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February 2014Vol. 2 Number 221,500 copiesEnErgy

As drought worsens, oil booms

Economic potential from wind energy high in wetsern Oklahoma

Oil and gas industry keeping rural

communities in western Oklahoma afloat

(See AFLOAT, 2)

(See WIND, 2)

By Logan LaydenStateImpact OklahOma

PHOTO BY LIz LAmBerT

The sun sets behind a well north of Elk City on Highway 34.

Wind energy

Drought and ag-riculture don’t mix very well. So after three years of intense drought, you might expect rural western Oklahoma communities — where fortunes have traditionally hinged on the condition of wheat crops — to be dying on the vine.

But no. As The Jour-nal Record‘s Brian Brus

reports, many of these towns are adapting to a new economy with a little help from the oil

and gas industry.Elk City Chamber of

Commerce Economic Development Direc-tor Jim Mason said his community has blos-somed as it’s moved from agriculture to petroleum…

“The local grain el-evator has closed down

“Drought has had a big impact, but it hasn’t

devastated us.”

Jim masonelk cIty ecOnOmIc DevelOpment

DIrectOr

Wind energy is ex-panding in Oklahoma, especially in western parts of the state.

As a resource, Okla-homa’s wind ranks No. 9 in the nation, accord-ing to the American Wind Energy Asso-ciation. Oklahoma pro-duced more than 2,100 megawatts of electricity from wind in 2011 — about 7.1 percent of the power produced in the state, AWEA data show.

Several wind farms are under construction, and Gov. Mary Fallin SOUrCe: U.S DePArTmeNT OF eNerGY

The U.S Department of Energy and the National Renewable Energy Laboratory’s map of wind energy potential.

Oil & Gas COrnerWorLd – nation – stateU.S. rig count down 14 to 1,771

Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 14 this week to 1,771.

The Houston firm said in its weekly report Friday that 1,416 rigs were ex-ploring for oil and 351 for gas. Four were listed as miscellaneous. A year ago there were 1,759 active rigs.

Of the major oil- and gas-producing states, Texas gained three rigs, Kansas was up two and Ohio rose by one.

(See OIL & GAS COrNer, 3)

explOrinG enerGy, February 2014,

(continued from page 1) (continued from page 1)

WIND: Potential high AFLOAT: Oil booms

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Oil, gas powering manufacturing growth, API economist says

“Domestic oil and gas production also is powering

a resurgence in U.S. manufacturing as businesses take advantage of affordable

and abundant energy supplies here in the United States.”

John FeLmyamerIcan petrOleum InStItute

chIef ecOnOmISt

WASHINGTON, Feb. 7 (UPI) -- American Petroleum Institute chief economist John Felmy said increased U.S. oil and gas production is driving growth in the manufacturing sector.

Felmy said new drill-ing technologies like hydraulic fracturing and horizontal drilling have put the United States "in a position of strength" economically.

"Domestic oil and gas production also is powering a resurgence in U.S. manufacturing as businesses take advan-tage of affordable and

abundant energy sup-plies here in the United States," he said in a statement recently.

A recent report from the Department of Com-merce said the trade deficit for goods and

services in December was 12 percent worse than in the previous month, suggesting the global economy is slow to expand.

The report said, how-ever, that the United States imported 2.8 bil-lion barrels of crude oil in 2013, a 9.2 percent decline from the previ-ous year and the lowest total the mid 1990s.

Felmy said the U.S. government could capitalize on the energy gains by encourag-ing more exports in products like liquefied natural gas.

The Energy Depart-ment attributes the increase in U.S. oil and gas production to developments in shale formations.

Hydraulic fracturing, a controversial shale drilling practice known as fracking, is viewed as a threat to the environ-ment by critics.

John Felmy

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and commerce of-ficials hope the state will become a center for manufacturing turbines and towers. The jobs potential has led several state technical schools to

start programs to train and certify workers in repairing and servic-ing wind turbines.

Recently, uncer-tainty over a federal wind energy tax credit was cited in layoffs at a wind tower manu-facturer in Tulsa.

need to KnoW

AS A reSOUrCe, Oklahoma’s wind ranks No. 9 in the nation, ac-cording to the American Wind Energy Association.

OkLAHOmA PrO-DUCeD more than 2,100 megawatts of electric-ity from wind in 2011 — about 7.1 percent of the power produced in the state, AWEA data show.

and our cotton gin is now gone. A lot of our agriculturally related businesses do seem off,” he said. “Drought has had a big impact, but it hasn’t devastated us.”

Mason told the paper local schools are struggling to keep up with enrollment, the housing market is booming and tourism is up, and it’s because “a lot of farmers have benefitted from miner-al rights or wind farm development.”

The Journal Record

also talked to Okla-homa State University agricultural econom-ics professor Dave Shideler, who provides the hard evidence for what’s happening in Elk City and beyond.

For the 30 years preceding 2012, the biggest commodity shipped out of west-ern Oklahoma by rail was wheat. Drought ended that trend and silos stood empty, he said.

Now sand is the No.1 commodity being brought in and the No. 1 commodity shipping out is oil, Shideler said.

“A lot of people started converting the ag infrastructure to support another indus-try instead: oil extrac-tion,” he said. “Some grain silos started being used as sand storage for hydro-frac-turing, for example.”

Shideler says the economic adaptation wouldn’t have been possible without oil and gas drilling and that some towns are actually better off now than before the drought. However, he says a currently unanswered question is: What happens when the water the petro-leum industry relies on runs out?

After all, cattle and wheat need water, but drillers and their fami-lies need water, too.

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explOrinG enerGy, February 2014,

New appointment for Oklahoma congressman

Rep. Markwayne Mullin named to Energy Committee

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Oil & Gas COrnerWorLd – nation – state

West Virginia was down by four, Loui-

siana declined by three, while Alaska, North Da-kota, Pennsylvania and Wyoming each dipped

by one. Arkansas, Cali-fornia, Colorado, New Mexico, Oklahoma and Utah were all unchanged.

Photos from 2005, recently uncovered from court documents, show that flaming water existed years before hydraulic fracturing began in Parker County, Texas, the website Ener-gyInDepth reports.

A hydraulically fractured well in Parker County was the source of the infamous “flam-ing hose” scene in Josh Fox’s “Gasland Part II,” which has already been debunked. The photos below are from a water well just a half-mile away from the well that produced the “Gasland” hoax.

Range Resources, the company accused of well contamination (and then exonerated), did not start drilling in Parker County until 2009, nearly half a decade after the photos above were taken.

Despite anti-HF activists’ claims that the water only began flam-ing after Range began drilling, the evidence shows that naturally occurring methane in the region’s water sup-ply was the real culprit. Another photo, of a well drilled in 2003, shows a water well in the same region with two “dan-ger” signs warning of flammable gas.

Of course, a video of a man with a hose at-tached to a gas line is far more powerful than any scientific evidence — or

the blessings of Obama administration officials.

Recently, former Interior Secretary Ken Salazar again confirmed that there has not been “a single case where hydraulic fracking has created an environmen-tal problem for anyone.”

Salazar, along with President Obama’s former Energy Secre-tary Steven Chu, said in September that fracking was “safe.”

Both former Envi-ronmental Protection Agency Administrator Lisa Jackson and current

Energy Secretary Ernest Moniz have said that there is no evidence of groundwater contamina-tion due to fracking.

Add to that support the recent discrediting of anti-fracking activ-ists’ favorite study, and the entire anti-fracking movement appears to be going out with the wastewater.

Read the original article: http://wash-ingtonexaminer.com/photos-confirm-flaming-water-existed-before-fracking-in-texas/arti-cle/2543568.

Oil companies ea-ger to sell U.S. crude overseas are pushing Congress to relax a 39-year-old ban on those exports, but even reliable allies on Capitol Hill are wary.

House Republicans are far from unified on the issue, said Rep.

John Shimkus, R-Ill., during a Politico forum on energy policy Thurs-day. Shimkus described a kind of “schizophrenia” on Capitol Hill and in the

GOP caucus as lawmak-ers grapple with the potential consequences of lifting crude export restrictions.

“Crude oil is a basic commodity product. There’s an argument

that if it’s like corn and beans, crude oil should be able to price (and be sold) on the world mar-ket,” he said. But there are potentially greater domestic returns if the U.S. “could expand our refinery capacity and sell and export refined product,” instead of just the raw crude.

The Republican Study Committee’s en-ergy task force is exam-ining the issue. Rep. Joe Barton, R-Ennis, who

(continued from page 1)

Photos confirm flaming water existed before hydraulic fracturing in ‘Gasland’ incident

Republican lawmakers divided on oil exportsOklahoma Con-

gressman Makwayne Mullin has received a new appointment in the House. He has been named to the House Energy and Mineral Resources Subcommittee. The

2nd district U.S. Representative from eastern Oklahoma will no longer serve on the Subcommittee on Water and Power.

But Rep. Mullin says the new House assignment will benefit

his district because part of the Keystone XL pipeline from Cushing south to the Gulf coast runs through the district.

Exploring EnErgy, February 2014,

Legislation would involve counties in permitting, regulate noise

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Oklahoma Senate passes bill giving state more authority to regulate wind farms

By Joe WertzStateImpact OklahOma

Oklahoma is a ma-jor wind-energy state, but some landowners

and communities have turned their backs on turbines.

Some oppose wind farms for purely aes-

thetic reasons, or be-cause they feel fields of turbines will hurt their property value. Turbine noise and “shadow flicker” are big com-plaints, too, and some people have raised safety questions about ice being thrown from turbine blades, and how the turbines would fare in severe weather.

In Oklahoma, the fight for and against wind farms has been waged at the municipal and county level be-cause the state has little regulatory authority. But that could change, The Oklahoman‘s Paul Mon-ies reports:

Senate Bill 1559, by Sen. Cliff Branan, R-Oklahoma City, and SB 1276, by Sen. Charles Wyrick, D-Fairland, would strengthen an ex-isting law that requires wind developers to pay for decommissioning projects. The bills forbid

wind turbines within a quarter-mile of houses unless the owner gives consent. They also set up a process at the Depart-ment of Environmental Quality to regulate noise from wind turbines.

On February 13, SB 1559 passed the Senate Energy Committee, the paper reported:

Branan, the commit-tee’s chairman, said the bill gives more local control to counties to be involved in permitting for wind developments, implements setbacks

from homes and regu-lates noise from wind turbines. It also requires developers to post a $25,000 bond for each turbine to be redeemed when wind farms are decommissioned.

The committee heard from Calumet resident Tammy Huffstutlar, a vocal opponent of the Canadian Hills Wind Farm. In a September 2013 interview with StateImpact, Huffstut-lar said the wind farm turned her quiet farm into an industrial park.

Piedmont was home to one of the state’s most contentious wind-energy fights, but another tussle is brewing in Northeast-ern Oklahoma, near the town of Cetralia, Monies reports:

EDP Renewables North America wants to build a 59-turbine devel-opment near Centralia in western Craig County. The project is still in the planning stages, but it’s drawn opposition from several nearby landown-ers, including one whose family owns a 15,000-acre ranch.

But as Monies reports, the wind-energy industry is cautioning against leg-islation that might stifle development.

Vicki Ayres-McCune, executive director of the Panhandle Regional Economic Development Coalition, said SB 1559 could affect future wind farms planned for the Panhandle. She pointed to a proposed high-volt-age, direct-current elec-tric transmission project by Clean Line Energy Partners LLC that would take electricity from the Panhandle to utilities in Tennessee and the south-eastern United States.

“I just want to encour-age you, as you assess this policy, to make sure you don’t hinder devel-opment that will come to our state,” Ayres-McCune said. “Quite honestly, the transmis-sion that is slated to go in the Panhandle, the wind farms could be de-veloped in another state, and Oklahoma would lose out because of our policy.”

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Petroleos Mexicanos, the world’s fifth-largest oil producer, will begin its first production joint ventures as early as the end of this year, its chief executive officer said.

Mature fields are the “low hanging fruits” where Pemex, as the state-owned oil com-pany is known, can increase production in the short term, CEO Emilio Lozoya said in an interview. Through new technology and investment, Pemex expects to increase output in mature fields with proven reserves that currently only yield minimal crude, he said.

“On the exploration and production side, the deals that should close the earliest will likely be in mature fields,” Lozoya said by phone. “With enhanced recovery or secondary recovery techniques, we could ramp up the re-covery of those mature fields by multiples.”

Pemex, the third-largest oil exporter to the U.S., has seen production decline for nine consecutive years, as output fell to 2.52 million barrels per day in 2013 from 3.3 mil-lion barrels per day in 2004. Given a new law

Pemex in Joint Venture Talks to Boost Crude Outputenacted by President En-rique Pena Nieto on Dec. 20, the company intends to partner with foreign companies for the first time in 76 years to boost production to as much as 4 million barrels per day by 2025.

“We are already hav-ing important discus-sions with players, not only in deep water, but in mature fields and other areas in Mexico,” Lozoya said. “We hope to be announcing some deals towards the end of 2014, early 2015.”

Northern BoomPemex reported a find

of 150 million to 200 million barrels of oil in a deep-water well in the Perdido area east of the Texas-Mexico border last month. Lozoya said it will be able to partner with private companies to co-develop deep-water fields in the Gulf of Mexico.

North America will become the world’s cheapest source of en-ergy if Canada, Mexico and the U.S. pool their resources to reduce costs and generate industrial growth across the conti-nent, Lozoya said. The call for greater col-laboration to leverage North America’s oil and natural gas boom comes as leaders of the three nations prepare to gather

in Toluca, Mexico, for a summit tomorrow.

Mexico, the U.S. and Canada should work together on matters such as regulation and infrastructure to make the most efficient use of the continent’s growing energy production that’s reshaping global mar-kets, he said.

“More than a counter-balance” to the market influence of the Or-ganization of Petroleum Exporting Countries, or OPEC, “I see it as our own strength,” Lozoya said. “There’s not going to be any other region in the foreseeable future that will enjoy cheaper energy than North America.”

Nafta PrecedentThe combined output

of the three countries could exceed 20 million barrels a day within a decade, or about two-thirds of OPEC’s current production, according to data and projections from Citigroup Inc., the Canadian Association of Petroleum Producers and the U.S. Energy Infor-mation Administration.

Just as the three countries cooperated two decades ago to forge the North American Free Trade Agreement, a similarly collabora-tive economic structure around oil and gas could

be developed to so-lidify North America as a regional energy super-power, Lozoya said.

As with Nafta, which went into effect in 1994, the U.S., Mexico and Canada could avoid duplication of spending on infrastructure such as pipelines or processing plants to save money and bring petroleum products to market more quickly, Lozoya said. The quickest path for oil or gas to markets in Asia may be through Mexican ports, and U.S. transpor-tation systems would be a boon to anyone drilling in Mexico’s deep-water prospects, he said.

Shale ProductionA revolution in drill-

ing techniques and sustained investment due to higher oil prices has pushed the U.S. past Saudi Arabia and Russia as the world’s top producer of oil and natural gas, the EIA estimated in October. By 2016, U.S. crude production will expand to 9.5 million barrels a day, the highest since the peak in 1970, according to the agency. Growth in Canada spurred by drill-ing in Alberta’s oil sands may push output to 4.85 million barrels a day by 2020, according to the Canadian producers’s as-sociation.


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Energy industry can create millions of good paying jobs for Americans

State of the Union ReSponSe

If President Obama has decided to take unilateral action, he can fight income ine-quality by seizing this once-in-a-lifetime energy moment by allowing more oil and natural gas jobs that pay seven times the minimum wage, says Karen Moreau of the American Petroleum Institute.

The American ener-gy renaissance gives us a unique opportu-nity to revitalize our

economy and become a global energy super-power while helping Americans get back to work, Moreau says. The president has the opportunity to seize this moment by ap-proving the Keystone XL pipeline, open-ing up new areas for responsible energy development, and pulling back unneces-sary and costly new regulations. These pro-growth energy policies would cre-

ate millions of stable, good paying jobs, which is the Ameri-can people's number one priority. If the president is serious about combating income inequality, we must take full advan-tage of the opportuni-ties in energy that are before us.

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Karen Moreau

Chesapeake En-ergy has won a royalties case in a legal battle before the Oklahoma Court of Civil Appeals. The court overturned a decision against Chesapeake that had evolved into a class action case in Beaver

Chesapeake Wins Law SuitCounty.

The original claim was filed by John Fitzgerald of Kansas who had sued Chesa-peake in 2010. He claimed Chesapeake had underpaid the oil and natural gas royal-ties owed to him on its Oklahoma wells. It

was the Beaver County judge’s decision in February 2013 that prompted Chesapeake to appeal the decision. The Appeals Court ruled a class action suit was not the best way to settle the claims made against Chesapeake by Fitzgerald.

By Paul JosephThe First Annual

Great Plains Oil and Gas Expo comes to the new Pioneer Cellular Event Center on the SWOSU campus in early May.

Show Director Ruben Tourian says he’s expecting about a thousand people at the first expo.

Tourian, who’s also a Southwestern Okla-homa State University employee was charged with bringing an event to the campus. So Tou-rian’s came up with a win/win. It’s the height

1st Annual Oil and Gas Expo

Another first is coming to Western Oklahomaof the oil and gas boon in Western Oklahoma and the event center is brand new and needing events. So, he says it’s a can’t miss, especially for anyone in the oil and gas business.

Ruben Tourian says they began promoting the event and received a great deal of interest, and he decided to utilize the entire event center for expo booths. He says there could be as many as 65 booths throughout the event center.

Tourian says they’re currently putting together a speakers list to provide

attendees with a number of oil and gas topics with experienced speakers.

The expo is scheduled for Thursday, May 01 just before a large golf tourna-ment for oil and gas busi-ness people.

He says the timing for an oil and gas expo is perfect.

Tourian says booth spaces are $1500 dollars and the door charge to get into the expo is $15.

For more information on the first annual May 01 expo, Tourian says, they can call him at (405) 250-4483


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WASHINGTON – API President and CEO Jack Gerard congratulated U.S. Senators Mary Lan-drieu, D-La., and Ron Wyden, D-Ore., on their new committee chairmanships.

“Senator Landrieu’s chairmanship arrives at a critical mo-ment for U.S. energy policy,” said Gerard. “With her strong support, the people of Louisiana have played a major role in America’s energy revolution, and her deep understanding of energy issues will con-tinue to serve her well as chairman. We look forward to working with Senator Landrieu on smart policies that will strengthen Ameri-can energy security and harness the full economic potential of domestic oil and natu-ral gas production.”

Landrieu will take the gavel in the Senate Energy and Natural Resources Commit-tee, which oversees some of Washington’s most high-profile energy issues. Accord-ing to a recent study conducted by Harris Poll on behalf of API, eighty-three percent of American voters support increased production of domes-tic oil and natural gas resources. Strong majorities also agree that growing domes-tic oil and natural gas

production could cre-ate jobs (91%), help lower energy costs for consumers (81%), and strengthen America’s energy security (88%).

“Senator Wyden has shown a keen interest in emerging energy issues, and we will continue to en-gage in a constructive dialogue with him in his newest role,” said Gerard. “America is in the midst of an energy revolution that is driving job crea-tion, but higher taxes on energy could hurt production, cost jobs, and reduce revenue to the government.”

Wyden will chair the Senate Finance Committee, respon-sible for crafting tax policy. Eighty-two percent of Ameri-can voters agree that greater domestic oil and natural gas pro-duction could generate new revenue for fed-eral and state budgets. Strong majorities also

agree that higher taxes on oil and natural gas companies could drive up energy costs for consumers (66%) and negatively impact the nation’s job market and hurt our economy (61%).

Poll Methodology The study was

conducted December 19 – 22, 2013, by telephone by Harris Poll on behalf of the American Petroleum Institute among 1,008 registered voters across the country, with a sampling error of +/- 3.0%. A full methodology is avail-

able upon request. API is the only

national trade associa-tion representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy. API’s more than 580 members in-clude large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine business-es, and service and supply firms. They provide most of the nation’s energy and are backed by a grow-ing grassroots move-ment of more than 20 million Americans.

"What America is Thinking on Energy Issues" is a public opinion series pro-vided by API, offering data to inform policy discussions and en-sure policymakers and others know Ameri-cans' perspectives on key energy issues.

API congratulates senators on chairmanships

Releases poll of public support for U.S. oil & natural gas production

Sen. Mary Landrieu

Sen. Ron Wyden

By Paul JosephDon’t cap that

oil or gas well pre-maturely. Industry experts say when marginal wells are prematurely aban-doned significant quantities of oil remain behind.

One western Oklahoma oil and gas man says there may not be enough left for large oil or gas companies, but stripper wells have plenty for the inde-pendent oilman – maybe even half of its original content is still in the ground.

Mike Bradstreet with Dakota Oper-ating out of Yukon says there’s a lot of money yet to be made using stripper wells.

A stripper well or marginal well is an oil or gas well that is nearing the end of its economically useful life. In the U. S., a “stripper” gas well is defined by the Interstate Oil and Gas Compact Commission as one that produces 60,000 cubic feet or less of gas per day at its maximum flow rate. Oil wells are gener-ally classified as stripper wells when they produce ten barrels per day or less for any twelve-month period.

Many wells are marginally economic and at risk of being prematurely aban-doned. Bradstreet says when world oil prices were in the low tens in the late 1990s, the oil that flowed from mar-ginal wells often cost more to pro-duce than the price it brought on the market.

Bradstreet, who conducts a lot of business in Western Oklahoma, says the larger companies have high overhead and can’t afford to stick around a two or three barrel a day well, but an independent oil man can’t afford not to.

According to the industry, one out of every six barrels of crude oil produced in the U.S. comes from a stripper oil well and over 85

There’s Oil inThose

Wellspercent of the total number of U.S. oil wells are now classi-fied as such.

Records show that there are over 420,000 of these wells in America. Together, they produce nearly 915,000 barrels of oil per day, which is about 18 percent of total U.S. production.

Additionally, there are more than 296,000 natural gas stripper wells in the lower 48 states. They account for over 1.7 trillion cubic feet of natural gas, or about 9 per-cent of the natural gas produced in the lower 48 states.

Bradstreet says there are a lot of strip-per wells in the area. He says that’s just the nature of drill-ing – there becomes less production every day. He says the best day for an oilman is the first day he drills a new well. That’s why there are so many capped wells and stripper wells.

Stripper wells are most common in older oil and gas producing regions, most notably in Oklahoma, Texas, and back east in Ap-palachia.

Sometimes, larger oil and gas companies plug a well long be-fore necessary, leav-ing lots of production in the ground. Brad-street says when they do, it doesn’t make sense for it hurts the owner of the mineral rights. The people who have mineral interests are out possi-bly millions of dol-lars.

Bradstreet says for an independent working with strip-per wells, in Western Oklahoma, is a profit-able market area. He says there are nearby pipeline docks making production transfer convenient and af-fordable.

Research shows from 1994 to 2006, approximately 177,000 marginal wells were plugged and abandoned, rep-resenting a number equal to 42 percent of all operating wells in 2006. The prema-ture plugging costs the U.S. more than $3.8 billion in lost oil revenue.


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Hydraulic fracturing firms not to blame for water worries in Texas

The oil and gas industry has been the subject of a variety of fear-based attacks from left-wing activ-ist groups in recent years, and the last week has seen a new one arise. An activist group out of Boston, Ceres, issued a report on Feb. 5 that is aimed at raising fears among large investors in oil and gas companies that the companies whose stock they hold may have a hard time sourcing water for their hydraulic fractur-ing operations in the coming years.

Unlike most of the fright scenarios raised by conflict groups around hydraulic fracturing in recent years, the Ceres report at least has some ele-ments of truth around it. To wit:

Several of the large shale plays in Texas and around the country happen to be situ-ated in areas that are in drought conditions and/or have histori-cally been water-poor regions;

Hydraulic fractur-ing jobs use millions of gallons of water - between 4 and 5 million per well in the Eagle Ford region, for example;

Oil and gas opera-tors often find them-selves attempting to source water from the same underground

reservoirs used for agriculture, power gen-eration and municipal uses; and, Operators in the Eagle Ford Shale region used about 19 billion gallons of water for hydraulic fracturing in 2013;

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I’ve written about these and other realities ex-tensively at Forbes.com and other places in the past three years.

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ENER*Y · 2014-04-10 · Listen Live To The Exploring Energy Show weekdays from 8:05 a.m. - 9 a.m....

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