Credibility of Natural Gas Industry on the Upswing?
by Allen Best
Sep 05, 2011 | 2278 views | 0 0 comments | 5 5 recommendations | email to a friend | print
<b>FLAMES FROM FAUCETS</b> – A scene from the film, ‘Gasland,’ about the impacts of natural gas drilling (Courtesy photo)
FLAMES FROM FAUCETS – A scene from the film, ‘Gasland,’ about the impacts of natural gas drilling (Courtesy photo)
Although ‘Burden of Proof Is Clearly on Drillers’ to Prove It Can Be Extracted With Minimal Harm to the Environment

DENVER – The movie Gasland, which premiered at the Telluride Mountainfilm Festival in 2010, took a hard look at the impacts of drilling for natural gas.

Let’s just say that the gas industry was not happy when the film was nominated for an Oscar in documentary filmmaking.

And the drillers have a point. Filmmaker Josh Fox didn’t let a few stray facts interrupt his story line. Flames from faucets? That particular story had been debunked long before the film went out on tour.

But the burden of proof is clearly on drillers to prove that natural gas can be extracted with minimal harm to the environment. Industry leaders in Colorado clearly understand this, and they’re not bashful about saying so. It is, they say, a matter of perception.

Just to make sure their rank and file understand what is at stake, they had a raft of speakers at the 23rd Annual Rocky Mountain Energy Epicenter conference last month in Denver, with more than 2,500 industry professionals in attendance. Over the years, speakers have ranged from former Robert Kennedy, Jr., to former Colorado Sen. Tim Wirth, who now runs the United Nations Foundation for Ted Turner. Better regulation, they said, will gain public trust.

This year was no different. The industry must become more transparent, said speakers. They mentioned “trust” at every turn.

“The natural gas industry has huge credibility problems at the moment,” said Mark Brownstein, deputy director of the energy program for the Environmental Defense Fund.

During the August 2-4 conference, The New York Times reported fresh news from West Virginia that challenged the insistence of geologists and industry leaders that hydraulic fracturing to gas deposits found at great depths has never damaged drinking water drawn from shallow aquifers.

Brownstein recounted a trip to New York’s Adirondack Mountains this summer where, he said, others repeatedly brought up hydraulic fracturing without his ever divulging what he does for a living. One of them, he said, was an evangelical Christian motorcycle rider from Texas.

“These aren’t folks getting their news from The New York Times or from the Huffington Post, yet the news they’re getting isn’t good,” said Brownstein. And, he added, it’s not just a few latté-loving cave dwellers from San Francisco.

That same essential message was delivered time and again during the three-day conference.

A matter of trust

The tone was set by the first speaker, Colorado Gov. John Hickenlooper, who jabbed at The Times, but said the industry needs to be more transparent, “to make it easier for the broad population to trust us.”

The royal “we” of Hickenlooper’s talk reflected the fact that he is a petroleum geologist, but also the simple bulk of natural gas drilling in Colorado. The industry contributes six percent of the state’s jobs and is responsible for 10 percent of the state’s economic activity.

Hickenlooper, a Democrat, outlined plans by Colorado to require that all ingredients used in the hydraulic fracturing be divulged and for each well site. The state will not require the proportions be reported, thus allowing companies an element of their proprietary “secret sauce.”

Representatives from the Colorado Oil and Gas Association and Hickenlooper also announced a new industry-sponsored plan to have third-party experts analyze water samples from underground sources both before drilling and three years after.

The reports will be publicly disclosed. COGA has enlisted willingness of 20 of its members to participate; the 20 companies have drilled 90 percent of wells in the last 18 months, and COGA, not the State, will administer the program, which is modeled on one employed for the last 10 years in the San Juan Basin south of Durango.

COGA representatives said they believe that the scientific data of the third-party testers will be adequate to gain public trust. (Mike Choropolos, land program director for Western Resource Advocates, says the plans by COGA and the state government do not go far enough. See related story).

A petroleum geologist in his first career, Hickenlooper said he had read one of The Times’ reports critical of natural gas drilling out loud to his wife, the writer Helen Thorpe, while in bed. “There’s no science here,” he reported complaining to her.

Democratic environmentalists and gas drillers have had a long if sometimes conflicted relationship. Even in the late 1980s, Wirth was promoting natural gas and was among the first to outfit his SUV with natural gas burning kit.

Lately, many environmentalists have come to see natural gas as an important bridge fuel to the future, replacing coal in some cases and providing an important backstop for solar, wind and other variable renewable forms of energy.

When burned, natural gas produces almost no pollutants such as nitrous oxide and mercury that come from coal-burning plants, and it has roughly half of the emissions of carbon dioxide, a greenhouse gas.

With that simple fact in mind, Wirth appeared before natural gas drillers in Colorado in 2009 to tell them: You blew it. They had failed to throw their support behind the climate change legislation, and tellingly were barely mentioned in the 900-plus pages of the Waxman-Markey bill.

Democrats and environmentalists insist that more closely regulated drilling will, in the long run, serve the best interests of natural gas industry. Transparent regulation will increase public trust, while displacing coal and imported oil.

“Obviously, red tape doesn’t help anybody, but some of the red tape exists because of these trust issues,” said Hickenloooper. He noted that the lag time for processing drilling permits has been reduced to 23 days, from a high of 70 days.

Former Colorado Gov. Bill Ritter, in whose administration the regulations governing drilling were adopted, also spoke. “Tension might be too soft a word,” he said of the rocky relationship between his administration and oil and gas drillers. He acknowledged that “some things that we could have done differently.”

But he didn’t back down from supporting the regulations, continuing to insist that Colorado remains a template for other states. The regulations, he said, have resulted in clear-burning fuel, extracted in ways that protect the environment, and is affordable for utility consumers.

The new rules continue to be blamed, in places like Grand Junction, for the slowed drilling of the last three years. Regulations were adopted about the same time as the Great Recession arrived, and many people in places like Grand Junction continue to insist that the former caused the latter.

Seeking to refute that lingering percpetion, Ritter reported that Colorado was second only to New Mexico, among Rocky Mountain states, in drilling rig counts as of mid-July. Now, it’s a matter of an improving economy, he said, before Colorado’s natural gas economy resumes its previous vigor.

During that boom, the price of natural gas peaked at $13 per million Btu, before plummeting to $2 million. A few weeks ago it was $4.43 at the Henry Hub in Louisiana. The more difficult terrain in the upper Piceance Basin, northwest of Rifle, will require prices of $6.50 per million Btu, analysts say.

Noting the fuel-switching bill that will see coal generation in Denver and Boulder replaced by natural gas, Ritter said that Colorado could now become the gold standard by becoming completely transparent in its drilling. “If you look at hydraulic fracturing, those problems are absolutely solvable,” he said.

Trust was also mentioned by Jim Martin, the Denver-based chief of Region 8 of the Environmental Protection Agency and a key official in the Ritter administration responsible for Colorado’s regulations.

“We have to find some space for dialogue, to find that pathway that allows us to develop the tremendous oil and gas resources in this country and region while at the same time instilling in the public the confidence necessary to allow that to occur,” he said.

For Tisha Conoly Schuller, the director of COGA, the speaking lineup for the annual conference, is no doubt a tricky balancing act. Her constituency certainly is not of one mind.

“We don’t want to be an industry echo chamber,” she said before introducing a speaker from the Department of Energy. “We have to understand their perspectives, whether we agree with them or not.”

But many drillers remain instinctually wary of government. Telling was a moment at COGA’s conference this year. Standing ovations were non-existent. The exception was when Bill Owens, Colorado governor from 2000 to 2008 and a self-described moderate but conservative Republican, pinned blame on the federal government for loss of jobs.

“It is our friends in government who have made it virtually impossible to do anything new in this country,” he said.

“When is the last time we built a refinery in the United States?” asked Owens, who has had a long association with the oil and gas industry, both before be became governor and now on the board of directors for several companies.

Citing a string of federal agencies, Owens charged that federal regulations have inhibited change, hampered productivity, and in the end have resulted in the export of jobs overseas.

Owens concluded by noting cryptically that “elections will bring us back.” Several people then sprang to their feet. Hickenlooper, the sitting governor, evinced no similar amount of enthusiasm.

Using the Produced Water

Occasionally, though, the same message of transparency came from speakers within the industry.

“There is such a thing as a social contract,” said George E. King, a Houston-based global technology consultant with Apache.

He dismissed much of the criticism of natural gas drilling as “hysteria and hype,” but said, “You need to go out and talk about what you’re doing, and you need to do it in a polite manner.”

King and other speakers also described technological progress that allows for increasing extraction. Several decades ago, one percent of gas could be recovered from vertical wells. By the 1990s, that had increased to two percent, then three to five percent by 2002 – and now, in some cases up to 40 percent.

But one of the raps against the predicted natural gas bonanza of the last several years was the rapid depletion rate – in other words, the fact that wells declined in production so quickly that more had to be sunk. King said that the new technology may lower that decline rate from 75 and 80 percent down to about 50 percent.

Drillers are also producing more gas from new formations very quickly. He said that it took 27 years to maximize production from the Barnett shale around Fort Worth. In other fields across the country, it’s just two to three years.

Still unclear as natural gas gains market share in energy, edging out coal, is the price stability. The price has been notoriously unstable, as witnessed by the swing from $13 to $2 per million Btu in recent years.

Susan Arigoni, vice president of fuels for Xcel Energy, said her company wants to see improved reliability of natural gas supplies, so that it can be counted on to produce electricity. Some of the uncertainty is due to the controversy about fracking and the response of regulatory agencies.

The division of Xcel that serves Colorado sees natural gas increasing from 27 percent of its fuel base to 38 percent by 2020. Coal will drop from 61 percent to 43 percent. Renewables will grow from 12 percent of the fuel mix to 19 percent.

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