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Long term sustainability of shale energy in doubt, scientists tell geology conference

Shale oil and gas may not be the economic “panacea” that some believe, a panel of scientists told a geology conference today. New studies point to higher than expected field decline rates and increasing costs to extract the energy, meaning the long-term sustainability of shale gas production is questionable.

The findings confirm what sources in the energy industry have been telling Northwest Coast Energy News for the past few months, that the output from hydraulic fracturing decreases much more quickly than conventional extraction.

The panel of three scientists released their findings at the annual convention of the Geological Society of America this morning in Boulder, Colorado.

The studies concentrate on the United States where fracking for “tight oil” and natural gas is more advanced than in Canada.

The panel says that while the use of hydraulic fracturing and horizontal drilling for “tight oil” is an important contributor to Amercian energy supply, fracking will not result in long-term sustainable production or allow the U.S. to become a net oil exporter.

Charles A.S. Hall, professor emeritus at the College of Environmental Science and Forestry, State University of New York, Syracuse, presented two studies: one of the global patterns of fossil-fuel production in the past decade, and the other of oil production patterns from the Bakken Field (the giant expanse of oil-bearing shale rock underneath North Dakota and Montana that is being produced using hydraulic fracturing).

According to a news release from the GSA, both studies show that despite a tripling of prices and of expenditures for oil exploration and development, the production of nearly all countries has been stagnant at best and more commonly is declining — and that prices do not allow for any growth in most economies.

“The many trends of declining EROIs suggest that depletion and increased exploitation rates are trumping new technological developments,” Hall said.

The second studies are from J. David Hughes, president of Vancouver-based Global Sustainability Research Inc. Hughes studied the Bakken Field and the Eagle Ford Field of Texas, which together comprise more than half of U.S. tight oil production. The results show that drilling must continue at high levels, to overcome field decline rates of 40 percent per year.

Drilling rates of more than 3,000 wells annually in the Eagle Ford, and more than 1,800 wells annually in the Bakken, are sufficient to offset field decline and grow production — for now. If drilling at these high rates is maintained, production will continue to grow in both fields for a few more years until field decline balances new production. At that point drilling rates will have to increase as “sweet spots” (relatively small high-productivity portions of the total play area) are exhausted and drilling moves into lower-productivity regions, in order to further grow or even maintain production.

The onset of production decline will likely begin before the end of the decade, Hughes said.

“These sweet spots yield the high early production observed in these plays, but the steep decline rates inevitably take their toll. ”

Arthur E. Berman, a geological consultant for Labyrinth Consulting Services, Inc., of Sugar Land, Texas, deems the U.S. 10-year history of shale-gas extraction “a commercial failure. ” However, he says, this will not be the case forever. “Prices will increase to, at least, meet the marginal cost of production. More responsible companies will dominate and prosper as the U.S. gas market re-balances and weaker players disappear.”

Hughes sums up: “Tight oil is an important contributor to the U.S. energy supply, but its long-term sustainability is questionable. It should be not be viewed as a panacea for business as usual in future U.S. energy security planning.”

Apache sells some of its gas and oil assets, confirms commitment to Kitimat project

Apache Corporation said Thursday it will sell oil and gas producing properties in the Nevis, North Grant Lands and South Grant Lands areas of western Alberta, to Ember Resources Inc., a private Canadian company, for CAN$220 million, as part of the company’s “portfolio rebalancing,” Apache said in a news release.

At the same time, Apache CEO Rodney Eichler said, “We also remain focused on advancing the Kitimat LNG project to monetize large unconventional resources in the Liard and Horn River basins in northern British Columbia.”

“Going forward, Apache is focused on growing our liquids production from a deep inventory of crude oil- and liquids-rich opportunities that generate attractive rates of return on our extensive remaining acreage in Canada’s Western Sedimentary Basin,” Eichler said.

“This transaction is one element of a comprehensive review of Apache’s portfolio to determine which assets make the most sense for Apache to own given our growth and return objectives and which assets are better owned by others,” Eichler said. “The Nevis, North Grant Lands and South Grant Lands assets fit in the latter category.”

Apache is selling 621,000 gross acres (530,000 net acres) and more than 2,700 wells that had average net production during the second quarter of 2013 of 67 million cubic feet of gas and 237 barrels of liquid hydrocarbons per day from late Cretaceous sands and coal seams. Apache says “it will retain 100 per cent working interest in horizons below the Cretaceous, such as potential Duvernay and Nisku, in Nevis and North Grant Lands.”

Apache previously announced plans to divest $4 billion in assets by the end of 2013. The company intends to use proceeds from the asset divestitures to reduce debt and enhance financial flexibility and to repurchase Apache common shares under a 30-million-share repurchase program authorized by the Board of Directors earlier this year.

In July, Apache announced an agreement to sell its Gulf of Mexico Shelf operations and properties to Fieldwood Energy LLC(Fieldwood), an affiliate of Riverstone Holdings, for cash proceeds of $3.75 billion. In addition, Fieldwood will assume all asset retirement obligations for these properties, which, as of June 30, 2013, Apache estimated at a discounted value of approximately $1.5 billion.

Oil spill caused “unexpected lethal impact” on herring, study shows

Scientists from the University of California at Davis and NOAA studying herring spawning beds in San Francisco Bay after the Costco Busan oil spill. (UC Davis)

A 53,569 gallon (202,780 litre) spill of bunker oil in San Francisco Bay in 2007 had an “unexpected lethal impact on embryonic fish,” according to scientists from the University of California at Davis and the US National Oceanic and Atmospheric Administration who spent two years on follow-up research after the spill, looking at the effects of the spill on Pacific herring.

One significant finding from the study is that different oil compounds, for example crude or bunker oil, likely have different effects on vulnerable environments.

On November 7, 2007, the container ship Cosco Busan hit the San Francisco-Oakland Bay bridge, breaching two fuel tanks and sending the bunker oil into the bay. Television images of the accident were seen around the world.

Damage to the Cosco Busan. ( PO 3 Melissa Hauck/US Coast Guard)

The oil spill polluted the nearby North Central Bay shoreline spawning and rearing habitat for herring, described by the study as “the largest coastal population of Pacific herring along the Continental United States.” The spill happened a month before the herring spawning season.

The herring from the estuaries of San Francisco Bay migrate in large schools up the Pacific Coast to the Bering sea, and are food for whales, other mammals, salmon and birds. After two years at sea they return to the spawning grounds.

The study also notes: “Herring are a keystone species in the pelagic food web and this population supports the last commercial finfish fishery in San Francisco Bay.” It adds: “Although visibly oiled shorelines were cleaned, some extensively, only 52% of the oil was recovered from surface waters and land or lost to evaporation. The amount of hidden or subsurface oil that may have remained near herring spawning areas is unknown.”

The study, Unexpectedly high mortality in Pacific herring embryos exposed to the 2007 Cosco Busan oil spill in San Francisco Bay, was published Monday, Dec. 26, in the journal Proceedings of the National Academy of Sciences.

The study suggests that even small oil spills can have a large impact on marine life. Gary Cherr, director of the UC Davis Bodega Marine Laboratory and lead author of the study says, “Our research represents a change in the paradigm for oil spill research and detecting oil spill effects in an urbanized estuary.”

That’s because the study builds on research following the 1989 Exxon Valdez disaster in Prince William Sound, Alaska, which released 32 million gallons (121 million litres) of crude. The Exxon Valdez spill also happened close to the herring spawning season and studies since then have shown mortality and abnormalities in the fish in Prince William Sound.

The San Francisco study shows that the bunker oil accumulated in naturally spawned herring embryos. At low tide, the oil then interacted with sunlight in the shallower regions of the estuary, killing the embryos. A control group of herring, fertilized in a laboratory and place in cages in deeper water, were protected from the combination of oil and sunlight but still showed “less severe” abnormalities.

“Based on our previous understanding of the effects of oil on embryonic fish, we didn’t think there was enough oil from the Cosco Busan spill to cause this much damage,” Cherr said. “We didn’t expect that the ultraviolet light would dramatically increase toxicity in the actual environment, as might observe in controlled laboratory experiments.”

One reason may be that crude oil, the kind spilled by the Exxon Valdez, is naturally occurring liquid petroleum. Bunker oil is a thick fuel oil distilled from crude oil and used as a fuel on ships. Bunker oil can be contaminated by other, unknown substances. In the case of the Cosco Busan, the bunker oil was relatively low in sulfur compared to some other bunker fuels but the embryos showed higher than expected levels of sulfur compounds.

Scientists from the University of California at Davis and NOAA studying herring spawning beds in San Francisco Bay after the Costco Busan oil spill. (UC Davis)

The scientists analyzed the levels of oil-based compounds in the caged herring embryos at four oiled and two-non oiled sub tidal sites, all at least one metre below the surface. Naturally spawned embryos from shallower areas were also studied.

In November, 2007, the spilled oil was visible in the areas chosen for the study. By the time the herring eggs were incubating, oil was not visible in the contaminated areas, except for some tar balls found on shore.

The researchers began the study in February 2008 . At the time, three months after the spill, the caged embryos showed non lethal heart defects, typical of exposure to oil spills. The embryos in the shallower sub tidal zones showed the same heart defects but also had “surprisingly high rates of dead tissue and mortality unrelated to the heart defects.”

“The embryos were literally falling apart with high rates of mortality,” Cherr said.

Normal herring embryos are translucent and colourless when they hatch, except for the pigment around the eye and melanophores (pigment cells) along the gut. The the brain, spinal cord and axial muscle from embryos from the oiled sites were not as clear. Those embryos had no heart beat and the skin tissue was disintegrating.

No toxicity was found in embryos in unoiled sites, even those close to major highways. The researchers concluded that the high death rates did not seem to be caused by natural or man made causes unrelated to the spill.

In 2009, when the scientists concentrated on the role of sunlight, the study showed that the embryos had death rates characterized by loss of tissue similar to the embryos from the year before, but possibly caused by undetected compounds from the oil spill.

In 2010, the scientists again looked at embryos from the oiled and unoiled sites. By that time, the hatching rates from the oiled sites were similar to the “relatively high hatching rates” for the unoiled areas. However, there was a “significant incidence” of heart problems among embryos from the oiled sites.

The scientists conclude that while the Exxon Valdez spill did show oil poisoning fish in the early stages of life, they say case wider research is needed beyond that done for in the case of the Exxon Valdez because the Cosco Busan

1. Highlights the difference in effects on fish from exposure to oil of differing composition (i.e. Crude vs bunker)
2. Shows the role of sunlight, interacting with local conditions (such as shallow water) can have significant affects on toxicity.
3. Shows the need for more study of the toxic effects of different oil compounds
4. The study has shown the “exceptional vulnerability of fish early stages to spilled oil.”

The conclusion adds “Although bunker oil typically accounts for only a small fraction of oil in ships, so spills may be small relative to those of crude oil, it may carry a potential for disproportionate impacts of in ecologically sensitive areas.”

Both Ellis Ross, Chief Counsellor of the Haisla Nation and April McLeod, president of the Kitimat Valley Naturalists expressed concern abut the findings of the study, especially with the Joint Review Hearings on the Enbridge Northern Gateway pipeline scheduled to begin a few days.

The numerous environmental critics of the Northern Gateway pipeline have pointed out that there is no way of knowing what would happen to an area like the Kitimat River, estuary and Douglas Channel is there was a bitumen spill. Enbridge has filed documents with the Joint Review Panel that include simulations of a spill. The new San Francisco study shows that any oil spill could have unforeseen effects.

Plans call for at least three new terminals to be built close to the Kitimat River estuary, not just the controversial Enbridge terminal for bitumen, but at least two for the liquified natural gas projects, KM LNG and BC LNG and in all three cases ships would normally be fueled by bunker oil.

The Kitimat estuary has been industrialized for 60 years since the building of the Rio Tinto Alcan smelter, but still has large areas teeming with fish and wildlife, so the estuary is somewhat in the middle between the heavily urbanized estuaries of San Francisco Bay and the more pristine Prince William Sound.

Ross pointed to the collapse of the oolichan in the Kitimat River as a strong indicator of potential problems. He recalls that in the early stages of the Eurocan paper mill the Haisla Nation was told there would be no effect on the oolichan, but soon after the mill began operations, the oolichan population collapsed. That is why, Ross said, the Haisla are wary of the plans and want to see more and stronger studies done on the effects of bitumen and other oil compounds in the region.

Other comments were unavailable due to the holiday. They will added as received.

Kitimat River estuary on Dec. 17, 2011, showing a Rio Tinto Alcan transmission tower. (Robin Rowland/Northwest Coast Energy News)

California Fish and Wildlife Cosco Busan spill web page.

According to Wikipedia, the US National Transportation Board found that the Cosco Busan accident was caused by

the pilot’s degraded cognitive performance from his use of prescription medications, despite his completely clean post accident drug test,
the absence of a comprehensive pre-departure master/pilot exchange and a lack of effective communication between Pilot John Cota and Master Mao Cai Sun during the accident voyage, and
(COSCO Busan Master) Sun’s ineffective oversight of Cota’s piloting performance and the vessel’s progress.

Other contributing factors included:

the failure of Fleet Management Ltd. to train the COSCO Busan crewmembers (which led to such acts of gross negligence as the bow lookout eating breakfast in the galley instead of being on watch) and Fleet Management’s failure to ensure that the crew understood and complied with the company’s safety management system;

the failure of Caltrans to maintain foghorns on the bridge which were silent despite the heavy fog;

the failure of Vessel Traffic Safety (VTS) to alert Cota and Sun that they were headed for the tower. VTS is legally required to alert a vessel if an accident appears imminent, yet they remained silent;

the malfunctioning radar on the COSCO Busan, which led Captains Cota and Sun to use an electronic chart for the rest of the voyage. Although Coast Guard investigators found the radar to be in working order, they did not examine it until days after the accident (allowing time for faulty equipment to be fixed, which is not uncommon after a marine accident)

Captain Sun’s incorrect identification of symbols on the electronic chart;

the U.S. Coast Guard’s failure to provide adequate medical oversight of Cota, in view of the medical and medication information he had reported to the Coast Guard.

NTSB report on the Cosco Busan accident (pdf)

Enbridge, EPA dispute amount of “oil” spilled at Kalamazoo

Energy Environment

AP reports that Enbridge and the US Environmental Protection Agency are haggling over how much “oil” was spilled into the Kalamazoo River. Enbridge is sticking with its estimate that 849,000 gallons were spilled when the pipeline was breached. The EPA says 1.1 million gallons have been recovered and there may be more to be recovered.
Apparently it all comes down to different definitions of the word “oil.”

Oliver in media blitz hinting at pushing Northern Gateway in case US stops Keystone XL

Energy Environment Politics

Canada’s minister of natural resources, Joe Oliver, has embarked on a media blitz, quietly pushing the idea that

Canada will go ahead and build the Northern Gateway pipeline to send bitumen sands to Asia if the United States blocks the Keystone XL pipeline from Alberta to Texas.

In a meeting with The Globe and Mail editorial board on Friday, and an interview with Reuters Monday, while attending the World Energy Council in Houston, Texas, Oliver warns the American that if they don’t buy bitumen sands oil, China will.

Speaking with the Globe and Mail editorial board Oliver said:

that he does not make this point to U.S. officials “unless they ask,” but “if they don’t want our oil….it is obvious we are going to export it elsewhere.”

China could be a key customer in the future, he said. “As a broad strategic objective we have to diversify our customer base…..[and] China has emerged as the largest consumer of energy in the world, so it is utterly obvious what we must do.

Speaking with Reuters, Oliver made similar statements

What will happen if there wasn’t approval — and we think there will be — is that we’ll simply have to intensify our efforts to sell the oil elsewhere,”

“It may be other parts of the United States, it may be a rerouted pipeline, and then, of course, there’s Asia.”

The Globe and Mail also reported that:

Mr. Oliver did not specifically endorse the proposed Northern Gateway pipeline, which would carry oil sands petroleum to the west coast, where it would be transported to Asia by tanker, saying he will respect the regulatory process that is now evaluating that project.

Reuters also says Oliver did not specifically endorse Northern Gateway in that interview.

Which means that Oliver has changed his tune a bit since becoming minister, since in the past he has been openly supportive of Northern Gateway “in the national interest” months before the Joint Review hearings on the pipeline are even due to begin.

In the Reuters interview, Oliver, apparently determined to promote energy from the oil sands, for the first time apparently, hinted that a bitumen pipeline might head somewhere to the east.

“What we want to do in respect to Asia, that objective is not mutually exclusive with the Keystone pipeline. We have a lot of oil and we want to get it to welcoming markets and open markets,” Oliver said.

“And there are also possibilities of moving it east as well. We just have to look at the whole picture. But there would be a delay, and that wouldn’t be positive for either country in our view,” he said.

Oliver also told The Globe and Mail he does not use the “ethical oil,” agrument in talks with the United States, instead emphasizing that Canada is a reliable producer. Oliver also continued his criticism of the EUropean union for an initiative that would label crude from the oil sands as dirtier than fuel from conventional sources.
Oliver told the Globe that the European Commission’s proposed fuel quality directive is “discriminatory” and not based on science.

In a news release, summarizing Oliver’s speech in Houston, the Ministry of Natural Resources quoted Oliver this way:

“Canada’s vast energy endowments of oil, gas, hydro and uranium, along with an innovative clean energy sector, provide us with a unique advantage — one that strengthens our role as a safe and secure global energy supplier….

“We welcome international investment because it is good for our economy, for our jobs and for our energy future.”

Minister Oliver reaffirmed the Government of Canada’s commitment to ensuring the environmentally and socially responsible development of the oil sands, a strategic resource that is critically important to Canada and its energy partners. He noted Canada’s energy policy is rooted in free market principles, coupled with a regulatory regime that is “efficient, transparent and effective.”

“Canada is a responsible and reliable partner in achieving a secure and sustainable global energy supply. We are fully mindful of the need to balance economic activity and energy demand with environmental sustainability,” the Minister added. “The Government of Canada is committed to the development of our energy resources, including the oil sands, in an environmentally and socially responsible manner.”

(Photo Canada Ministry of Natural Resources)

China Petroleum plans expansion in Canada: China Daily

Energy Link

CNPC plans steady overseas expansion

China National Petroleum Corp (CNPC), the country’s biggest energy company by production, said on Thursday that its overseas expansion will continue to focus on the upstream division with Canada and Australia as the major targets.

CNPC’s overseas oil and gas output is expected to reach 100 million tons of oil equivalent this year, of which equity-based production will account for 50 percent, according to Jiang Jiemin, the company’s general manager.

In 2010, the energy conglomerate’s overseas oil and gas output stood at 86.73 million tons.

“Our company’s foreign sales and profits will both hit a record high this year,” Jiang said. He added that CNPC plans to continue to rapidly and consistently expand overseas and that it regards Canadian and Australian assets as its top priorities because of the two countries’ abundant natural resources and steady investment environment.

EPA finds submerged oil, orders Enbridge to file new Michigan clean up plan by Oct. 20

Environment

A map issued by the US Environmental Protection Agency showing pockets of submerged oil found in the Kalamazoo River during summer 2011 cleanup operations (EPA) Click on map for larger version.

The United States Environmental Protection Agency has ordered Enbridge to “to take additional steps to clean up the July 2010 oil spill that damaged over 35 miles of the Kalamazoo River system.”

The
directive requires Enbridge to submit plans by Oct. 20, 2011 “for
cleanup and monitoring work expected to last through 2012”. EPA news release. Failure to comply could result in civil penalties.

The local newspaper the Battle Creek Courier quotes an EPA official as saying agency has learned a lot in the 14 months since the Enbridge pipeline burst, contaminating five acres of land, part of Talmadge Creek and 35 miles of the Kalamazoo River. The order was based on what the EPA has learned in the past few months.

“As we get near the end of the active submerged oil recovery, we’ll have to have systems in place long-term to do long-term maintenance,” Ralph Dollhopf, the EPA’s on-scene coordinator told the paper. “So we’ve taken all of these elements and packaged them into a set of expectations — specific tasks that Enbridge has to perform through 2012.”

Most of the remaining oil is submerged at the bottom of the Kalamazoo River or on about 200 riverbank sites that haven’t had work done yet, Dollhopf told the paper.

The EPA also is asking Enbridge to install “passive collection devices” in areas where oil commonly accumulates in the river, Dollhopf said. Oil remaining in the river tends to mass at natural deposit points — most commonly near dammed areas.

The EPA says the work will continue to the end of 2012 and even into 2013 if necessary to remove as much remaining oil as it can without harming the environment.

Some parts of the river may be reopened to the public in 2012.

An Enbridge spokesman, Jason Manshum said in an email to the Michigan paper “Enbridge has committed since the outset of this incident to restore the area as close as possible to its pre-existing condition, and to the satisfaction of the U.S. EPA, Michigan DEQ and the local community. We remain fully committed to that goal.”

The EPA situation report says that after a year of extensive cleanup work in the Kalamazoo River system. the EPA identified pockets of submerged oil in three areas covering approximately 200 acres that require cleanup…

To date, more than 766,000 gallons of oil have been recovered and 113,000 cubic yards of contaminated soil and debris have been sent to EPA-approved disposal facilities. Enbridge will be required to repay the government for all response costs.

Work during the summer of 2011 was focused on:

Revisiting shoreline areas cleaned up in 2010 where winter weather and spring floods exposed previously unseen oil or spill impacts.
Excavating oil contaminated soil and weathered tarry oil from the overbank areas.
Recovering pockets of submerged oil in the sediment. EPA has identified three major submerged oil areas including the delta leading into Morrow Lake.

Michigan cleanup by the numbers

766,288 gallons of oil recovered
6 million gallons of oil/water collected and disposed
144,942 cubic yards soil/debris disposed
783 personnel on site
$33.9 million costs to date

Source EPA, Sept. 16, 2011

Al Arabiya turns its eyes on Kitimat

Energy link

The English-language website of one the world’s major Arab-language satellite television networks Al Arabiya, has turned its eye on Kitimat, the Northern Gateway pipeline and the repeated claim by the Conservative government that Canada is an “energy super power.”

The article: Canada: Energy Superpower? is an analysis by Mary E. Stonaker, described as “an independent scholar, most recently with the Middle East Institute, National University of Singapore.” Stonaker puts Canada’s energy policy, including the pipelines to Kitimat, in a world wide perspective, summing up the story for Saudi-owned Al Arabiya‘s main audience in the oil-rich Middle East. It doesn’t just look at oil and gas energy, but hydro, solar and wind.

“Northern Gateway” has yet to be fully hatched though it is encouraging to see Canada expand its partnerships beyond its southern neighbor especially during the recent economic downturn. Relying too heavily on one consumer, no matter who that consumer may be, is setting up an extremely weak energy security strategy.