Texas Urges U.S. to Leave Gas Fracking Oversight to States

http://www.bloomberg.com/news/2011-06-02/texas-urges-u-s-to-leave-gas-fracking-oversight-to-states.html

By Joe Carroll

Rex Tillerson, chief executive officer of Exxon Mobil, called last week for the federal government to leave fracking oversight to the states.

The top energy regulator in the biggest natural-gas producing state urged federal officials to keep their hands off drilling techniques that environmental groups say contaminate drinking water.

Texas Railroad Commission Chairman Elizabeth Ames Jones said in an interview today that states are better-equipped than the federal government to regulate hydraulic fracturing, the practice of injecting high-pressure jets of water, sand and chemicals into rock formations to release gas and oil. Jones said yesterday that Texas won’t require drillers to disclose ingredients they regard as trade secrets.

“It would be a big mistake” for federal regulators to assume oversight of drilling for natural gas, Jones, 54, said today on the sidelines of a U.S. Energy Department meeting in Washington. She said she’s “hopeful” the panel “will come to the understanding that the one-size-fits-all federal oversight practice does not merit further attention.”

Jones, a Republican who has announced her candidacy for U.S. Senate, told a federal panel studying the risks of hydraulic fracturing that the practice, known as fracking, never has contaminated groundwater in Texas. She made her comments during a meeting of the seven-person task force established by Energy Secretary Steven Chu last month at the behest of President Barack Obama.

“It’s geologically impossible for frack fluid to migrate into the water table” because the process occurs too far underground, Jones said today.

‘Huge Gaps’

The task force includes former Central Intelligence Agency Director John Deutch, Environmental Defense Fund President Fred Krupp and Daniel Yergin, co-founder of Cambridge Energy Research Associates, a unit of IHS Inc. (IHS)

Texas and other gas-rich states such as Michigan, Arkansas and Wyoming are adopting fracking rules that “leave open huge gaps” that prevent landowners from discovering what substances are being injected into wells on their property, said Kate Sinding, a New York-based senior attorney at the Natural Resources Defense Council.

“The industry and some states are looking at the increasing concern about this practice at a national level and they want to find a way to forestall federal regulation,” Sinding said.

State vs. Federal

Anadarko Petroleum Corp. (APC) Chief Executive Officer James T. Hackett told the panel yesterday that states should take the lead in regulating gas drilling, rather than the federal government. His comments echoed Exxon Mobil Corp. (XOM) CEO Rex Tillerson’s call last week for the federal government to leave fracking oversight to the states.

“Every state has a right to permit a well, and every state has a right to insist on certain practices,” Hackett said during yesterday’s testimony.

Jones said the railroad commission, which oversees oil and gas exploration in the state, will begin formulating fracking- fluid rules in the next few months. The agency was directed to establish a disclosure process in a bill approved by a vote of 137-8 in the Texas legislature on May 29. The bill is awaiting Governor Rick Perry’s signature.

New York has temporarily banned fracking while it develops new rules to ensure the safety of water and air. In France, senators yesterday began discussing a proposed fracking ban. The debate follows a May 11 vote in the National Assembly to penalize drillers who use the technique with fines, jail time and cancellation of exploration permits.

Exxon’s Campaign

Exxon, the largest U.S. gas producer, is mounting an advertising campaign to defend fracking as environmentally safe, Tillerson told reporters May 25.

Michigan’s Department of Environmental Quality last week adopted fracking disclosure rules that allow drillers and service companies to shield proprietary mixtures from public view, Brad Wurfel, a spokesman for the agency, said in a phone interview from Lansing. Wyoming and Arkansas approved similar rules last year that also preclude disclosure of proprietary recipes.

Regulators in states that rely on oil and gas royalties and fees for a substantial portion of state revenue may feel too beholden to the energy industry to strictly enforce fracking rules, said Kenneth Green, the interim director of the center for regulatory studies at the American Enterprise Institute.

“Some states are going to be better at it than others,” Green said. “Those that derive a lot of revenue from the gas industry may be too lax.”

Gas Output Surges

U.S. gas output expanded 20 percent in the past five years as fracking enabled energy explorers to extract the fuel from shale formations in Texas, Louisiana, Arkansas and Pennsylvania previously considered impenetrable. In 2010, gas production from U.S. wells reached a level last seen in 1973, Energy Department figures showed.

Texas is experiencing a drilling boom as explorers including Exxon, Occidental Petroleum Corp. (OXY), Chesapeake Energy Corp. (CHK), Marathon Oil Corp. (MRO), Anadarko and Southwestern Energy Co. (SWN) expand the search for oil and gas. The number of rigs drilling wells in Texas jumped 27 percent in May from a year earlier, according to Baker Hughes Inc., an oilfield service provider that tracks rig usage.

Texas pumped 587 billion cubic feet of gas in March, or 31 percent of U.S. production, according to the Energy Department in Washington.

Shale formations have the potential to more than double the world’s gas reserves, the Energy Department said in an April 5 assessment. By 2035, gas trapped in shale may account for almost half the nation’s supply, the department said.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

China energy: supply vs demand

http://www.linkedin.com/news?viewArticle=&articleID=552138939&gid=2002439&type=member&item=56283983&articleURL=http%3A%2F%2Fblogs%2Eft%2Ecom%2Fbeyond-brics%2F2011%2F05%2F31%2Fchina-energy-battling-supply-and-demand%2F&urlhash=-T7i&goback=%2Egde_2002439_member_56283983

by Simon Rabinovitch

Try as it might to outrun market forces, China’s decision to hike electricity prices from June 1 shows that even the mighty mandarins in Beijing cannot ignore basic laws of supply and demand. They finally flinched late on Monday, announcing a roughly 3 percent increase in power prices for non-residential users in a move to combat looming blackouts by stimulating more electricity production and discouraging consumption.

The immediate prompt was the threat of a nationwide 40 gigawatt power shortage this summer, China’s worst since 2004. To put this in perspective, all the power plants in Sweden could be hooked up to the Chinese grid, but there still would not be enough electricity to fill the hole.

In diagnosing the cause of the shortage, the difference with 2004 is, well, illuminating. Back then, there was not enough power production capacity to meet surging demand. Electric companies invested handsomely in new plants in the subsequent years, so capacity is no longer a constraint. Instead today, the problem is the market – more specifically, the government’s unwillingness to let market conditions prevail in the power sector.

China gets about 70 percent of its electricity from burning coal, but it has little control over the price of the black rock and has watched anxiously over the past two years as it has soared. Wary of the inflationary consequences of passing the true cost onto end-users, Beijing has forced power producers to take the brunt of the pain, squeezing their margins by increasing electricity rates only incrementally.

China’s power plants faced perverse incentives: the more they produced, the more money they lost. Their solution, naturally enough, was to scale back output, even as demand continued to increase apace. With electricity consumption set to spike in the sweltering summer months, China had already ordered supply cuts to some industrial users.

By increasing prices on Monday, Beijing has tried to rejig the balance ever so slightly. It has given power producers a reason to fire up their plants again and it has cleared the way for a pass-through of coal costs to end-users that analysts estimate could add about 0.05 percent to inflation.

It was a small victory for market forces, enough to warm the hearts of Chinese investors, who pushed up the Shanghai stock index for the first time in nearly two weeks. The Shanghai Composite closed up 1.37 per cent on Tuesday.

But already, some analysts say that coal miners will respond to the higher electricity tariffs by increasing their prices in lock-step, putting the power sector back at square one. Beijing’s battle against laws of supply and demand is far from over.

Related reading:

Analysis: Power crisis may force China to face inflation demons, Reuters
China: are power cuts possible?, beyondbrics
Energy file, beyondbrics

Nigeria: House Throws Out PIB Bill

http://allafrica.com/stories/201106020937.html

Turaki A. Hassan and Hamisu Muhammad

The House of Representatives yesterday unanimously resolved not to pass the long-awaited controversial Petroleum Industry Bill popularly known as PIB.

Shortly after the lawmakers resumed consideration of the report of the joint committees on Petroleum (Upstream and Downstream), Gas Resources and Justice's report on the PIB that has been hanging for the past three years, Rep Halims Agoda (PDP, Delta) argued that it was only the House of Representatives that was still working on the petroleum sector legislation as the Senate has since stood it down.

Agoda maintained that it would be a waste of time for them to continue considering the bill since the Senate had stopped work on it saying, "what will be the result? There is need for us to find out what the other house is doing.

For his part, House Leader Rep Tunde Akogun (PDP, Edo) moved a motion that the House stands down consideration of the report.

The House had on many occasions unsuccessfully attempted to resume consideration of the report but was met with stiff opposition by members following allegations that the original bill presented by late President Umaru Musa Yar'adua in December 2008 has been watered down by Multi-National Oil Companies (IOCs) which were said not to be comfortable with some of the provisions.

Meanwhile, the Civil Society Legislative Advocacy Centre (CISLAC) said the killing of the PIB is another way of saying that they don't want stability of the Nigerian oil and gas industry, since the bill is all about engaging oil communities in dialogue, compensations on the environmental damage, reduction of corruption and irregularities in the sector.

Auwal Musa Rafsanjani, Executive Director of CISLAC said both the executive and the legislature have failed, adding that "we hope the next legislative session will act promptly about it.

"It was unfortunate even the legislatures from the oil communities have no concern about the bill because of their personal interest."

For Rev. David Ugolor of African Network for Environment and Economic Justice (ANEEJ), what happened is not only a setback for Nigeria but for President Goodluck Jonathan who appointed an incompetent petroleum minister.

Today, the members of parliament have confirmed to Nigerians that their parliament is not for the good of Nigeria but for their personal interest.

Crude Oil Futures Fluctuate in New York on Jobless Claims, Weaker Dollar

http://www.bloomberg.com/news/2011-06-02/crude-oil-futures-fluctuate-in-new-york-on-jobless-claims-weaker-dollar.html

By Moming Zhou

Crude oil fluctuated in New York as more Americans than forecast filled applications for unemployment benefits and as the dollar weakened, boosting the value of dollar-denominated commodities.

Jobless claims fell by 6,000 to 422,000 in the week ended May 28, Labor Department data showed, more than the 417,000 decline estimated by economists in a Bloomberg News survey. The euro rose against the dollar to the highest level in four weeks as German Chancellor Angela Merkel said she is committed to the currency.

“The jobless claim is negative, but the market seems to be recovering a little bit after yesterday’s sharp decline,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “We made a four-week low in the dollar and it certainly may provide a little support to oil.”

Crude for July delivery gained 1 cent to $100.30 a barrel at 9:09 a.m. on the New York Mercantile Exchange. Futures fell as much as 1 percent in earlier trading to $99.25. The contract dropped 2.4 percent yesterday, the biggest decline since May 11.

Brent crude for July delivery gained 52 cents, or 0.5 percent, to $115.05 a barrel on the London-based ICE Futures Europe exchange.

The euro strengthened 0.9 percent to $1.4456 as of 9:10 a.m. after increasing to $1.4486, the strongest level since May 6. A decline in the U.S. currency makes dollar-priced assets such as crude appear cheaper to investors using other currencies.

Inventory Report

An Energy Department report scheduled for 11 a.m. in Washington is forecast to show crude stockpiles declined 1.6 million barrels last week, according to the median of 13 analyst estimates in a Bloomberg News survey. The industry-funded American Petroleum Institute said yesterday supplies rose 3.5 million barrels to 371.6 million.

Gasoline inventories climbed 1.49 million barrels to 212.7 million, the API said. The Energy Department report may show a 900,000-barrel increase for the fuel, the survey showed.

Oil-supply totals from the API and the Energy Department have moved in the same direction 72 percent of the time over the past year. API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Economists in a Bloomberg News survey project a government report tomorrow may show payroll gains weakened in May, raising the risk that consumers will curb spending, the biggest part of the economy.

The Organization of Petroleum Exporting Countries is likely to keep production levels steady when it meets next week, according to a Bloomberg survey.

To contact the reporters on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

NATO Pressures Gadhafi With Tripoli Strikes .

http://online.wsj.com/article/SB10001424052702303745304576361180111461652.html

By JOE PARKINSON And SAM DAGHER

TRIPOLI, Libya—The North Atlantic Treaty Organization struck Tripoli with a series of air strikes early Thursday, as the alliance sought to build pressure on Colonel Moammar Gadhafi just hours after it extended its Libyan mission and another top official abandoned the regime.

Shortly after midnight local time, several blasts echoed across Tripoli. A NATO statement said the strikes hit a vehicle storage facility and a surface-to-air missile launcher in the capital and other targets, including ammunitions depots and radars, in other Gadhafi-held territory. Libyan government officials weren't available to offer information on the blasts.

The air strikes came shortly after NATO Secretary-General Anders Fogh Rasmussen said Wednesday the organization and its partner countries agreed to extend its Libya mission for a further 90 days. "This decision sends a clear message to the Gadhafi regime: We are determined to continue our operation to protect the people of Libya," the Secretary-General said in Brussels.

NATO efforts to pressure Col. Gadhafi were boosted by news from Rome, where Libya's top oil official and former prime minister Shokri Ghanem on Wednesday announced his defection in a news conference complaining of "unbearable" violence against civilians and stressing that he backed "the choice of Libyan youth to create a modern constitutional state respecting human rights and building a better future for all Libyans."

Journal Community

Mr. Ghanem's whereabouts had been unknown for several days, and his defection had been widely expected, although he didn't say whether he would join the rebel leadership in Benghazi. But the announcement comes just two days after the defections of eight army officers, including five generals and those in earlier weeks of senior diplomats and former ministers, adding political momentum to the uprising against Col. Gadhafi's 41-year rule.

Mr. Ghanem also said oil production in Libya is coming to a halt and the territory controlled by Col. Gadhafi in the west faces "very hard shortages" due to international sanctions.

Mounting pressure on the Gadhafi regime was welcomed by the rebel leadership in Benghazi, eastern Libya, on Wednesday, but the rebel stronghold was later hit by a car bomb in the parking lot of a hotel hosting most foreign diplomats including the American envoy, security and military advisers, U.N. officials and some Western media outlets. There were no casualties, said the rebel leadership, which swiftly blamed it on "sleeper cells" tied to Col. Gadhafi.

"He's sending messages," Mahmoud Shammam, a member of the executive committee of the rebels' National Transitional Council told reporters. "We were expecting something."

Although a car bomb had exploded near the central courthouse in Benghazi last month, this was the first bombing of a facility hosting foreigners since rebels took control of the east in late February.

The Gadhafi regime, pressured by international sanctions and a NATO bombing campaign that is entering its third month, is fighting rebel forces on three fronts—in the enclave around rebel-held Misrata, to the west in the Nafusa mountains and against the main opposition forces in Brega in Libya's east.

In Washington on Wednesday, House Republican leaders abruptly canceled a vote on a resolution forcing a U.S. withdrawal from Libya amid signs an unusual alliance of liberals and conservatives would approve the measure, indicating Congress' growing dissatisfaction with the extent of U.S. military operations overseas.

Write to Joe Parkinson at joe.parkinson@dowjones.com and Sam Dagher at sam.dagher@wsj.com

Marathon Oil to pay $3.5 billion for Texas shale acreage

http://www.latimes.com/business/la-fi-marathon-20110601,0,5023097.story/

By Steve Gelsi

Reporting from New York— Marathon Oil Corp. said Wednesday that it planned to buy acreage in the natural gas-rich Eagle Ford shale region of Texas in a deal valued at $3.5 billion, accelerating efforts to build up its exploration and production portfolio as the Houston company moves to spin off its refining unit.

Marathon will buy properties held by Hilcorp Resources Holdings, a partnership between affiliates of Hilcorp Energy Co. and Kohlberg Kravis Roberts & Co. KKR said its stake in the deal was worth about $1.13 billion.

The deal underscores energy companies' attention focused on Eagle Ford shale, prized because of its liquid resources, which fetch higher market prices than "dry" natural gas.

Along with other transactions expected to close by the end of 2011, its Eagle Ford acreage position in Texas is expected to more than double to 285,000 acres, Marathon said.

The deal includes about 141,000 acres in Atascosa, Karnes, Gonzales and DeWitt counties in Texas, plus an opportunity to buy about 14,000 additional acres through tag-along rights and other leasing.

The Eagle Ford deal comes on the heels of Marathon's board voting to approve spinning off of its refining and marketing business through the distribution of shares of Marathon Petroleum Corp. to holders of Marathon Oil common stock.

Marathon Petroleum will become an independent company trading on the New York Stock Exchange under the symbol MPC.

Gelsi writes for MarketWatch.com/McClatchy.

Libya's oil minister defects to 'fight for democracy'

http://www.guardian.co.uk/world/2011/jun/01/libya-oil-minister-defects-ghanem

Shukri Ghanem told reporters in Rome: 'I have left my country and my work to unite myself with the choice of young Libyans to fight for a democratic country.' Photograph: Gregorio Borgia/AP

Libya's oil minister Shukri Ghanem has defected and now supports the rebels, striking another blow to Muammar Gaddafi, as Nato and its partners decided to extend their Libyan mission for another 90 days.

Ansa news agency quoted Ghanem saying in Rome: "In this situation you can no longer work, so I have left my country and my work to unite myself with the choice of young Libyans to fight for a democratic country."

Ansa said he told its reporters he had left the regime two weeks ago and arrived in Rome on Tuesday. The Italian foreign ministry said it had no comment.

For several weeks, Libyan officials have insisted Ghanem, who as head of the National Oil Corp serves as Libya's oil minister, was on a business trip. Last week, Libya's foreign ministry said he would represent the Gaddafi government at the Opec meeting in Vienna next week.

Eight top Libyan army officers, including five generals, were presented to reporters in Rome this week by the Italian foreign ministry days after they fled Libya.

Another 13, including a colonel and four commanders, have fled to neighbouring Tunisia, the official Tunisian news agency reported.

Meanwhile in Brussels, Nato and its partners in the military campaign to protect Libyan civilians decided to extend their mission for another 90 days, an official said on Wednesday.

"This decision sends a clear message to the Gaddafi regime: we are determined to continue our operation to protect the people of Libya," said Nato's secretary general Anders Fogh Rasmussen.

The move came during a meeting of ambassadors from the 28 Nato countries and ambassadors from the five non-Nato countries participating in the Libya campaign – Jordan, Qatar, Sweden, the United Arab Emirates and Morocco, according to Carmen Romero, Nato's deputy spokeswoman.

The military alliance took over command of the operation on 31 March after difficult negotiations among its members.

Unanimity is required for action, and the operations to enforce a no-fly zone and use air power, based on a UN security council resolution that calls for the protection of civilians, were authorised for an initial 90 days. That would have expired on 27 June. The decision to extend the campaign was taken nearly a month ahead of time to allow the participating countries to do their internal planning, Romero said.