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Oil and Gas Roundup — Jan. 17

January 17, 2014
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Researchers find new way to recycle HF wastewater

Researchers believe they have found an unlikely way to decrease the radioactivity of some hydraulic fracturing wastewater: Mix it with the hazardous drainage from mining operations.

The wastewater is created when some of the chemical-laced water used to fracture thick underground rocks flows back out of the wellbore. The water is tainted with chemicals, toxins and in some parts of the country — such as Pennsylvania — naturally occurring radioactive materials, such as radium. Research has shown that even wastewater that had been treated with conventional means was changing the chemistry of rivers when discharged into waterways.

In 2011, Pennsylvania barred drillers from taking the wastewater to treatment facilities, forcing them to haul the fluid waste to be disposed in underground injection wells in Ohio. This, along with a lack of freshwater in other parts of the country needed to drill new wells, has scientists and the industry looking for creative solutions.

The discovery by Duke University researchers would allow oil and gas drillers to combine flowback waters from the fracking process with acid drainage from mining, or any other salty water. The solids that form, which include radioactive materials, are removed and dumped at a hazardous waste landfill, and then the now cleaner water is used to drill a new well, said Avner Vengosh, the Duke professor who oversaw the project, which included scientists from Dartmouth College and the Technion – Israel Institute of Technology in Haifa.

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New regulations for oil on rail cars to come in 2015

Regulations that could force oil companies to use stronger rail cars to move crude likely will be ready in 2015, according to a schedule released Tuesday by the U.S. Department of Transportation.

Oil companies have increasingly used rail cars to move crude, but recent disasters, including a derailment and massive explosions in North Dakota last month, have drawn attention to the cars’ vulnerabilities. New regulations that could force older tank cars to be upgraded or phased out are under development, but will not be proposed until Nov. 12 and will be subject to a public comment period until Jan. 12, 2015, according to the Department of Transportation.

However, that initial timeline could shift as the process continues, said Pipeline and Hazardous Materials Safety Administration spokesman Gordon Delacambre.
Recent derailments and explosions, including one in Quebec that killed 47, have involved tank cars widely thought to be weak.

The National Transportation Safety Board on Monday drew more concern about the tank cars, reporting that 18 of the 20 tank cars that derailed in the North Dakota incident were punctured. The NTSB also confirmed that the tank cars involved in the incident were an aging model that has drawn scrutiny for being especially vulnerable to punctures.

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U.S. natural gas output seen at record high for 5th year

U.S. natural gas production was forecast to hit a fifth consecutive annual record high in 2015, while net imports of the fuel next year will drop to their lowest in nearly 30 years as output from shale fields grows, the U.S. Energy Information Administration said on Tuesday.

In its January Short-Term Energy Outlook which extends to 2015, the EIA said it expected marketed natural gas production in 2014 to rise 1.45 billion cubic feet per day, or 2.1 percent from 2013's estimated record-high levels, to 71.66 bcf per day.

EIA also forecast production will increase again in 2015 to 72.58 bcf per day, up about 1.3 percent from its 2014 forecast.

EIA said rising production in the Marcellus shale play in Appalachia has driven much of the recent production growth, more than outpacing declines in offshore Gulf of Mexico and Haynesville shale output.

EIA however noted rapid Marcellus production growth was causing gas forward prices in the Northeast to fall even to, or below the benchmark Henry Hub prices outside of peak-demand winter months. This could cause some drilling activity to move away from the Marcellus back to Gulf Coast plays, such as the Haynesville and Barnett.

Pipeline imports from Canada were expected to decline slightly next year, falling to 7.54 bcf daily from the 7.56 bcfd estimated in 2013.

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Why shale gas won't conquer Britain

In Britain, proponents of increased drilling, including Prime Minister David Cameron, like to point to the success of expanded shale gas production in America.

A number of specific conditions helped to drive the American shale gas revolution, not least favorable geology. Much of America’s shale yields high levels of very valuable liquids, like crude oil, as well as gas. The ability to extract these liquids, produced as a byproduct of shale gas operations, has tended to make the economics of American shale operations favorable despite low domestic gas prices.

The geological know-how underpinning the success of drilling in the United States was the product of government-funded research dating as far back as the 1980s. … Extensive tax breaks for shale operations were allotted early on in the game, and environmental regulations were relatively weak. Capital markets were willing to provide risk finance for oil and gas operations, and the industry was dominated by a network of small, entrepreneurial companies, supported by a dynamic and highly competitive service sector.

Finally, property rights in the United States make any extracted shale gas the property of the landowner, incentivizing private owners to tolerate the disruptions caused by shale operations.

Virtually none of these characteristics are present in Britain. The British government is ideologically reluctant to fund basic scientific research. Environmental regulations are extremely strict, and public opposition to fracking is vehement. Capital markets are not accustomed to funding high-risk petroleum exploration activities, and the onshore service industry is woefully undeveloped compared with its American counterparts. The vesting of British oil and gas rights in the state, instead of with the private landowner, discourages individuals from supporting new drilling operations.

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