US Oil Drilling--A Gusher

[melman]

This story in today's Philly Inquirer sounds like VERY good news. Would love to get the comments of ceejay. No not cj the horseplayer but ceejay the oil man/horseplayer.

http://www.philly.com/philly/busines...st_fields.html

[Steve R]

http://www.aspousa.org/index.php/201...d-randy-udall/

http://www.theoildrum.com/node/3868

[melman]

Wanted to bump this up to get the views and thinking of ceejay who is in the business. I see that ceejay is back posting again.

[ceejay]

Mel,

Yes, the E & P world has changed.

The world of natural gas exploration changed a few years ago with the implementation of horizontal drilling and fracture technology to previously-impermeable shale rocks, here in the US. The exploration and production companies have been so successful that the price of natural gas has collapsed (about $24/barrel equivalent) with no realistic expectation of pickup anytime soon. In the business, we like to joke that natural gas at the well head is free.

Now that technology is moving into oil-rich shale rocks, and the world of oil exploration is changing. The impact of this on US and world oil markets can (and I think will) be tremendous. Right now I am working on a prospect that I wouldn't have touched 5 years ago. But, keep in mind that this technology is expensive. It would have cost about $700,000 to drill and complete a conventional vertical well, but horizontal will cost about $3 million.

Hydraulic fracturing is proven technology, that has been implemented for decades. Done correctly in properly cased wells I see little risk to water supplies.

[melman]

Thanks ceejay, good to see you back posting.

[highnote]

Originally Posted by ceejay

Hydraulic fracturing is proven technology, that has been implemented for decades. Done correctly in properly cased wells I see little risk to water supplies.

http://www.youtube.com/watch?v=dZe1AeH0Qz8

It will be interesting to see how ground water is affected. Bush/Cheney pushed through legislation that gave these drilling companies an exemption from the Nixon adminstrations "Clean Water Act". These drilling companies do not have to disclose the chemicals they are using.

Critics claim that a cocktail of over 500 chemicals are being used -- chemicals like Benzene -- that seep into the wager supply.

One man, in a video I saw, could light his tap water on fire!

I read an article today that there is plenty of oil sitting in Cushman (?) Oklahoma, the problem is there is no good way to get it to the refineries. Also, Canada is producing a lot of oil, but the pipelines are too small to move it as fast as it is needed. As a result, gasoline prices remain high.

So there are plenty of oil options.

In the county of my hometown in Ohio there is a huge natural gas boom going on. Landowners are getting offers of over $4,000 per acre to lease the mineral rights plus 17% of the profits.

However, it isn't clear who will be liable for environmental damage and cleanup after the oil drillers have extracted all the oil and moved on. Some of the companies being set up are shell companies. Once the oil has been extracted, the shell companies will fold and the landowners may be left holding the bag -- or more likely, taxpayers. Again, this is a recipe of privitizing the profits, but socializing the losses.

But I can certainly understand why a landowner in a poor county in Appalachia would want a quick $500,000 windfall. That's lifechanging to some of these people. The problem is, if all the people in the surrounding area have to suffer from air pollution, noise pollution and water contamination then it's not such a good deal for everyone else.

So there are some positives, but also some negatives.

[ElKabong]

Originally Posted by swetyejohn

http://www.youtube.com/watch?v=dZe1AeH0Qz8

Critics claim that a cocktail of over 500 chemicals are being used -- chemicals like Benzene -- that seep into the wager supply.

One man, in a video I saw, could light his tap water on fire!

.

John,
If you're speaking of GASLAND, the documentary, it was speculated that the glass of water that was "ignited" was a staged event. You can put chemicals in the glass to make water appear to be flammable.

And it's "Cushing" OK that you're thinking of.

[highnote]

Originally Posted by ElKabong

John,
If you're speaking of GASLAND, the documentary, it was speculated that the glass of water that was "ignited" was a staged event. You can put chemicals in the glass to make water appear to be flammable.

And it's "Cushing" OK that you're thinking of.

I've worked in the television industry long enough to know that you can't believe everything you see or hear on TV. The medium is all about the art of illusion, sensationalization and manipulation. People want to be entertained by seeing the train wreck.

This is why peer reviewed scientific studies are done.

One does wonder why the Bush/Cheney administration pushed through legislation that exempted drilling companies from Nixon's Clean Water Act. Why shouldn't drillers have to disclose the chemicals they are inserting into the ground to help extract oil?

I pour some used motor oil on the ground and I can get a hefty fine. These guys pump benzene and other undisclosed chemicals into the ground and get rewarded. What's the big secret?

Maybe it is 100% safe? If so, then why the exemptions?

But I don't want to come across as a Bush/Cheney basher. I'm not against domestic drilling or even against fracing. A lot of poor people in the county of my hometown are going to make a lot of money. Well, actually, those poor people who already own at least 100 acres and perhaps those who have property abutting those with 100 acres -- since it might be the case that some of the oil extracted will come from under the ground of the smaller acreage property owners and those smaller acreage owners will be entitled to some of the royalty money.

A big concern is that a lot of this drilling is not far from the Ohio River. Will these chemicals eventually make their way down river and eventually into the Gulf of Mexico?

If there is water contamination 25 or 1000 miles away and lawsuits are filed against the property owners and drillers, property owners may lose everything they made by having to defend themselves.

A lot of the oil/water/chemical compound is pumped into above ground evaporation pools where the chemicals are allowed to vaporize into the atmosphere. There are reports of ozone clouds drifting 250 miles from these pools. What if everyone who has to suffer the ill effects of these ozone clouds starts suing for damage to their health?

The liabilities are very high. This is not like drilling a hole and pumping out oil. This is a totally different technique and it is not clear that it is 100% safe.

It's a big issue that is going to get a lot bigger as more people find out what takes place.

I was reading my local newspaper about the land rush that is going on. Everyday at the courthouse 25 company reps fight over the 4 computer terminals to do research on the available property. The courthouse clerks say they have never seen anything like it. It's like a gold rush. And this gold rush is going to cover most of the northeast states. It's got huge potential to create a lot of wealth, but also a lot of environmental damage.

Stay tuned...

[plainolebill]

If anyone wants to read a good book about oil/gas get 'Oil 101' by Morgan Downey.

[ceejay]

swetyejohn,

FRAC fluid contained some nasty stuff, but I stand by my statement that done correctly in properly cased wells risk is minuscule. If these Wells are not properly cased it is another story. In Interviews I heard with the documentarian who made GASLAND I recall him saying he does not know the cause of the flammable water because he is not a scientist. Assuming the scene was not staged, my guess (and no more than a guess) would be bad cement jobs and the Wells were not properly cased.

Disposal of spent "produced" FRAC fluid does look like an issue that requires further regulation. As I understand, it is legal to take this to a municipal wastewater treatment plant which gets relatively little inspection.

I am not sure what the Tank batteries in Cushing has to do with this discussion. I believe that Cushing is the delivery location for the West Texas intermediate oil futures contract.

I am not a lawyer, and I certainly don't know how things work in Ohio, but I have never heard of a landowner or royalty owner who did not own a working interest in a well being sued for Wellsight remediation.

The "17% of the profits" is probably 17% of the gross (after production tax) not the net. Usually leasehold offers include a certain bonus with one royalty (using your example $4000 and 17%) and a lesser bonus with a higher royalty (say $3000 and 20%). The oil or gas company will always rather the mineral owner keeping the lower royalty and taking more cash, so which you think is the best decision for the royalty owner? I certainly recommend contacting a geologist and/or landman for professional advice if any of your friends or family are contacted for leases.

Nothing is without any risk. You know that. Even as you put it "drilling a hole and pumping out oil." And, we have been Fracing oil wells for decades: that's nothing new. the only thing new is the type of formation (shale, which in the past was considered just source rock) that they are Fracing.