Northeast Petrochemical Conference, Pittsburgh, June 2019

From an Article by Nick Cunningham, OilPrice.com, June 24, 2019

Fracking has been an “unmitigated disaster” for shale companies themselves, according to a prominent former shale executive.

“The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions,” Steve Schlotterbeck, former chief executive of EQT, a shale gas giant, said at a petrochemicals conference in Pittsburgh. “In fact, I’m not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change.”

He did not pull any punches. “While hundreds of billions of dollars of benefits have accrued to hundreds of millions of people, the amount of shareholder value destruction registers in the hundreds of billions of dollars,” he said. “The industry is self-destructive.”

The message is not a new one. The shale industry has been burning through capital for years, posting mountains of red ink. One estimate from the Wall Street Journal found that over the past decade, the top 40 independent U.S. shale companies burned through $200 billion more than they earned. A 2017 estimate from the WSJ found $280 billion in negative cash flow between 2010 and 2017. It’s incredible when you think about it – despite the record levels of oil and gas production, the industry is in the hole by roughly a quarter of a trillion dollars.

The red ink has continued right up to the present, and the most recent downturn in oil prices could lead to more losses in the second quarter.

So, questionable economics is not exactly breaking news when it comes to shale. But the fact that a prominent former shale executive – who presided over one of the largest shale gas companies in the country – called out the industry face-to-face, raised some eyebrows, to say the least. “In a little more than a decade, most of these companies just destroyed a very large percentage of their companies’ value that they had at the beginning of the shale revolution,” Schlotterbeck said. “It’s frankly hard to imagine the scope of the value destruction that has occurred. And it continues.”

“Nearly every American has benefited from shale gas, with one big exception,” he said, “the shale gas investors.”’

The industry is at a bit of a crossroads with Wall Street losing faith and interest, finally recognizing the failed dreams of fracking. The Wall Street Journal reports that Pioneer Natural Resources, often cited as one of the strongest shale drillers in Texas, is largely giving up on growth and instead aiming to be a modest-sized driller that can hand money back to shareholders. “We lost the growth investors,” Pioneer’s CEO Scott Sheffield said in a WSJ interview. “Now we’ve got to attract a whole other set of investors.”

Sheffield has decided to slash Pioneer’s workforce and slow down on the pace of drilling. Pioneer has been bedeviled by disappointing production from some of its wells and higher-than-expected costs.

But, as Schlotterbeck told the industry conference in Pittsburgh, the problem with fracking runs deep. While shale E&Ps have succeeded in boosting oil and gas production to levels that were unthinkable only a few years ago, prices have crashed precisely because of the surge of supply. And, because wells decline at a precipitous rate, capital-intensive drilling ultimately leaves companies on a spending treadmill.

Meanwhile, as the financial scrutiny increases on the industry, so does the public health impact. A new report that studied over 1,700 articles from peer-reviewed journals found harmful impacts on health and the environment. Specifically, 69 percent of the studies found potential or actual evidence of water contamination associated with fracking; 87 percent found air quality problems; and 84 percent found harm or potential harm on human health.

The health impacts have been a point of controversy for years, pitting the industry against local communities. The industry largely won the tug-of-war over fracking, beating back federal and state efforts to regulate it. However, the story is not over. Related: Philadelphia Refinery Explosion To Boost Gasoline Prices

In many cases, there is an abundance of anecdotal evidence pointing to serious health impacts, but peer-reviewed research takes time and has lagged behind the incredible rate of drilling. Now, the public health research is starting to catch up. Of the more than 1,700 peer-reviewed studies looking at these issues, more than half have been published since 2016.

One need not be an opponent of fracking to recognize that this presents a threat to the industry. For instance, a spike of a rare form of cancer has cropped up in southwestern Pennsylvania recently. The causes are unclear, but some public health advocates and environmental groups are pointing the finger at shale gas drilling, and have called on the governor to stop issuing new drilling permits. The Marcellus Shale Coalition, an industry group, said the request was “ridiculous.” The region is right at the heart of high levels of shale drilling, so any regulatory action coming in response the public health outcry could impact drilling operations. Time will tell.

In the meantime, poor financials are the largest drag on the shale sector. “And at $2 even the mighty Marcellus does not make economic sense,” Steve Schlotterbeck, the former EQT executive said at the conference. “There will be a reckoning and the only questions is whether it happens in a controlled manner or whether it comes as an unexpected shock to the system.”

Green Century Investing Avoids Fossil Fuels

The global movement to divest from fossil fuels has taken off, growing from a campaign on a few college campuses in 2012 to more than 500 institutions representing over $3.4 trillion in assets under management.

If you are considering joining the movement, the first questions you might ask are, What does it mean to invest fossil fuel free? And how do I get started?

There are lots of people trying to answer this question right now. Some investors begin by eliminating coal plants, or fracking companies from their portfolios. 350.org asks for divestment from the top 200 fossil fuel companies by carbon reserves.*

As environmentally responsible investors with a deep commitment to a fossil fuel free future, Green Century has been engaged with the conversation around defining divestment for a long time. We have come to believe that, for moral, political, and financial reasons, fossil free investing should mean cutting financial ties with all fossil fuel companies.

For our funds, investing fossil fuel free means excluding all companies that extract, explore, refine, or process coal, oil, or natural gas, as well as fossil fired utilities. 

When you invest with the Green Century Funds, you know your investments are supporting a fossil fuel free future, no matter the definition you use.

If you are already invested in the Green Century Funds, thank you for helping to grow the fossil fuel free movement. If you are considering going fossil fuel free, download our free personal guide to learn how to get started today.

*The list of 200 companies used by 350.org is known as the Carbon Underground 200. It includes the top 100 public coal and the top 100 public oil and gas companies globally, based on the potential carbon emissions contained in their reserves.

To obtain a Prospectus that contains information about the Funds, please click here for more information, email info@greencentury

Stocks will fluctuate in response to factors that may affect a single company, industry, sector, or the market as a whole and may perform worse than the market. Bonds are subject to risks including interest rate, credit, and inflation. The Funds’ environmental criteria limit the investments available to the Funds compared to mutual funds that do not use environmental criteria.

The Green Century Funds are distributed by UMB Distribution Services, LLC. 235 W Galena Street, Milwaukee, WI 53212.

Inside the free Guide:

• Learn the moral and financial reasons to divest.
• See the different ways you can reinvest.
• Read a special introduction written by Bill McKibben of 350.org
• Published by Green Century, 350.org, and Trillium Asset Management

Learn more about investing Fossil Fuel Free on our updated resources page.

About Green Century

Green Century manages two fossil fuel free mutual funds that keep your money out of environmental polluters and seek competitive returns.

>>  The Green Century Equity Fund invests in the longest-running socially responsible stock index, minus the fossil fuel companies in that index. Read more …

>>  The Green Century Balanced Fund invests in the stocks of environmentally responsible companies, and green bonds. Read more … 

Request Information by Mail or Download the Green Century Prospectus

See also: www.FrackCheckWV.net

Investors pressure oil companies to disclose climate change risk

From an Article by David Katz, Preserve the Beartooth Front, April 21, 2015

The request was made in a 10-page letter to Mary Jo White, head of the Securities and Exchange Commission, and signed by 62 institutional investors from the United States and Europe. The letter cites a lack of disclosure of “carbon asset risks” in SEC filings by oil and gas companies. The signers contend that these risks constitute “known trends,” which are required to be reported according to SEC rules.

The group argues that carbon assets could become “uneconomic” if climate-related trends permanently undercut prices and demand for fossil fuels.

From the letter:

The economics of the oil and gas industry are changing rapidly as exploration and production costs increase. As conventional oil and gas reserves decline, companies have been forced to increase investments in high cost, carbon intensive “unconventional” exploration projects.

Since 2005, annual upstream investment for oil has increased by 100%, from $220 billion in 2005 to $440 billion in 2012, while crude oil supply has only increased 3%. In 2014 the global oil industry spent $650 billion on exploration and development of new reserves, which is producing diminishing marginal returns in terms of new reserves being added.

Thus, the industry is investing more money to produce less oil and has become less profitable in recent years.

The Carbon Tracker Initiative (CTI) estimates oil and gas  companies are likely to spend approximately $1.1 trillion in capex (capital expenditures) from 2014 – 2025 on high cost, carbon-intensive exploration projects that require at least an $80 break-even price.

Due to recent low oil prices, we have seen oil majors cancel or delay billions of dollars worth of projects, and nearly $1 trillion of projects face the risk of cancellation.

BP shareholders pass legally binding disclosure resolution

The letter came a day after 98% of BP shareholders passed a resolution requiring the company to begin reporting on “ongoing operational emissions management; asset portfolio resilience to the International Energy Agency’s (IEA’s) scenarios; low-carbon energy research and development (R&D) and investment strategies; relevant strategic key performance indicators (KPIs) and executive incentives; and public policy positions relating to climate change.”

What is unusual about the resolution for BP, a UK-based corporation, is that it is legally binding under British law. Shareholders have often asked US corporations to disclose similar information, and several requests are included in resolutions to be considered at annual meetings in the near future. But in the US these resolutions are not binding, and corporations do everything they can to avoid them.

A growing movement

The movement for disclosure is now growing rapidly. Last April we wrote about a group of investors who published a report called Disclosing the Facts: Transparency and Risk in Hydraulic Fracturing Operations that documented the lack of transparency of oil and gas companies with regard to the impact of their operations on the environment.

It’s unclear how the SEC will respond to the letters, or how quickly it might act if it agrees that more disclosure is warranted.” The SEC could act quickly here if it wanted to,” said Jim Coburn of Ceres, an advocacy organization for sustainable environmental leadership. “We would love the SEC to really embrace the concept of climate risk, and to acknowledge that, apart from what happens in Paris [on a climate treaty], there’s a trend toward low-carbon economies that’s picking up speed.”

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Here’s a link to the 2013 report that was published by Richard Liroff’s group at Investors Environmental Health Network……

“Disclosing the Facts: The Transparency and Risks of the Hydraulic Fracturing Operations

http://disclosingthefacts.org/report/DisclosingTheFacts_2013.pdf

Some information and pictures are from the WV Host Farms Program, i.e. pages 15, 22, 25, 26, 27, 30.  Some other photos are from Ed Wade /Wetzel Co. Action Group, EcoWatch, Earthworks, etc.

Risky Business

Marcellus Shale Topics of the WVU Extension Program

West Virginia is home of one of the largest Marcellus Shale natural gas deposits on the East Coast. As landowners and community members began asking questions of  WVU Extension agents about this topic, we began our work to learn more, gather experts and create the resources to respond.

Upcoming Programs [Internet Site]

Planning for Financial Success and Managing Windfalls When They Come

Fred A. Scheeren, CFP, Managing Director-Investments, Wells Fargo Advisors, LLC

Farmers who have recently received financial windfalls in the form of agricultural product sales, land sales, natural gas leasing, lottery winnings, or inheritance, may find it a challenge to manage those funds. While the first impulse will either be to save all the money in a bank account or spend at will, both of these strategies are not effective ways to manage your good fortune. To help make your money work for you, Fred will provide information on avoiding financial predators and their money making schemes; choosing a competent financial advisor; avoiding investment and spending mistakes; creating an income stream for the rest of your life; making money without undue risk; and ways to pass it on.

These programs are part of the WVU Extension Services’s Winter Educational Dinner Meeting series. You must register by calling the contact listed to attend.

January 15: Belington Volunteer Fire Department, 301 Watkins St., Belington, WV, @ 6:30 p.m. Contact: Josh Peplowski, 304-457-3254

March 23: Doddridge County Park, Snowbird Rd., West Union, WV, @ 6:00 p.m. Contact: David Snively, 304-873-1801

March 24: Roane-Jackson Tech Center, Cunningham Hall, 9450 Spencer Road, Leroy, WV @ 6:30 p.m. Contact: Brandy Brabham, 304-927-0975 or John Johnson, 304-372-8199

March 25: Fort Boreman Room, Judge Black Annex,, Wood County Courthouse, 1 Courtsquare, Parkersburg, WV @ 7:00 p.m. Contact: JJ Barrett, 304-424-1960

>>>>>>>>>> SAVE THE DATE – May 20, 2015

4th Annual Enhancing Public Understanding of Natural Gas Issues Conference

Wednesday, May 20, 2015, Bridgeport Conference Center, Bridgeport, WV

For more information, contact Georgette Plaugher, WVU Extension Service Natural Gas Team Coordinator at 304-329-1391 or via e-mail Georgy.Plaugher@mail.wvu.edu.

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WVU Extension Service’s Goals and Objectives — WVU Extension Service’s oil and natural gas team will enhance programming to provide the expertise and knowledge that the citizens of West Virginia need to make informed decisions about the oil and natural gas industry.
View a complete list of goals and objectives

Additional Publications & Information — View a list of publications and web links to information surrounding Exploration and Natural Gas Development, Economic Impacts of Natural Gas Exploration, Environmental Issues and Impacts, Regulation, Agenda and Locations of Educational Programs

Educational Programs & Presentations

Educational Programs — WVU Extension Service hosts educational programs within counties and communities across the state. For a listing of upcoming sessions, view the Oil & Natural Gas Calendar on the right side of this screen or view them on the Educational Programs page.

Presentations — View reviewed and approved PDF versions of Presentations from expert speakers on a variety of topics.

Crude Oil Supply: Saudi Arabia & US

Oil Production is in Flux.  Gas Supply is Uncertain.  Where Are The Safe Investments?

Commentary by S. Tom Bond, Retired Chemistry Professor and Resident Farmer, Lewis County, WV

This graph is supposed to show the American ascendancy in oil production. The result is claimed over and over. Concealed are three important facts:

(1) The gap between the extraction cost in Saudi Arabia’s conventional oil and the US fracked oil is approximately $60/bbl. Extracting oil from shale costs $60 to $100 a barrel, compared with $25 a barrel on average for conventional supplies from the Middle East, according to the International Energy Agency [IEA]. Extreme energy extraction is just that – extremely expensive.

(2) U. S. shale drillers have to deal with high decline of production where redrilling the shales requires constant vast input of capital to keep up high production. They are on the “drilling teadmill.” Quarter by quarter they have to struggle to keep up appearances of profitability to attract capital.

(3) They are already beginning to have to deal with the fact there are “sweet spots” where production is good, but much of the drilling range is not so rewarding. They find the sweet spots in early drilling by spacing wells widely and drilling the second round adjacent to the best of the first round. Get out of the sweet spots and some wells are not even breakeven, although in the targeted shale.

You are sure to know the price of oil is down. As of this writing, $67.39 a barrel.  According to the Washington Post, down 40% since mid mid-June (then $115). Oil is a commodity, so it responds to supply and demand. It is notoriously unstable, a gambler’s dream. Storage capacity is small compared to the volume being used, so production has to go somewhere, and the price is reduced to get rid of it.

The fracking industry tells us price is down because of the increasing production of American oil. Too quick and self-serving, it is best to look for more substantial reasons, because we have not reached self sufficiency, and can’t for more than a short burst. Reserve calculations don’t factor in decline in return due to come, because of moving out of the sweet spots.

The decline in the economy world-wide is part of it – less demand. You’ve heard of the disappointment of Black Friday sales – they didn’t get as much as expected. Russia is nearing a recession. Much of Europe has trouble. Japan doesn’t seem able to pull out of recession, and China is slowing. It’s bound to have an effect, along with recent increased production by Libya, Nigeria, South Sudan, Iraq and Russia. Some think the previous high price has induced an increased efficiency of oil use, too.

All cite the decision by Saudi Arabia not to decrease production as a major part of falling prices. World consumption of oil is 85.5 million barrels per day, with Saudi Arabia contributing to it 10. 2 million a day. That’s about one-eighth world consumption. (It could pump 12.5 million, so it is already holding in, while most oil producing countries need money and pump all they can.) As a member of the Organization of Petroleum Exporting Countries (OPEC), the Saudi’s have a controlling interest. U. S. – Saudi relations is much too complicated to get into here, but basically the U. S. is pledged to protect the Saudi family’s hold on Arabia, in return for her control of the oil price for U. S. interests (Saudi Arabia also provides 40% of the U. S. arms production industry income. The U. S. is the largest arms producer in the world, $28B worth.)

The Saudi’s want the U. S. to wipe out Iran, their worst enemy, but Iran produces too much oil, 4.14% of the world supply. Since the U. S. is not complying, the shoe is now on the other foot. It may be that the real reason Saudi Arabia won’t turn down the production is because it is in their national interest. Here’s why.

Two things can be expected to happen if oil stays low:

(1) The other oil producing states will feel the hurt, because they need the money. If this continues for a year or more, they will be compelled to join OPEC, giving the Saudi’s much more power to raise of lower oil prices (which also effects natural gas, too).

(2) Low prices puts the fracking producers in the U. S. and elsewhere in trouble. Many of fracking companies are marginal now, because of the “fracking treadmill,” the necessity having to drill many new wells constantly to maintain production, and because of the high cost of inputs.. They have to seek new capital quarterly. If profits won’t allow repayment, the big banks will surely cut off funds and leave them swinging in the breeze.

These topics will be interesting for a long time to come. Anybody want to invest in shale?

What Shale Gas Investors Should be Told About the Industry

The shale drilling industry is a giant – so large it takes a great deal of study to understand what is going on. For most folks it is like the elephant of the fable. One blind man felt its side and thought it was like a wall, one felt its tail and thought it was like a rope and one felt its trunk and thought it was like a tree.

Investors are particularly unlikely to have a clear picture: they don’t see the wells and the damages, don’t get to talk to the actual drilling people or the neighbors in the gas field, and they aren’t particularly interested in environmental concerns. Most only want the highest, quickest return on their money invested. They simply choose among suitors, like the belle of the ball. Here is some of what Mr. and Mrs. Investor should understand.

The shale drilling suitor, like any salesman, tells only the “good part.” How the wells have a quick return, once drilled. How the world needs the energy and how governments “bend over backward” to accommodate drilling. How there is a huge volume of gas in the new reserve. And, how the new technology provides easy access to it.

There is much more that needs to be said, however. The new technology, first put together by George Mitchell, with the help of the Department of Energy just before 2000, has a series of problems that accompany it. It never went through a “pilot plant” stage, with careful testing for its effects on the health of people living near the drilling, nor for the other environmental impacts. It was adopted wholesale, and although minor tweaks have been tried to improve production, the attendant problems which pop up everywhere it is tried (and which make people fighting mad) are simply denied! Any attempt to study them is put down any way the industry can.

Claims the wells will continue producing 30 or 40 years are based on conventional wells. Shale wells have a fantastic production at first, which makes great sales talk for investors, but in fact, half the production of shale wells occurs in two or two and a half years. Well after well must be drilled to keep up production in any particular gas field.

The original objective of the entrepreneurs appears to have been leasing with the objective of selling gas at high market prices. This was initially very profitable for those running this game, like Aubrey McClendon, who had a net worth reported to be $1.1 B, according to Forbes in March 2012. His 2008 total compensation was $112,464,517, making him the nation’s top-paid CEO, according to Tulsa World.

Determining the ultimate reserve of shale gas is a difficult project. Claims to the public have been reduced several times. One thing that is now becoming apparent is the productivity of different areas within the fields varies considerably. There are “hot spots” in the fields and other areas where production is not economic. Claims for 100 years of natural gas supply should not be taken too seriously.

The percent of the resource recovered is around 10% at best, and no plan for anything like “secondary recovery” is discussed. Although gas use in electrical generation has increased the last two years, it is mostly due to use of gas in dual-fuel plants. Many plants exist which were designed to use gas to increase wattage at high-demand times such as other plants being put off-line or during periods of extremely hot weather. Now gas is used for routine production, due to low price, and coal is used for emergencies.

Gas-only electrical generating plants can be designed with dual-cycle, very high efficiency engines. The dual-cycle plants approach 60%, vs. low forty’s for thermal cycle plants. But electrical generating plants are built for 40 to 60 year use, and electrical power executives are reluctant to rush in and build new plants that cannot use coal before the long term availability of natural gas supply is assured at a low price.

If the supply is very large and is available for many years, and it is shipped overseas, it will serve neither national security nor be likely to replace coal on price. And certainly not be cheap for personal use.

Health claims from shale drilling are being actively investigated. No money for this will come from the industry and not much money from government, due to the immense political power of the money and the story told by the industry. But it is coming anyway, from brave physicians and public health experts. We can be sure the results will be attacked by industry by every means at their disposal, just as claims of destroyed aquifers have been.

And the companies always deny doing any harm. If they become involved in a law suit, they settle out of court, requiring the victim to refrain from discussing the settlement – gag them – but pay well for the restraint.

So, Mr. and Mrs. Investor, your money will be “in good hands” with the shale industry, but a lot of innocent people are going to get ground up while you are getting it back.

>>> S. Tom Bond raises cattle on 500 acres in Lewis County, WV. He has been active in the Guardians of the West Fork and the Monongahela Area Watersheds Compact. <<<