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America's Resources For America... The Oil & Gas Revolution Short Term Shale Bubble
by Tomas DiFiore
Thursday Apr 4th, 2013 5:33 AM
Shale development is not about job creation. Optimistic job estimates by industry have relied heavily on unrealistic multipliers to claim vast numbers of indirect jobs. Direct industry related jobs (for onshore and offshore oil and gas) have accounted for less than 1/20 of 1% of the overall U.S. labor market since 2003, according to the Bureau of Labor Statistics. This cannot be construed as game changing job creation.
America's Resources For America... The Oil & Gas Revolution Short Term Shale Bubble
In story form or full 32 page report:
Shale and Wall Street: Was the Decline in Natural Gas Prices Orchestrated?
http://shalebubble.org/wall-street/

Jobs, Jobs, Jobs... where and at what wage, for how long?

It is interesting to note that while once the oil and gas industry exploited other regions of the globe to effect energy security for the U.S., it is now exploiting the U.S. to provide energy security to other regions, primarily Asia. These economies will pay the highest price and thereby offer the most profitability to the individual corporations.

It is, therefore, imperative to take a dispassionate view of this industry. Platform rhetoric about energy independence is nonsense. Further, oil and gas companies are not in business to steward the environment, save the family farm or pull depressed areas out of economic decline. If these things should by chance happen, they are merely peripheral.

In October of 2011, the Department of Energy granted the first shale gas export permit to Cheniere Energy. At that time, another 7 permits were pending which collectively committed approximately 20% of U.S. shale gas for export.

One year later, in November of 2012, the number of permits had grown to 18 and the percentage of shale gas committed for export has grown significantly, accounting for approximately 60% of current U.S. Consumption.

Much of content of this article is based on excerpts from the February 19, 2013 Energy Policy Forum publication “Shale & Wall Street: Was the Decline in Natural Gas Prices Orchestrated?”
http://energypolicyforum.org/portfolio/was-the-decline-in-natural-gas-prices-orchestrated/
The report examines the role of Wall Street investment banks in the recent shale gas drilling frenzy and related drop in natural gas prices.

Shale development is not about job creation. Optimistic job estimates by industry have relied heavily on unrealistic multipliers to claim vast numbers of indirect jobs. Direct industry related jobs (for onshore and offshore oil and gas) have accounted for less than 1/20 of 1% of the overall U.S. labor market since 2003, according to the Bureau of Labor Statistics. This cannot be construed as game changing job creation.

Nor is shale development about technological advancements (Horizontal/Deviant Drilling)

Longer laterals have offered little in increased production, even in shale oil. Additional fracture stimulation stages also resulted in very little production gain according to studies conducted by the U.S. Geological Survey.

Due to irresponsibly high debt levels, low cash, and the need to meet production targets for share appreciation, the price of both natural gas and natural gas liquids (NGLs) has been driven to new lows. Exportation and its concomitant lucrative price spread is clearly seen by industry as offering the best hope for recovering losses.

For more than a decade the largest oil and gas producers (the “Majors” as they are collectively called) have not been able to materiallyexpand their reserve replacement ratios.14 In fact, approximately one quarter of their reserve growth has come from acquisitions rather than the drill bit, such as ExxonMobil’s acquisition of XTO Energy. This constitutes consolidation rather than organic growth.

Energy Returned On Investment

There are various grades and types of hydrocarbons, some much more efficient as fuels than others. Additionally, some hydrocarbons simply require such an expenditure of energy to extract and produce that their use becomes questionable. This measure is referred to EROI (energy returned on investment) and is often seen as a ratio. For instance, it is estimated that in the early days of the U.S. oil industry, the EROI for oil was 100:1 (that is, 100 units of energy recovered for every one unit of energy invested) but this has since declined to an EROI of under 20:1. Because unconventional hydrocarbons like tar sands and shales are by definition more challenging (i.e., more energy-intensive) to produce, they generally have very low EROIs: likely well under 5:1.

Due to the new technology of hydrofracture stimulation, shale results could not be verified for a number of years. There simply was not enough historical production data available to make a reasonable assessment. It wasn't until 2009 that enough production history on shale wells in the Barnett had been filed with the Texas Railroad Commission that well performance could be checked. What emerged was significantly different from operators’ original rosy projections.

Each shale play has essentially followed the same pattern. Operators move into a region and begin a prolific drilling program. Economically, it provides a boost in the short term. The sweet spots are drilled out first as this provides the best possibilities for good wells in addition to good public relations material. In the beginning of a play, individual well productivity appears to climb rapidly. But to extrapolate from this that shale will necessarily provide long term economic stability for a region is highly problematic and unlikely. The older the play, the more difficult it becomes to maintain the production plateau. And the more costly.

The purported economic benefits of shale gas and oil have been consistently and egregiously overstated by industry in every shale play to date. While there is some initial economic boost, it has proved short-lived and will almost certainly never cover the peripheral costs of production such as long-term environmental degradation, air quality impacts, aquifer depletion and potential contamination, road repairs and health costs just to name a few.

On February 19, 2013 Energy Policy Forum published “Shale & Wall Street: Was the Decline in Natural Gas Prices Orchestrated?”
http://energypolicyforum.org/portfolio/was-the-decline-in-natural-gas-prices-orchestrated/
The report examines the role of Wall Street investment banks in the recent shale gas drilling frenzy and related drop in natural gas prices.

The full 32 page report can be viewed below or downloaded here.
http://energypolicyforum.org/wp-content/uploads/2013/02/SWS-report-FINAL.pdf

About Deborah Rogers and the Energy Policy Forum

Deborah Rogers began her financial career in London working in investment banking. Upon her return to the U.S., she worked as a financial consultant for several major Wall Street firms, including Merrill Lynch and Smith Barney. Ms. Rogers was appointed as a primary member to
the U.S. Extractive Industries Transparency Initiative (USEITI), an advisory committee within the Department of Interior, in 2013 for a three year term. She also served on the Advisory Council for the Federal Reserve Bank of Dallas from 2008-2011. She was appointed in 2011 by the Texas Commission on Environmental Quality (TCEQ) to a task force reviewing placement of air monitors in the Barnett Shale region in light of air quality concerns brought about by the natural gas operations in North Texas. She is a Member of the Board of Earthworks/OGAP (Oil and Gas Accountability Project). She is also the founder of Energy Policy Forum, a consultancy and educational forum dedicated to policy and financial issues regarding shale gas and renewable energy. Ms. Rogers lectures on shale gas economics throughout the U.S. and abroad and has appeared on MSNBC and NPR. She has also been featured in articles discussing the financial anomalies of shale gas in the New York Times (June 2011), Rolling Stone (March 2012) and the Village Voice (September 2012).

Related protests were held in San Francisco at an Obama fund raiser, against the Keystone Pipeline yesterday, April 3rd, 2013.
http://www.alternet.org/environment/keystone-xl-pipeline-protesters-take-streets-outside-obama-fundraiser-san-francisco

Banking Bailout, or Buying The Environmental Nightmare:
Two Important Reports just published in 2013

PCI's report is titled "Drill Baby, Drill," authored by Post Carbon Institute Fellow and former oil and gas industry geoscientist J. Dave Hughes,
http://shalebubble.org/drill-baby-drill/

EPF's report is titled "Shale Gas and Wall Street," authored by Energy Policy Forum Director and former Wall Street financial analyst Deborah Rogers.
http://shalebubble.org/wall-street/
Industry proponents rely on a figure known as "technically recoverable reserves" when they promote the potential of shale reserves, but this will also have to be be evaluated in a production cost ratio against market prices.

David Hughes analyzed the industry's production data for 65,000 wells from 31 shale basins nationwide utilizing the DI Desktop/HPDI database, widely used both by the industry and the U.S. government.

Wells Experience Severe Rates Of Depletion
This steep rate of depletion requires a frenetic pace of drilling... to offset declines. Roughly 7,200 new shale gas wells need to be drilled each year at a cost of over $42 billion simply to maintain current levels of production. And as the most productive well locations are drilled first, it’s likely that drilling rates and costs will only increase as time goes on.
To learn more, visit this great site:
http://www.desmogblog.com/2013/02/19/fracking-wall-street-housing-bubble

“The Climate Protection Act Of 2013” offers a 'New Paradigm And New Solutions'
http://www.indybay.org/newsitems/2013/03/07/18733275.php

If the Boxer(CA)-Sanders’(VT) “Climate Protection Act Of 2013” proposed carbon fee were adopted, it would generate $US 1.2 trillion from the 2,900 largest carbon polluters in the United States by 2024 (over a period of 10 years after date of enactment).

10 years, 2900 polluters, 1.2 trillion dollars...
1.2 trillion dollars divided by 10 years is $120 billion per year

And $120 billion divided by 2900 is a meager $41,379,000.00
An average of $42 million dollars in fees per year per individual world's worst polluting company. (Sliding scale)

In 2012, Chevron made $26.2 billion in profits. Exxon, $44.9 billion. Shell, $26.59 billion.
Subtract $42 million from any of those....

Does your calculator have enough zeros?
World’s Biggest Companies Cause more than $2.2 Trillion yearly in Environmental Damage.
$2,200,000,000,000.00 each year in Environmental Damage.

S. 332 “The Climate Protection Act Of 2013” New Paradigm And New Solutions
“A portion of the revenue raised by the carbon tax would be split equally between EPA and the Department of Transportation and would be used to fund climate change adaptation programs and infrastructure projects, including electric vehicle charging stations and preferential parking for carpools, energy efficiency and sustainability projects, including weatherizing homes for low-income persons, job training to allow fossil fuel employees to work in the clean energy sector, and energy research.”

A section of the bill proposes $30 Billion a year for 10 years to pay down the National Debt.
These are real amounts, numbers that begin to sound like commonly heard corporate numbers.

The bill would allocate 60% of the revenue raised to a residential environmental rebate program, the Family Clean Energy Rebate, as part of the “The Climate Protection Act Of 2013” will work off the rebate model developed by Alaska's Oil Dividend. Legal residents of the United States would receive monthly rebate payments:

Four 'fracking' important reasons to pass the “The Climate Protection Act Of 2013”
1) “This is the most progressive way to insure that if fossil fuel companies jack up prices, consumers and families can offset can offset price increases on fuel and electricity.”
2) “The proposal also would provide rebates to consumers to offset any efforts by oil, coal or gas companies to raise prices.”
3) Sanders has said “60 percent of that revenue would subsidize the higher bills of U.S. energy users.”
4) Senator Bernie Sanders (I-Vermont), the bill’s sponsor, “says the bill will try to offset spikes in energy costs for consumers.”

All four points, are coincidental to the expected US Domestic Energy price hikes and the failure of the false promise of the shale gas economic bubble.

US Domestic Natural Gas Prices Expected To Double by 2016
http://www.indybay.org/newsitems/2013/03/01/18732922.php

“It is expected that Future U.S. LNG imports would be competitive even if domestic natural gas prices were to double, and rise above even $8 per million Btu.” Current price is $3-$4. Friday Mar 1st, 2013, Global Market Spot Prices (FERC)

Support is needed in the Public Forum, for (S.332) The Climate Protection Act Of 2013.
Call or write your local State Senators and Representatives by name
http://www.usa.gov/Contact/Elected.shtml

or find by State

http://www.contactingthecongress.org/
Contacting the Congress is a very up-to-date and easy citizen's congressional directory for the 113th Congress. As of March 06, 2013 there are 538 electronic contact addresses (of which 535 are Web-based contact forms), and 538 home pages known for the 540 members of the 113th Congress. Traditional ground mail addresses are available for all current members of Congress.


Tomas DiFiore