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If Shale Gas Is a Game-Changer, Why Are All the Major Producers Looking for Oil?

Jeff Rubin, Huffington Post
Curious, isn’t it, how some of the largest shale gas producers seem to be drilling more for oil these days? According to Baker Hughes Inc., a major oil services company, last week the number of natural gas rigs operating in the US fell for a fifth consecutive week to a ten-month low.

Just as the rest of the world seems set to emulate the American engineering breakthrough for harvesting shale gas, it looks like North American producers are scaling back. Do they know something that others don’t about this supposed game-changer for world gas supply?

What investors in these companies have already found is the unprofitable wellhead economics of shale gas at today’s natural gas prices. Weak cash flows have spurred investor concerns that companies may no longer even be able to meet wellhead break-even costs at those prices. While debt rollovers, new equity offering, and asset lease sales have financed the shale gas boom, disappointing cash flows, meanwhile, are leading some investors to jump off the bandwagon. And some industry commentators are suggesting that more than a few operators will face Chapter 11 bankruptcy protection over the next year, barring a huge rise in natural gas prices…
(11 January 2011)
Link to Bloomberg article on this – SO

Natural Gas: Continually Running Into New Obstacles

Gail Tverberg,
Natural gas would like to be bridge fuel as we deal with oil shortages, but it keeps running into obstacles.

A big obstacle is the fact that the price is now too low, relative to what it costs to extract the natural gas. Arthur Berman has shown based on his detailed analysis of drilling data that shale gas seems to need a much higher price than today’s $4 per thousand cubic feet to be profitable. I have shown something similar, looking at aggregate drilling costs. However, if the prices go up enough to be profitable for producers, natural gas will not look like nearly as good a “deal” for the homeowner.

But today I would like to talk about two new setbacks:

1) An EPA ruling against Range Resources regarding the contamination of two wells in Texas’ Barnett Shale.
2) An EPA analysis that says escaping greenhouse gases are more of a problem than previously assumed, particularly for well completions and hydraulic fracturing after completion.
The latter analysis is only an interim report, but adds further fuel to the debate about how “green” natural gas is. Indicated green house gas emissions based seem to be as high as coal emissions, although this is not explicitly stated in the report. There are no doubt steps that can be taken to reduce these emissions, but if the report is correct, without change, the indication is that natural gas is not very “green”…
(5 January 2011)

Pennsylvania’s Drilling Wastewater Released to Streams, Some Unaccounted For

Nicholas Kusnetz, ProRePublica
As gas-drilling operations proliferated in Pennsylvania’s Marcellus Shale over the past couple of years, most of the hundreds of millions of gallons of briny wastewater they produced was eventually dumped into the state’s rivers. Much of the rest is unaccounted for. That news, from a detailed look at the state’s management of drilling wastewater by the Associated Press, should come as no surprise to readers of this site.

As we reported in October 2009, Pennsylvania was largely unprepared for the vast quantities of salty, chemically tainted wastewater produced by drilling operations in the Marcellus, the gas-bearing shale formation that stretches under that state and into West Virginia, New York and Ohio. While the state Department of Environmental Protection called for the fluids to be sent through municipal treatment plants, those facilities are largely unable to remove the salts and minerals, also known as Total Dissolved Solids (TDS), from the waste.

As our story noted, abnormally high salt levels in the Monongahela River in 2008 corroded machinery at a steel mill and a power plant that were drawing water from the river. The DEP suspected that drilling wastewater was the cause and ordered upstream treatment plants to reduce their output. But months later levels spiked again…
(5 January 2011)

Fracking the life out of Arkansas and beyond

Rady Ananda,
The last four months of 2010, nearly 500 earthquakes rattled Guy, Arkansas. [1] The entire state experienced 38 quakes in 2009. [2] The spike in quake frequency precedes and coincides with the 100,000 dead fish on a 20-mile stretch of the Arkansas River that included Roseville Township on December 30. The next night, 5,000 red-winged blackbirds and starlings dropped dead out of the sky in Beebe. [3] Hydraulic fracturing is the most likely culprit for all three events, as it causes earthquakes with a resultant release of toxins into the environment. [4]

A close look at Arkansas’ history of earthquakes and drilling reveals a shocking surge in quake frequency following advanced drilling. The number of quakes in 2010 nearly equals all of Arkansas’ quakes for the entire 20th century. The oil and gas industry denies any correlation, but the advent of hydrofracking followed by earthquakes is a story repeated across the nation. It isn’t going to stop any time soon, either. Fracking has gone global.

Hydraulic fracturing (fracking) pumps water and chemicals into the ground at a pressurized rate exceeding what the bedrock can withstand, resulting in a microquake that produces rock fractures. Though initiated in 1947, technological advances now allow horizontal fracturing, vastly increasing oil and gas collection. [5] In 1996, shale-gas production in the U.S. accounted for 2 percent of all domestic natural gas production, reports Christopher Bateman in Vanity Fair. “Some industry analysts predict shale gas will represent a full half of total domestic gas production within 10 years.” [6] In 2000, U.S. gas reserve estimates stood at 177 trillion cubic feet, but ramped up to 245 tcf in 2008. These new technologies prompt experts to increase global gas reserve estimates ninefold. [7]…
(6 January 2011)