
Wirth used to represent Colorado and has long been an advocate of natural gas. Since 1998, he has been president of the United Nations Foundation, a nonprofit organization that works on climate change.
Wirth told the industry leaders that on Waxman-Markey, they blew it. “Every industry was deeply engaged, except one: Yours,” he said. “The natural gas industry, the industry with the most to gain and the most to offer, was not at the bargaining table.”
It’s an especially harsh verdict because the Waxman-Markey bill was drafted only after high-profile negotiations with proponents of coal, nuclear, oil, wind, solar and other energy sources.
What Kept Natural Gas Out?
Three things kept natural gas away from that table.
First of all: politics. The industry likes Republicans and historically has funneled most of its campaign contributions to the GOP. But now, of course, it’s the Democrats who control Congress.
The second problem: The natural gas industry has a lot of global-warming skeptics. Fred Julander, president of Julander Energy Co. in Denver, isn’t one of them, but he understands their perspective.
“They want to be honest brokers,” Julander says. “They don’t want to take advantage of something they don’t believe in, even if it improves their bottom line if it’s based on a falsehood — which is, I mean, is in some ways commendable, but in some ways is short-sighted.”
And the industry’s third problem is size. It’s made up mostly of medium to small companies that can’t compete on Capitol Hill.
Who’s Looking At Natural Gas Now? Big Oil
by Tom Gjelten
September 23, 2009
http://www.npr.org/templates/story/story.php?storyId=113142234
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September 23, 2009
Second in a series
In the energy world, Big Oil has long been the key player — with one notable exception: The natural gas business in the United States is dominated by small, independent companies. More than 80 percent of U.S. natural gas supplies are produced by companies with a market capitalization of less than $500 million. On average, these companies have only a dozen employees.
But their business is booming. New production techniques in recent years have enabled companies to extract natural gas from shale rock formations deep underground. As a result, estimates of accessible natural gas reserves have been revised dramatically upward. Small gas producers can justifiably take the credit for the transformation of their industry.
“The major oil companies haven’t been paying attention to the U.S. for decades,” says Robert Hefner, a 50-year veteran of the natural gas business with a company of his own, GHK Exploration, in Oklahoma City. “It’s been a lot of independents like us that have found all this gas, developed the technology and made it happen.”
Hefner attributes the proliferation of small natural gas companies to the fact that individual landowners generally retain the mineral rights to their own property. “In America, if [your] dream is to drill a well, you can go out and drill a well,” Hefner points out. “As a result, there’s been about three-and-a-half-million wells drilled in America over the years, versus about a million and a half for the rest of the world.”
Mom-And-Pop Businesses
Many of those natural gas wells are mom-and-pop operations, or began that way. Often they evolve into slightly larger companies, but even the publicly traded companies are generally small. Those that survive in the energy world have learned to leverage their size.
“We certainly don’t have an advantage when it comes to capital,” says J. Russell Porter, chairman and chief executive of Gastar Exploration, a Houston-based company with just 23 employees. “The large companies can spend a lot more money than we can. But we can be very quick on the draw, if you will, to seize an opportunity and buy into a new concept or a new area that we think could be prospective for natural gas. If we do that, we usually have a first-mover advantage.”
U.S. Energy Consumption, By Fuel Type
Natural gas accounts for just 22 percent of the nation’s energy consumption. Natural gas advocates say that increased use would mean a cleaner environment and less dependence on foreign oil.
Notes
Percentages do not total 100.
Source: Energy Information Agency, U.S. Department of Energy
Credit: Alyson Hurt / NPR
The agility of small companies is an important strength in a field where the ability to move fast is key to maintaining a competitive edge. But there is also a more practical reason small companies dominate the U.S. natural gas business. Typically, a new gas well produces in abundance in the year after it’s opened, but then production begins to decline. If a natural gas company is to keep production and revenue steady, it has to keep drilling new wells. The energy majors may not have the patience for that effort.
“Big oil companies like big projects that they can manage over 30 and 40 years,” says Nikos Tsafos, natural gas analyst at PFC Energy in Washington. “They prefer those over the project that you need to stay on top of every single day, every single month.”
There’s no dispute on that point from the oil majors. “With a company our size, we have to have a larger scale,” says Patrick McGinn, spokesman for Exxon Mobil’s exploration arm. “We have to have a potential resource that has more capability for us to go after.”
Managing Innovation And Risk
The natural gas industry, in fact, serves as a case study demonstrating how business strategies vary according to a company’s size. From small to large, energy companies manage innovation and risk in ways appropriate to their own circumstances.
Gastar Exploration, like many other natural gas companies, is currently focused on the Marcellus shale formation in the Appalachian basin, perhaps the most promising area for natural gas development in the United States today. But the company has so far limited its activity in the area to a few shallow wells in West Virginia, choosing to let a few larger gas companies take the lead in the area.
“We look at what they’re doing,” says Gastar CEO Porter. “[We] let them drill some of the early wells, try to determine which drilling techniques work the best, and then once they have done that trial and error and established a pattern that works, we can go in and design our wells without having that trial-and-error phase, which can be very expensive.”
The challenge of managing risk is important in any new industrial venture. In the natural gas business, the smallest companies in some ways can be the most adventurous. The new investments they make are tiny compared with what a large company would make. But they will still try to shift as much of the risk to their rivals as they can, just as Gastar is doing.
A Magnet For Big Oil
Paradoxically, the biggest energy companies follow a similar strategy, though in their case they try to shift risk to their smaller rivals. Shale production in the United States looks so promising right now that the big oil companies are thinking about getting back into the natural gas business. Exxon, for example, is looking at some possible shale “plays” in the United States, but — like Gastar — the company is biding its time before making a big move.
“We’ve taken a couple of years to really work on the technology that’s required to do the exploration and production of these kinds of shale plays,” says spokesman McGinn. “Doing the homework and doing the technology development takes some time for us, and we are willing to wait for that.”
Natural Gas: Traditional Drilling Areas And Shale Basins
The possibility of Exxon’s entry into the U.S. shale gas business would have major implications for a “micro-cap” company like Gastar Exploration, but Porter, Gastar’s CEO, is not overly concerned.
“We can live on the fringes if necessary,” he says. Or Gastar could just let the big oil companies take over some of its gas operations — for the right price.
“If Exxon came in and wanted to become a dominant player in the Marcellus shale, I’m sure there are lots of small operators who would be willing to sell out to them if they were willing to pay full value,” Porter says. “There’s always going to be another play for us to go invest in and start creating value all over again.”
It’s all part of the natural gas business game.
More About The Quest For Shale
Modern Shale Gas Development In The United States: A Primer by the U.S. Department of Energy (PDF)
The American Clean Skies Foundation is a nonprofit devoted to educating the public about natural gas and its relation to renewable energy and energy efficiency.
The Ground Water Protection Council monitors regulation of natural gas drilling and production in the U.S.
Worldwatch Institute, an independent research group based in Washington, D.C., conducts research about energy and climate change.
Rediscovering Natural Gas By Hitting Rock Bottom
by Tom Gjelten
September 22, 2009
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September 22, 2009
First in a series
In recent years, natural gas producers in the United States have struggled, mostly in vain, to be taken more seriously in the energy world. Big oil companies like Exxon had concluded that natural gas reserves in the United States were not sufficiently abundant to warrant big investments in exploration and drilling. When small independent gas producers argued otherwise, they were often ridiculed.
“I once had to tell the Exxon people in front of a congressional committee that I respectfully disagreed with every single thing they had presented,” recalls Robert Hefner, 74, a veteran gas producer from Oklahoma.
But the natural gas folks now have numbers on their side due to new successes in getting gas out of shale rock. Geologists have always known that shale rock, often found in combination with coal and oil deposits, holds substantial amounts of natural gas. If a piece of shale rock is broken and lit with a match, it will actually burn for a few moments with a small flame.
The shale gas was previously considered unreachable, but advances in drilling techniques have changed that assessment. The result is a dramatic increase in estimated natural gas reserves. The Potential Gas Committee, loosely affiliated with the Colorado School of Mines, reported in June that natural gas reserves in the United States are actually 35 percent higher than believed just two years ago, and some geologists say even that estimate is too conservative.
Drowning In Natural Gas
“I used to say the nation is awash in natural gas,” Hefner says. “Now I say we’re drowning in it.”
One area getting new attention is the Marcellus basin, a 400-million-year-old shale formation stretching from New York to West Virginia. That basin alone is believed to hold as much as 500 trillion cubic feet of natural gas, the equivalent of about 80 billion barrels of oil. (There are also large shale gas basins in Texas, Wyoming, Arkansas and Michigan.) It is not clear how much of the shale gas is recoverable, but the new production techniques have boosted all previous estimates.
Shale formations are deep underground — 6,000 feet or more — and the rock is relatively impermeable. Deep drilling is expensive, and in the past the amount of gas that could be reached was not considered sufficient to justify the cost.
Horizontal Drilling
In recent years, however, gas producers expanded the use of “horizontal” drilling. After boring more than a mile below the Earth’s surface to reach the shale layer, a drill operator will slowly “steer” the drill bit to one side, until it is heading sideways across the shale layer, thus achieving access to more of the shale than a traditional vertical well could provide.
Even so, the tightness of the shale rock would mean that relatively little of the trapped gas would seep into the pipeline. Gas producers therefore fracture the rock by forcing a water and sand mixture into the formation at very high pressure. This “water fracturing” technique opens millions of tiny cracks in the rock, enabling more of the gas to seep out.
Horizontal drilling and water fracturing are not new techniques in the oil and gas business, but only in recent years have producers used the procedures in combination to produce shale gas, and the results have been dramatic.
“It’s the biggest thing I’ve ever even heard of,” says Ray Walker, vice president of Range Resources, a gas exploration and production company. “It’s huge. The ability to produce these shale reservoirs is going to revolutionize this industry all over the world.”
Walker moved to Pennsylvania from Texas two years ago to direct his Fort Worth-based company’s exploration of the Marcellus basin. Since then, Range Resources has dug more than 40 horizontal wells in Pennsylvania, and several dozen more are in preparation. In Texas, Wyoming and other areas, it’s the same story.
Spreading The Word
“[Shale gas] is the most important energy development since the discovery of oil,” says Fred Julander, founder and chief executive of his own Denver-based gas company, Julander Energy.
But the word has not yet spread as far as gas advocates would like. Ian Cronshaw, the top gas analyst at the Paris-based International Energy Agency, highlighted the jump in estimated gas in his most recent energy outlook report, but noted that the news had gotten little notice. “If that had happened in the oil industry, it would be a headline item,” Cronshaw said at a recent meeting in Washington. “But because it happened in gas, nobody seems to be paying any attention.”
As an energy source, natural gas is cheaper than oil, and when burned it produces only about half the carbon dioxide that comes from burning coal. As long as natural gas reserves in the United States were believed to be nearing depletion, the fuel did not get much attention, but with the upward revision of estimated reserves, that has changed.
“Natural gas is the fuel that can change everything for our nation,” says Robert Hefner, who lays out his case in a new book, The Grand Energy Transition. Hefner argues that a big boost in the use of natural gas would dramatically lower greenhouse gas emissions and reduce the U.S. dependence on foreign oil. Much of the nation’s electrical power now generated by burning coal could instead come from natural gas, and a switch to natural gas-powered automobiles would produce dramatic results.
Horizontal Drilling And Water Fracturing: The Keys To Shale Gas Production
Gas embedded in shale rock formations deep below the Earth’s surface has long been considered inaccessible, due to high drilling costs. New horizontal drilling methods, combined with techniques to fracture the rock, have for the first time made shale gas production practical.
“If we were to convert half of our existing vehicle fleet [to natural gas], we would eliminate a little over half our oil imports,” Hefner contends. He and other natural gas advocates have been supported in recent months by environmental organizations.
“There’s a huge capacity of natural gas that is lying idle,” says Timothy Wirth, a former Democratic senator from Colorado who now heads the United Nations Foundation. “That makes absolutely no sense at all when what we’re trying to do is clean up the atmosphere.”
A ‘Transition’ Fuel
Natural gas is still a fossil fuel, and when burned it does produce greenhouse gases. Environmentalists working for the use of renewable energy sources nonetheless see natural gas as a transition fuel. One idea is to build mini-power generating stations, each connected to the natural gas pipeline infrastructure. A station attached to a hospital or a shopping mall could produce heat as well as electrical power, cutting energy costs dramatically.
“You can combine that with improvements in end-use efficiency and the development of renewable energy sources, and really see these as a partnership,” says Christopher Flavin, president of Worldwatch Institute, an environmental research organization.
“Even the International Energy Agency is saying the path for oil is downward, and suddenly we’ve got this very different picture for natural gas,” says Flavin. “I think it’s unfortunately not fully percolated into the understanding of what’s possible among policymakers. But I think as that takes hold in the next few years, it’s really going to change the game.”
Face-Off Over ‘Fracking’: Water Battle Brews On Hill
by Jeff Brady
May 27, 2009
http://www.npr.org/templates/story/story.php?storyId=104565793
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May 27, 2009
Environmentalists and the natural gas industry are getting ready for a battle in Congress over something known as “hydraulic fracturing.”
“Fracking,” as the industry calls it, involves injecting a million gallons or more of water and chemicals deep underground to pry out gas that’s locked away in tight spaces.
Environmentalists want the federal government to regulate the practice because, in some cases, fracking may be harming nearby water wells. The industry says regulation should be left up to the states.
Hydraulic fracturing allows drillers to dramatically increase production. The chemicals pumped underground with the water help drillers bore through the hard rock. The pressure used is tremendous — about 300 times a typical garden hose. That creates small cracks in the rock that allow gas to escape.
Steve Harris believes that pressure also ruined his well. He lives on 14 acres south of Dallas. Shortly after a driller fracked a nearby well, he and his neighbors noticed a change in water pressure.
“When you’d flush the toilet — in the back where the bowl is — water would shoot out the top of the bowl,” says Harris.
When he took a shower, there was a foul odor, and the water left rashes on his grandson’s skin. His horses stopped drinking from their trough, and there was an oily film on top of the water.
Similar stories are popping up around the country. In Ohio, a couple’s house blew up when gas from their water well filled their basement. A woman in Colorado blames her health problems on the chemicals used for fracking.
For the most part, people nearby don’t even know what chemicals are being injected into the ground — companies don’t have to report that.
Theo Colborn, who founded The Endocrine Disruption Exchange, based in Paonia, Colo., has spent years trying to figure out what chemicals the industry is using, with some success. She says removing the exemption fracking has been given from the Safe Drinking Water Act would bring some much-needed light to the industry.
“Believe me, we have a lot of good people within our federal agencies that would love to be working on this issue and addressing it. And they can’t — it’s hands-off right now,” says Colborn.
Generally, the Environmental Protection Agency regulates anything that could affect underground drinking water supplies. But in 2005, the industry successfully lobbied for the exemption for fracking from the Safe Drinking Water Act. That leaves regulation up to the states, which don’t have the kind of resources the EPA does.
“We have no evidence that hydraulic fracturing is causing problems,” says Lee Fuller, vice president of government relations for the Independent Petroleum Association of America. Without evidence of problems, he says there’s no reason to pile on more regulation.
“I think people need to have more faith in the regulatory agencies that are watching it very closely and their ability to respond to issues if they arise,” says Fuller.
But environmental groups are lobbying Congress to get that exemption overturned as hydraulic fracturing becomes increasingly common. Halliburton, which pioneered hydraulic fracturing, says about 35,000 wells are fracked each year.
Gwen Lachelt of the Oil and Gas Accountability Project says that politically, now is the time for those on her side of this issue to move.
“We have a different presidential administration. We have new regions of the country that are now experiencing oil and gas development,” says Lachelt. “New York City is a case in point. … Companies are wanting to drill natural gas wells in New York City’s drinking watershed.”
Several City Council members have expressed concern over that idea, and there’s been talk of finding a way to ban drilling in that region.
But the natural gas industry argues that more regulation will push up prices. To be sure, hydraulic fracturing is, in part, responsible for the low natural gas prices consumers are paying now.
Colorado School of Mines professor Geoffrey Thyne understands that. Still, he wants the industry to start encouraging more scientific research on fracking.
“Let’s prove to everybody what we’re saying — that’s there’s absolutely no danger — but let’s do it in a rigorous way we can defend,” says Thyne.
Thyne says the industry also could agree to stop using harmful chemicals in the process. Already, several of the largest drillers have agreed to stop using diesel, which can poison groundwater with benzene.