The industry recognizes an innovator; China enters the Wolfcamp; regulators held accountable; and another oil company picks up stakes for the Cline.
Mora County in northeastern New Mexico became the first county in the U.S. to pass an ordinance banning hydraulic fracturing. The Los Angeles Times reported that all residents in Mora County depend on wells as their only source of water, and landowners “turned their back on potentially lucrative royalty payments from drilling on their property and joined in a groundswell of civic opposition.”
According to the Times, there are 5,000 residents of the “poor, conservative” county, and 67 percent are Spanish speaking. County commission chair John Olivas told the Times the ordinance is not a referendum on oil and gas. Rather, he said, it “is all about water.” Olivas said 95 percent of people in the county support the ordinance adopted in April 2013.
The first city to outlaw fracking was Pittsburgh, Pa., in November 2010, according to the Times.
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George P. Mitchell, whose pioneering work in hydraulic fracturing and horizontal drilling launched a nationwide boom in shale production, was honored recently with a joint resolution of the Texas Senate and House of Representatives. Mitchell, 95, was not present, but his daughter, Sheridan Lorenz, encouraged state leadership to “redouble its efforts to position Texas to lead the transition to a clean energy economy by modernizing existing oil and gas regulations to better manage advanced drilling technologies, to continue expanding renewable energy markets, and to create incentives to use energy more efficiently.”
Earlier this year Mitchell also was honored with a “History Making Texan Award” by the Texas State History Museum Foundation “in tribute to his exemplary contributions to the oil and gas industry.”
The production techniques that Mitchell’s company, Mitchell Energy, pioneered in Texas have led to an increase in shale oil and gas production that has reversed a decades-long decline in U.S. output. While shale production is seemingly an overnight success, the Fort Worth Star-Telegram reported that Mitchell worked for years to find the right combination that make the dense rock give up its oil and gas in economic quantities.
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BVX Operating of Midland is turning its attention to the Cline Shale after a $26 million sale of 17 jointly owned producing wells on 608 acres in Andrews and Ector counties.
Bill Burns, president of BVX Operating, said the company plans to drill on 4,640 acres in Sterling County and divide its activities evenly between vertical and horizontal drilling. “The future, we really feel, is horizontal unconventional resources,” Burns told the Midland Reporter-Telegram.
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The Railroad Commission recently adopted amendments to the commission’s well construction requirements rule (Statewide Rule 13) that will clarify oil and gas well construction requirements for casing, cementing, drilling, well control, and completions.
Commissioner David Porter said, “Texas is blessed with an abundance of natural resources, including several prolific shale plays that will continue to fuel an unprecedented growth of exploration and production. It is vital that as the state’s top energy regulator, we update and enhance our rules to continue our agency’s proud legacy of environmental protection and public safety.”
The new rule amendments take effect Jan. 1, 2014, and apply to wells drilled on or after Jan. 1, 2014.
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Harvard alumnus Barry Smitherman, chair of the Texas Railroad Commission, emphasized the importance of including all stakeholders in developing predictable and sound energy regulations.
“Regulation needs to be predictable and transparent,” Smitherman told a Harvard Kennedy School alumni publication. “Rules that ‘come out of left field’ usually meet with great opposition, so it’s important to include all stakeholders.”
Before joining the Railroad Commission, he served on the Public Utility Commission of Texas, which regulates electricity, transmission, and telecommunications. With experience in the largest energy-producing state, Smitherman is a leading U.S. energy policymaker.
“The Kennedy School was good at helping us learn how to bring all stakeholders together to solve a problem,” he said. “Our bold initiatives need broad buy-in. Any time you try to run over a stakeholder group, it never works out well.”
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Pioneer Natural Resources agreed to sell for $1.7 billion a 40 percent interest in 207,000 acres in the Wolfcamp shale to the Chinese conglomerate Sinochem Group. The Van Horn Advocate said it’s the third largest single investment by a Chinese company in the U.S. oil industry.
The joint venture covers portions of Upton, Reagan, Irion, Crockett, and Tom Green counties in West Texas. Pioneer retains its current working interests in all horizons more shallow that the Wolfcamp.
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The Texas Railroad Commission, which regulates the state’s oil and gas industry, is not getting a new name or new ethics reforms to limit the campaign fundraising of its three elected commissioners. Senate Bill 212, the sunset bill for the agency, officially died in the final month of the 83rd session of the Texas legislature in Austin.
For the second session in a row (it also failed in the 82nd session in 2011), the House of Representatives killed chances of long-called-for reforms that would have provided more transparency for a confused public—the commission no longer has anything to do with railroads—and would have limited the practice of commissioners filling their campaign accounts with money donated by the oil and gas industry they regulate.
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The newly-formed Permian Basin Coalition met recently to plan a unified voice in Austin and to highlight the economic strength and job creation the oil and gas industry has brought to the Permian Basin and to the state of Texas. “Our population is one percent of the total state population,” Midland County commissioner Robin Donnelly told the Midland Reporter-Telegram, “but we paid 2.5 percent of the sales tax.”
The newspaper said the 59 counties in the West Texas portion of the Permian Basin sent $3.9 billion to the state in severance and sales taxes and to the Permanent University Fund and the Permanent School Fund. “Call it an energy renaissance, an energy revolution,” David Leaverton of Pioneer Natural Resources said. “There is so much this region shares. If people work together with one voice, great things will happen.”
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FROM THE RAILROAD COMMISSION OF TEXAS
[issued 30 May 2013]
The Texas average rig count as of May 17, 2013, was 831, representing about 49 percent of all active land rigs in the United States. In the last 12 months, total Texas reported production was 583 million barrels of oil and 7.4 trillion cubic feet of natural gas. The commission’s estimated final production for March 2013 is 58,472,484 barrels of crude oil and 524,643,816 MCF (thousand cubic feet) of gas well gas.
The commission derives final production numbers by multiplying the preliminary March 2013 production totals of 50,087,788 barrels of crude oil and 455,578,166 MCF of gas well gas by a production adjustment factor of 1.1674 for crude oil and 1.1516 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the RRC for April 2013 was 300,716,943 Mcf compared to 378,427,552 Mcf in April 2012. The May 2013 gas storage estimate is 328,988,802 Mcf.
The RRC Oil and Gas Division set initial June 2013 natural gas production allowables for prorated fields in the state to meet market demand of 8,779,071 MCF (thousand cubic feet). In setting the initial June 2013 allowables, the commission used historical production figures from previous months and producers’ demand forecasts for the coming month, then adjusted the figures based on well capability. These initial allowables will be adjusted after actual production for June 2013 is reported.
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FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
[issued 07 May 2013]
Falling crude oil prices contributed to a decline in the U.S. regular gasoline retail price from a year-to-date high of $3.78 per gallon Feb. 25 to $3.52 per gallon April 29. EIA expects the regular gasoline price will average $3.53 per gallon in the summer (April through September), down $0.10 per gallon from last month’s forecast.
The annual average regular gasoline retail price is projected to decline from $3.63 per gallon in 2012 to $3.50 per gallon in 2013 and to $3.39 per gallon in 2014. Energy price forecasts are highly uncertain, and the current values of futures and options contracts suggest that prices could differ significantly from the projected levels.
After increasing to $119 per barrel in early February 2013, the Brent crude oil spot price fell to a low of $97 per barrel in mid-April 2013 and then recovered to $105 per barrel on May 3. EIA expects that the Brent crude oil spot price will average $104 per barrel over the second half of 2013 and $101 per barrel in 2014.
The projected discount of West Texas Intermediate (WTI) crude oil to Brent, which increased to a monthly average of more than $20 per barrel in February 2013, fell to below $9 per barrel in April. EIA expects the discount to increase in the near term and average $13 per barrel in 2013 and $9 per barrel in 2014.
Natural gas working inventories ended April 2013 at an estimated 1.82 trillion cubic feet (Tcf), about 0.80 Tcf below the level at the same time a year ago and 0.13 Tcf below the five-year average (2008-12). EIA expects the Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.80 per MMBtu in 2013 and $4.00 per MMBtu in 2014, about 27 cents per MMBtu and 40 cents per MMBtu higher than forecast last month.
The projected increasing cost of natural gas relative to coal contributes to higher levels of electricity generation from coal. The share of total generation fueled by coal is forecast to increase from 37.4 percent in 2012 to 40.1 percent in 2013. The share of generation fueled by natural gas declines from 30.4 percent in 2012 to 27.8 percent in 2013.
—compiled by Garner Roberts