the major news coming out of the oil patch this week was that of the largest weekly drop in the number of oil rigs operating since national rig records were first kept in 1987; Baker Hughes reported that there were 1543 rigs operating on January 30th, the lowest rig count since June 2010, down 90 rigs from the 1633 rigs that were operating on January 23rd....the count of offshore rigs was down by 5 to 49, while land based rigs fell by 86 to 1,482 and one rig was added to the 11 that were drilling in inland waters last week...the number of rigs drilling for oil in the US fell by 94 to 1,223, while gas drilling rigs were up by 3 to 319, and one rig considered unclassified was also added this past week....that leaves the US rig count down 242 rigs from last January 30th's 1785 rigs, with oil rigs down 199, gas rigs down 39, and miscellaneous rigs down 4...since the OPEC decision 9 weeks ago not to cut production in the face of an oil glut, US oil drillers have shut down 377 rigs, leaving the current rig count down 386 from its peak on October 10th
once again, drilling activity in Texas took the biggest hit this week, as drillers there shut down 58 more rigs, leaving 695 still operating there; in addition, Oklahoma drillers idled 10 more rigs, dropping their active count to 183, and Mississippi drillers shut down 9, leaving 54...meanwhile, 4 rigs were idled in both North Dakota and Wyoming, leaving them with 143 rigs and 42 rigs running respectively, and Ohio drillers shut down another 3 rigs, leaving 41 running in the state...otherwise, most states dropped a rig or two, while Pennsylvania and California each added a unit and the rig count in Arkansas was unchanged at 12….north of the border, the Canadian rig count was down by an even greater percentage, dropping 38 rigs from last week to 394, with the Canadian oil rig count down 23 to 200 and their gas rig count down 15 to 194...they are now running 214 less drilling rigs than they were a year ago on the same date, with their oil rigs down 204, and their gas rigs down 10 from a year ago...
the release of the rig count data on Friday had the perverse effect of precipitating a rally in oil prices, as they rose from below $45 a barrel on Friday morning to close the day at $47.47...in the larger scheme of things, however, it was not a large jump, as oil contracts have been trading in a $44 to $48 a barrel price range over the past two weeks, with one price spike to $50.20 a barrel last Thursday before prices fell to $46.21 at the close the same day..remember, these oil price quotes are for light sweet oil at or delivered to the depot in Cushing Oklahoma; other prices may differ, depending on transportation costs, specific gravity and sulfur content…for instance, Williston Basin sweet crude from N. Dakota was quoted at $28.19 a barrel mid week, while Williston sour had dropped down to $19.08 a barrel...
meanwhile, natural gas prices continued to slump this week despite the above normal demand for heating....starting the week with a Henry Hub contract price at $2.88 per mmBTU, they rose to close Tuesday at $2.98, then fell continuously to end the week at $2.69, the lowest in three years...considering that much of the early Marcellus fracking was undertaken when gas prices were ranging between $6 and $8 per mmBTU, it's easy to understand why many operators in the area are in a world of hurt..
otherwise, it was a pretty busy news week in the US fracking patches, with reports of local issues coming from almost every state...one of the most interesting was from Oklahoma, where a lawsuit from a resident of Prague who was injured in the November 5.6 earthquake has made its way to the Oklahoma Supreme Court; the woman i question is using the peer reviewed study by the USGS and university scientists to establish that operation of specific injection wells were responsible for that quake, something the oil companies knew was possible, and thus their actions represented “wanton or reckless disregard for public or private safety.”...needless to say, if such a lawsuit would ever be found for the plaintiff, it would mean a sea-change in the ability of injection well operators to do business, and possibly by extension to frackers themselves, as no one would want to fund an operation with that kind of liability hanging over their heads...
a Washington Post graphic on the Oklahoma quake situation, also published this week, shows that the circumstantial evidence that injection wells are causing the quakes is pretty clear....on the map of Oklahoma below, the locations and amounts of fracking flowback water in millions of barrels that were injected underground between 2011 and 2013 is shown as mustard colored cubes of various shades; superimposed on the same map is the location of all the earthquakes over 3.0 on the Richter Scale that occurred in the state since, with the graphic correctly representing a 5.0 quake as 100 times as large as a 3.0...considering that before 2008, the entire state was only seeing 2 earthquakes a year, it's hard to believe that anything other than those injection wells could be the cause...
across the state line in Kansas, the increase in earthquakes in that state was also the subject of an inquiry by the legislature there, as the state had gone from one felt earthquake a year to 115 over the past two years..in the widely covered testimony from the director of the Kansas Geological Survey, he attempted to make it clear that the increase was not caused by fracking itself, but that the disposal of the brine byproduct of the process could be the cause of increased seismic activity in the state...south of the Oklahoma quake swarm, anincrease in earthquakes in the Dallas area, all under 4.0 on the Richter Scale, was also the subject of a boisterous public meeting late last week...the Dallas suburb of Irving Texas has felt 26 earthquakes over the past month..
to the west of those states, Colorado, which has also seen an increase in fracking related quakes, is seeing a move by Republican legislators to compensate mineral rights ownerswhen local governments ban fracking, which you'll recall has happened in several Colorado towns...Coloradans had already seen five oil & gas related spills large enough to be reported to the state conservation commission in the first 14 days of the month, including one near Gill that covered an area of 300 feet long by 100 feet wide with a fine oil mist...meanwhile, the largest gas fracker in the state has instituted a freeze on wells already drilled in the Piceance Basin of that state....WPX Energy has about 20 wells already drilled and awaiting the fracking necessary to release the gas in those formations, and presumably they'll hold off on that till prices are better...since some companies operating in the Marcellus and Utica shales are also doing the same thing, it appears there's a lot of gas out there waiting to go to market...hopefully, there wont be a stampede for the door by all of them at the same time...
to the north the Wyoming Oil & Gas Conservation Commission agreed to strengthen fracking chemical disclosure requirements in response to citizen pressure..to that end, they reached an agreement with Halliburton, which will now resubmit applications covering their use of 24 chemicals...and in Washington state, regulators are upset that they've been kept in the dark about an oil spill from a railroad tank car that arrived at the largest refinery in the state 1,611 gallons short...apparently it had leaked that oil somewhere along the train’s 1,200-mile trip from North Dakota to the BP refinery near Ferndale on the west coast..
North Dakota itself has had a plethora of issues, including seeing their accidental oil patch death count already reaching last year's level in this fiscal year, boosted by 4 deaths in the first few weeks of January....you'll recall that last week they had discovered that 3 million gallons of fracking wastewater had leaked from a 4 inch pipeline 15 miles north of Williston in the heart of the Bakken oil patch, and that a large portion of that had flowed downstream to the Missouri river...this week the EPA reported that they've pumped a 4 million gallon mixture of fresh water, brine and oil from the area, which they conveniently intend to dispose of in injection wells…they also report that they’re building underflow dams, which allow water to flow underneath to contain oils that float on water’s surface,around the area in case water levels rise...another report on that same spill from the state industrial commission indicates that the pipeline that leaked had never been inspected, basically because the state can't afford to pay qualified inspectors what they'd get for similar jobs in the oil industry.... meanwhile, in Williston, where they were also dealing with effects of the oil spill upstream in the Yellowstone River, the city found the water safe to drink despite the fact that it smells and tastes of oil...the hydrocarbon content of their water measured 3.39 parts per billion, and apparently it would have had to reach 5 parts per billion before it was considered dangerous enough to shut down the intakes...by the way, sonar indicates that 50 feet of that breached pipeline that leaked that oil into the Yelllowstone still lies exposed on the riverbed...it was supposed to have been buried 8 feet below the river...
on the other side of the Mississippi river, landowners in Illinois are complaining that they missed out on all the fracking funbecause of the oil price bust…it was just a few months ago that the permitting process was in place in the state, and not a single company has applied for a fracking permit...facing budgetary problems, the state had hired 36 employees and five lawyers to handle the expected rush of applications, and only one company even inquired...the Illinois bureaucrats had been anticipating a oil boom that would create 10,000 jobs and related revenues...
closer to home, officials in West Virginia are having a bit more success auctioning off the rights to drill for oil and natural gas beneath state-owned lands, including waterways and a wildlife management area; just one deal has been finalized: a $6.2 million deal letting Antero drill below 518 acres at the Conaway Run Wildlife Management Area; but they've also already received bids on various tracts of the Jug wildlife land, 134 acres under Fish Creek and adjacent land in Marshall County, and under another 2-mile section of the Ohio River, south of the panhandle section of the river that they'd auctioned off previously….all this despite that on Monday, a gas pipeline in Brooke County just north of there exploded into a massive fireball shooting hundreds of feet into the air, large enough to register on National Weather Service radar screens, and melting the siding on nearby homes…like US the killing of civilians in Pakistan, West Virginia officials apparently consider explosions such as that expected collateral damage…
and while there were no gas explosions of note in Pennsylvania this week, there were a couple reports out by or concerning fracking in the state...first, the state Department of Environmental Protection released a long awaited study on radioactive matter produced by fracking, which found among other things that radium was a serious problem and should be added to the Pennsylvania spill protocol to ensure cleanups, that more studies of use of brine for dust suppression, de-icing and road stabilization should be conducted, and that the mining, drilling and burning of fossil fuels produces more hazardous radioactive waste material in a matter of days than the nuclear energy does in a year ..the upshot of this study is that they've decided to send it all to Ohio cause we'll take anything...then a new report from the Environment America Research & Policy Center showed that all types of frackers, from Chevron to the small firms, continuously violate rules intended to protect human health and the environment, citing several examples...compiling violation data for Pennsylvania frackers between January 2011 and August 2014, they found that the top 20 companies violated rules in such a way as to pose serious risks to workers, the environment and public health 1.5 times per day on average...
also in Pennsylvania, new governor Tom Wolf fulfilled a campaign pledge and issued an executive order banning fracking in state parks and forests...however, a closer reading of his writreveals that it only applies to new leases, which leaves most of the state parks and forests already opened up by his frack happy predecessor Tom Corbett still at risk...for the time being, low prices may serve the same purpose as an order from the governor, for in addition tothe Marcellus drilling cuts noted last week, Chevron announced this week that they'd cut 23% of ther Pennsylvania workforce "due to activity levels."..
in Ohio, we saw governor Kasich roll out his state budget proposal for the coming fiscal year, which included a proposal to eliminate income taxes for businesses which would be paid for by an increase in severance taxes on gas and oil...although the latter is probably the only Kasich proposal i'd support, it seems unlikely it would get through the gas and oil owned state legislature...also in the news was the letter to the US EPA that was drafted by Teresa Mills and signed by representatives of 40 Ohio environmental groups challenging the ability of the Ohio Department of Natural Resources’ (ODNR) to manage chemical reporting and emergency response of the state’s oil and gas industry that they work for...specifically, the letter note that Ohio law contradicts federal reporting requirements for hazardous chemicals and cites examples of occasions when the ODNR was asleep at the switch while unknown fracking chemicals were being spilled onto Ohio properties and into Ohio waterways....the letter calls on the U.S. EPA to allow hazardous chemical reporting to additional state agencies and specifically not to keep that information secret from the State Emergency Response Commission, as Ohio has done.
in another widely reported story, the state responded to a request for information from the AP on Bakken crude oil being transported on rail lines through Ohio each week, after earlier refusing to disclose it...as you'll recall, crude oil from the Bakken is very light and volatile and has a large percentage of highly flammable compounds, and a derailment of a train carrying that crude was responsible for 47 deaths in the Quebec city of Lac-Mégantic...according to these reports, railroad records indicate that up to 137 million gallons of Bakken crude oil come through Ohio each week on the way to East Coast refineries....since that's coming from North Dakota and most of it is heading for New Jersey, it's fairly likely that it passes through our area...