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Oil and Gas Roundup — Oct. 1

October 01, 2014
TOPICS: In the news
A roundup of oil and natural gas news from around the state, nation and world:

NY Post column targets carbon hypocrites

Billionaire Democrat activist Tom Steyer is using his fortune to combat what he thinks is the greatest threat to America.

No, not ISIS or ebola. To help favored congressional candidates, he’s running an ad that highlights pollution from an oil refinery owned by Charles and David Koch — whose political donations largely favor the party Steyer opposes.

And never mind the fact that Steyer had no qualms about fossil fuel back when his hedge fund was making millions in the industry.

With this effort, Steyer joins a long list of green activists who use fossil-fuel profits to bash the industry that fed them.

What makes the hypocrisy truly outrageous is that these activists promote policies that will prevent average Americans from sharing in the benefits of the energy boom.

Consider George Soros, the world’s richest hedge-fund manager. He supports groups such as Alliance for Climate Change, the Natural Resources Defense Council and the Union of Concerned Scientists — which all oppose the job-creating innovation known as hydraulic fracturing, or “fracking.”

Yet Soros himself recently bought a giant stake in CONSOL Energy, a company actively involved in fracking. Hmm . . .

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Why peak-oil predictions haven't come true

Have we beaten "peak oil"?

For decades, it has been a doomsday scenario looming large in the popular imagination: The world's oil production tops out and then starts an inexorable decline—sending costs soaring and forcing nations to lay down strict rationing programs and battle for shrinking reserves.

U.S. oil production did peak in the 1970s and sank for decades after, exactly as the theory predicted. But then it did something the theory didn't predict: It started rising again in 2009, and hasn't stopped, thanks to a leap forward in oil-field technology.

To the peak-oil adherents, this is just a respite, and decline is inevitable. But a growing tide of oil-industry experts argue that peak oil looks at the situation in the wrong way. The real constraints we face are technological and economic, they say. We're limited not by the amount of oil in the ground, but by how inventive we are about reaching new sources of fuel and how much we're willing to pay to get at it.

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EPA likely to increase 2014 biodiesel mandate in final RFS, API says

The Obama administration is considering raising the biodiesel mandate in the 2014 Renewable Fuel Standard from the proposed 1.28 billion gallons, the oil industry's main lobbying group in Washington said Friday, citing its conversations with the White House Office of Management and Budget.

But the American Petroleum Institute said such an increase would be illegal under the Clean Air Act, which requires the Environmental Protection Agency to finalize each year's biodiesel mandate 14 months beforehand. That means the 2014 mandate should have been finalized by November 2012, said Bob Greco, the API's downstream group director.

"The Clean Air Act expressly compels EPA to provide a 14-month lead time when modifying the mandate," Greco wrote in a letter Friday to EPA Administrator Gina McCarthy. "Congress establishes statutory deadlines for a reason, [to] provide certainty to the regulated industries."

But Greco stopped short of saying whether the API, which has sought to repeal the RFS, would sue the EPA if it raises the mandate.

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WoodMac: EOR could boost U.S. tight oil output 3 million b/d by 2030

Additional volumes from enhanced oil recovery (EOR) slated to come on stream after 2020 could boost tight oil production in the US by 1.5-3 million b/d by 2030, up to 25 percent more oil than is being forecasted today, according to analysis from Wood Mackenzie.

“Growth in US tight oil continues to impress as development technology and techniques have yet to mature beyond adolescence,” explained Phani Gadde, WoodMac senior North America upstream analyst.

WoodMac notes that these technologies are in early test phases and not yet commercial, but indicators suggest up to a 100% increase in recovery rates. Pilot tests are being conducted by operators such as EOG Resources Inc. in the Eagle Ford shale.

“This is going to happen, like horizontal drilling and [hydraulic fracturing], leading to another step-change in production technology,” noted Skip York, WoodMac principal analyst, Americas downstream, midstream and chemicals.

The crude oil export ban, however, could delay such advancement, York warns. Excessive production could drive down US crude oil prices by more than $30/bbl compared with their international benchmarks, stranding barrels in reservoirs and leading to no net change in US tight oil volumes.

Policymakers could lift the export ban to preserve current investment levels if US crude prices fall compared with international benchmarks, resulting in improved US tight oil wellhead margins by $5/bbl.

The margin improvement would then attract additional investment, yielding another 350,000-450,000 b/d, WoodMac says. This environment would attract more capital—where every $5 billion invested could yield additional production of 400,000 b/d over 5 years.

Ann-Louise Hittle, WoodMac head of macro oils, added, “The fact these additional volumes are poised to have an impact after 2020 means the increased US tight oil production above our current forecast is likely to be absorbed without a strong effect on Brent oil prices. This is particularly the case because of potential long-term political risk in key future sources of supply such as Iraq’s.”

Rail tank car phaseout could cost $45.2B

The federal government’s proposed timeline for taking older rail tank cars out of crude oil service could cost consumers $45.2 billion, the American Petroleum Institute (API) said.

That estimate is based on a study by ICF International on the Pipeline and Hazardous Materials Administration’s (PHMSA) new proposed rules to increase the safety of trains carrying crude oil and ethanol.

“Due to the limits of shop capacity and other resources … the timeline proposed by PHMSA for completing these retrofits is not feasible,” API president Jack Gerard told reporters Tuesday.

“In fact, PHMSA’s timeline could harm consumers by disrupting the production and transportation of goods that play major roles in our economy, including chemicals, gasoline, crude oil and ethanol,” he said.

The rules unveiled in July focus primarily on the DOT-111 tank car standard that has been involved in a string of train derailments and explosions in North America since last year. Federal regulators were spurred by those disasters, along with a large increase in oil transport by rail due to the domestic oil production boom of recent years.

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