Posts Tagged ‘Energy’
Louisiana’s shale gas bonanza – Financial Times
After their father died 15 years ago, Mike Smith’s six siblings wanted nothing to do with the tract of land the old man had gradually acquired from his income as a pipeline welder. The land, 365 acres of it, lay in a quiet and sparsely populated corner of Louisiana: nothing but pine trees for miles around. In a county so poor that about a fifth of the population lives below the poverty line, the bequest wasn’t good for much.
But for Smith, a tall, slim man of 61 with a kindly face, DeSoto parish was home. “That’s where my roots are. I wanted the land,” he says. Smith paid $300 an acre – $109,500 in total – to his siblings. And while he kept his home in Shreveport, 40 miles to the north, he travelled down to DeSoto regularly to walk his acres, or hunt squirrel and deer. His plan was to sell the trees for lumber one day, and use the income to fund his retirement. Until then, he would pass the years frugally, making a living as a property valuer and sharing his 50-year-old house with two dogs and a cat.
All the while, the county seat of Mansfield, home to 5,500 people, withered. With only coal and timber to support it, the parish could not even repair its roads. Across from the courthouse are telltale signs of the desperation that began to claw at the area – the dusty, vacant windows of the hardware shop and cinema, and beyond them the Community Bank of Louisiana. It opened its doors in 1901 but is now so run down that the visitor struggles to make out what colour the wallpaper would once have been. The phones are from another age and an old standard lamp in an upstairs office blinks fitfully into life and then goes dark again.
“When I came in, the town was dead. There was no sign of economic growth here,” remembers Curtis McCoy, mayor for the past seven years.
All that changed in 2008, when oil and gas companies began knocking on doors, offering locals a couple of hundred dollars an acre if they would lease their land for prospecting. Some, like Jim May, executive director of the DeSoto Chamber of Commerce, jumped at the offer and signed a three-year lease on his 100 acres for a total of $25,000. Nobody had shown any interest in the land in decades, he reasoned. Six months later, the goldrush was at its height and prices leapt to $25,000 or even $30,000 an acre. “I lost $2.5m,” says May with a wistful smile.
People went to bed one night and woke up the next morning to find themselves rich,” says McCoy. That included Mike Smith, whose land was so sought after that in May 2008, PetroHawk Energy, a small, independent oil and gas company, handed him a $1.4m signing bonus in return for permission to drill for natural gas on his late father’s property. “It changed my whole life,” he says. “I don’t have to cut my trees any more.”
Smith is sitting behind the wheel of a new gold Cadillac, parked outside this year’s Haynesville Shale Expo in Shreveport, an event that has attracted 5,000 people, most of them landowners who missed the leasing frenzy and are eager to see whether they still have time to cash in. It was Smith’s dream since he was a boy to own a new Cadillac, like the one his father always made sure his mother drove. He paid $52,000 cash for the car. “That was the first investment. It kind of hurt a little bit,” he smiles. A small wooden cross dangles from the rearview mirror.
. . .
The prize that drew companies such as PetroHawk to Smith’s impoverished corner of Louisiana is known as shale gas. Smith’s acres sit on top of the Haynesville Shale, named after the town near which the prospect was discovered – a seam of black rock between 150 and 300ft thick that lies hundreds of feet underground and extends across 3,400 square miles of Louisiana and Texas. Trapped inside this rock are vast quantities of natural gas – estimated at between 112 and 245 trillion cu ft. At the upper end of this range, Haynesville gas could meet the US’s energy needs for about 12 years.
This isn’t the most extensive prospect of its kind in the US; that distinction belongs to the Marcellus Shale in Pennsylvania and neighbouring states, which is reckoned to cover 65,000 square miles, an area larger than Greece. But based on the wells drilled so far, the Haynesville may well turn out to be one of the most productive. “It was the Haynesville that turned the tide on how big shale could be for US supply,” says Jeff Fisher, senior vice-president of production at another US company, Chesapeake Energy.
Indeed, the impact is expected to extend well beyond America’s borders. Industry consultants at PFC Energy in Washington, DC, believe that developing supplies trapped in shale deposits could more than quadruple the world’s known gas reserves. “This is a transformational event,” says its chairman, Robin West. His consultancy puts global reserves of natural gas from “unconventional” sources such as shale beds at 3,250 trillion cu ft, a total based on 1997 geological estimates that he believes will rise as the techniques available to extract the gas improve. By comparison, global reserves of natural gas from “conventional” sources total 620 trillion cu ft. Not all of these shale reserves will ever be tapped, but the technology to do so is available and, for the first time, companies are putting it to use.
To extract gas from shale involves drilling down, sometimes thousands of feet, and then sideways as much as 4,500ft. Once a well has been drilled, water with fine grains of sand is pumped through at high pressure; this fractures the shale and leaves behind the grains of sand, which prop open the fissures in the rock and allow the gas to escape.
Using this technique, Devon Energy, an Oklahoma-based oil and gas independent, sank a well last autumn in the Texas portion of the Haynesville shale (until then thought to be a low point in the “play”) that produced a flow rate of more than 30 million cu ft of gas per day, the highest ever from that area. This result led others to redraw the borders of the gas field, suggesting it was even more extensive than originally believed. “No one, us included, knows how that play is going to evolve,” says Larry Nichols, Devon’s chief executive. “We did not anticipate it would grow this much. Now we realise there are more opportunities for onshore growth than we ever thought would be possible.”
This realisation marks a volte-face for America’s oil and gas companies. By the 1970s, the majors had decided that onshore reserves of oil and gas in the US had been tapped, so they sold much of their acreage in order to focus on offshore and international exploration. This left the independent explorers, which drill 90 per cent of onshore wells in the US, to pursue what was left. “For years we have known that the United States holds vast quantities of so-called tight gas or shale gas – natural gas locked in formations denser than concrete,” Rex Tillerson, ExxonMobil’s chief executive, said in October. “But we did not have the technology to extract this so-called tight gas in a cost-effective way. Until now.”
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Obama’s State of the Union’s Energy Pitch – Chicago Tribune
Pitching his energy and climate agenda to a joint session of Congress last February, President Obama warned of the “ravages of climate change” and asked the House and Senate to send him legislation to send me legislation “that places a market-based cap on carbon pollution and drives the production of more renewable energy in America.”
Tonight, in his State of the Union address, Obama pushed essentially the same energy agenda with language that was decidedly more … aisle-crossing.
He won bipartisan applause by emphasizing plans to build new nuclear plants, develop so-called “clean coal” technology and drill for oil and gas offshore – initiatives favored by many Republicans, and a clear attempt to attract GOP support for a Senate energy and climate bill.
The President didn’t explicitly mention a carbon cap – a key feature of his efforts to lead a global effort to combat climate change, and which many Republicans oppose because they say it would kill American jobs – though he did call for “comprehensive” energy and climate legislation, which, in Washington code, means Obama is still pushing for greenhouse gas emissions limits.
He also acknowledged “those who disagree with the overwhelming scientific evidence on climate change.”
In language that echoed his campaign rhetoric of his 2008 opponent, Republican Sen. John McCain of Arizona, Obama told those climate skeptics: “Here’s the thing: Even if you doubt the evidence, providing incentives for energy efficiency and clean energy are the right thing to do for our future – because the nation that leads the clean energy economy will be the nation that leads the global economy.”
The language won cheers from Republicans, at least in the drilling and nuke sections. Environmentalists liked it, too; Frances Beinecke, the president of the Natural Resources Defense Council, called the speech “a clear and unmistakable call to action” on the climate bill that appears stuck in a legislative queue behind health care, a jobs bill and financial regulation.
Here are the key paragraphs on energy policy:
Next, we need to encourage American innovation. Last year, we made the largest investment in basic research funding in history – an investment … an investment that could lead to the world’s cheapest solar cells or treatment that kills cancer cells but leaves healthy ones untouched. And no area is more ripe for such innovation than energy. You can see the results of last year’s investments in clean energy – in the North Carolina company that will create 1200 jobs nationwide helping to make advanced batteries; or in the California business that will put 1,000 people to work making solar panels.
But to create more of these clean energy jobs, we need more production, more efficiency, more incentives. And that means building a new generation of safe, clean nuclear power plants in this country. (chamber-wide ovation) It means making tough decisions about opening new offshore areas for oil and gas development. It means continued investment in advanced biofuels and clean coal technologies. And yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.
I am grateful to the House for passing such a bill last year. And this year, this year, I am eager to help advance the bipartisan effort in the Senate. I know there have been questions about whether we can afford such changes in a tough economy. I know that there are those who disagree with the overwhelming scientific evidence on climate change. But … But, here’s the thing: Even if you doubt the evidence, providing incentives for energy efficiency and clean energy are the right thing to do for our future – because the nation that leads the clean energy economy will be the nation that leads the global economy. America must be that nation.
And, for comparison, the similar passages from Obama’s 2009 speech:
We know the country that harnesses the power of clean, renewable energy will lead the 21st century. And yet, it is China that has launched the largest effort in history to make their economy energy efficient. We invented solar technology, but we’ve fallen behind countries like Germany and Japan in producing it. New plug-in hybrids roll off our assembly lines, but they will run on batteries made in Korea.
Well I do not accept a future where the jobs and industries of tomorrow take root beyond our borders – and I know you don’t either. It is time for America to lead again.
Thanks to our recovery plan, we will double this nation’s supply of renewable energy in the next three years. We have also made the largest investment in basic research funding in American history – an investment that will spur not only new discoveries in energy, but breakthroughs in medicine, science and technology.
We will soon lay down thousands of miles of power lines that can carry new energy to cities and towns across this country. And we will put Americans to work making our homes and buildings more efficient so that we can save billions of dollars on our energy bills.
But to truly transform our economy, protect our security and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy. So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America. And to support that innovation, we will invest $15 billion a year to develop technologies like wind power and solar power; advanced biofuels, clean coal and more fuel-efficient cars and trucks built right here in America.
As for our auto industry, everyone recognizes that years of bad decision-making and a global recession have pushed our automakers to the brink. We should not, and will not, protect them from their own bad practices. But we are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win. Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented the automobile cannot walk away from it.
None of this will come without cost, nor will it be easy. But this is America. We don’t do what’s easy. We do what is necessary to move this country forward.
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